U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
Massachusetts 04-2601571
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
200 Lake Street, Suite 102, Peabody MA 01960
Address of principal executive offices) (Zip Code)
508-536-2777
(Issuer's telephone number)
(Former Name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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_____ PHC,
Inc. became subject to the Exchange Act on March 3, 1994 .
Applicable only to corporate issuers
Number of shares outstanding of each class of common equity, as of October 31,
1996:
Class A Common Stock 2,327,624
Class B Common Stock 806,556
Class C Common Stock 199,816
Transitional Small Business Disclosure Format
(Check one):
Yes No X
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1 Financial Statements
PHC INC. AND SUBSIDIARIES UNAUDITED
CONSOLIDATED BALANCE SHEETS
Sept. 30 June 30
1996 1996
ASSETS (
Current assets:
Cash & Cash Equivalents........................ $6,547 $293,515
Accounts receivable, net of allowance for bad debts
of $1,591,393 at Sept. 30, 1996, 1,492,983 at June
30, 1996....................................... 10,116,730 8,866,065
Prepaid expenses............................. 407,780 259,893
Other receivables and advances............... 261,957 66,513
Deferred Income Tax Asset.................... 515,300 515,300
Total current assets....................... 11,308,314 10,001,286
Accounts Receivable, noncurrent................ 740,000 740,000
Loan Receivable................................. 113,805 113,805
Property and equipment, net..................... 7,987,527 7,884,063
Deferred income taxes 154,700 154,700
Deferred financing costs, net of amorization 698,445 702,948
Goodwill, net of accumulated amortization 894,951 709,573
Other assets....................................... 550,612 454,160
Net assets of operations held for sale............. 57,867 56,682
Total......................................... 2,506,221 $20,817,217
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................. 3,379,769 3,127,052
Notes payable--related parties ................... 56,600 56,600
Notes payable-- bank.............................. 39,005
Current maturities of long term debt................ 1,101,679 403,894
Current portion of obligations under capital leases 114,329 88,052
Accrued Payroll, Payroll Taxes and Benefits........ 656,051 715,515
Accrued expenses and other liabilities............. 425,034 738,784
Total Current liabilities....................... 5,772,467 5,129,897
Construction Note Payable ---
Long-term debt...................................... 8,467,128 7,754,262
Obligations under capital lease..................... 1,614,053 1,468,475
Notes payable related parties........................ 39,496 47,394
Total noncurrent liabilities....................... 10,120,677 9,270,131
Total liabilities................................. 15,893,144 14,400,028
Stockholders' Equity:
Preferred stock, $.01 par value; 1,000,000 shares
authorized, none issued.......................... --- ---
Class A common stock, $.01 value; 10,000,000 shares
authorized, 2,327,624 and 2,293,568 shares issued
Sept. 96 and June 96............................ 23,276 22,936
Class B common stock, $.01 par value; 2,000,000
shares authorized, 806,556 and 812,237 issued
Sept. 96 and June 96 convertible into
one share of Class A common stock................ 8,066 8,122
Class C common stock, $.01 par value; 200,000 shares
authorized, 199,816 and 199,816 issued Sept. 96
and June 96.................................... 1,998 1,998
Additional paid-in capital........................ 8,208,245 8,078,383
Notes receivable related to purchase of 31,000 shares
of Class A common stock......................... (63,928) (63,928)
Accumulated Deficit............................... (1,564,580) (1,630,322)
Total Stockholders' Equity........................ 6,613,077 6,417,189
Total.............................................. 22,506,221 $20,817,217
See Notes to Consolidated Financial Statements
<PAGE>
PHC INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended
September 30
1996 1995
Revenues:
Patient Care, net .............................. $5,784,856 $4,492,880
Management Fees. ............................... 133,204 36,557
Total revenue..................................... 5,918,060 4,529,437
Operating expenses:
Patient care expenses........................... 3,056,894 2,600,543
Cost of Management Contracts.................... 69,893 31,637
Administrative expenses......................... 2,469,444 1,651,550
Total operating expenses.......................... 5,596,231 4,283,730
Income from operations............................. 321,829 245,707
Other income (expense):
Interest income.................................. 2,650 2,763
Other income..................................... 81,464 49,746
Interest expense................................. (295,344) (147,998)
Gain (loss) from operations held for sale
Total other income (expense)....................... (211,954) (96,456)
Income before Provision for Taxes.................. 109,875 149,251
Provision for Income Taxes......................... 44,133 54,378
NET INCOME ........................................ 65,742 $94,873
Earnings per Share:
Net Income per share............................. .02 .04
Weighted average number
of shares outstanding............................ 3,117,915 2,404,933
See Notes to Consolidated Financial Statements
<PAGE>
PHC INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Three Months Ended
September 30
1996 1995
Cash flows from operating activities:
Net income ...................................... $65,742 94,873
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization................. 138,872 91,691
(Increase) decrease in accounts receivable....... (1,446,109) (540,287)
Decrease (increase) in prepaid expenses and other
current assets................................ (147,887) (74,877)
(Increase) decrease in other assets.............. 124,945 (26,659)
(Increase) decrease in net assets of operations
held for sale................................. (1,185) (17,311)
Increase (decrease) in accounts payable.......... (93,288) 111,501
Increase (decrease) in accrued and withheld taxes 6,923 4,068
Increase (decrease) in accrued expenses and other
liabilities................................... (308,532) 6,866
Net cash provided by (used in) operating activities. (1,660,519) (290,135)
Cash flows from investing activities:
Costs related to Business acquistion.............. (420,007) ---
Acquisition of property and equipment............. (224,602) (897,511)
Net cash provided by (used in) investing activities. (644,609) (897,511)
Cash flows from financing activities:............... 130,147 ---
Issuance of common stock net debt activity........ 1,888,013 836,636
Net cash provided by (used in) financing activities. 2,018,160 836,636
NET INCREASE (DECREASE) IN CASH..................... (286,968) (351,010)
Beginning cash balance.............................. 293,515 586,738
ENDING CASH BALANCE................................. 6,547 235,728
<PAGE>
PHC, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE A - THE COMPANY
PHC, Inc. ("PHC") operates substance abuse treatment centers in several
locations in the United States, a psychiatric hospital in Michigan, out-patient
psychiatric centers in Nevada, Kansas and Michigan and a long-term care facility
in Massachusetts. The consolidated financial statements include PHC and its
subsidiaries, all of which are 100% owned (collectively the "Company"):
PHC's subsidiaries, PHC of Utah, Inc., ("PHU"), PHC of Virginia, Inc.
("PHV"), and PHC of Rhode Island , Inc. ("PHRI"), provide treatment of addictive
disorders and chemical dependency. PHC of Rhode Island, Inc. operates Good Hope
Center which was purchased on March 16, 1994. Quality Care Centers of
Massachusetts, Inc. ("Quality Care") operates a long-term care facility known as
the Franvale Nursing and Rehabilitation Center. PHC of Michigan, Inc. ("PHM"),
operates Harbor Oaks Hospital which was purchased on September 20, 1994. PHM
provides inpatient psychiatric care to children, adolescents and adults and
operates a partial hospitalization program that includes outpatient treatment
services. PHC of Nevada, Inc. ("PHN"), operates Harmony Healthcare which was
purchased on November 1, 1995. PHN provides outpatient psychiatric care to
children, adolescents and adults. PHC of Kansas, Inc. ("PHK"), operates Total
Concept EAP which was purchased on March 15, 1996. PHK operates Employee
Assistance Programs and provides outpatient behavioral health care to children,
adolescents and adults. North Point-Pioneer, Inc. ("NPP"), operates six out
patient behavioral health centers under the name of Pioneer Counseling Centers.
Four of the centers were purchased on August 31, 1996 for $110,000 and 15,000
shares of PHC Inc. Class A Common Stock. The other two centers were purchased on
September 6, 1996 for $150,000 of which payment of $100,000 is contingent on
completion of certain contracts. STL, Inc. ("STL") operated day care centers
prior to July, 1993. Since that time, PHC has been systematically phasing out
its day care center operations and the operating results of STL and its net
assets have been classified as "operations held for sale" in the Condensed
Consolidated Financial Statements. All significant intercompany transactions and
balances have been eliminated in consolidation.
<PAGE>
NOTE B - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with the instructions to Form 10-QSB and Item
310 of Regulation S-B. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
only of normal recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the three months ended September 30,
1996 are not indicative of the results that may be expected for the year ending
June 30, 1997. The accompanying financial statements should be read in
conjunction with the June 30, 1996 consolidated financial statements and
footnotes thereto included in the Company's 10-KSB filed on October 4, 1996.
NOTE C - SUBSEQUENT EVENTS
On October 7, 1996, PHC, Inc., (the "Company") issued $3,125,000 principal
amount of its 7% Convertible Debentures (the "Debentures") to two accredited
investors. For details regarding this transaction please refer to the company's
Form 8-K filed on November 5, 1996.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
PHC, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net patient care revenue increased 29% to $5,784,856 for the three months
ended September 30, 1996 from $4,492,880 for the three months ended September
30, 1995. This increase in revenue is due to the acquisitions in August and
September 1996 of North Point-Pioneer, Inc. and the increase in available beds
for the long term care facility. Net Income decreased 31% to $65,742 for the
three months ended September 30, 1996 from $94,873 for the three months ended
September 30, 1995. This decrease in net income is due primarily to costs
associated with the acquisition of the new outpatient psychiatric centers in
Michigan and expenses incurred in the re-engineering of the Good Hope Center's
operations after the loss of referrals from a state agency.
Net patient care revenue for the psychiatric and substance abuse
facilities increased to $4,212,872 for the quarter ended September 30, 1996 from
$3,375,350 for the same period in 1995. This increase in revenue is due
primarily to newly acquired psychiatric treatment facilities. Net patient care
revenue for the long term care facility increased to $1,571,984 for the three
months ended September 30, 1996 from $1,117,530 for the three months ended
September 30, 1995 due to an increase in net revenue per patient day and the
number of occupied beds. The long term care facility opened the thirty-seven bed
addition on September 29, 1995 which resulted in increased rates and census.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
A significant factor in the liquidity and cash flow of the Company is the
timely collection of its accounts receivable. Accounts receivable related to
patient revenue increased during the quarter ended September 30, 1996 by
$1,250,665, approximately 13.0%, which contributed to cash used in operations
during the quarter of $1,660,519. This increase in accounts receivable is
primarily the result of an increase in revenues from new acquisitions and
increased beds at Franvale. The company continues to closely monitor its
accounts receivable balances and is working to reduce amounts due consistent
with growth in revenues.
The Company believes that it has the necessary liquidity and capital
resources and contingent funding commitments to sustain existing operations for
the foreseeable future. The Company also intends to expand its operations
through the acquisition or establishment of additional treatment facilities. The
Company's expansion plans will be dependent upon obtaining adequate financing as
such opportunities arise.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
In connection with the trademark challenge by Pioneer Health Care, Inc.
(described in the company's 10 KSB for the year ended June 30, 1994 and the
company's 10-KSB for the year ended June 30, 1995) the company filed an appeal
on July 10, 1995 with the United States First Circuit Court of Appeals from an
unfavorable judgment of the Federal District Court. The company does not believe
that an adverse decision would have a material adverse effect on the company.
Item 5. Other Information
Effective November 1, 1996, the Company acquired Behavioral Stress Centers,
Inc. ("BSC"), a New York corporation which provides management and
administrative services to psychotherapy and psychological practices in the
greater New York City Metropolitan Area. The acquisition was consummated through
the merger of a newly formed wholly owned subsidiary of the Company, BSC-NY,
Inc., and BSC with BSC-NY, Inc. being the surviving company (the "Surviving
Company") pursuant to an Agreement and Plan of Merger (the "Merger") between the
Company, BSC, the subsidiary, and Messrs. Irwin Mansdorf and Yakov Burstein,
each a stockholder of BSC (collectively, Messrs. Mansdorf and Burstein are
referred to as the "Sellers"). In connection with the Merger, the Company issued
150,000 shares of its Class A Common Stock to the Sellers. The Agreement
provides that the Company is also obligated to pay the Sellers a portion of the
profits of the Surviving Company (not to exceed 49%) over the next three years.
The earn-out consideration is payable 50% in Class A Common Stock shares and 50%
in cash provided that the Sellers are not obligated to receive more than
$200,000 in the form of Class A shares based on its fair market value at time of
payment. Each Seller agreed not to compete directly or indirectly with the
Surviving Company during the four years following Closing.
At Closing, the Company and Perlow Physicians P.C., a professional
corporation (the "Professional Corporation") of which Gerald M. Perlow, M.D., a
director of the Company, is a principal stockholder, entered into an Asset
Purchase Agreement (the "Purchase Agreement") with the Sellers pursuant to which
the Company purchased certain assets of Clinical Associates, a partnership of
which the Sellers are the general partners ("CA"), and certain assets of
Mansdorf, which were used in a business operated by Mansdorf doing business as
Clinical Diagnostics ("CD"), for $1,500,000 and the Professional Corporation
purchased contracts between CA or CD and 31 nursing homes (the "Nursing Home
Contracts") under which CA and/or CD provides psychotherapy and psychological
consulting services to patients at the nursing homes for a $750,000 note of
which the Company is the maker. Also at Closing, the Professional Corporation
entered into a five year Management Agreement, renewable for five additional
years, with the Surviving Company pursuant to which the Surviving Company agreed
to provide management, administrative and billing services to the Professional
Corporation and will receive a fee in connection therewith plus reimbursement of
all the practice expenses (as defined in the Management Agreement) of the
Professional Corporation. The Management Agreement also requires the
Professional Corporation to repay up to $750,000, plus interest at 8% per annum,
to the extent payments are made on the $750,000 note issued to the Sellers under
the Purchase Agreement. The note is subject to pro rata reduction for each
nursing home which terminates its contract with the Professional Corporation
during the 90-day period following Closing.
Also at Closing, Dr. Burstein, who is a psychologist and has a Ph.D.
degree, entered into a three year employment agreement and Dr. Mansdorf, who is
a psychologist and has a Ph.D. degree, entered into a three year consulting
agreement with the Professional Corporation pursuant to which Dr. Burstein
agreed to continue to provide psychotherapy services to the Professional
Corporation and to be involved in its business and operations and Dr. Mansdorf
agreed to provide consulting services to the Professional Corporation. Dr.
Mansdorf will also provide psychotherapy services to the Professional
Corporation. The Professional Corporation also employs approximately 20
psychotherapists, psychologists and psychiatrists in the greater New York City
Metropolitan Area to provide psychiatric and psychotherapy services to patients,
in clinical settings including those at the nursing homes. CA and CD were
providing professional services in excessive of 30,000 patient visits per year
at more than 30 nursing homes and other institutions.
The foregoing is only a summary of the principal terms of the Merger
Agreement, the Purchase Agreement, the Employment Agreement, the Consulting
Agreement and the Management Agreement, and reference is made to the agreements,
copies of which accompany this filing, for additional information.
BSC, which has been in operation since 1978, provides management,
administrative and billing services to psychiatrists and psychologists,
including CA and CD, and furnishes them with office facilities, secretarial
assistance, billing and general support. It also provides assessment counseling
referral and follow-up services to governmental agencies or employee
associations, while CA and CD provide psychotherapy and psychological clinical
services to businesses, governmental entities and nursing home patients.
The Company intends to continue the business and operation of BSC and,
pursuant to the Management Agreement with the Professional Corporation, to
provide services to the Professional Corporation, and the Professional
Corporation intends to continue the business and operation of CA and CD.
For the seven month period ended July 31, 1996, the acquired companies had
aggregate net cash flow of approximately $970,000 on cash receipts of
approximately $2,100,000 and expenditures of approximately $1,130,000.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibits
10.84 Security Agreement by and between PHC, Inc., PHC of Rhode Island, Inc.,
PHC of Virginia, Inc., PHC of Nevada, Inc. and LINC Anthem Corporation
dated July 25, 1996.
10.85 Custodial Agreement by and between LINC Anthem Corporation and PHC,
Inc. and Choate, Hall and Stewart dated July 25, 1996.
10.86 Loan and Security Agreement by and between North Point-Pioneer, Inc.
and LINC Anthem Corporation dated July 25, 1996.
10.87 Corporate Guaranty by PHC, Inc., PHC of Rhode Island, Inc., PHC of
Virginia, Inc., PHC of Nevada, Inc. and LINC Anthem Corporation dated
July 25, 1996 for North Point-Pioneer, Inc.
10.88 Stock Pledge and Security Agreement by and between PHC, Inc. and LINC
Anthem Corporation.
10.89 Secured Promissory Note of North Point-Pioneer, Inc. in favor of LINC
Anthem Corporation dated July 25, 1996 in the amount of $500,000.
10.90 Lease Agreement by and between PHC, Inc. and 94-19 Associates dated
October 31, 1996 for BSC-NY, Inc.
10.91 Note by and between PHC Inc. and Yakov Burstein in the amount of
$180,000.
10.92 Note by and between PHC, Inc. and Irwin Mansdorf in the amount of
$570,000.
10.93 Employment Agreement by and between BSC-NY, Inc. and Yakov Burstein
dated November 1, 1996
10.94 Consulting Agreement by and between BSC-NY, Inc. and Irwi n Mansdorf
dated November 1, 1996
10.95 Agreement and Plan of Merger by and among PHC, Inc., BSC-NY, Inc.,
Behavioral Stress Centers, Inc., Irwin Mansdorf, and Yakov Burstein
dated October 31, 1996.
10.96 Assignment and Assumption Agreement dated October 31, 1996 by and
between Clinical Associates and Perlow Physicians, P.C.
10.97 Bill of Sale by and between Clinical Diagnostics and Perlow Physicians,
P.C.
E10.98 Employment Agreement by and between Perlow Physicians, P.C. and Yakov
Burstein dated November 1, 1996.
10.99 Agreement for Purchase and Sale of Assets by and between Clinical
Associates and Clinical Diagnostics and PHC, Inc., BSC-NY, Inc., Perlow
Physicians, P.C., Irwin Mansdorf, and Yakov Burstein dated October 31,
1996
10.100 Consulting Agreement by and between Perlow Physicians, P.C. and Irwin
Mansdorf dated November 1, 1996.
10.101 Option Agreement by and between Pioneer Healthcare and Gerald M. Perlow
M.D., dated November 15, 1996.
(b) There were no Current Reports filed on Form 8-K during the first
quarter of fiscal year 1997.
<PAGE>
Signatures
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
PHC, Inc.
Registrant
Date: November 14, 1996 /s/ Bruce A. Shear
Bruce A. Shear
President
Chief Executive Officer
Date: November 14, 1996 /s/ Paula C. Wurts
Paula C. Wurts
Controller
Assistant Treasurer
<PAGE>
EXHIBIT INDEX
Exhibit
Number Document
10.84 Security Agreement by and between PHC, Inc., PHC of Rhode Island, Inc.,
PHC of Virginia, Inc., PHC of Nevada, Inc. and LINC Anthem Corporation
dated July 25, 1996.
10.85 Custodial Agreement by and between LINC Anthem Corporation and PHC,
Inc. and Choate, Hall and Stewart dated July 25, 1996.
10.86 Loan and Security Agreement by and between North Point-Pioneer, Inc.
and LINC Anthem Corporation dated July 25, 1996.
10.87 Corporate Guaranty by PHC, Inc., PHC of Rhode Island, Inc., PHC of
Virginia, Inc., PHC of Nevada, Inc. and LINC Anthem Corporation dated
July 25, 1996 for North Point-Pioneer, Inc.
10.88 Stock Pledge and Security Agreement by and between PHC, Inc. and LINC
Anthem Corporation.
10.89 Secured Promissory Note of North Point-Pioneer, Inc. in favor of LINC
Anthem Corporation dated July 25, 1996 in the amount of $500,000.
10.90 Lease Agreement by and between PHC, Inc. and 94-19 Associates dated
October 31, 1996 for BSC-NY, Inc.
10.91 Note by and between PHC Inc. and Yakov Burstein in the amount of
$180,000.
10.92 Note by and between PHC, Inc. and Irwin Mansdorf in the amount of
$570,000.
10.93 Employment Agreement by and between BSC-NY, Inc. and Yakov Burstein
dated November 1, 1996
10.94 Consulting Agreement by and between BSC-NY, Inc. and Irwi n Mansdorf
dated November 1, 1996
10.95 Agreement and Plan of Merger by and among PHC, Inc., BSC-NY, Inc.,
Behavioral Stress Centers, Inc., Irwin Mansdorf, and Yakov Burstein
dated October 31, 1996.
10.96 Assignment and Assumption Agreement dated October 31, 1996 by and
between Clinical Associates and Perlow Physicians, P.C.
10.97 Bill of Sale by and between Clinical Diagnostics and Perlow Physicians,
P.C.
10.98 Employment Agreement by and between Perlow Physicians, P.C. and Yakov
Burstein dated November 1, 1996.
10.99 Agreement for Purchase and Sale of Assets by and between Clinical
Associates and Clinical Diagnostics and PHC, Inc., BSC-NY, Inc., Perlow
Physicians, P.C., Irwin Mansdorf, and Yakov Burstein dated October 31,
1996
10.100 Consulting Agreement by and between Perlow Physicians, P.C. and Irwin
Mansdorf dated November 1, 1996.
10.101 Option Agreement by and between Pioneer Healthcare and Gerald M. Perlow
M.D., dated November 15, 1996.
27 Financial Data Schedule
<PAGE>
Exhibit 10.84
SECURITY AGREEMENT
(Accounts Receivable - General Intangibles - Chattel Paper)
This Security Agreement ("Agreement") is made this 25th day of July, 1996
between PHC, INC. a Massachusetts corporation, PHC OF RHODE ISLAND, INC. a
Massachusetts Corporation, PHC OF VIRGINIA, INC. a Massachusetts Corporation and
PHC OF NEVADA, a Massachusetts Corporation (jointly and severally the "Debtor"),
and LINC ANTHEM CORPORATION, a Delaware corporation (the "Secured Party").
Preliminary Statements
A. Debtor has contemporaneously delivered to Secured Party that certain
Corporate Guaranty of even date herewith (the "Guaranty") whereby Debtor has
agreed to guaranty the obligations of NORTH POINT - PIONEER, INC. ("Borrower")
under that certain Loan and Security Agreement of even date herewith (the "Loan
Agreement") including that certain Secured Promissory Note in the principal
amount of $500,000.00 made by Borrower in favor of Secured Party, as payee (the
"Note").
B. Debtor desires to induce Secured Party to extend credit to the Borrower under
the Note and to better secure Secured Party in respect of Debtor's performance
under the Guaranty of the Loan Agreement and the Note.
NOW, THEREFORE, in consideration of the premises and mutual agreements herein
contained, the parties hereto hereby agree as follows:
1. DEFINED TERMS. Capitalized terms not otherwise defined herein shall have
the meanings given such terms in the Loan Agreement, the Note and the Guaranty.
2. COLLATERAL.
(a) Grant of Security. To secure the prompt and complete payment, observance and
performance of all of the obligations and liabilities of Debtor under the
Guaranty and the payment of sums due and to become due thereunder and all other
obligations and liabilities of Debtor to Secured Party (whether or not evidenced
by a note or other instrument or document and whether or not for the payment of
money) direct or indirect, absolute or contingent, due or to become due, now
existing or hereafter and howsoever arising, including without limitation, Costs
and Expenses (as defined in Section 6) in connection therewith (collectively,
the "Liabilities"), Debtor hereby assigns and pledges to the Secured Party, and
hereby grants to Secured Party, a security interest in all of the Debtor's
right, title and interest in and to the following, whether now owned or existing
or hereafter arising or acquired and wheresoever located (the "Collateral"):
Accounts. All present and future accounts, accounts receivabl and other
rights of the Debtor to payment for goods sold or leased or for services
rendered (except those evidenced by instruments or chattel paper), whether now
existing or hereafter arising and wherever arising, and whether or not they have
been earned by performance (collectively, "Accounts") ** **[except for any
Accounts sold by Debtor to LINC Finance Corporation VIII under the terms of (i)
that certain Sale and Purchase Agreement dated January 20, 1995 between PHC of
Rhode Island, Inc. and LINC Finance Corporation VIII or (ii) that certain Sale
and Purchase Agreement dated as of March 6, 1995 between PHC of Virginia, Inc.
and LINC Finance Corporation VIII or (iii) all future Sale and Purchase
Agreements as may be executed between Debtor or its affiliates and LINC Finance
Corporation VIII or its successors and assigns (collectively the "Receivables
Agreement") but including any right to payment Debtor may have under the
Receivables Agreement with respect to any Advance Amounts and Provider Interest
then due and payable by LINC Finance Corporation VIII to Debtor] and subject
only to the security interest of LINC Finance Corporation VIII granted to LINC
Finance Corporation VIII under the Receivables Agreement;
General Intangibles. All rights, interests, chooses in action, causes of
action, claims and all other intangible property of Debtor of every kind and
nature related to or arising in connection with Accounts, in each instance
whether now owned or hereafter acquired by Debtor, and however and whenever
arising, including, without limitation,
G:\LAW\LAC\2924.phc. - 7/16/96
<PAGE>
all customer contracts, firm orders, rights under provider contracts and all
other contracts and contract rights; all deposit accounts (general or special)
with any bank or other financial institution, including, without limitation, any
deposits or other sums at any time credited by or due to Debtor from any
affiliate of Secured Party with the same rights therein as if the deposits or
other sums were credited by or due from Secured Party thereunder; all rights to
indemnification; and all letters of credit, guaranties, liens, security
interests and other security held by or granted to Debtor; and all other
intangible property, whether or not similar to the foregoing related to or
arising in connection with the Accounts; and
Chattel Paper, Instruments and Documents. All chattel paper, leases, all
instruments and all payments thereunder and instruments and other property from
time to time delivered in respect thereof or in exchange therefor, and other
documents of title and documents, in each instance whether now owned or
hereafter acquired by Debtor relating to or arising in connection with the
Accounts.
Other Property. All money and proceeds of Accounts and insurance proceeds
and books and records relating to any of the Accounts together, in each
instance, with all accessions and additions thereto, substitutions therefor, and
replacements, proceeds and products thereof.
(b) Debtor Remains Liable. Anything herein to the contrary notwithstanding, (i)
Debtor shall remain solely liable under the contracts and agreements included in
the Collateral to the extent set forth therein to perform all of its duties and
obligations thereunder to the same extent as if this Agreement and any other
security document executed in connection with the Guaranty or this Agreement
("Security Documents") had not been executed, (ii) the exercise by Secured Party
of any of its rights hereunder or under any other Security Documents shall not
release Debtor from any of its duties or obligations under the contracts and
agreements included in the Collateral and (iii) Secured Party shall not have any
responsibility, obligation or liability under the contracts and agreements
included in the Collateral by reason of this Agreement or any other Security
Documents, nor shall Secured Party be required or obligated, in any manner, to
(A) perform or fulfill any of the obligations or duties of Debtor thereunder,
(B) make any payment, or make any inquiry as to the nature or sufficiency of any
payment received by Debtor or the sufficiency of any performance by any party
under any such contract or agreement or (C) present or file any claim, or take
any action to collect or enforce any claim for payment assigned hereunder.
(c) Representations and Warranties Regarding Collateral. Debtor represents and
warrants, as of the date of this Agreement and as of each date hereafter (except
for changes permitted or contemplated by this Agreement) until termination of
this Agreement:
(i) The correct name of Debtor is set forth in the first paragraph of this
Agreement. The chief place of business, chief executive office of Debtor and all
Collateral of Debtor is located at the address specified as the notice address
for Debtor (the "Premises") and Debtor has exclusive possession and control of
the Collateral. All records concerning any Accounts and all originals of all
chattel paper which evidence any Account are located at the Premises and none of
the Accounts is evidenced by a promissory note or other instrument except for
such notes and other instruments delivered to Secured Party.
(ii) Debtor is the legal and beneficial owner of the Collateral free and clear
of all liens except for liens of Secured Party.
(iii) This Agreement creates in favor of Secured Party a legal, valid an
enforceable security interest in the Collateral. When financing statements have
been filed in the office of the Secretary of State of Michigan and Massachusetts
and the County Recorder's office or delivery of Collateral made to Secured
Party, Secured Party will have a fully perfected first priority lien on, and
security interest in, the Collateral in which a security interest may be
perfected by filing or delivery.
(iv) No authorization, approval or other action by, and no notice to or filin
with, any governmental authority that have not already been taken or made and
which are in full force and effect, is required (A) for the grant by Debtor of
the security interest in the Collateral granted hereby; (B) for performance of
this Agreement by Debtor; or (C) for the exercise by Secured Party of any of its
other rights or remedies hereunder.
(d) Perfection and Maintenanceof Security Interest and Lien. Debtor agrees that
until all liabilities have been fully satisfied and the
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<PAGE>
Note has been canceled, Secured Party's security interests in and liens
on and against the Collateral, and all proceeds and products thereof, shall
continue in full force and effect. Debtor shall perform any and all steps
reasonably requested by Secured Party to perfect, maintain and protect Secured
Party's security interests in and liens on and against the Collateral granted or
purported to be granted hereby and by the other Security Documents or to enable
Secured Party to exercise its rights and remedies hereunder and under the other
Security Documents with respect to any Collateral, including, without
limitation, (i) executing and filing financing or continuation statements, or
amendments thereof, in form and substance reasonably satisfactory to Secured
Party, (ii) executing and recording mortgages, deeds of trust and other Security
Documents in form and substance reasonably satisfactory to Secured Party, (iii)
delivering to Secured Party all certificates, notes and other instruments
(including, without limitation, all letters of credit on which Debtor is named
as a beneficiary) representing or evidencing Collateral duly endorsed and
accompanied by duly executed instruments of transfer or assignment, including,
but not limited to, note powers, all in form and substance satisfactory to
Secured Party, (iv) placing notations on Debtor's books of account to disclose
Secured Party's security interest therein and marking conspicuously each
document, contract, chattel paper and all records pertaining to the Collateral
with a legend, in form and substance satisfactory to Secured Party, indicating
that such document, contract, chattel paper or Collateral is subject to the
security interest granted herein and (v) executing and delivering all further
instruments and documents, and taking all further action, as Secured Party may
reasonably request.
(e) Financing Statements. To the extent permitted by applicable law, Debtor
hereby authorizes Secured Party to file one or more financing or continuation
statements and amendments thereto, disclosing the security interest granted to
Secured Party under this Agreement without Debtor's signature appearing thereon
and Secured Party agrees to notify Debtor when such a filing has been made.
Debtor agrees that a carbon, photographic, photostatic or other reproduction of
this Agreement or of a financing statement is sufficient as a financing
statement.
(f) Filing Costs. Debtor shall pay the costs of, or incidental to, all
recordings or filings of all financing statements and other Security Documents.
(g) Schedule of Collateral. Debtor shall furnish to Secured Party from time to
time statements and schedules further identifying and describing the Collateral
and such other reports in connection with the Collateral as Secured Party may
reasonably request, all in reasonable detail.
(h) Accounts. Debtor covenants and agrees with Secured Party that from and after
the date of this Agreement and until termination of this Agreement that:
(i) Debtor shall keep its chief place of business and chief executive
office and the office where it keeps its records concerning the Accounts, and
the offices where it keeps all originals of all chattel paper which evidence
Accounts, at the Premises. Debtor will hold and preserve such records (in
accordance with Secured Party's usual document retention practices) and chattel
paper and will permit representatives of Secured Party at any time during normal
business hours to inspect, copy and make abstracts from such records and chattel
paper;
(ii) Except as otherwise provided in this subsection (ii), Debtor shall
continue to collect, at its own expense, all amounts due or to become due Debtor
under the Accounts. In connection with such collections, Debtor may, take (and,
at the Secured Party's discretion, shall take) such action as Debtor or Secured
Party may deem necessary of advisable to enforce collection of the Accounts;
provided however, that Secured Party shall have the right at any time upon
written notice to Secured Party of its intention to do so, to notify the account
debtors or obligors under any Account of the assignment of such Account to
Secured Party and to direct such account debtors or obligors to make payment of
all amounts due or to become due to Debtor thereunder directly to, Secured Party
and, upon such notification and at the expense of Debtor, to enforce collection
of any such Account, and to adjust, settle or compromise the amount or payment
thereof, in the same manner and to the same extent as Debtor might have done.
After receipt by Debtor of the notice from Secured Party referred to in the
proviso to the preceding sentence, (A) all amounts and proceeds (including
instruments) received by Debtor in respect of the Accounts shall be received in
trust for the benefit of Secured Party hereunder, shall be segregated from other
funds of Debtor and shall be forthwith paid over to Secured Party in the same
form as so received (with any necessary endorsement) to be held as cash
collateral and either ((i)) released to Debtor so long as no 'Event of Default"
(as hereinafter defined) shall have occurred and be continuing or ((ii)) if any
Event of Default shall have occurred and be continuing, applied as provided
herein and (B) Debtor shall not adjust, settle or compromise the amount or
payment of any Account, or release wholly or partly any account debtor or
obligor thereof, or allow any credit or discount thereon;
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<PAGE>
(iii) In any suit, proceeding or action brought by Secured Party under any
Account comprising part of the Collateral, Debtor will save, indemnify and keep
Secured Party, harmless from and against all expenses, loss or damage suffered
by reason of any defense, setoff, counterclaim, recoupment or reduction of
liability whatsoever of the obligor thereunder, arising out of a breach by
Debtor of any obligation or arising out of any other agreement, indebtedness or
liability at any time owing to or in favor of such obligor or its successors
from Debtor, and all such obligations of Debtor shall be and shall remain
enforceable against and only against Debtor and shall not be enforceable against
Secured Party;
(iv) At Secured Party's request in the event that Debtor has Accounts with
respect to which the account debtor is the United States of America or any
department, agency or instrumentality thereof (all such Accounts being
hereinafter referred to as "Government Receivables"), Debtor shall, with respect
to such Government Receivables, promptly comply with the Assignment of Claims
Act of 1940, as amended (31 U.S.C. 3727 et seq.) and any other statute or
regulation governing the collection of such Government Receivables, and shall
promptly deliver to Secured Party evidence of such compliance, which evidence
shall be in form and substance satisfactory to Secured Party in its sole
discretion;
(v) Debtor shall keep and maintain at Debtor's own cost and expense
satisfactory and complete records of Debtor's Collateral in a manner consistent
with reasonable and appropriate business practices, including, without
limitation, a record of all payments received and all credits granted with
respect to such Collateral. Debtor shall, for the Secured Party's further
security, deliver and turn over to Secured Party or Secured Party's designated
representatives at any time following the occurrence of an Event of Default and
upon five (5) days' notice from Secured Party or Secured Party's designated
representative, any such books and records (including, without limitation, the
file cabinets in which paper records are stored and any and all computer tapes,
programs and source codes relating to such Collateral in which Debtor has an
interest or any part or parts thereof);
(vi) Debtor will not create, permit or suffer to exist, and will defend the
Collateral against, and take such other action as is necessary to remove, any
lien on such Collateral, and will defend the right, title and interest of
Secured Party in and to Debtor's rights to such Collateral, including, without
limitation, the proceeds and products thereof, against the claims and demands of
all persons or entities whatsoever;
(vii) Debtor will not, without Secured Party's prior written consent, except
in the ordinary course of business and for amounts which are not material in the
aggregate, (A) grant any extension of the time of payment of any of the
Collateral or compromise, compound or settle any Account for less than the full
amount thereof; (B) release, wholly or partly, any person liable for the payment
thereof; or (C) allow any credit or discount whatsoever thereon other than trade
discounts granted in the ordinary course of business; and
(viii) Debtor will advise Secured Party promptly, in reasonable detail, of (A)
any material lien, security interest or claim made by or asserted against any or
all of the Collateral, and (B) the occurrence of any other event which would
have a material adverse effect on the aggregate value of such Collateral or on
the security interest and liens with respect to such Collateral created
hereunder or under any other Security Document.
(i) Secured Party Appointed Attorney-in-Fact. Debtor hereby irrevocably
appoints Secured Party as Debtor's attorney-in-fact, with full authority in the
place and stead of Debtor and in the name of the Debtor or otherwise, from time
to time in Secured Party's discretion, to take any action and to execute any
instrument which the Secured Party may deem necessary or advisable to accomplish
the purposes of this Agreement, including, without limitation, (i) following the
occurrence and during the continuance of an Event of Default, to:
(A) obtain and adjust insurance;
(B) ask, demand, collect, sue for, recover, compromise, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral,
(C) receive, endorse and collect any drafts or other instruments
documents and chattel paper, in connection with clause (A) or (B) above; and
(D) file any claims or take any action or institute any proceedings
which Secured Party may deem necessary or desirable for the collection of any of
the Collateral or otherwise to enforce the rights of Secured Party with respect
to any
G:\LAW\LAC\2924.PHC. - 7/16/96
<PAGE>
of the Collateral;
and (ii) at any time, to:
(A) obtain access to records maintained for Debtor by computer services
companies and other service companies or bureaus;
(B) send requests under Debtor's or a fictitious name to Debtor's
customers or account debtors for verification of Accounts; and
(C) do all things necessary to carry out this Agreement.
(j) Secured Party May Perform. If Debtor fails to perform any agreement
contained herein, Secured Party may itself perform, or cause performance of,
such agreement, and the reasonable expenses of the Secured Party incurred in
connection therewith shall be payable by Debtor on demand and shall become part
of the Liabilities secured hereunder.
(k) Secured Party's Duties. The powers conferred on Secured Party hereunder are
solely to protect its interest in the Collateral and shall not impose any duty
upon Secured Party to exercise any such powers. Except for the safe custody of
any Collateral in its possession and the accounting for moneys actually received
by it hereunder, Secured Party shall have no duty as to any Collateral. Secured
Party shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which Secured Party accords its own
property, it being understood that Secured Party shall be under no obligation to
take any steps necessary to preserve rights against prior parties or any other
rights pertaining to any Collateral, but may do so at its option, and all
reasonable expenses incurred in connection therewith shall be for the sole
account of Debtor and shall be added to the Liabilities.
3. WARRANTIES AND REPRESENTATIONS. Debtor hereby represents and warrants to
Secured Party, on each date indebtedness is incurred under the Note, that:
(a) All of the Collateral is kept as such place(s) of business of
the respectable Debtors.
(b) Debtor is lawfully possessed of and has good title to the
Collateral, five and clear of all liens, encumbrances, security
interests and adverse claims except only for the security interest
granted to Secured Party herein except as otherwise provided herein;
(c) (i) Debtor is legally organized and validly existing, in good
standing under the laws of its state of organization and is duly
qualified to do business and in good standing under the laws of each
jurisdiction where the nature of its business or the character of its
properties makes it necessary for it to so qualify to do business; (ii)
Debtor has full power and authority to execute and deliver this
Security Agreement, together with all notes, leases, agreements and
instruments evidencing Indebtedness, and to pay and perform its
obligations thereunder; (iii) Debtor has full power and authority to
own its properties and carry on its business as now being conducted;
(iv) this Security Agreement and all documents evidencing indebtedness
under the Guaranty have been duly authorized, executed and delivered by
Debtor and constitute the valid, legal and binding obligations of
Debtor enforceable in accordance with their terms.
(d) (i) The execution, delivery and payment of any and all of the
documents and instruments evidencing indebtedness under the Guaranty
and the entering into by Debtor of this Security Agreement and the
performance of its obligations hereunder will not violate or conflict
with any of the provisions of the Certificate of Incorporation or
By-Laws of Debtor (or Debtor's Articles of Partnership, if applicable)
and will not result in any breach of, or constitute a default under, or
result in the creation of any lien, charge, security interest, or other
encumbrance in or upon any of Debtor's property or assets (except for
the security interest created hereby) pursuant to any indenture,
mortgage, deed of trust, bank loan or credit agreement, or any other
instrument to which Debtor is a party or by or under which it may be
bound; (ii) no approval is required from any public regulatory body nor
from any parent, subsidiary or affiliate of Debtor or from any other
person, firm or corporation with respect to the execution, delivery and
payment upon any documents evidencing Indebtedness, the entering into
of this Security Agreement, and the performance by Debtor of its
obligations hereunder; (iii) there are no suits or proceedings pending,
or to the knowledge of Debtor threatened, in any court or before any
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<PAGE>
regulatory commission, board or other administrative governmental agency against
or affecting Debtor which will have a material adverse effect on the financial
condition or business of Debtor.
4. COVENANTS.
(a) Financial Information: On or prior to the tenth day of each month, Debtor
shall deliver to Secured Party:
(i) a schedule of all Accounts created or acquired by Debtor during the
preceding month together with an aged trial balance of Accounts (an
"Accounts Trial Balance") for Debtor, indicating which Accounts are 1
to 30, 31 to 60, 61 to 90, 91 to 120 and 120 or more days past the
origina invoice date and, if requested by Secured Party, listing the
names and addresses of all account debtors;
(ii) an accounts pyable aging, showing which accounts payable are 10 to
30, 31 to 60, 61 to 90 and 91 days or more past due; and
(iii) interim financial statements, consisting of balance sheets, income
statements, cash flow statements for such month and for the period
from the beginning of the then current fiscal year to the end of such
month.
(b) Distributions: From and after Secured Party gives notice to Debtor to do
so, Debtor shall not:
(i) make any distribution of dividends or the equivalent (including
repurchases of interests in Debtor from any holder thereof); or
(ii) pay any management fees to any affiliate of Debtor.
5. TERM OF AGREEMENT. This Agreement shall become effective as provided herein,
and shall remain in effect until such time as all of the Liabilities shall have
been fully performed and paid in full and the Guaranty shall have been canceled.
6. SECURED PARTY'S EXPENSES. Debtor shall reimburse the Secured Party for all
fees, costs and expenses (including, but not limited to, attorneys' fees, costs
and expenses) incurred by the Secured Party, in connection with this Agreement
including, but not limited to, such fees, costs and expenses incurred in
connection with the implementation, administration and enforcement of this
Agreement and the other agreements, documents and instruments referred to herein
or contemplated hereby and the auditing, appraising, evaluating or otherwise
monitoring the Collateral or other credit support for the Liabilities (all such
costs and expenses, "Cost and Expenses").
7. DEFAULT; REMEDIES.
(a) Events of Default. Any one of the following acts shall constitute an
"Event of Default" under this Agreement:
(i) Failure by the Debtor to pay any of the Liabilities when due.
(ii) Any representation or warranty now or hereafter made by the Debtor
herein or by the Debtor in connection with this Agreement shall prove to
have been incorrect in any material respect when made.
(iii) Failure by the Debtor to perform or observe any covenant, condition
or agreement contained in this Agreement.
(b) Remedies. If any Event of Default occurs, in addition to all other
remedies Secured Party may have at law or in equity, Secured Party may (i)
declare all Liabilities to be forthwith due and payable, whereupon the
Liabilities shall become and be forthwith due and payable, without presentment,
demand, protest, or further notice of any kind, all of which are hereby
expressly waived by the Debtor, and (ii) exercise all or any of the rights of a
secured party under the Uniform Commercial Code in the State where the
Collateral is located or other applicable laws and any other rights and remedies
available to Secured Party, all of which rights and remedies shall be
cumulative, and none exclusive, to the extent permitted
G:\LAW\LAC\2924.PHC 7/16/96
<PAGE>
by law; provided, however, that if an Event of Default involving the bankruptcy
of the Debtor shall exist or occur, all of the Liabilities shall automatically,
without notice of any kind, be immediately due and payable and Secured Party
shall be entitled to reclaim the Collateral.
(c) Entry Upon Premises. Upon the occurrence of an Event of Default, (i) Secured
Party shall have the right to enter upon the premises of the Debtor where the
Collateral is located (or is believed to be located) without any obligation to
pay rent to the Debtor, or any other place or places where the Collateral is
believed to be located and kept, and render the Collateral unusable or remove
the Collateral therefrom, in order effectively to collect or liquidate the
Collateral, or (ii) Secured Party may require the Debtor to assemble the
Collateral and make it available to Secured Party at a place reasonably
convenient to Secured Party or (iii) some combination thereof.
(d) Sale or Other Disposition of Collateral by Secured Party. Any notice
required to be given by Secured Party of a sale, lease or other disposition or
other intended action by Secured Party with respect to any of the Collateral, at
least three (3) business days prior to such proposed action shall constitute
fair and reasonable notice to the Debtor of any such action. If the Secured
Party chooses to dispose of the Collateral, it shall dispose of the Collateral
in a commercially reasonable manner. Any sale of the Collateral conducted in
conformity with the reasonable commercial practices of banks, insurance
companies, commercial finance companies or other financial institutions
disposing of property similar to the Collateral shall be deemed to be
commercially reasonable. The net proceeds realized by Secured Party upon any
such sale or other disposition, after deduction for the expense of retaking,
holding, preparing for sale, selling or the like and the reasonable attorneys'
fees and legal expenses incurred by Secured Party in connection therewith, shall
be applied toward satisfaction of the Liabilities. Secured Party shall account
to Debtor for any surplus realized upon such sale or other disposition, and
Debtor shall remain liable for any deficiency. The commencement of any action,
legal or equitable, or the rendering of any judgment or decree for any
deficiency shall not affect Secured Party's security interest in the Collateral
until the Liabilities are fully paid. Debtor agrees that Secured Party has no
obligation to preserve rights to the Collateral against any other parties.
8. AMENDMENTS. No amendment or modification of any provision of this Agreement
shall be effective without the written agreement of the Secured Party and
Debtor, and no termination or waiver of any provision of this Agreement, or
consent to any departure by Debtor therefrom, shall in any event be effective
without the written concurrence of Secured Party. Any waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
it was given. No notice to or demand upon Debtor or any guarantor of the
obligations of Debtor in any case shall entitle such party to any other or
further notice or demand in similar or other circumstances.
9. NO WAIVER. Secured Party's failure, at any time or times hereafter, to
require strict performance by Debtor of any provision or term of this Agreement
shall not waive, affect or diminish any right of Secured Party thereafter to
demand strict compliance and performance therewith. Any suspension or waiver by
Secured Party of an Event of Default shall not, except as may be expressly set
forth herein, suspend, waive or affect any other Event of Default, whether the
same is prior or subsequent thereto and whether of the same or of a different
kind or character. None of the undertakings, agreements, warranties, covenants
and representations of Debtor contained in this Agreement, and no Event of
Default shall be deemed to have been suspended or waived by Secured Party,
unless such suspension or waiver is (a) in writing and signed by Secured Party,
and (b) delivered to Debtor.
10. SOLE BENEFIT OF PARTIES. This Agreement is solely for the benefit of the
parties hereto and their respective successors and assigns, and no other person
shall have any right, benefit or interest under or because of the existence of
this Agreement.
11. LIMITATION ON RELATIONSHIP BETWEEN PARTIES. The relationship of Secured
Party on the one hand, and Debtor, on the other hand, has been and shall
continue to be, at all times, that of lessor and lessee and, to the extent
monies are owed to Secured Party by Debtor, creditor and debtor. Nothing
contained in this Agreement, any instrument, document or agreement delivered in
connection therewith or in the Guaranty, the Loan Agreement, the Note or any of
the other documents shall be deemed or construed to create a fiduciary
relationship between the parties. 12. NO ASSIGNMENT. This Agreement shall not be
assignable by Debtor without the written consent of Secured Party. Secured Party
may assign to one or more persons all or any part of, or any participation
interest in, the Secured Party's rights and benefits hereunder.
G:\LAW\LAC\2924.PHC
<PAGE>
13. SECTION TITLES. The section and subsection titles contained in this
Agreement are included for the sake of convenience only, shall be without
substantive meaning or content of any kind whatsoever, and are not a part of the
agreement between Debtor and Secured Party. 14. NOTICES. Except as otherwise
expressly provided herein, any notice required or desired to be served, given or
delivered hereunder shall be in writing, and shall be deemed to have been
validly served, given or delivered (a) four (4) days after deposit in the United
States mails, with proper postage prepaid, (b) when sent after receipt of
confirmation or answerback if sent by telecopy, telex or other similar facsimile
transmission, (c) one (1) business day after deposited with a reputable
overnight courier with all charges prepaid or (d) when delivered, if
hand-delivered by messenger, all of which shall be properly addressed to the
party to be notified and sent, to the address or number indicated below:
(a) If to Secured Party: LINC ANTHEM CORPORATION
303 East Wacker Drive
Chicago, Illinois 60601
Attention:Vice President - Operations
Telecopy: (312) 938-4290
Confirmation: (312) 946-1000
(b) If to Debtor: __________________________________________
==========================================
Attention: ______________________________
Telecopy: _________________________________________
Confirmation: __________________________________________
15. COUNTERPARTS. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.
16. GOVERNING LAW. SECURED PARTY AND DEBTOR EACH HEREBY AGREE THAT ALL DISPUTES
AMONG OR BETWEEN THEM, ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL
TO THE RELATIONSHIP ESTABLISHED AMONG OR BETWEEN THEM IN CONNECTION WITH THIS
AGREEMENT, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE
RESOLVED IN ACCORDANCE WITH THE INTERNAL LAWS AND NOT THE CONFLICTS OF LAW
PROVISIONS OF THE STATE OF ILLINOIS.
17. WAIVER OF JURY TRIAL. EACH OF DEBTOR AND SECURED PARTY WAIVES ANY RIGHT TO
HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT,
TORT OR OTHERWISE, BETWEEN DEBTOR AND SECURED PARTY OR ANY OF THEIR RESPECTIVE
AFFILIATES ARISING OUT OF, CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT INSTEAD,
ANY DISPUTES RESOLVED IN COURT WELL BE RESOLVED IN A BENCH WITHOUT A JURY.
18. WAIVER OF BOND. DEBTOR WAIVES THE POSTING OF ANY BOND OTHERWISE REQUIRED OF
SECURED PARTY IN CONNECTION WITH ANY JUDICIAL PROCESS OR PROCEEDING TO ENFORCE
ANY JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF SECURED PARTY OR TO
ENFORCE THIS AGREEMENT BY SPECIFIC PERFORMANCE, TEMPORARY RESTRAINING ORDER,
PRELIMINARY OR PERMANENT INJUNCTION.
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<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed as of this 25th day of
July, 1996.
PHC, INC.
(Debtor)
By: _______________________________
Authorized Signature
Name: ____________________________
Title: _____________________________
PHC OF RHODE ISLAND, INC.
(Debtor)
By: _______________________________
Authorized Signature
Name: ____________________________
Title: _____________________________
PHC OF VIRGINIA, INC.
(Debtor)
By: ______________________________
Authorized Signature
Name: ___________________________
Title: ____________________________
PHC OF NEVADA, INC.
(Debtor)
By: _____________________________
Authorized Signature
Name: __________________________
Title: ___________________________
Acknowledged by:
LINC ANTHEM CORPORATION
(Secured Party)
By: _____________________________
Authorized Signature
Name: __________________________
Title: ___________________________
G:\LAW\LAC\2924.PHC
<PAGE>
Exhibit 10.85
CUSTODIAL AGREEMENT
This agreement made this 25th day of July 1996, by and between LINC ANTHEM
CORPORATION, a Delaware corporation with its principal place of business at 303
East Wacher Drive, Chicago, Illinois 60601 (hereinafter called "LIC"), PHC,
INC., a Massachusetts corporation with its principal office at 200 Lake Street,
Peabody, Massachusetts 01960 (hereinafter called "PHC"), and Choate Hall &
Stewart, a law firm having its office at Exchange Place, 53 State, Street,
Boston, MA 02109 (hereinafter called the "Custodian").
Witnesseth:
Whereas, LINC and PHC have entered into a Stock Pledge Agreement ("Pledge
Agreement") dated June 1996 whereby PHC has pledged all of its right title and
interest in all of the stock held by PHC in its wholly owned subsidiary North
Point - Pioneer, Inc. (the "Stock ") in accordance with the requirements of that
certain Loan and Security Agreement dated __________, 1996 (the "Loan
Agreement"), and
Whereas, under the terms of the Pledge agreement, LIC is entitled to hold
physical possession of the stock certificates evidencing the Stock pledged to
LINC (the "Stock Certificates:);
Whereas, LINC and PHC have agreed that physical possession of the Stock
Certificates may be held by the Custodian for administrative convenience of both
LINC and PHC.
Now, Therefore, in consideration of the premises and the mutual undertakings
herein, and the aforesaid Agreement between LINC and PHC, it is hereby agreed.
as follows:
1. The Stock Certificates shall be promptly delivered to the Custodian who is
hereby retained by PHC as its agent for the purpose of holding said Stock
Certificates in trust solely for the benefit of PHC and LINC and for the purpose
hereinafter set forth.
2. The Custodian is hereby directed and agrees to keep the Stock Certificates at
all times in its exclusive control and custody , in trust for and subject to the
direction of LINC, in a secure space in the ustodian's office set aside
specifically for that purpose, to which a duly appointed representative of
Custodian approved by PHC alone shall have access, and said representative
shall: (a) deliver the Stock Certificates only upon written request of LINC
pursuant to the terms of the Pledge Agreement; (b) upon the termination of
Custodian's employment hereunder and the appointment of a successor for
Custodian hereunder, immediately deliver Stock Certificates, when so directed by
LINC and PHC, to such successor or to such other person or concern as PHC may
designate, subject to the same terms hereof; and (c) make such other lawful
disposition of the Stock Certificates as PHC and LINC may expressly direct.
3. The Custodian agrees without cost or charge to PHC to provide a suitable safe
space at its office for the safekeeping of such Stock Certificates, and agrees
that such space and the said Stock Certificates shall be in the sole and
exclusive custody and control of the Custodian. PHC further agrees to reimburs
the Custodian for all proper and reasonable expenses which the Custodian may
incur in carrying out the terms oF this Agreement, such expenses to be
separately negotiated between Custodian and PHC and not be a part of this
Agreement.
4. PHC shall at any time have full and unconditional right and power to
discharge the Custodian and to appoint a successor for him to act hereunder. The
Custodian accepts all of the provisions hereinabove contained.
<PAGE>
5. LINC shall deliver a notice of termination of this Agreement and release of
the Stock Certificates collaterally assigned to LINC to the Custodian and PHC
upon the satisfaction of all the obligations of PHC under the Pledge Agreement.
6. When the Stock Certificate is delivered to the Custodian, it shall be
maintained by the Custodian in an envelope in the corporate books and records of
PHC marked as follows:
"Property of LINC ANTHEM CORPORATION pursuant to Stock Pledge
Agreement dated ___________, 1996 between PHC, INC. and LINC
ANTHEM CORPORATION"
7. In the event that it is necessary for LINC and PHC to have possession of the
Stock Certificates in order to pursue, prove or protect their respective
interests or claims, LINC or PHC shall be permitted access to and possession of
the Stock Certificates to the extent necessary to pursue, prove and protect such
interests upon written request.
8. It is agreed and understood that PHC is solely responsible for any mistake,
error or omission of PHC or the Custodian in the handling, release, delivery or
redelivery of the Stock Certificates while in the possession and control of
Custodian or PHC. It is agreed and understood that LINC is solely responsible
for any mistake, error or omission of LINC in the handling, release, delivery or
redelivery of the Stock Certificates while it is in the actual possession and
control of LINC.
In witness whereof, the parties have executed this Agreement as of the date
first stated above.
PHC, INC. CHOATE HALL & STEWART
Custodian
By: ___________________________ By: __________________________
Name: Name:
Title: __________________________ Title: ________________________
LINC ANTHEM CORPORATION
By: ___________________________
Title: __________________________:
G.:\LAW\LAC\PHC\CUSTION\ACT
<PAGE>
July ______, 1996
LINC Finance Corporation VIII
303 East Wacker Drive,
Chicago, IL 60601
LINC Financial Services, Inc.
303 East Wacker Drive,
Chicago, IL 60601
Re: LETTER OF DIRECTION FOR SALE AND PURCHASE AGREEMENTS
Ladies and Gentlemen:
This letter will set forth the irrevocable instruction being issued by PHC,
Inc. and its affiliates PHC of Rhode Island, Inc. and PHC of Virginia, Inc. who
are parties to a Sale and Purchase Agreement (the "Agreement") among LINC
Financial Services, Inc. (the "Administrative Agent"), LINC Finance Corporation
VIII ("LFC") under either (i) that certain Sale and Purchase Agreement dated as
of January 20, 1995 between PHC of Rhode Island, Inc. and LINC FINANCE
CORPORATION VIII or (ii) that certain Sale and Purchase Agreement dated as of
March 6, 1995 between PHC of Virginia, Inc. and LINC FINANCE CORPORATION VIII
(iii) all future Sale and Purchase Agreements as may be executed between Debtor
or its affiliates and LINC Finance Corporation VIII or its successors and
assigns. Each of the signatories hereto are referred to in each applicable
Agreement as the "Provider" under which the Provider will sell certain health
care receivables to LFC and the terms under which LFC will purchase such
receivables. Except as otherwise expressly defined herein all capitalized terms
shall have the same meanings as set forth in the Agreement.
PHC, Inc., PHC of Rhode Island, Inc., PHC of Virginia, Inc. and PHC of
Nevada, Inc., has each entered into that certain Corporate Guaranty dated July
_____, 1996 in favor of LINC Anthem Corporation and has granted LINC Anthem
Corporation a security interest in all accounts receivable now or hereafter
acquired by PHC, Inc., PHC of Rhode Island, Inc. and PHC of Virginia, Inc. In
connection therewith each of the undersigned hereby agrees that upon written
notice of a default in the payment or performance of PHC, Inc., PHC of Rhode
Island, Inc., PHC of Virginia, Inc. or PHC of Nevada, Inc., under the Corporate
Guaranty through a letter issued by LINC Anthem Corporation (the "Default
Notice") to each or all of the undersigned setting forth the aggregate amount
then due under the Corporate Guaranty to LINC Anthem Corporation, the
undersigned hereby agree that LINC Finance Corporation VIII may withhold an
amount equal to the aggregate amount set forth in the Default Notice from any
Advance Amount or any Provider Interest then or thereafter payable by LINC
Finance Corporation VIII to each or all of the undersigned and to remit such
amounts to LINC Anthem Corporation or to its designee as directed in the Default
Notice.
Amounts to be withheld from the undersigned shall be pro-rated among the
Providers on each Purchase Date. In the event that there is insufficient sums
available to be withheld on any Purchase Date to satisfy the amounts set forth
in the Default Notice, then LINC Finance Corporation VIII is hereby authorized
to continue to withhold and remit sums to LINC Anthem Corporation on each
subsequent Purchase Date until the full amount due LINC Anthem Corporation as
set forth in the Default Notice has been paid in full or until LINC Anthem
Corporation instructs LINC Finance Corporation VIII to cease making such
remittances. Notwithstanding the foregoing it is understood that the maximum
amount of any Advance Amount to be withheld from any one Provider shall not
exceed 10% of the Advance Amount payable for any Batch on any Purchase Date and
shall not exceed 50% of any Provider Interest payable on any remittance date. It
is further understood that to the extent any Advance Amount or Provider Interest
is payable directly to PHC, Inc. then up to 100% of such amounts shall be
withheld and remitted to LINC Anthem Corporation in accordance with the Default
Notice before any amounts are withheld from any other Provider.
This Direction may be executed in any number of counterparts, each of which
shall be deemed to be an original, and all of which together shall constitute
but one and the same instrument.
<PAGE>
PHC, INC.
By: __________________________
Name: ________________________
Title: ________________________
Date: ________________________
PHC OF RHODE ISLAND, INC.
By: __________________________
Name: ________________________
Title: ________________________
Date: ________________________
PHC OF VIRGINIA, INC.
By: __________________________
Name: ________________________
Title: ________________________
Date: ________________________
PHC OF NEVADA, INC.
By: __________________________
Name: ________________________
Title: ________________________
Date: ________________________
Accepted by:
LINC ANTHEM CORPORATION
By: __________________________
Name: ________________________
Title: ________________________
Date: ________________________
Receipt of this Direction issued by the related Provider to the applicable Sale
and Purchase Agreement is hereby accepted and acknowledged to by:
LINC FINANCE CORPORATION VIII
By: __________________________
Name: ________________________
Title: ________________________
Date: ________________________
LINC FINANCIAL SERVICES, INC.
By: __________________________
Name: ________________________
Title: ________________________
Date: ________________________
<PAGE>
Exhibit 10.86
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this 'Agreement") is made July 25, 1996,
by and between NORTH POINT - PIONEER, INC., a Massachusetts corporation, with
its principal place of business at 200 Lake Street, Peabody, Massachusetts 01960
("Debtor') and LINC ANTHEM CORPORATION, a Delaware corporation, located at 303
East Wacker Drive, Chicago, IL 60601 ("Secured Party").
WITNESSETH:
WHEREAS, Secured Party wishes to make and Debtor wishes to receive loans
(hereinafter individually and collectively referred to as the 'Loan') evidenced
by one or more of Debtor's Promissory Notes delivered in connection herewith
from time to time (hereinafter individually referred to as the "Note' and
collectively referred to as the "Notes"); and
WHEREAS, the Note and all principal thereof and interest thereon and all
additional amounts and other sums at any time due and owing from or required to
be paid by Debtor under the terms of each Note and this Agreement are
hereinafter sometimes referred to as the 'Indebtedness'; and
WHEREAS, in exchange for receiving the Loan Debtor will grant to Secured
Party a security interest in the tangible and intangible assets of Debtor and
all proceeds thereof; and
WHEREAS, all of the requirements of law have been fully complied with and
all other acts and things necessary to make this Agreement a valid, binding and
legal instrument for the security of each Note have been done and performed;
NOW, THEREFORE, in consideration of the covenants and conditions stated in
this Agreement, the parties agree as follows:
1. The Loan; Assignment; Security Interest.
1.01 Loan Amount. Subject to the terms and conditions of this Agreement,
Secured Party agrees to make a Loan to Debtor in the aggregate principal amount
of $500,000.00 ("Loan") on or before July _, 1996 with an interest rate of 10.75
% per annum. The proceeds of the Loan shall be directed by Secured Party to
those persons identified by Debtor in writing at the time the Loan is made.
1.02 The Note. Each Note shall: (a) be dated the date on which the Loan is
made; (b) be in a principal amount which, when taken together with all other
Notes execute in connection herewith collectively equals the amount of the Loan;
(c) bear interest on the unpaid principal amount thereof at the Discount Rate;
and (d) be transferable by the holder thereof. The form of the Note is attached
as Exhibit A.
1.03 Loan Deliveries. In connection with the initial Loan, Debtor shall
deliver or cause to be delivered to Secured Party the following documents,
certificates, opinions of counsel, and agreements, in form and substance
satisfactory to Secured Party:
(a) A certified copy of the Articles of Incorporation and By Laws of Debtor
as amended and restated through the date of the initial loan;
(b) Certificates of authority and incumbency to enter into this transaction
in a form acceptable to Secured Party ;
(c) Opinion of Debtor's counsel in a form acceptable to Secured Party;
(d) A Corporate Guaranty issued by PHC, of Rhode Island, Inc., PHC of
Virginia, and PHC of Nevada, Inc., in favor of Secured Party in a form
acceptable to Secured Party ("Corporate Guaranty");
(e) A Security Agreement issued by PHC, Inc., PHC of Rhode Island, Inc.,
PHC of Virginia, Inc. and PHC of Nevada, Inc., in favor of Secured Party in form
acceptable to Secured Party
G|\law\lac\phc\loandoc 7/16/96
<PAGE>
granting Secured Party a continuing valid and enforceable perfected security
interest and collateral assignment of (i) all accounts receivables and related
rights of PHC, Inc. now owned or hereafter created by PHC, Inc., PHC of Rhode
Island, Inc., PHC of Virginia, Inc. and PHC of Nevada, Inc., ('PHC Security
Agreement') except for any accounts receivable sold to and purchased by LINC
Finance Corporation VIII under either (a) that certain Sale and Purchase
Agreement dated as of January 20, 1995 between PHC of Rhode Island, Inc. and
LINC FINANCE CORPORATION VIII or (b) that certain Sale and Purchase Agreement
dated as of March 6, 1995 between PHC of Virginia, Inc. and LINC FINANCE
CORPORATION VIII or (c) any subsequent Sale and Purchase Agreement between
Debtor and LINC Finance Corporation VIII or its successors and assigns
(collectively, the "Receivables Agreement") and subject only to the security
interest of LINC Finance Corporation VIII granted to LINC Finance Corporation
VIII under the Receivables Agreement; & (ii) all other assets of PHC, Inc.
including, equipment, chattel paper, documents, instruments, general intangibles
and other property of PHC, Inc. whether now owned or hereafter acquired and all
products and proceeds thereof subject to no other interests.
(f) UCC-1 financing statements naming the Debtor as debtor and Secured
Party as secured party, executed by Debtor for filing by Secured Party for
acknowledgment by the appropriate recording offices where the collateral, as
hereafter defined, is located;
(g) UCC-1 flanking statements naming the PHC, Inc. as debtor and Secured
Party as secured party, executed by PHC, Inc. for filing by Secured Party for
acknowledgment by the appropriate recording offices where the collateral under
the PHC Security Agreement is located;
(h) UCC-1 financing statements naming the PHC of Rhode Island, Inc. as
debtor and Secured Party as secured party, executed by PHC of Rhode Island, Inc.
for filing by Secured Party for acknowledgment by the appropriate recording
offices where the collateral under the PHC Security Agreement is located;
(i) UCC-1 financing statements naming the PHC of Virginia, Inc. as debtor
and Secured Party as secured party, executed by PHC of Virginia, Inc. for filing
by Secured Party for acknowledgment by the appropriate recording offices where
the collateral under the PHC Security Agreement is located; and
0) UCC-1 financing statements naming the PHC of Nevada, Inc. as debtor and
Secured Party as secured party, executed by PHC of Nevada, Inc. for filing by
Secured Party for acknowledgment by the appropriate recording offices where the
collateral under the PHC Security Agreement is located; and
(k) Such other instruments and documents as required by Secured Party
including a direction to LINC Finance Corporation VIII to remit sums otherwise
payable to PHC, Inc., PHC of Rhode Island, Inc. and PHC of Virginia, Inc. under
the Receivables Agreement to Lender upon the occurrence of certain events.
(1) A Stock Pledge and Security Agreement
(m) Stock Power Agreement
(n) Custodial Agreement
1. DEFINED TERMS. Capitalized terms not otherwise defined herein shall have the
meanings given such terms in the Note
2. COLLATERAL.
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<PAGE>
(a) Grant of Security. To secure the prompt and complete payment,
observance and performance of all of the obligations and liabilities of Debtor
under the Note and the payment of sums due and to become due thereunder and all
other obligations and liabilities of Debtor to Secured Party (whether or not
evidenced by a note or other instrument or document and whether or not for the
payment of money) direct or indirect, absolute or contingent, due or to become
due, now existing or hereafter and howsoever arising, including without
limitation, Costs and Expenses (as defined in Section 6) in connection therewith
(collectively, the "Liabilities"), Debtor hereby assigns and pledges to the
Secured Party, and hereby grants to Secured Party, a security interest in all of
the Debtor's right, title and interest in and to the following, whether now
owned or existing or hereafter arising or acquired and wheresoever located (the
"Collateral'):
Accounts. All present and future accounts, accounts receivable and other
rights of the Debtor to payment for goods sold or leased or for services
rendered (except those evidenced by instruments or chattel paper), whether now
existing or hereafter arising and wherever arising, and whether or not they have
been earned by performance (collectively, "Accounts");
Equipment. All machinery, all manufacturing, distribution, selling, data
processing and office equipment, all furniture, furnishings, appliances,
fixtures and trade fixtures, tools, tooling, molds, dies, vehicles and all other
goods of every type and description (other than inventory), in each instance
whether now owned or hereafter acquired by Debtor and located at the Debtor's
Location (collectively, "Equipment");
General Intangibles. All rights, interests, chooses in action, causes of
action, claims and all other intangible property of Debtor of every kind and
nature related to or arising in connection with Accounts, or Equipment, in each
instance whether now owned or hereafter acquired by Debtor, and however and
whenever arising, including, without limitation, all customer contracts, firm
orders, rights under provider contracts and all other contracts and contract
rights; all deposit accounts (general or special) with any bank or other
financial institution, including, without limitation, any deposits or other sums
at any time credited by or due to Debtor from any affiliate of Secured Party
with the same rights therein as if the deposits or other sums were credited by
or due from Secured Party thereunder; all rights to indemnification; and all
letters of credit, guaranties, liens, security interests and other security held
by or granted to Debtor; and all other intangible property, whether or not
similar to the foregoing related to or arising in connection with the Accounts
or Equipment; and
Chattel Paper, Instruments and Documents. All chattel paper, leases, all
instruments and all payments thereunder and instruments and other property from
time to time delivered in respect thereof or in exchange therefor, and other
documents of title and documents, in each instance whether now owned or
hereafter acquired by Debtor relating to or arising in connection with the
Accounts or Equipment.
Other Property. All other tangible and intangible real and personal
property now or hereafter acquired by Debtor including all money and proceeds of
Accounts and Equipment and insurance proceeds and books and records relating to
any of the Accounts and Equipment; together, in each instance, with all
accessions and additions thereto, substitutions therefor, and replacements,
proceeds and products thereof.
(b) Debtor Remains Liable. Anything herein to the contrary notwithstanding, (i
Debtor shall remain solely liable under the contracts and agreements included in
the Collateral to the extent set forth therein to perform all of its duties and
obligations thereunder to the same extent as if this Agreement and any other
security document executed in connection with the Note or this Agreement
("Security Documents") had not been executed, (ii) the exercise by Secured Party
of any of its rights hereunder or under any other Security Documents shall not
release Debtor from any of its duties or obligations under the contracts and
agreements included in the Collateral and (iii) Secured Party shall not have any
responsibility, obligation or liability under the contracts and agreements
included in the Collateral by reason of this Agreement or any other Security
Documents, nor shall Secured Party be required or obligated, in any manner, to
(A) perform or fulfill any of the obligations or duties of Debtor thereunder,
(B) make any payment, or make any inquiry as to the nature or sufficiency of any
payment received by Debtor or the sufficiency of any performance by any party
under any such contract or agreement or (C) present or file any claim, or take
any action to collect or enforce any claim for payment assigned hereunder.
(c) Representations and Warranties Regarding Collateral. Debtor represents and
warrants, as of the date of this
G|\law\lac\phc\loandoc 7/16/96
<PAGE>
Agreement and as of each date hereafter (except for changes permitted or
contemplated by this Agreement) until termination of this Agreement:
(i) The correct name of Debtor is set forth in the first paragraph o this
Agreement. The chief plac e of business, chief executive office of Debtor and
all Inventory and Equipment of Debtor is located at the address specified as the
notice address for Debtor (the "Premises") and Debtor has exclusive possession
and control of the Equipment and Inventory. All records concerning any Accounts
and all originals of all chattel paper which evidence any Account are located at
the Premises and none of the Accounts is evidenced by a promissory note or other
instrument except for such notes and other instruments delivered to Secured
Party.
(ii) Debtor is the legal and beneficial owner of the Collateral free and
clear of all liens except for liens o Secured arty. Debtor currently conducts
business under the name: NORTH POINT - PIONEER, INC..
(iii) This Agreement creates in favor of Secured Party a legal, valid and
enforceable security interest in the Collateral. When flanking statements have
been filed in the office of the Secretary of States of Massachusetts and Nevada
or delivery of Collateral made to Secured Party, Secured Party will have a fully
perfected first priority lien on, and security interest in, the Collateral in
which a security interest may be perfected by filing or delivery.
(iv) No authorization approval or other action by, and no notice to or
filing with, any governmental authorit y that have not already been taken or
made and which are in full force and effect, is required (A) for the grant by
Debtor of the security interest in the Collateral granted hereby; (B) for
performance of this Agreement by Debtor; or (C) for the exercise by Secured
Party of any of its other rights or remedies hereunder.
(d) Perfection and Maintenance of Security Interest and Lien. Debtor agrees that
until all liabilities have been fully satisfied and the Note has been canceled,
Secured Party's security interests in and liens on and against the Collateral,
and all proceeds and products thereof, shall continue in full force and effect.
Debtor shall perform any and all steps reasonably requested by Secured Party to
perfect, maintain and protect Secured Party's security interests in and liens on
and against the Collateral granted or purported to be granted hereby and by the
other Security Documents or to enable Secured Party to exercise its rights and
remedies hereunder and under the other Security Documents with respect to any
Collateral, including, without limitation, (i) executing and filing flanking or
continuation statements, or amendments thereof, in form and substance reasonably
satisfactory to Secured Party, (ii) executing and recording mortgages, deeds of
trust and other Security Documents in form and substance reasonably satisfactory
to Secured Party, (iii) delivering to Secured Party all certificates, notes and
other instruments (including, without limitation, all letters of credit on which
Debtor is named as a beneficiary) representing or evidencing Collateral duly
endorsed and accompanied by duly executed instruments of transfer or assignment,
including, but not limited to, note powers, all in form and substance
satisfactory to Secured Party, (iv) placing notations on Debtor's books of
account to disclose Secured Party's security interest therein and marking
conspicuously each document, contract, chattel paper and all records pertaining
to the Collateral with a legend, in form and substance satisfactory to Secured
Party, indicating that such document, contract, chattel paper or Collateral is
subject to the security interest granted herein and (v) executing and delivering
all further instruments and documents, and taking all further action, as Secured
Party may reasonably request.
(e) Financing Statements. To the extent permitted by applicable law, Debtor
hereby authorizes Secured Party to file one or more flanking or continuation
statements and amendments thereto, disclosing the security interest granted to
Secured Party under this Agreement without Debtor's signature appearing thereon
and Secured Party agrees to notify Debtor when such a filing has been made.
Debtor agrees that a carbon, photographic, photostatic or other reproduction of
this Agreement or of a financing statement is sufficient as a financing
statement.
(f) Filing Costs. Debtor shall pay the costs of, or incidental to, all
recordings or filings of all financing statements and other Security Documents.
(g) Schedule of Collateral. Debtor shall furnish to Secured Party from time to
time statements and schedules further identifying and describing the Collateral
and such other reports in connection with the Collateral as Secured Party may
reasonably request, all in reasonable detail.
G|\law\lac\phc\loandoc 7/16/96
<PAGE>
(h) Equipment and Inventory. Debtor covenants and agrees with lessor that from
and after the date of this Agreement and until termination of this Agreement
Debtor shall:
(i) Keep the Equipment and Inventory (other than Inventory sold in
the ordinary course of business) on the Premises;
(ii) Maintain or cause to be maintained in good repair, working order an
condition, excepting ordinary wear and tear and damage due to casualty, all of
the Equipment, and make or cause to be made all appropriate repairs, renewals
and replacements thereof, as quickly as practicable after the occurrence of any
loss or damage thereto which are necessary or desirable to such end.
(i) Accounts. Debtor covenants and agrees with Secured Party that from and
after the date of this Agreement and until termination of this Agreement that:
(i) Debtor shall keep its chief place of business and chief executive
office and the office where it keeps its records concerning the Accounts, and
the offices where it keeps all originals of all chattel paper which evidence
Accounts, at the Premises. Debtor will hold and preserve such records (in
accordance with Secured Party's usual document retention practices) and chattel
paper and will permit representatives of Secured Party at any time during normal
business hours to inspect, copy and make abstracts from such records and chattel
paper;
(ii) Except as otherwise provided in this subsection (ii), Debtor shall
continue to collect, at its own expense, all amounts due or to become due Debtor
under the Accounts. In connection with such collections, Debtor may, take (and,
at the Secured Party's discretion, shall take) such action as Debtor or Secured
Party may deem necessary of advisable to enforce collection of the Accounts;
provided however, that Secured Party shall have the right at any time upon
written notice to Secured Party of its intention to do so, to notify the account
debtors or obligors under any Account of the assignment of such Account to
Secured Party and to direct such account debtors or obligors to make payment of
all amounts due or to become due to Debtor thereunder directly to Secured Party
and, upon such notification and at the expense of Debtor, to enforce collection
of any such Account, and to adjust, settle or compromise the amount or payment
thereof, in the same manner and to the same extent as Debtor might have done.
After receipt by Debtor of the notice from Secured Party referred to in the
provision to the preceding sentence, (A) all amounts and proceeds (including
instruments) received by Debtor in respect of the Accounts shall be received in
trust for the benefit of Secured Party hereunder, shall be segregated from other
funds of Debtor and shall be forthwith paid over to Secured Party in the same
form as so received (with any necessary endorsement) to be held as cash
collateral and either ((i)) released to Debtor so long as no "Event of Default"
(as hereinafter defined) shall have occurred and be continuing or ((ii)) if any
Event of Default shall have occurred and be continuing, applied as provided
herein and (B) Debtor shall not adjust, settle or compromise the amount or
payment of any Account, or release wholly or partly any account debtor or
obligor thereof, or allow any credit or discount thereon;
(iii) In any suit, proceeding or action brought by Secured Party under any
Account comprising part of the Collateral, Debtor will save, indemnify and keep
Secured Party, harmless from and against all expenses, loss or damage suffered
by reason of any defense, setoff, counterclaim, recoupment or reduction of
liability whatsoever of the obligor thereunder, arising out of a breach by
Debtor of any obligation or arising out of any other agreement, indebtedness or
liability at any time owing to or in favor of such obligor or its successors
from Debtor, and all such obligations of Debtor shall be and shall remain
enforceable against and only against Debtor and shall not be enforceable against
Secured Party;
(iv) At Secured Party's request in the event that Debtor has Accounts with
respect to which the account debtor is the United States of America or any
department, agency or instrumentality thereof (all such Accounts being
hereinafter referred to as ("Government Receivables"), Debtor shall, with
respect to such Government Receivables, promptly comply with the Assignment of
Claims Act of 1940, as amended (31 U.S.C. 3727 et seq.) and any other statute or
regulation governing the collection of such Government Receivables, and shall
promptly deliver to Secured Party evidence of such compliance, which evidence
shall be in form and substance satisfactory to Secured Party in its sole
discretion;
(v) Debtor shall keep and maintai at Debtor's o wn cost and expense
satisfactory and complete records of Debtor's Collateral in a manner consistent
with reasonable and appropriate business practices, including, without
limitation, a record of all payments received and all credits granted with
respect to such Collateral. Debtor shall, for the
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<PAGE>
Secured Party's further security, deliver and turn over to Secured Party or
Secured Party's designated representatives at any time following the occurrence
of an Event of Default and upon five (5) days' notice from Secured Party or
Secured Party's designated representative, any such books and records
(including, without limitation, the file cabinets in which paper records are
stored and any and all computer tapes, programs and source codes relating to
such Collateral in which Debtor has an interest or any part or parts thereof);
(vi) Debtor will not create, permit or suffer to exist, and will defend the
Collateral against, and take such other action as is necessary to remove, any
lien on such Collateral, and will defend the right, title and interest of
Secured Party in and to Debtor's rights to such Collateral, including, without
limitation, the proceeds and products thereof, against the claims and demands of
all persons or entities whatsoever;
(vii) Debtor will not, without Secured Party's prior written consent, except
in the ordinary course of business and for amounts which are not material in the
aggregate, (A) grant any extension of the time of payment of any of the
Collateral or compromise, compound or settle any Account for less than the full
amount thereof, (B) release, wholly or partly, any person liable for the payment
thereof; or (C) allow any credit or discount whatsoever thereon other than trade
discounts granted in the ordinary course of business; and
(viii) Debtor will advise Secured Party promptly, in reasonable detail, of (A)
any material lien, security interest or claim made by or asserted against any or
all of the Collateral, and (B) the occurrence of any other event which would
have a material adverse effect on the aggregate value of such Collateral or on
the security interest and liens with respect to such Collateral created
hereunder or under any other Security Document.
0) Secured Party Appointed Attorney-in-Fact. Debtor hereby irrevocably appoints
Secured Party as Debtor's attorney-in-fact, with full authority in the place and
stead of Debtor and in the name of the Debtor or otherwise, from time to time in
Secured Party's discretion, to take any action and to execute any instrument
which the Secured Party may deem necessary or advisable to accomplish the
purposes of this Agreement, including, without limitation, (i) following the
occurrence and during the continuance of an Event of Default, to:
(A) obtain and adjust insurance;
(B) ask, demand, collect, sue for, recover, compromise, receive an give
acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral;
(C) receive, endors and collect any drafts or other instruments, documents
and chattel paper, in connection with clause (A) or (B) above; and
(D) file any claims or take any action or institute any proceedings which
Secured Party may deem necessary or desirable for the collection of any of
the Collateral or otherwise to enforce the rights of Secured Party with
respect to any of the Collateral;
and (ii) at any time, to:
(A) obtain access to records maintained for Debtor by computer services
companies and other service companies or bureaus;
(B) send requests under Debtor's or a fictitious name to Debtor's customers
or account debtors for verification of Accounts; and
(C) do all things necessary to carry out this Agreement.
(k) Secured Party May Perform. If Debtor fails to perform any agreement
contained herein, Secured Party may itself perform, or cause performance of,
such agreement, and the reasonable expenses of the Secured Party incurred in
connection therewith shall be payable by Debtor on demand and shall become part
of the Liabilities secured hereunder.
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<PAGE>
(1) Secured Party's Duties. The powers conferred on Secured Party hereunder are
solely to protect its interest in the Collateral and shall not impose any duty
upon Secured Party to exercise any such powers. Except for the safe custody of
any Collateral in its possession and the accounting for moneys actually received
by it hereunder, Secured Party shall have no duty as to any Collateral. Secured
Party shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which Secured Party accords its own
property, it being understood that Secured Party shall be under no obligation to
take any steps necessary to preserve rights against prior parties or any other
rights pertaining to any Collateral, but may do so at its option, and all
reasonable expenses incurred in connection therewith shall be for the sole
account of Debtor and shall be added to the Liabilities.
3 . WARRANTIES AND REPRESENTATIONS. Debtor hereby represents and warrants to
Secured Party, on each date indebtedness is incurred under the Note, that:
(a) Debtor's principal place of business is that shown at the beginning
of this Security Agreement. All of the Collateral is kept as such place(s) of
business
(b) Debtor is lawfully possessed of and has good title to the Collateral,
free and clear of all liens, encumbrances, security interests and adverse claims
except only for the security interest granted to Secured Party herein except as
otherwise provided herein;
(c) (i) Debtor is legally organized and validly existing, in good standing
under the laws of its state of organization and is duly qualified to do business
and in good standing under the laws of each jurisdiction where the nature of its
business or the character of its properties makes it necessary for it to so
qualify to do business; (ii) Debtor has full power and authority to execute and
deliver this Security Agreement, together with all notes, leases, agreements and
instruments evidencing Indebtedness, and to pay and perform its obligations
thereunder; (iii) Debtor has full power and authority to own its properties and
carry on its business as now being conducted; (iv) this Security Agreement and
all documents evidencing indebtedness under the Note have been duly authorized,
executed and delivered by Debtor and constitute the valid, legal and binding
obligations of Debtor enforceable in accordance with their terms.
(d) (i) The execution, delivery and paymentof any and all of the documents
and instruments evidencing indebtedness under the Note and the entering into by
Debtor of this Security Agreement and the performance of its obligations
hereunder will not violate or conflict with any of the provisions of the
Certificate of Incorporation or By-Laws of Debtor (or Debtor's Articles of
Partnership, if applicable) and will not result in any breach of, or constitute
a default under, or result in the creation of any lien, charge, security
interest, or other encumbrance in or upon any of Debtor's property or assets
(except for the security interest created hereby) pursuant to any indenture,
mortgage, deed of trust, bank loan or credit agreement, or any other instrument
to which Debtor is a party or by or under which it may be bound; (ii) no
approval is required from any public regulatory body nor from any parent,
subsidiary or affiliate of Debtor or from any other person, firm or corporation
with respect to the execution, delivery and payment upon any documents
evidencing Indebtedness, the entering into of this Security Agreement, and the
performance by Debtor of its obligations hereunder; (iii) there are no suits or
proceedings pending, or to the knowledge of Debtor threatened, in any court or
before any regulatory commission, board or other administrative governmental
agency against or affecting Debtor which will have a material adverse effect on
the financial condition or business of Debtor.
4. COVENANTS.
(a) Financial Information: On or prior to the tenth day of each month, Debtor
shall deliver to Secured Party:
(i) a schedule of all Accounts created or acquired by Debtor during the
preceding month together with an aged trial balance of Accounts (an "Accounts
Trial Balance") for Debtor, indicating which Accounts are 1 to 30, 31 to 60, 61
to 90, 91 to 120 and 120 or more days past the original invoice date and, if
requested by Secured Party, listing the names and addresses of all account
debtors;
(ii) an accounts payable aging, showing which accounts payable are 10 to
30, 31 to 60, 61 to 90 and 91 days
G|\law\lac\phc\loandoc 7/16/96
<PAGE>
or more past due; and
(iii) interim financial statements, consisting of balance sheets, income
statements, cash flow statements for such month and for the period from the
beginning of the then current fiscal year to the end of such month.
(b) Distributions: From and after Secured Party gives notice to Debtor to do so,
Debtor shall not:
(i) make any distribution of dividends or the equivalent (including
repurchases of interests in Debtor from any holder thereof); or
(iii) pay any management fees to any affiliate of Debtor.
5. TERM OF AGREEMENT. This Agreement shall become effective as provided herein,
and shall remain in effect until such time as all of the Liabilities shall have
been fully performed and paid in full and the Note shall have been canceled.
6. SECURED PARTY'S EXPENSES. Debtor shall reimburse the Secured Party for all
fees, costs and expenses (including, but not limited to, attorneys' fees, costs
and expenses) incurred by the Secured Party, in connection with this Agreement
including, but not limited to, such fees, costs and expenses incurred in
connection with the implementation, administration and enforcement of this
Agreement and the other agreements, documents and instruments referred to herein
or contemplated hereby and the auditing, appraising, evaluating or otherwise
monitoring the Collateral or other credit support for the Liabilities (all such
costs and expenses, ("Cost and Expenses").
7. DEFAULT; REMEDIES.
(a) Events of Default. Any one of the following acts shall constitute an "Event
of Default' under this Agreement:
(i) Failure by the Debtor to pay any of the Liabilities when due.
(ii) Any representation or warranty now or hereafter made by the Debtor
herein or by the Debtor in connection with this Agreement shall prove
to have been incorrect in any material respect when made.
(iii) Failure by the Debtor to perform or observe any covenant, condition or
agreement contained in this Agreement.
(b) Remedies. If any Event of Default occurs, in addition to all other remedies
Secured Party may have at law or equity, Secured Party may (i) declare all
Liabilities to be forthwith due and payable, whereupon the Liabilities shall
become and be forthwith due and payable, without presentment, demand, protest,
or further notice of any kind, all of which are hereby expressly waived by the
Debtor, and (ii) exercise all or any of the rights of a secured party under the
Uniform Commercial Code in the State where the Collateral is located or other
applicable laws and any other rights and remedies available to Secured Party,
all of which rights and remedies shall be cumulative, and none exclusive, to the
extent permitted by law; provided, however, that if an Event of Default
involving the bankruptcy of the Debtor shall exist or occur, all of the
Liabilities shall automatically, without notice of any kind, be immediately due
and payable and Secured Party shall be entitled to reclaim the Equipment.
(c) Entry Upon Premises. Upon the occurrence of an Event of Default, (i) Secured
Party shall have the right to enter upon the premises of the Debtor where the
Collateral is located (or is believed to be located) without any obligation to
pay rent to the Debtor, or any other place or places where the Collateral is
believed to be located and kept, and render the Collateral unusable or remove
the Collateral therefrom, in order effectively to collect or liquidate the
Collateral, or (ii) Secured Party may require the Debtor to assemble the
Collateral and make it available to Secured Party at a place reasonably
convenient to Secured Party or (iii) some combination thereof.
(d) Sale or Other Disposition of Collateral by Secured Party. Any notice
required to be given by Secured Party of a sale, lease or other disposition or
other intended action by Secured Party with respect to any of the Collateral, at
G|\law\lac\phc\loandoc 7/16/96
<PAGE>
least three(3) business days prior to such proposed action shall constitute fair
and reasonable notice to the Debtor of any such action. If the Secured Party
chooses to dispose of the Collateral, it shall dispose of the Collateral in a
commercially reasonable manner. Any sale of the Collateral conducted in
conformity with the reasonable commercial practices of banks, insurance
companies, commercial finance companies or other financial institutions
disposing of property similar to the Collateral shall be deemed to be
commercially reasonable. The net proceeds realized by Secured Party upon any
such sale or other disposition, after deduction for the expense of retaking,
holding, preparing for sale, selling or the like and the reasonable attorneys'
fees and legal expenses incurred by Secured Party in connection therewith, shall
be applied toward satisfaction of the Liabilities. Secured Party shall account
to Debtor for any surplus realized upon such sale or other disposition, and
Debtor shall remain liable for any deficiency. The commencement of any action,
legal or equitable, or the rendering of any judgment or decree for any
deficiency shall not affect Secured Party's security interest in the Collateral
until the Liabilities are fully paid. Debtor agrees that Secured Party has no
obligation to preserve rights to the Collateral against any other parties.
8. AMENDMENTS. No amendment or modification of any provision of this Agreement
shall be effective without the written agreement of the Secured Party and
Debtor, and no termination or waiver of any provision of this Agreement, or
consent to any departure by Debtor therefrom, shall in any event be effective
without the written concurrence of Secured Party. Any waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
it was given. No notice to or demand upon Debtor or any guarantor of the
obligations of Debtor in any case shall entitle such party to any other or
further notice or demand in similar or other circumstances.
9. NO WAIVER. Secured Party's failure, at any time or times hereafter, to
require strict performance by Debtor of any provision or term of this Agreement
shall not waive, affect or diminish any right of Secured Party thereafter to
demand strict compliance and performance therewith. Any suspension or waiver by
Secured Party of an Event of Default shall not, except as may be expressly set
forth herein, suspend, waive or affect any other Event of Default, whether the
same is prior or subsequent thereto and whether of the same or of a different
kind or character. None of the undertakings, agreements, warranties, covenants
and representations of Debtor contained in this Agreement, and no Event of
Default shall be deemed to have been suspended or waived by Secured Party,
unless such suspension or waiver is (a) in writing and signed by Secured Party,
and (b) delivered to Debtor. 10. SOLE BENEFIT OF PARTIES. This Agreement is
solely for the benefit of the parties hereto and their respective successors and
assigns, and no other person shall have any right, benefit or interest under or
because of the existence of this Agreement.
11. LIMITATION ON RELATIONSHIP BETWEEN PARTIES. The relationship of Secured
Party on the one hand, and Debtor, on the other hand, has been and shall
continue to be, at all times, that of lessor and lessee and, to the extent
monies are owed to Secured Party by Debtor, creditor and debtor. Nothing
contained in this Agreement, any instrument, document or agreement delivered in
connection therewith or in the Note or any of the other documents shall be
deemed or construed to create a fiduciary relationship between the parties.
12. NO ASSIGNMENT. This Agreement shall not be assignable by Debtor without the
written consent of Secured Party. Secured Party may assign to one or more
persons all or any part of, or any participation interest in, the Secured
Party's rights and benefits hereunder.
13. SECTION TITLES. The section and subsection titles contained in this
Agreement are included for the sake of convenience only, shall be without
substantive meaning or content of any kind whatsoever, and are not a part of the
agreement between Debtor and Secured Party.
14. NOTICES. Except as otherwise expressly provided herein, any notice required
or desired to be served, given or delivered hereunder shall be in writing, and
shall be deemed to have been validly served, given or delivered (a) four (4)
days after deposit in the United States mails, with proper postage prepaid, (b)
when sent after receipt of confirmation or answer back if sent by telecopy,
telex or other similar facsimile transmission, (c) one (1) business day after
deposited with a reputable overnight courier with all charges prepaid or (d)
when delivered, if hand-delivered by messenger, all of which shall be properly
addressed to the party to be notified and sent, to the address or number
indicated below:
G|\law\lac\phc\loandoc 07/16/96
<PAGE>
(a) If to Secured Party at: LINC ANTHEM CORPORATION
303 East Wacker Drive, Suite 1000
Chicago, Illinois 60601
Attention: Vice President - Operations
Telecopy: (312) 938-4290
Confirmation: (312) 946-1000
(b) If to Debtor, at: NORTH POINT - PIONEER, INC.
200 Lake Street,
Peabody, Massachusetts 01960
Attention:
Telecopy: (508) 536 - 2677
Confirmation: (508) 536 - 2777
or to such other address as each party may designate for itself by like notice.
15. COUNTERPARTS. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.
16. GOVERNING LAW. SECURED PARTY AND DEBTOR EACH HEREBY AGREE THAT ALL DISPUTES
AMONG OR BETWEEN THEM, ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL
TO THE RELATIONSHIP ESTABLISHED AMONG OR BETWEEN THEM IN CONNECTION WITH THIS
AGREEMENT, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE
RESOLVED IN ACCORDANCE WITH THE INTERNAL LAWS AND NOT THE CONFLICTS OF LAW
PROVISIONS OF THE STATE OF ILLINOIS.
17. WAIVER OF JURY TRIAL. EACH OF DEBTOR AND SECURED PARTY WAIVES ANY ANY RIGHT
TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN
CONTRACT, TORT OR OTHERWISE, BETWEEN DEBTOR AND SECURED PARTY OR ANY OF THEIR
RESPECTIVE AFFILIATES ARISING OUT OF, CONNECTED WITH, RELATED TO OR INCIDENTAL
TO HE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT.
lNSTEAD, ANY DISPUTES RESOLVED IN COURT WILL BE RESOLVED IN A BENCH TRIAL
WITHOUT A JURY.
18. WAIVER OF BOND. DEBTOR WAIVES THE POSTING OF ANY BOND OTHERWISE REQUIRED OF
SECURED PARTY IN CONNECTION WITH ANY JUDICIAL PROCESS OR PROCEEDING TO NFORCE
ANY JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF SECURED PARTY OR TO
ENFORCE THIS AGREEMENT BY SPECIFIC PERFORMANCE, TEMPORARY RESTRAINING ORDER,
PRELIMINARY OR PERMANENT INJUNCTION.
IN WITNESS WHEREOF, this Agreement has been duly executed as of this 25 day of
July, 1996.
NORTH POINT - PIONEER, INC. LINC CORPORATION
(Debtor) (Secured Party)
By: _____________________________ By: _________________________
Authorized Signature Authorized Signature
Name: ______________________________ Name: __________________________
Title: ______________________________ Title: __________________________
G|\law\lac\phc\loandoc 07/16/96
<PAGE>
Exhibit 10.87
CORPORATE GUARANTY
FOR VALUE RECEIVED, and other good and sufficient consideration the receipt of
which is hereby acknowledged, PHC, INC., a Massachusetts corporation, with its
principal place of business at 200 Lake Street, Peabody, Massachusetts 01960 PHC
OF RHODE ISLAND, INC., d/b/a Good Hope Center, a Massachusetts corporation with
its place of business at, John Potter Road, West Greenwich, RI 02817, PHC OF
VIRGINIA, INC., d/b/a Mount Regis Center, a Massachusetts corporation with its
place of business at 405 Kimball Avenue, Salem, VA 24153 and PHC OF NEVADA,
INC., a Nevada Corporation with its place of business at, 2340 Paseo Del Prado,
Las Vegas, NV 89102 (herein jointly and severally called "Guarantor") , being
financially interested in and dependent upon the economic well being of NORTH
POINT - PIONEER, INC. a Massachusetts corporation (herein called "Obligor") with
its principal place of business at 200 Lake Street, Peabody, Massachusetts 01960
and in order to induce LINC ANTHEM CORPORATION with its principal place of
business at 303 East Wacker Drive, Chicago, IL 60601 (herein called "LINC"), to
make loans and other financial accommodations to Obligor the undersigned, hereby
absolutely and unconditionally guarantees to LINC the full and prompt
performance by Obligor of all obligations which Obligor presently or hereafter
may have to LINC under any agreement now or hereafter executed and delivered by
Obligor to LINC (collectively the "Liabilities"), and the payment when due of
all sums owing by Obligor to LINC thereunder, and agrees to indemnify LINC
against any losses LINC may sustain and expenses it may incur as a result of any
default by Obligor thereunder and/or as a result of the enforcement or attempted
enforcement by LINC of any of its rights against Guarantor hereunder.
Guarantor hereby expressly waives all defenses which might constitute a legal or
equitable discharge of a surety or guarantor, and agrees that this Guaranty
shall be valid and unconditionally binding upon Guarantor regardless of (i) the
reorganization, merger or consolidation of Obligor into or with another entity,
corporate or otherwise, or the dissolution of Obligor, or the sale or other
disposition of all or substantially all of the capital stock, business or assets
of Obligor to any other person or party, or (ii) the voluntary or involuntary
bankruptcy (including a reorganization in bankruptcy) of Obligor, or (iii) the
granting by LINC of any indulgences to Obligor, or (iv) the assertion by LINC
against Obligor of any of LINC's rights and remedies provided for under the
Liabilities or existing in its favor in law, equity or bankruptcy, or (v) the
release of Obligor from any of the Liabilities or by operation of law or
otherwise, or (vi) any invalidity, irregularity, defect or unenforceability of
any provision of the Liabilities, or (vii) any defect in LINC's rights against
Obligor under the Liabilities. Guarantor hereby waives notice of and consents to
all of the provisions of the Liabilities of Obligor to LINC, and to any
amendments thereof, and to any actions taken thereunder, and to the execution by
Obligor of the foregoing documents and of any other agreements, documents and
instruments executed by Obligor in connection therewith.
Guarantor further waives notice of LINC's acceptance of this Guaranty, of any
default and non-payment and/or non-performance by Obligor under the obligations
due to LINC, of presentment, protest and demand, and of all other matters to
which Guarantor might otherwise be entitled. Guarantor further agrees that this
Guaranty shall remain and continue in full force and effect notwithstanding any
renewal, modification or extension of the obligations owed to LINC or any
ancillary document related thereto, Guarantor hereby expressly waiving all
notice of and consenting to any such renewal, modification or extension, and to
the execution by Obligor of any documents pertaining to any such renewal,
modification or extension. Guarantor further agrees that its liability under
this Guaranty shall be absolute, primary and direct, and that LINC shall not be
required to pursue any right or remedy it may have against Obligor under the
Liabilities or otherwise (and shall not be required to first commence any action
or obtain any judgment against Obligor) before
<PAGE>
enforcing this Guaranty against Guarantor, and that Guarantor will, upon demand,
pay LINC the amount of all sums due under the Liabilities, the payment of which,
by Obligor, is in default under the Liabilities, and will, upon demand, perform
all other obligations of Obligor, the performance of which, by Obligor, is in
default under the Liabilities.
Guarantor further warrants and represents to LINC that the execution and
delivery of this Guaranty is not in contravention of Guarantor's charter,
certificate of incorporation, by-laws and applicable law; that the execution and
delivery of this Guaranty, and the performance thereof, has been duly authorized
by Guarantor's Board of Directors, and will not result in a breach of or
constitute a default under, or result in the creation of any security interest,
lien, charge or encumbrance upon any property or assets of Guarantor pursuant to
any loan agreement, indenture or contract to which Guarantor is a party or by or
under which it is bound.
Guarantor will furnish LINC unaudited quarterly financial statements of
Guarantor within sixty (60) days after the end of each quarter, certified to be
true and correct by its chief financial officer, and will also furnish LINC,
within ninety (90) days after the close of each fiscal year of Guarantor a
consolidated Balance Sheet and Profit and Loss Statement and Source and
Application of Funds of Guarantor as of the end of such year certified by the
independent public accountants of Guarantor. To the extent that Guarantor is or
may be required to submit quarterly and/or annual reports and/or certifications
to the Securities Exchange Commission, Guarantor will furnish LINC with copies
of such reports and/or certifications at the time of the said submission of same
by Guarantor.
Guarantor hereby agrees that the failure of LINC to insist in any one or more
instances upon a strict performance or observance of any of the terms,
provisions or covenants of the Liabilities, or to exercise any of its rights
thereunder, shall not be construed or deemed to be a waiver or relinquishment
for the future of any such terms, provisions, covenants or rights, but such
terms, provisions, covenants and rights shall continue and remain in full force
and effect. Receipt by LINC of any sums payable under the Liabilities with
knowledge that Obligor has breached any of the terms, provision or covenants of
the Liabilities shall not be deemed to be a waiver by LINC of such breach.
No assignment or other transfer by LINC or Obligor of any interest, right or
obligation under the Liabilities or any ancillary document related thereto, or
assumption by any third party of the obligations of Obligor under the
Liabilities, shall extinguish or diminish the unconditional, absolute, primary
and direct liability of Guarantor under this Guaranty, Guarantor hereby
consenting to and waiving all notice of any such assignment, transfer or
assumption.
This Guaranty is assignable by LINC without notice to Guarantor, but may not be
assigned by Guarantor. Any assignee of LINC shall have all the rights of LINC
hereunder and may enforce this Guaranty against Guarantor with the same force
and effect as if this Guaranty were given to such assignee in the first
instance. This Guaranty shall be construed liberally in LINC's favor, shall
inure to the benefit of LINC, and its successors and assigns, and shall be
binding upon Guarantor and its successors and assigns.
THE UNDERSIGNED GUARANTOR HEREBY KNOWINGLY, WILLINGLY AND VOLUNTARILY AGREES
THAT THIS GUARANTY AND THE OBLIGATIONS PROVIDED FOR HEREUNDER SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS AND THE
VALIDITY, INTERPRETATION, ENFORCEMENT AND EFFECT OF THEREOF SHALL BE GOVERNED BY
THE LAWS OF THE STATE OF ILLINOIS. THE UNDERSIGNED GUARANTOR HEREBY KNOWINGLY,
WILLINGLY AND VOLUNTARILY CONSENTS TO THE JURISDICTION AND VENUE OF ALL COURTS
IN SAID STATE. THE UNDERSIGNED GUARANTOR HEREBY KNOWINGLY, WILLINGLY AND
VOLUNTARILY WAIVES ANY RIGHT TO PERSONAL SERVICE OF PROCESS IN ANY ACTION
BROUGHT IN CONNECTION WITH OR ARISING OUT OF THIS GUARANTY AND CONSENTS TO
SERVICE OF PROCESS BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED,
<PAGE>
DIRECTED TO THE LAST KNOWN ADDRESS OF THE UNDERSIGNED GUARANTOR, WHICH SERVICE
SHALL BE DEEMED COMPLETED WITHIN TEN (10) DAYS AFTER THE DATE OF MAILING
THEREOF. THE UNDERSIGNED GUARANTOR HEREBY KNOWINGLY, WILLINGLY AND VOLUNTARILY
WAIVES ANY RIGHT TO ASSERT THAT ANY ACTION BROUGHT IN CONNECTION WITH OR ARISING
OUT OF THIS GUARANTY IN SUCH COURT IS IN AN IMPROPER VENUE OR SUCH ACTION SHOULD
BE TRANSFERRED TO A MORE CONVENIENT FORUM. THE UNDERSIGNED GUARANTOR HEREBY
KNOWINGLY, WILLINGLY AND VOLUNTARILY WAIVES TRIAL BY JURY IN ANY ACTION BROUGHT
IN CONNECTION WITH OR ARISING OUT OF THIS GUARANTY.
This Guaranty may be executed in counterparts by the Guarantor.
IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be executed by its
duly authorized officer, this _________ day of July, 1996.
PHC, INC.
(Guarantor)
By: __________________________
Title: _________________________
PHC OF RHODE ISLAND, INC.
(Guarantor)
By: __________________________
Title: : _________________________
PHC OF VIRGINIA, INC.
(Guarantor)
By: __________________________
Title: _________________________
PHC OF NEVADA, INC.
(Guarantor)
By: __________________________
Title: ________________________
<PAGE>
Exhibit 10.88
LOAN AND SECURITY AGREEMENT
STOCK PLEDGE AND SECURITY AGREEMENT
Agreement made and entered into as of the 25th day of July, 1996, by and between
PHC, INC. a Massachusetts corporation with its principal place of business at
200 Lake Street, Peabody, Massachusetts 01960 ("Pledgor") and LINC ANTHEM
CORPORATION , a Delaware corporation, with its principal place of business at
303 East Wacker Drive, Chicago, Illinois 60601 ("Pledgee").
WITNESSETH:
Whereas, Pledgor desires to induce Pledgee to enter into a leasing and/or
financing arrangement (hereinafter referred to as the "Financing Arrangement")
with NORTH POINT - PIONEER, INC., a Massachusetts corporation (hereinafter
referred to as the "Company" or, hereafter referred to both as "Pledgor" and as
"Company" if such parties are one and the same); and
Whereas, Pledgor, in order to induce Pledgee to enter into such Financing
Arrangement, and to secure the payment and performance of all of Company's
obligations under the Financing Arrangement, has agreed to pledge and grant a
lien and security interest in all of the securities listed and described in
Section I hereof and Exhibit "A" hereto.
Now, Therefore, in consideration of the foregoing, the covenants and conditions
herein contained and the mutual agreements of the parties hereto, Pledgor and
Pledgee hereby agree as follows:
1. Collateral. To secure the payment and performance of all Company's
obligations and liabilities under the Financing Arrangement and all other
obligations and liabilities of the Company and/or the Pledgor to the Pledgee,
absolute or contingent, due or to become due, direct or indirect, and whether
now existing or hereafter and howsoever arising, Pledgor hereby pledges and
assigns to Pledgee and grants unto Pledgee a security interest in:
1.1 The securities described in Exhibit "A" attached hereto, with stock
powers attached thereto, all duly endorsed in blank, herewith delivered to
Pledgee;
1.2 Any and all other securities deposited with Pledgee from time to time in
accordance with the provisions of Section 3 hereof;
1.3 Any and all other or additional securities to which Pledgor (without
additional consideration) now is, or hereafter may be, entitled by virtue of his
ownership of any of the foregoing securities as the result of any corporate
reorganization, merger or consolidation, stock split, stock dividend or
otherwise; and
1.4 Any and all dividends, distributions and other amounts to which Pledgee
is entitled pursuant to the provisions of Section 4 hereof;
Subsections 1. I through 1.4 above are hereinafter collectively called the
"Collateral".
2. Representations and Warranties. Pledgor hereby represents and warrants to
Pledgee that:
2.1 The execution, delivery and performance by Pledgor of this Stock Pledge
and Security Agreement will not violate any provision of law, any order of any
court or other agency of government, or any indenture agreement or other
instrument to which Pledgor is a party or by which Pledgor or any of Pledgor's
property is bound or be in conflict with, result in a breach of or constitute
(with due notice or lapse of time, or both) a default under any such indenture,
agreement or other instrument, or result in the creation or imposition of any
lien, charge or encumbrance of any nature whatsoever upon any of his property or
assets, except as contemplated by the provisions of this Stock Pledge and
Security Agreement;
2.2 This Stock Pledge and Security Agreement constitutes a legal, valid and
binding obligation of Pledgor in accordance with its terms; and
2.3 As to such of the Collateral deposited with Pledgee on the date hereof,
(i) Pledgor is the legal and beneficial owner thereof; (ii) the same is validly
issued, fully paid and non-assessable and is registered in Pledgor's name;
g:|\law\lac\phc\loandoc 7/16/96
<PAGE>
(iii) the stock transfer forms attached to the certificates representing
such. Collateral have been duly executed and delivered by Pledgor to
Pledgee; and (iv ) none of such Collateral is subject to any security
interest, pledge, lien or other encumbrance, or adverse claim of any kind
whatsoever, except for the interest therein granted to Pledgee hereby.
3. Value of Collateral. It is the intent of Pledgor and Pledgee that the
Collateral shall have, at all times, a value of not less than the then
outstanding unpaid balance due under that certain Secured Promissory Note issued
by NORTH POINT - PIONEER, INC. in favor of Pledgee in the original principal
amount of $750,000. Pledgor agrees to maintain such value by pledging from time
to time pursuant to this Stock Pledge and Security Agreement and, upon the
request of Pledgee, additional cash or securities satisfactory to Pledgee.
4. Stock Splits, Stock Dividends, Etc.
4.1 In the event that Pledgor, by v irtue of Pledgor's ownership of the
Collateral now is, or hereafter becomes, entitled (without additional
consideration) to other or additional securities as the result of any
corporate reorganization, merger or consolidation, stock split, stock
dividend or otherwise, Pledgor shall:
4.1.1 Cause the issuer thereof to deliver to Pledgee the certificates
evidencing Pledgor's ownership thereof and hereby authorizes and empowers
Pledgee to demand the same fro such issuer, and agrees if such certificates
are delivered to Pledgor, to take possession thereof in trust for Pledgee and
forthwith deliver the same to Pledgee;
4.1.2 Deliver to Pledgee a stock transfer form with respect to such
securities, executed in blank by Pledgor and on which hall be endorsed the
guarantee by a banking association acceptable to Pledgee, that the signature
on such form is genuine;
4.1.3 Deliver to Pledgee a certificate, executed by Pledgor and dated the
date of such pledge, as to the ruth and orrectness on such date of the
warranties set forth in Subsection
2.3 hereof; and
4.1.4 Deliver to Pledgee such other certificates, forms and other
instruments as Pledgee may request in connection with such pledge.
4.2 Pledgor agrees t hat such securities shall constitute a portion of the
Collateral and be subject to this Stock Pledge and Security Agreement in the
same manner and to the same extent as the securities pledged hereby to
Pledgee on the date hereof.
5. Voting Power, Dividends, Substitutions. Unless and until an Event of Default
hereunder shall have occurred, Pledgor shall be entitled to:
5.1 Exercise all voting powers pertaining to the securities included in the
Collateral for any purpose not inconsistent with, or in violation of, the
provisions of this Stock Pledge and Security Agreement, in all corporate
matters (unless Pledgee consents thereto) except those which, in Pledgee's
sole discretion, may affect the value of the assets owned by the Company or
the value of the Collateral, including, but not limited to, those related
to any merger or consolidation of the Company with any other firm or
corporation, reorganization or liquidation of the Company, or mortgage
hypothecation, sale or any other disposition whatsoever by the Company of
any of its assets;
5.2 Collect and receive all cash dividends with respect to such securities
paid out of the retained earnings or the current net profits of the issuer
thereof.
Pledgee shall be entitled to collect and receive all other dividends and
distributions on such securities (whether in stock, cash or other property)
received in exchange or substitution for or upon conversion of, such securities,
and all amounts payable or distributable upon the liquidation, whether voluntary
or involuntary, of any issuer thereof. Cash received by Pledgee pursuant to the
provisions of this Section 5 may be commingled by Pledgee with its other funds,
and shall be non-interest bearing. Pledgor agrees that if it receives any of
such dividends, distributions, securities and other amounts to which Pledgee is
entitled, it shall take possession thereof in trust for Pledgee and forthwith
deliver the same to Pledgee, and agrees that the same shall constitute a portion
of the Collateral and be subject to this Stock Pledge and Security
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<PAGE>
Agreement in the same manner and to the same extent as the securities pledged to
Pledgee on the date hereof.
6. Default and Remedies.
6.1 The occurrence of any of the following shall constitute an Event of
Default hereunder:
6.1.1 Any representation orwarranty made by Pledgor to ledgee
hereunder, or in any ertificate delivered to Pledgee pursuant
hereto, or order any other agreement between Pledgor and
Pledgee, shall prove to have been false or misleading in any
material respect as of the date on which the same was made; or
6.1.2 Pledgor shall fail to duly observe or perform any other covenant
or agreement made by Pledgor hereunder or under any other
agreement made by Pledgor and Pledgee; or
6.1.3 An Event of Default under the Financing Arrangement shall occur
and be continuing; or
6.1.4 Bankruptcy, reorganization, receivership, insolvency or other
similar proceedings shall be instituted by or against Pledgor or
all or any part of his property under the Federal Bankruptcy Act
or other law of the United States or of any state or other
competent jurisdiction and, if against Pledgor, he shall consent
thereto or shall fail to cause the same to be discharged within
thirty (30) days.
6.2 If an Event of Default shall occur and be continuing, Pledgee may, at
its option:
6.2.1 Upon giving notice to Pledgor thereof, cause the securities
included in the Collateral to be registered in its name or in
the name of its nominee;
6.2.2 Upon giving notice to Pledgor thereof, exercise all voting
powers pertaining to such securities and otherwise act with
respect thereto as though Pledgee were the outright owne thereof
(Pledgor hereby irrevocably constituting and appointing Pledge
its proxy and attorneys-in-fact with full power of substitution
so to do);
6.2.3 Receive all dividends and all other distributions of any kind
whatsoever on all or any of such securities;
6.2.4 Exercise any and all rights of collection, conversion or
exchange, and any and all other rights, privileges, options or
powers of Pledgor pertaining or relating to such securities
(Pledgor hereby irrevocably constitutig and appointing Pledgee
its proxy and attorneys-in-fact with full power of substitution
so to do);
6.2.5 Sell, assign and deliver the whole, or from time to time, any
part of such securities at any broker's board or at any private
sale or at public auction, with or without demand for
performance, advertisement or notice of the time or place of
sale or adjournment thereof or otherwise, and free from any
right of redemption (all of which hereby are expressly waived
for cash, for credit or for other property, for immediate or
future delivery, and for such price or prices and on such terms
as Pledgee in its uncontrolled discretion may determine; and
6.2.6 Exercise any other remedy specifically granted under this Stock
Pledge and Security Agreement or now or hereafter existing in
equity, at law, by virtue of statute or otherwise.
6.3 For the purposes of this Section 6, an a greement to sell all or any
part of such securities shall be treated as a sale thereof and Pledgee
shall be free to carry out such sale pursuant to such agreement, and
Pledgor shall not be entitled to the return of any of the same subject
thereto, notwithstanding that after Pledgee shall have entered into
such an agreement, all Events of Default hereunder may have been
remedied or all obligations under the Financing Arrangement may have
been paid and performed in full.
6.4 At any sale made pursuant to Subsection 6.2, Pledgee may bid for and
purchase, free from any right or equity of redemption on the part of
Pledgor (the same being hereby waived and released), any part of or
all
g:\law\lac\phc\loanddoc 7/16/96
<PAGE>
securities included in the Collateral that are offered for sale and may make
payment on account thereof by using any claim then due and payable to Pledgee by
Pledgor as a credit against the purchase price, and Pledgee may, upon compliance
with the terms of sale, hold, retain and dispose of such securities without
further accountability therefor.
6.5 Pledgee shall apply the proceedsof any sale of the whole or any part of
such securities and any other monies at the time held by Pledgee under
the provisions of this Stock Pledge and Security Agreement, after
deducting all costs and expenses of collection, sale and delivery
(including, without limitation, reasonable attorneys' fees and other
legal expenses) incurred by Pledgee in connection with such sale,
towards the payment of the Company's obligations, accrued and
executory, under the Financing Arrangement and any other obligations of
the Company and/or Pledgor to Pledgee. Pledgee shall remit an surplus
to Pledgor.
6.6 Pledgee shall not have any duty to exercise any of the rights,
privileges, options or powers or to sell or otherwise realize upon any
of such securities, as hereinbefore authorized, and Pledgee shall not
be responsible for any failure to do so or delay in so doing.
6.7 Any sale of, or the grant of options to purchase, or any other
realization upon, all or any portion of such securities, under
Subsection 6.2 shall operate to divest all right, title, interest,
claim and demand, either at law or in equity, of Pledgor in and to such
securities so sold, optioned or realized upon, or any part thereof,
from, through and under Pledgor.
6.8 Pledgor recognizes that Pledgee may be unable to effect a public sale
of all or a part of the Collateral by reason of certain prohibitions
contained in the Securities Ac t of 1933 as amended (the "Act"), or
that it may be able to do so only after delay which might adversely
affect the value that might be realized upon the sale o f the
Collateral. Accordingly, Pledgor agrees that Pledgee may, without the
necessity of attempting to cause any registration of the Collateral to
be effected under the Act, sell the Collateral or any part thereof in
one or more private sales to a restricted group of purchasers who may
be required to agree, among other things, that they are acquiring the
Collateral for their own account for investment and not with a view to
the distribution or resale thereof. Pledgor agrees that any such
private sale may be at prices or on terms less favorable to the owner
of the Collateral than would be the case if they were sold at public
sale, and that any such private sale shall be deemed to have been made
in a commercially reasonable manner.
6.9 Pledgo r agrees that without affecting the right of private sale as
aforesaid, it will, upon request of Pledgee, if in the opinion of
Pledgee's counsel registration of the Collateral or any part thereof is
required under the Act, use its best efforts to complete and cause to
become effective a registration of the Collateral under the Act, and to
take all other actions necessary, in Pledgee's opinion, to enable
Pledgee to sell, within ninety (90) days of the commencement of such
best efforts, the Collatera pursuant to an effective registration
statement under the Act. Such best efforts shall be commenced promptly
after request by Pledgee which may be given at any time on or after the
occurrence of an Event of Default hereunder or under the Financing
Arrangement and while the same is continuing. All expenses of such
registration, including, without limitation, registration and filing
fees, blue sky fees, printing expenses, fees and disbursements of
counsel for Pledgor and Pledgee, fees and expense of auditors of
Pledgor and Pledgee, and all underwriter, broke r or dealer discounts,
and all transfer taxes properly attributable to the Collateral, shall
be home by Pledgor who agrees to do all acts and things which are usual
and customary in connection with registered offerings of securities,
including entering into indemnification agreements with Pledgee and any
underwriters. The managing underwriter of any public offering for which
any said registration statement is filed shall have the right to impose
such conditions on the sale of the Collateral as it shall reasonably
deem necessary to protect the underwritten offering, provided such
conditions are similarly and proportionately imposed on other shares
which may be included in said registration as the result of the
exercise of piggyback rights by the holders of such other shares.
7. Pledgee's Obligations, Custodial Agreement.
7.1 Pledgee shall have no duty to protect, preserve or enforce rights
under any security included in the Collateral other than a duty
of reasonable custodial care of any such security in its
possession.
7.2 Pledgor understands and agrees that Pledgee may deposit such
securities with a custodian and hereby agrees to pay reasonable
fees of any such custodian in connection with its acting as
custodian.
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<PAGE>
8. Termination of Stock Pledge and Security Agreement. Upon termination of the
Financing Arrangement and the payment in full of all of the obligations secured
hereby, Pledgee shall cause to be transferred to Pledgor all of the stock
pledged by Pledgor herein and any rights received by Pledgee pursuant hereto
(less any portion of same sold, transferred or disposed of pursuant to, and
under the circumstances specified in, Section 6 hereof), and this Stock Pledge
and Security Agreement shall thereupon be terminated.
9. Miscellaneous.
9.1 Pledgor further unconditionally agrees that if Company is in default
under the Financing Arrangement, Pledgee may exercise its rights and
remedies hereunder prior to, concurrently with, or subsequent to, the
exercise by Pledgee of its rights and remedies against the Company under
the Financing Arrangement, or otherwise, or against any guarantor of the
Company's obligations under same. The obligations of Pledgor under this
Stock Pledge and Security Agreement shall be absolute and unconditional,
and shall remain in full force and effect without regard to, and shall
not be released or discharged or in any way affected by:
9.1.1 The failure of Pledgee to give any notices to which Pledgor is or
may be entitled, all of which are hereby waived by Pledgor;
9.1.2 Any amendment or modification of or supplement to the Financing
Arrangement;
9.1.3 Any exercise or non-exercise of any right, remedy or privilege
under or in respect of this Stock Pledge and Security Agreement,
the inancing Arrangement or any other agreements, instruments or
documents, or the granting of any postponements or extensions for
time of payment or other indulgences to the Company or any other
person, or the settlement or adjustment of any claim or the
release or discharge or substitution of any person primarily or
secondarily liable with respect to the Financing Arrangement;
9.1.4 The institution of any bankruptcy, insolvency, reorganization debt
arrangement, radjustment, composition, receivership or liquidation
proceedings by or against the Company; or
9.1.5 Any assumption by any third party of the obligations of the
Company under the Financing Arrangement, or any assignment by
Pledgee referred to in Subsection 9.2
9.2 Should Pledgee at any time assign any of its rights under the Financing
Arrangement, Pledgee may assign its rights under this Stock Pledge and
Security Agreement, and may deliver the Collateral or any portion
thereof to the assignee who shall thereupon, to the extent provided in
the instrument of assignment, have all of the rights of Pledgee
hereunder with respect to the Collateral and Pledgee shall, thereafter,
be fully discharged from any responsibility with respect to the
Collateral so delivered to such assignee. No such assignment, however,
shall relieve such assignee of those duties and obligations of Pledgee
specified hereunder.
9.3 Each and every right, remedy and power granted to Pledgee hereunder
shall be cumulative and in addition to any other right, remedy or power
herein specifically granted or now or hereafter existing in equity, at
law, by virtue of statute or otherwise and may be exercised by Pledgee,
from time to time, concurrently or independently and as often and in
such order as Pledgee may deem expedient. Any failure or delay on the
part of Pledgee in exercising any such right, remedy or power, or
abandonment or discontinuance of steps to enforce the same, shall not
operate as a waiver thereof or affect Pledgee's right thereafter to
exercise the same, and any single or partial exercise of any such right,
remedy or power shall not preclude any other or further exercise thereof
or the exercise of any other right, remedy or power.
9.4 Any modification or waiver of any provision of this Stock Pledge and
Security Agreement, or any consent to any departure by Pledgee
therefrom, shall not be effective in any event unless the same is in
writing and signed by Pledgee, and then such modification, waiver or
consent shall be effective only in the specific instance and for the
specific purpose given. Any notice to or demand on Pledgor in any event
not specifically required of Pledgee hereunder shall not entitle Pledgor
to any other or further notice or demand in the same, similar or other
circumstances unless specifically required hereunder.
9.5 Pledgor agrees that at any time, and from time to time, after the
execution and delivery of this Stock Pledge
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<PAGE>
and Security Agreement, Pledgor will upon the request of Pledgee,
execute,and deliver such further documents and do such further acts and
things as Pledgee may reasonably request in order to fully effect the
purpose of this Stock Pledge and Security Agreement and to subject to
the security interest created hereby any property intended by the
provisions hereof to be covered hereby.
9.6 Any notice, request, emand, consent, approval or other communication
providedor permitted hereunder shall be in writing and be given by
personaldelivery or sent by United States first-class mail, postage
prepaid,addressed to the party for whom it is intended, at its address
as follows:
To Pledgor: PHC, INC.
200 Lake Street,
Peabody, Massachusetts 01960
Attention: ____________________________
To Pledge LINC ANTHEM CORPORATION
303 East Wacker Drive, 10th Floor
Chicago, Illinois 60601
Attn: Treasurer
provided, however, that either party may change its address for purposes
of receipt of any such ommunication by giving ten (10 days' written
notice of such chance to the other party in the manner above provided.
9.7 This Stock Pledge and Security Agreement shall be deemed to have been
made under, and shall be governed by, the laws of the State of Illinois
in all respects, including matters of construction, validity and
performance.
9.8 If any provision of this Stock Pledge and Security Agreement is
prohibited by, or is unlawful or unenforceable under, any applicable law
of any jurisdiction, such provision shall, as to such jurisdiction, be
ineffective to the extent of such prohibition without invalidating the
remaining provisions hereof; provided, however, that any such
prohibition in any jurisdiction shall not invalidate such provision in
any other jurisdiction; and, provided further, that where the provisions
of any such applicable law may be waived, they hereby are waived by
Pledgor to the full extent permitted by law to the end that this Stock
Pledge and Security Agreement shall be deemed to be valid and binding in
accordance with its terms.
9.9 This Stock Pledge and Security Agreement shall inure to the benefit of
the successors and assigns of Pledgee and shall be binding upon the
heirs, executors, administrators, legal representatives, successors and
assigns of Pledgor.
In Witness Whereof, Pledgor and Pledgee have caused this Agreement to be
executed as of the date first above written.
Witness or Attest: PHC, INC.
(Pledgor)
_______________________________ By: ______________________________
_______________________________ Title: ___________________________
(Print Name)
LINC ANTHEM CORPORATION
(Pledgee)
By: ____________________________
Title: _________________________
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<PAGE>
EXHIBIT "A"
Capitalization and Stockholders of: NORTH POINT - PIONEER, INC.
Authorized: 200,000 Shares
Par Value: $ .0 1
Issued and Outstanding: 100 Shares
Shares Held by Pledgor: 100 Shares
Stock Certificate Number(s): 1
- ----------------- --------------------
Pledgor's Initials Pledgee's Initials
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<PAGE>
STOCK POWER
FOR VALUE RECEIVED, PHC, INC. , the undersigned hereby sells, assigns and
transfers unto LINC ANTHEM CORPORATION (100) Shares of the Common stock of NORTH
POINT - PIONEER, INC., (the "Company") represented on the books of the Company
by Certificate No. 1 herewith and do hereby irrevocably constitute and appoint
______________________ attorney to transfer the said stock on the books of the
within named Company with full power of substitution in the premises.
Date: __________________ PHC, INC.
By: __________________________________
Name: ________________________________
Title: ________________________________
ATTESTED IN PRESENCE OF
- -------------------------------
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<PAGE>
Exhibit 10.89
SECURED PROMISSORY NOTE
$900,000.00 Chicago, Illinois
July 25, 1996
The undersigned, NORTH POINT - PIONEER, INC. ("Maker"), promises to pay to
the order of LINC ANTHEM CORPORATION ("LINC") or any holder of this note the
principal sum of NINE HUNDRED THOUSAND AND 00/100 DOLLARS ($900,000.00) in
United States currency at its office at 303 East Wacker Drive, Chicago, IL
60601, or at such other place as the holder hereof may appoint, plus interest
thereon at a rate equal to Eleven and 50 One Hundredths percent (11.50%) per
annum payable in Forty Eight (48) consecutive monthly installments commencing on
July 30, 1996 and continuing on the same day of each month thereafter as follows
in accordance with the following schedule: (2) consecutive monthly installments
each in the amount of $4,791.67 followed by (4) consecutive monthly installments
each in the amount of $8,625.00 followed by Forty-Two (2) consecutive monthly
installments each in the amount of $26,130.78 until the entire principal amount
plus all accrued interest and other charges due LINC have been paid in full.
Interest shall accrue from the date of initial disbursement hereof computed
on the basis of a 360-day year provided further that the aggregate interest
payable hereunder shall not exceed the maximum rate permitted by law. Provided
that all payments required to be made under this Note have been made in a timely
manner, Maker may voluntarily prepay not less than all of the unpaid principal
balance remaining plus all accrued and unpaid interest due thereon together with
a prepayment fee equal to a percentage of the then unpaid principal balance of
the Note. The prepayment fee percentage shall be (a) 4% if prepayment occurs
after the date hereof but prior to July 30, 1997; (b) 3% if prepayment occurs
after July 30, 1997 but prior to July 30, 1998; (c) 2% if prepayment occurs
after July 30, 1998 but prior to July 30, 1999 and (d) 2% if prepayment occurs
after July 30, 1999.
In the event the entire principal amount is not advanced by LINC to the Maker
hereof, principal payments will be reduced on a pro rata basis.
If any payment of principal or interest to be made hereunder shall become past
due for a period in excess of five (5) days, Maker shall pay a late charge of
two percent (2%) of such overdue payment for each month or portion of a month
for which such payment shall remain unpaid plus LINC's expenses resulting
therefrom together with collection expenses and reasonable attorneys' fees if
placed with an attorney for collection.
Demand, presentment for payment, notice of non-payment and protest are hereby
waived by the undersigned.
This Note is secured by and entitled to (i) the benefits of a certain
Security Agreement dated as of July 25, 1996, and (ii) any other agreements
under which the holder has been granted a lien and security interest in property
to secure the payment and performance by Maker of this Note (all of the
foregoing hereinafter sometimes collectively referred to as the "Security
Agreement") to which reference is hereby made for a statement of the nature and
extent of the protection and security afforded and the rights of the payee
hereof and the rights and obligations of the undersigned. LINC's books and
records shall de dispositive evidence of the amount disbursed under this Note.
Upon an "Event of Default," as defined in the Security Agreement, this Note may
become or be declared due in the manner and with the effect provided in the Loan
Agreement. The holder hereof shall not be required to look to any collateral for
the payment of this Note, but may proceed against Maker, or any guarantor hereof
in such manner as it deems desirable. None of the rights or remedies of the
holder hereunder or under the Security Agreement are to be deemed waived or
affected by any failure to exercise same. All remedies conferred upon the holder
of this Note, the Security Agreement or any other instrument or agreement to
which the undersigned or any guarantor hereof is a party or under any or all of
them is bound, shall be cumulative and not exclusive, and such remedies may be
exercised concurrently or consecutively at the holder's option.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS AND
DECISIONS OF THE STATE OF ILLINOIS. AT HOLDER'S ELECTION AND WITHOUT LIMITING
HOLDER'S RIGHT TO COMMENCE AN ACTION IN OTHER JURISDICTION, MAKER HEREBY SUBMITS
<PAGE>
TO THE EXCLUSIVE JURISDICTION AND VENUE OF ANY COURT (FEDERAL, STATE OR LOCAL)
HAVING SITUS WITHIN THE STATE OF ILLINOIS, EXPRESSLY WAIVES PERSONAL SERVICE OF
PROCESS AND CONSENTS TO SERVICE BY CERTIFIED MAIL, POSTAGE PREPAID, DIRECTED TO
THE LAST KNOWN ADDRESS OF MAKER, WHICH SERVICE SHALL BE DEEMED COMPLETED WITHIN
TEN (10) DAYS AFTER THE DATE OF MAILING HEREOF. MAKER HEREBY WAIVES ANY
OBJECTION TO IMPROPER VENUE, FORUM NON CONVENIENS AND TRIAL BY JURY.
In Witness Whereof, the undersigned hereunto sets its hand and seal as of the
date first set forth above.
NORTH POINT - PIONEER, INC.
Maker
By: _____________________________
Title: __________________________
note.mas
<PAGE>
DIRECTION TO PAY LOAN PROCEEL
July __________, 1996
NORTH POINT - PIONEER, INC. (the "Borrower'), pursuant to the Loan and
Security Agreement dated as of July __________, 1996 (the "Loan Agreement'),
between the Borrower and LINC ANTHEM CORPORATION (th "Lender") hereby directs
that the proceeds of the Loan aggregating $500,000.00 be remitte by Lender as
indicated below:
A. Please remit the sum of $______________ to Borrower for the purpose of
paying the unpaid balance of the Purchase Price due Seller under that
certain Asset Purchase Agreement dated as of May 26, 1996 in accordance
with the following wire instructions:
Bank Name: __________________________________________
Address: __________________________________________
City/State: _________________ MA ___________________
Acct. No.: For Credit to Account __________________
ABA No.: ____________________________________________
Attention: ____________________________________________
B. Please remit the sum of $___________________ to Borrower for the purpose
of providing Borrower with working capital and other capital needs of
Borrower in connection with the Practice acquired under the Asset urchase
Agreement in accordance with the following wire instructions:
Bank Name: _______________________
Address: _______________________
City/State: _______________________
Acct. No.: For Credit to Account
ABA No.: ________________________
Attention: ________________________
Borrower hereby acknowledges that the Loan has been made by Lender to
Borrower to enable Borrower to acquire rights in some of the Collateral
described in the Loan Agreement and that the proceeds of the Loan has in fact
been so used. The Borrower hereby authorizes Lender to insert or correct any
dates missing in the Loan Agreement.
The undersigned certifies that he is a duly authorized officer of the
Borrower, and that as such he is authorized to execute this Direction on behalf
of the Borrower. Lender is hereby authorized to remit the proceeds of the Loan
in accordance with this Direction.
NORTH POINT - PIONEER, INC.
By: _____________________________
Name: ___________________________
Title: ___________________________
ACKNOWLEDGED AND AGREED:
LINC ANTHEM CORPORATION
By: __________________________
Name: __________________________
Its: __________________________
Date: July ______, 1996
<PAGE>
G:\LEVYJ\MEMO\MERGAGT.015
AGREEMENT AND PLAN OF MERGER
Dated as of October 31, 1996
<PAGE>
EXHIBIT 10.93
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is entered into this 1st day of November, 1996,
(the "Effective Date") by and between BSC-NY, Inc., a New York corporation (the
"Corporation"), and Yakov Burstein, Ph.D. (the "Employee").
W I T N E S S E T H:
WHEREAS, the Corporation is in the business of providing management and
administrative services; and
WHEREAS, Perlow Physicians, P.C. (the "PC") is a New York professional
corporation that provides psychotherapy services; and
WHEREAS, the Corporation has been retained by the PC to provide
administrative and management services in support of the PC's provision of
psychotherapy services; and
WHEREAS, the Corporation desires to employ Employee on the terms and
conditions hereafter set forth, and the Employee desires to accept such
employment;
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein contained, the Corporation hereby employs Employee and Employee hereby
agrees to work for the Corporation, upon the following terms and conditions:
1. EMPLOYMENT DUTIES. Employee is hereby employed by the Corporation to
provide non-clinical administrative and management services in support of the
business operations of the PC. In performing duties hereunder, Employee shall at
all times comply with all policies and procedures of the Corporation, copies of
which shall be provided to the Employee by the Corporation, and incorporated by
reference into this Agreement when initialed by the Employee.
2. TIME REQUIREMENTS. Subject to the provisions of Section 7
hereof, Employee agrees to devote forty (40) hours per week during the term
of this Agreement to the affairs and activities of the Corporation on such
days and at such times as are consistent with his past practices at
Behavioral Stress Center, Inc. and Professional Health Associates, Inc. its
wholly owned subsidiary.
3. COMPENSATION. Subject to the provisions of Section 7 hereof, the
Corporation agrees to pay to Employee as compensation for his services hereunder
a salary at an annual rate of one hundred twenty five thousand dollars
($125,000.00) per year. Any and all compensation to be paid to Employee pursuant
to this Section 3 and pursuant to the Employment Agreement between Employee and
the P.C. of even date herewith (the "P.C. Agreement") shall be paid by the P.C.
4. BENEFITS. Subject to the provisions of Section 7 hereof, the
Corporation shall provide and Employee shall be entitled to participate in all
of the employee benefit programs and plans which are applicable to other
professionals of the Corporation in accordance with the terms of said programs
and plans. Such programs and plans shall include, without limitation, group
health insurance, life insurance, short and long-term disability insurance and a
401(k) program.
5. REIMBURSEMENT OF EXPENSES. Subject to the provisions of Section 7
hereof, the Corporation shall provide the Employee with an automobile allowance
of $475.00 per month. The Corporation shall reimburse the Employee for all
reasonable and necessary business expenses incurred by him in the performance of
his duties hereunder, including parking expenses, cellular phone expenses and
beeper expenses. The Corporation shall also reimburse Employee for membership
dues in professional organizations bearing direct relationship to Employee's
duties in connection with this Agreement.
6. VACATIONS AND EMPLOYEE MEETINGS. Subject to the provisions of Section 7
hereof, Employee shall be entitled to (a) four (4) weeks' vacation during each
calendar year, and (b) one (1) week each year to attend professional meetings
and seminars. The Employee shall be entitled to his normal salary during
vacation and while in attendance at professional meetings and seminars.
7. DUPLICATION OF TIME REQUIREMENTS, COMPENSATION AND BENEFITS. Any hours
of time devoted by Employee to his responsibilities pursuant to Section 2 of
this Agreement shall offset the number of hours he is required to devote to his
responsibilities under the terms of the P.C. Agreement. Any right to
compensation, item of benefit, reimbursement of item of expense, or
vacation/seminar time to be provided by the Corporation to Employee pursuant to
Sections 3,4,5 and 6 of this Agreement shall be offset by such compensation,
such item of benefit, such reimbursement of item of expense, or such
vacation/seminar time to be provided by the Corporation to the Employee under
the P.C. Agreement.
8. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE CORPORATION.
The Corporation represents and warrants at all times during the term of this
Agreement that:
8.1 The Corporation is a duly formed corporation organized, validly
existing and in good standing under the laws of the State of New York.
8.2 The Corporation has the corporate power and authority to enter
into this Agreement and carry on its business as currently conducted.
8.3 Within 90 days of the Effective Date of this Agreement, the
Corporation shall employ a qualified Chief Operating Officer to manage the
affairs of the Corporation. Should the employment of the Chief Operating Officer
be terminated for any reason, the Corporation shall hire a replacement within 90
days thereafter.
9. TERM; BASIS FOR TERMINATION. Subject to the provisions of this
Section, the term of this Agreement shall be for three (3) years, commencing
on the Effective Date. This Agreement shall terminate earlier on the first
to occur of the following:
9.1 The death of Employee;
9.2 The permanent disability of the Employee at any time. Employee
shall be deemed to have become permanently "disabled" when by reason of a
physical or mental disability or incapacity he shall have failed or is unable to
perform his customary duties and activities on behalf of the Corporation for a
consecutive period of four (4) months or for any six (6) months within any
twelve (12) month period; or
9.3 At any time by the Corporation for "cause" which, for purposes
of this Agreement, shall mean (a) willful and serious or habitual failure of the
Employee to perform his duties hereunder in all material respects which is not
remedied within 30 days after the receipt of notice thereof from the
Corporation; or (b) gross misconduct, fraud or embezzlement by the Employee.
10. PROTECTION OF THE CORPORATION. In consideration of the Employee's
initial and/or continued employment and other good and valuable consideration
provided by the Corporation, the adequacy of which is hereby acknowledged, the
parties agree to the following:
10.1 COVENANTS. In consideration of the execution and delivery of
this Agreement and in recognition that the Corporation was induced to enter into
this Agreement based on the covenants and assurances made by the Employee,
Employee covenants and agrees that, for a period of four (4) years after the
Closing, he will not (i) directly or indirectly (whether as a sole proprietor,
partner, stockholder, director, officer, employee, consultant, independent
contractor, or in any capacity as principal or agent or in any other individual
or representative capacity) engage in Competition (as such term is defined
below) with the Corporation or be interested in or associated with or render
services to or sell any ideas, inventions or products to any party in
Competition with the Corporation or (ii) make known or disclose the name or
address of (x) any of the clients, customers or patrons of the Corporation or
(y) any persons having a contractual relationship with the Corporation (except
where the facts of such relationships are generally available to or known by the
public other than as a result of a disclosure by Employee) or (iii) call upon,
solicit, divert or take away, or attempt to solicit, divert or take away, any
such clients, customers or patrons or employees of the Corporation or any
persons having a contractual relationship with the Corporation or (iv) request
or advise any present or future client, customer or patron of the Corporation or
any persons having a contractual relationship with the Corporation to withdraw,
curtail or cancel their business relationship with the Corporation. For purposes
hereof, the term "Competition" shall mean the providing of (i) psychotherapy
services to individuals either individually or in group settings in out-patient
clinics, nursing homes or hospitals, or (ii) management services in connection
therewith, in any case, within a radius of twenty five (25) miles from any
location in which psychotherapy services or management services in connection
therewith are then being provided by the Corporation; provided, however, that
the Employee may engage in private practice and may provide such services to the
Hempstead Hospital, administrative divisions of the State of New York, Upstate
Clinical Associates and, with respect only to administrative and management
services provided to governments or municipalities ("GMC Contracts"), BSC Health
Management ("BSCHM"). In the event Upstate Clinical Associates plans to render
psychotherapy services at a location more than twenty five (25) miles from
Monroe County, New York, it shall provide PHC, Inc. ("PHC") with notice of such
location. If PHC or any of its subsidiaries engages in such services or provides
management services in connection therewith within twenty five (25) miles of
such location during the sixty (60) days following the date of such notice, then
Upstate Clinical Associates shall discontinue such plans for so long as PHC is
so engaged. BSCHM will obtain clinical services from the PC or from an
authorized provider associated with PHC under the GMC Contracts except (A) in
the Capital District (as defined in the "GMC Contracts"), (B) to the extent
BSCHM's partner or joint venturer as of the date hereof (which is a national
behavioral health care provider identified to PHC) or the governmental entity
withholds its consent and/or (C) to the extent prices and services proposed by
the PC or from an authorized provider associated with PHC in connection with the
GMC Contracts are not competitive. For purposes hereof, "Competition" shall not
preclude the ownership of less than ten (10) percent of the common stock, or
other class of voting stock, or any percentage of non-voting securities, of any
publicly traded company. 10.1 COVENANTS. In consideration of the execution and
delivery of this Agreement and in recognition that the Corporation was induced
to enter into this Agreement based on the covenants and assurances made by the
Employee, Employee covenants and agrees that, for a period of four (4) years
after the Closing, he will not (i) directly or indirectly (whether as a sole
proprietor, partner, stockholder, director, officer, employee, consultant,
independent contractor, or in any capacity as principal or agent or in any other
individual or representative capacity) engage in Competition (as such term is
defined below) with the Corporation or be interested in or associated with or
render services to or sell any ideas, inventions or products to any party in
Competition with the Corporation or (ii) make known or disclose the name or
address of (x) any of the clients, customers or patrons of the Corporation or
(y) any persons having a contractual relationship with the Corporation (except
where the facts of such relationships are generally available to or known by the
public other than as a result of a disclosure by Employee) or (iii) call upon,
solicit, divert or take away, or attempt to solicit, divert or take away, any
such clients, customers or patrons or employees of the Corporation or any
persons having a contractual relationship with the Corporation or (iv) request
or advise any present or future client, customer or patron of the Corporation or
any persons having a contractual relationship with the Corporation to withdraw,
curtail or cancel their business relationship with the Corporation. For purposes
hereof, the term "Competition" shall mean the providing of (i) psychotherapy
services to individuals either individually or in group settings in out-patient
clinics, nursing homes or hospitals, or (ii) management services in connection
therewith, in any case, within a radius of twenty five (25) miles from any
location in which psychotherapy services or management services in connection
therewith are then being provided by the Corporation; provided, however, that
the Employee may engage in private practice and may provide such services to the
Hempstead Hospital, administrative divisions of the State of New York, Upstate
Clinical Associates and, with respect only to administrative and management
services provided to governments or municipalities ("GMC Contracts"), BSC Health
Management ("BSCHM"). In the event Upstate Clinical Associates plans to render
psychotherapy services at a location more than twenty five (25) miles from
Monroe County, New York, it shall provide PHC, Inc. ("PHC") with notice of such
location. If PHC or any of its subsidiaries engages in such services or provides
management services in connection therewith within twenty five (25) miles of
such location during the sixty (60) days following the date of such notice, then
Upstate Clinical Associates shall discontinue such plans for so long as PHC is
so engaged. BSCHM will obtain clinical services from the PC or from an
authorized provider associated with PHC under the GMC Contracts except (A) in
the Capital District (as defined in the "GMC Contracts"), (B) to the extent
BSCHM's partner or joint venturer as of the date hereof (which is a national
behavioral health care provider identified to PHC) or the governmental entity
withholds its consent and/or (C) to the extent prices and services proposed by
the PC or from an authorized provider associated with PHC in connection with the
GMC Contracts are not competitive. For purposes hereof, "Competition" shall not
preclude the ownership of less than ten (10) percent of the common stock, or
other class of voting stock, or any percentage of non-voting securities, of any
publicly traded company.
10.2 ENFORCEMENT. Employee agrees that the remedies at law for any
breach of the covenants contained in this Section 10 will be inadequate and that
PHC or the Corporation shall be entitled to appropriate equitable remedies
including injunctive relief in any action or proceeding brought to prevent the
taking or continuation of any action which would constitute or result in a
breach of such covenant. Such remedies shall not be exclusive and shall be in
addition to any and all remedies which may be available, directly or indirectly,
without limiting the recovery of any incidental, consequential and/or punitive
damages. Employee further agrees that if any restriction in this Section 10 is
held by any court to be unenforceable or unreasonable, a lesser restriction will
be enforced in its place and the remaining restrictions will be enforced
independently of each other. The attorneys' fees, court costs and other expenses
incurred by the prevailing party to enforce any rights under any provision of
this Section 10, or to defend any such attempted enforcement, shall be paid by
the non-prevailing party.
10.3 ANCILLARY OBLIGATIONS. This covenant shall be construed as an
obligation ancillary to the other provisions of this Agreement and the existence
of any claim or cause of action by the Employee, whether predicated on a breach
of this Agreement or otherwise, shall not constitute a defense to the
enforcement by PHC or the Corporation of this covenant.
10.4 JURISDICTION. The Employee hereby irrevocably and
unconditionally consents to submit to the exclusive jurisdiction of the courts
of the State of New York located in New York City for any actions, suits or
proceedings arising out of or relating to this covenant and each further agrees
that service of any process, summons, notices or document by U.S. registered
mail to the address set forth herein shall be effective service of process for
any action, suit or proceeding brought against him in any such court.
11. GOVERNING LAW. This Agreement shall be construed under the laws
of the State of New York without giving effect to the conflict of laws
provisions thereof.
12. ASSIGNMENT. Neither this Agreement nor any right, duty or obligation
arising under it may be assigned by either party without the prior written
consent of the other party. Notwithstanding the foregoing, in the event of the
merger or consolidation of the Corporation with any other corporation or
corporations, the sale by the Corporation of a major portion of its assets or of
its business and good will, or any other corporate reorganization involving the
Corporation, this Agreement may, without the Employee's written consent, be
assigned and transferred to such successor in interest as an asset of the
Corporation upon such assignee assuming the Corporation's obligation hereunder,
in which event the Employee agrees to continue to perform his duties and
obligations, according to the terms hereof, to or for such assignee or
transferee of this Agreement; provided, however, that the Corporation will
remain secondarily liable as guarantor of such assignee or transferee's
obligations to the Employee hereunder.
13. NATURE OF RELATIONSHIP. Nothing in this Agreement shall be
construed as establishing the parties as partners or joint venturers.
14. BINDING NATURE OF AGREEMENT; ENTIRE AGREEMENT. This Agreement shall be
binding upon and inure to the benefit of the parties and their respective heirs,
representatives and successors. This Agreement supersedes all prior agreements,
representations or understandings, oral or written, express or implied with
respect to the subject matter hereof.
15. AMENDMENTS. No amendment to this Agreement shall be valid unless
in writing signed by both of the parties.
16. RESOLUTION OF DISPUTES. The rights of the parties under this Agreement
and concerning the employment relationship shall be determined, in the event of
a dispute, by an independent arbitrator selected in accordance with the rules of
the American Arbitration Association and the decision of the arbitrator shall be
final and binding on both parties. To the maximum extent permitted by law, the
parties waive their rights to a determination of any such issues by a court or
jury. In the event either party resorts to arbitration or other legal action to
resolve a dispute arising under this Agreement, the prevailing party shall be
entitled to recover the costs and expenses incurred in connection with such
arbitration or action from the other party, including, without limitation,
reasonable attorneys' fees. For purposes of this Section, the term "dispute"
means all controversies or claims relating to terms, conditions or privileges of
employment, including, without limitation, claims for breach of contract,
discrimination, harassment, wrongful discharge, misrepresentation, defamation,
emotional distress or any other personal injury, but excluding claims for
unemployment compensation or worker's compensation. This Section shall survive
the termination of this Agreement.
17. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be considered an original and all of which
shall constitute one and the same agreement. This Agreement shall not become
effective until it has been executed by both of the parties hereto.
18. HEADINGS. The headings used in this Agreement are for
convenience of reference only and shall have no force or effect in the
construction or interpretation of the provisions of this Agreement.
19. NOTICES. All notices, requests, demands, and other communications
required or permitted by this Agreement shall be in writing (unless otherwise
specifically provided herein) to the addresses of the parties set forth below
and shall be deemed to have been received: (a) three (3) days after deposit in
the U.S. mail, postage prepaid, registered or certified, and addressed to either
party at the addresses set forth below, or to such changed address as either
party may have given to the other by notice in the manner herein provided; or
(b) upon personal delivery.
If to the Corporation: BSC-NY, Inc.
c/o PHC, Inc.
200 Lake St.
Suite 102
Peabody, MA 01960
With a copy to: Arent Fox Kintner Plotkin & Kahn
1675 Broadway
New York, N.Y. 10019
Attn: Jerome T. Levy, Esq.
If to the Employee: Yakov Burstein, Ph.D.
54-19 59th Ave.
Elmhurst, N.Y. 11373
With a copy to: Harvey Z. Werblowsky, Esq.
McDermott, Will & Emery
50 Rockefeller Plaza
New York, N.Y. 10020
20. SEVERABILITY. Nothing contained in this Agreement shall be construed
to require the commission of any act contrary to law, and whenever there is any
conflict between any provision of this Agreement and any statute, law, ordinance
or regulations the statute, law, ordinance or regulation shall prevail. In such
event, and in any case in which any provision of this Agreement is determined to
be in violation of a statute, law, ordinance or regulation, the affected
provision(s) shall be limited only to the extent necessary to bring it within
the requirements of the law and, insofar as possible under the circumstances, to
carry out the purposes of this Agreement. The other provisions of this Agreement
shall remain in full force and effect, and the invalidity or unenforceability of
any provision hereof shall not affect the validity and enforceability of the
other provisions of this Agreement.
21. NO WAIVER. The waiver by any party to this Agreement of any
breach of any term or condition of this Agreement shall not constitute a
waiver of subsequent breaches. No waiver by any party of any provision of
this Agreement shall be deemed to constitute a waiver of any other provision.
22. NO REQUIREMENT TO REFER. It is not a purpose of this Agreement to
induce or encourage the referral of patients, and there is no requirement under
this Agreement, or under any other agreement between the practice and the
Employee, that the Employee refer any patient to the PC or to any other entity
for the delivery of health care items or services. The compensation paid to the
Employee under this Agreement is made for services and obligations as set forth
in this Agreement, and no payment made under this Agreement is in return for the
referral of patients or in return for purchasing, leasing, ordering or arranging
for any good, facility, item or service from the PC or any other entity.
<PAGE>
IN WITNESS WHEREOF, the parties hereby have executed this Agreement as of
the date first above written.
EMPLOYEE BSC-NY, INC.
By: By:
Yakov Burstein, Ph.D. Its President
<PAGE>
EXHIBIT 10.94
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT is entered into this 1st day of November, 1996,
(the "Effective Date") by and between BSC-NY, a New York corporation (the
"Corporation"), and Irwin Mansdorf, Ph.D (the "Consultant").
W I T N E S S E T H:
WHEREAS, the Corporation is in the business of providing management and
administrative services; and
WHEREAS, Perlow Physicians, P.C. (the "P.C.") is a New York
professional corporation that provides psychotherapy services; and
WHEREAS, the Corporation has been retained by the P.C. to provide
administrative and management services in support of the P.C.'s provision of
psychotherapy services; and
WHEREAS, the Corporation desires to retain the Consultant on the terms and
conditions hereafter set forth, and the Consultant desires to accept such
engagement.
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein contained, the Corporation hereby retains the Consultant to provide
consulting services and the Consultant hereby agrees to provide such consulting
services to the Corporation, upon the following terms and conditions:
1. DUTIES. The Consultant is hereby retained by the Corporation to perform
marketing and business development services. The Consultant shall at all times
comply with all policies and procedures of the Corporation, copies of which
shall be provided to the Consultant by the Corporation, and incorporated by
reference into this Agreement when initialed by the Consultant.
2. TIME REQUIREMENTS. Subject to the provisions of Section 5
hereof, the Consultant agrees to devote one hundred (100) hours per month
during the term of this Agreement to the affairs and activities of the
Corporation.
3. COMPENSATION. Subject to the provisions of Section 5 hereof, the
Corporation agrees to pay to the Consultant as compensation for his services
hereunder a salary at an annual rate of one hundred twenty five thousand dollars
($125,000.00) per year. Any and all compensation to be paid to Consultant
pursuant to this Section 3 and under the Consulting Agreement between Consultant
and the P.C. of even date herewith (the "P.C. Agreement") shall be paid by the
P.C.
4. REIMBURSEMENT OF EXPENSES. Subject to the provisions of Section 5
hereof, the Corporation will provide the Consultant with an automobile allowance
or $475.00 per month. The Corporation shall reimburse the Consultant for all
reasonable and necessary business expenses incurred by him in the performance of
his duties hereunder, to include parking expenses, cellular phone expenses and
beeper expenses. The Corporation shall also reimburse the Consultant for
membership dues in professional organizations bearing direct relationship to the
Consultant's duties in connection with this Agreement.
5. DUPLICATION OF TIME REQUIREMENTS AND COMPENSATION. Any hours of
time devoted by Consultant to his responsibilities pursuant to Section 2 of
this Agreement shall offset the number of hours Consultant is required to
devote to his responsibilities under the P.C. Agreement. Any right to
compensation or reimbursement of item of expense paid by the Corporation to
the Consultant pursuant to Section 3 and 4 of this Agreement shall be offset
by such compensation or such reimbursement of item of expense to be provided
by the Corporation to Consultant under the P.C. Agreement.
6. REPRESENTATIONS. WARRANTIES AND COVENANTS OF THE CORPORATION.
The Corporation represents and warrants at all times during the term of this
Agreement that:
6.1 The Corporation is a duly formed corporation organized, validly
existing and in good standing under the laws of the State of New York.
6.2 The Corporation has the corporate power and authority to enter
into this Agreement and to carry on its business as currently conducted.
6.3 Within 90 days of the Effective Date of this Agreement, the
Corporation shall employ a qualified Chief Operating Officer to manage the
affairs of the Corporation. Should the employment of the Chief Operating Officer
be terminated for any reason, the Corporation shall hire a replacement within 90
days thereafter. The Corporation shall confer with the Consultant prior to the
hiring of an initial or replacement Chief Operating Officer.
7. TERM; BASIS FOR TERMINATION. Subject to the provisions of this
Section 7, the term of this Agreement shall be for three (3) years,
commencing on the Effective Date. This Agreement shall terminate on the
earlier to occur of the following:
7.1 The death of the Consultant;
7.2 The permanent disability of the Consultant at any time. The
Consultant shall be deemed to have become permanently "disabled" when by reason
of a physical or mental disability or incapacity he shall have failed or is
unable to perform his customary duties and activities on behalf of the
Corporation for a consecutive period of four (4) months or for any six (6)
months within any twelve (12) month period; or
7.3 At any time by the Corporation for "cause" which, for purposes
of this Agreement, shall mean (a) willful and serious or habitual failure of the
Consultant to perform his duties hereunder in all material respects which is not
remedied within 30 days after the receipt of notice thereof from the
Corporation; (b) gross misconduct, fraud or embezzlement by the Consultant.
8. GOVERNING LAW. This Agreement shall be construed under the laws
of the State of New York without giving effect to the conflict of laws
provisions thereof.
9. ASSIGNMENT. Neither this Agreement nor any right, duty or obligation
arising under it may be assigned by either party without the prior written
consent of the other party. Notwithstanding the foregoing, in the event of the
merger or consolidation of the Corporation with any other corporation or
corporations, the sale by the Corporation of a major portion of its assets or of
its business and good will, or any other corporate reorganization involving the
Corporation, this Agreement may, without the Consultant's written consent, be
assigned and transferred to such successor in interest as an asset of the
Corporation upon such assignee assuming the Corporation's obligation hereunder,
in which event the Consultant agrees to continue to perform his duties and
obligations, according to the terms hereof, to or for such assignee or
transferee of this Agreement; provided, however, that the Corporation will
remain secondarily liable as guarantor of such assignee or transferee's
obligations to the Consultant hereunder.
<PAGE>
10. NATURE OF RELATIONSHIP. For the purposes of this Agreement and all
services to be provided hereunder, the parties shall be, and shall be deemed to
be independent contractors and not agents or employees of each party. Nothing in
this Agreement shall be construed as establishing the parties as partners or
joint venturers.
11. BINDING NATURE OF AGREEMENT; ENTIRE AGREEMENT. This Agreement shall be
binding upon and inure to the benefit of the parties and their respective heirs,
representatives and successors. This Agreement supersedes all previous
employment agreements and any amendments thereto entered into between the
Consultant and the Corporation concerning the subject matter of this Agreement,
prior agreements, representations or understandings, oral or written, express or
implied with respect to the subject matter hereof.
12. AMENDMENTS. No amendment to this Agreement shall be valid unless
in writing, signed by both of the parties.
13. RESOLUTION OF DISPUTES. The rights of the parties under this Agreement
and concerning the consulting relationship shall be determined, in the event of
a dispute, by an independent arbitrator selected in accordance with the rules of
the American Arbitration Association and the decision of the arbitrator shall be
final and binding on both parties. To the maximum extent permitted by law, the
parties waive their rights to a determination of any such issues by a court or
jury. In the even that either party resorts to arbitration or other legal action
to resolve a dispute arising under this Agreement, the prevailing party shall be
entitled to recover the costs and expenses incurred in connection with such
arbitration or action from the other party, including, without limitation,
reasonable attorney's fees. For purposes of this Section, the term "dispute"
means all controversies or claims relating to terms, conditions or privileges of
employment, including, without limitation, claims for breach of contract,
discrimination, harassment, wrongful discharge, misrepresentation, defamation,
emotional distress or any other personal injury, but excluding claims for
unemployment compensation or worker's compensation. This Section shall survive
the termination of this Agreement.
14. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be considered an original and all of which
shall constitute one and the same agreement. This Agreement shall not become
effective until it has been executed by both of the parties hereto.
15. HEADINGS. The headings used in this Agreement are for
convenience of reference only and shall have no force or effect in the
construction or interpretation of the provisions of this Agreement.
16. NOTICES. All notices, requests, demands, and other communications
required or permitted by this Agreement shall be in writing (unless otherwise
specifically provided herein) to the addresses of the parties set forth below
and shall be deemed to have been received: (a) three (3) days after deposit in
the U.S. mail, postage prepaid, registered or certified, and addressed to either
party at the addresses set forth below, or to such changed address as either
party may have given to the other by notice in the manner herein provided; or
(b) upon personal delivery.
If to the Corporation: BSC-NY, Inc.
c/o PHC, Inc.
200 Lake St., Suite 102
Peabody, MA.
01960
With a copy to: Arent Fox Kintner Plotkin & Kahn
1675 Broadway
New York, N.Y. 10019
Attn: Jerome T. Levy, Esq.
If to the Consultant: Irwin Mansdorf, Ph.D.
94-19 59th Ave.
Elmhurst, N.Y. 11373
With a copy to: Harvey Z. Werblowsky, Esq.
McDermott, Will & Emery
50 Rockefeller Plaza
New York, N.Y. 10020
16. SEVERABILITY. Nothing contained in this Agreement shall be construed
to require the commission of any act contrary to law, and whenever there is any
conflict between any provision of this Agreement and any statute, law, ordinance
or regulation, the statute, law, ordinance or regulation shall prevail. In such
event, and in any case any provision of this Agreement is determined to be in
violation of a statute, law, ordinance or regulation, the affected provision(s)
shall be limited only to the extent necessary to bring it within the
requirements of the law and, insofar as possible under the circumstances, to
carry out the purposes of this Agreement. The other provisions of this Agreement
shall remain in full force and effect, and the invalidity or unenforceability of
any provision hereof shall not affect the validity and enforceability of the
other provisions of this Agreement.
17. NO WAIVER. The waiver by any party to this Agreement of any
breach of any term or condition of this Agreement shall not constitute a
waiver of subsequent breaches. No waiver by any party of any provision of
this Agreement shall be deemed to constitute a waiver of any other provision.
18. NO REQUIREMENT TO REFER. It is not a purpose of this Agreement to
induce or encourage the referral of patients, and there is no requirement under
this Agreement, or under any other agreement between the practice and the
Consultant, that the Consultant refer any patient to the P.C. or to any other
entity for the delivery of health care items or services. The compensation paid
to the Consultant under this Agreement is made for professional services and
obligations as set forth in this Agreement, and no payment made under this
Agreement is in return for the referral of patients or in return for purchasing,
leasing, ordering or arranging for any good, facility, item or service from the
P.C. or any other entity.
<PAGE>
IN WITNESS WHEREOF, the parties hereby have executed this Agreement as of
the date first above written.
CONSULTANT BSC-NY, INC.
By: By:
Irwin Mansdorf, Ph.D. Its President
<PAGE>
EXHIBIT 10.95
G:\LEVYJ\MEMO\MERGAGT.015
iii
TABLE OF CONTENTS
PAGE
ARTICLE I
<TABLE>
<S> <C> <C> <C> <C>
THE MERGER................................................. 1
SECTION 1.1 THE MERGER....................................................................... 1
SECTION 1.2 EFFECTIVE TIME.................................................................... 1
SECTION 1.3 EFFECTS OF THE MERGER............................................................. 1
SECTION 1.4 CERTIFICATE OF INCORPORATION AND BYLAWS........................................... 1
SECTION 1.5 DIRECTORS......................................................................... 1
SECTION 1.6 OFFICERS.......................................................................... 2
SECTION 1.7 CONVERSION OF SHARES.............................................................. 2
SECTION 1.8 CHANGE OF CONTROL; ESTABLISHMENT OF MERGER CONSIDERATION FLOOR.................... 4
SECTION 1.9 CONVERSION OF MERGER SUB COMMON STOCK............................................. 5
ARTICLE II
EXCHANGE OF SHARES............................................. 5
SECTION 2.1 EXCHANGE OF CERTIFICATES.......................................................... 5
SECTION 2.2 NO FURTHER OWNERSHIP RIGHTS IN THE COMPANY COMMON STOCK........................... 5
SECTION 2.3 NO FRACTIONAL SHARES.............................................................. 5
SECTION 2.4 NO LIABILITY...................................................................... 5
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.......................... 6
SECTION 3.1 DUE ORGANIZATION................................................................. 6
SECTION 3.2 INTERIM OPERATION OF MERGER SUB.................................................. 6
SECTION 3.3 AUTHORITY........................................................................ 6
SECTION 3.4 BOARD AND SHAREHOLDER APPROVAL................................................... 6
SECTION 3.5 CAPITALIZATION................................................................... 7
SECTION 3.6 SEC REPORTS AND FINANCIAL STATEMENTS............................................. 7
SECTION 3.7 VALIDITY......................................................................... 8
SECTION 3.8 LEGAL PROCEEDINGS................................................................ 8
SECTION 3.9 HART-SCOTT-RODINO................................................................ 9
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................... 9
SECTION 4.1 DUE ORGANIZATION.................................................................. 9
SECTION 4.2 SUBSIDIARY........................................................................ 9
SECTION 4.3 AUTHORITY......................................................................... 9
SECTION 4.4 BOARD AND SHAREHOLDER APPROVAL................................................... 9
SECTION 4.5 CAPITALIZATION................................................................... 10
SECTION 4.6 EXECUTION, DELIVERY AND PERFORMANCE............................................... 10
SECTION 4.7 INCOME TAX RETURNS............................................................... 11
SECTION 4.8 ERISA............................................................................. 11
SECTION 4.9 REAL PROPERTY AND REAL ESTATE LEASES............................................. 13
SECTION 4.10 OPERATING EQUIPMENT............................................................. 14
SECTION 4.11 EMPLOYEE MATTERS................................................................ 14
SECTION 4.12 LICENSES AND PERMITS............................................................ 14
SECTION 4.13 CONTRACTS AND COMMITMENTS....................................................... 15
SECTION 4.14 TAXES........................................................................... 15
SECTION 4.15 LEGAL PROCEEDINGS............................................................... 16
SECTION 4.16 INVESTMENTS..................................................................... 16
SECTION 4.17 CONDUCT OF BUSINESS............................................................. 16
SECTION 4.18 COMPLIANCE WITH APPLICABLE LAWS................................................. 17
SECTION 4.19 UNDISCLOSED LIABILITIES......................................................... 17
SECTION 4.20 BANKING RELATIONSHIPS........................................................... 18
SECTION 4.21 INSURANCE....................................................................... 18
SECTION 4.22 MINUTE BOOKS.................................................................... 18
SECTION 4.23 CASH FLOW....................................................................... 18
SECTION 4.24 DISCLOSURE...................................................................... 18
SECTION 4.25 ABSENCE OF CERTAIN CHANGES...................................................... 18
SECTION 4.26 SUFFOLK COUNTY.................................................................. 18
ARTICLE V
CONDUCT OF BUSINESSES PENDING THE MERGER.................................. 19
ARTICLE VI
ADDITIONAL AGREEMENTS........................................... 19
SECTION 6.1 ACCESS TO INFORMATION............................................................ 19
SECTION 6.2. LEGAL CONDITIONS TO MERGER...................................................... 19
SECTION 6.3. STOCK EXCHANGE LISTING.......................................................... 20
SECTION 6.4 NOTIFICATION OF CERTAIN MATTERS.................................................. 20
SECTION 6.5 SUPPLEMENTAL DISCLOSURE.......................................................... 21
SECTION 6.6 ADDITIONAL AGREEMENTS; BEST EFFORTS.............................................. 21
SECTION 6.7 RECORD RETENTION................................................................. 21
SECTION 6.8 EMPLOYMENT WITH THE BUSINESS..................................................... 22
SECTION 6.9 CONSULTING AGREEMENTS............................................................ 22
SECTION 6.10 ACCOUNTS RECEIVABLE............................................................. 22
ARTICLE VII
COVENANTS................................................. 22
SECTION 7.1 CONDUCT OF BUSINESS BY PARENT AND SURVIVING CORPORATION.......................... 22
SECTION 7.2 NO SOLICITATION BY PARENT AND SURVIVING CORPORATION.............................. 23
SECTION 7.3 CERTAIN OPERATIONAL MATTERS...................................................... 23
ARTICLE VIII
CONDITIONS................................................. 24
SECTION 8.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER........................ 24
SECTION 8.2 CONDITIONS TO OBLIGATION OF THE COMPANY TO EFFECT THE MERGER...................... 25
SECTION 8.3 CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER SUB TO EFFECT THE MERGER........... 27
SECTION 8.4 OTHER AGREEMENTS.................................................................. 27
ARTICLE IX
TERMINATION................................................ 27
SECTION 9.1 TERMINATION....................................................................... 27
SECTION 9.2 EFFECT OF TERMINATION............................................................ 28
SECTION 9.3 AMENDMENT........................................................................ 28
SECTION 9.4 EXTENSION; WAIVER................................................................ 28
ARTICLE X
COVENANT NOT TO COMPETE.......................................... 29
SECTION 10.1 COVENANTS....................................................................... 29
SECTION 10.2 ANCILLARY OBLIGATIONS........................................................... 30
SECTION 10.3 ENFORCEMENT..................................................................... 30
SECTION 10.4 SUCCESSORS AND ASSIGNS.......................................................... 30
ARTICLE XI
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
................................................................................................................ 30
SECTION 11.1 SURVIVAL......................................................................... 30
SECTION 11.2 STATEMENTS AS REPRESENTATIONS................................................... 30
SECTION 11.3 CLAIMS AGAINST PROMISSORY OBLIGATIONS AND EARN OUT PAYMENTS..................... 31
SECTION 11.4 INDEMNIFICATION BY THE STOCKHOLDERS. ........................................... 33
SECTION 11.5 INDEMNIFICATION BY PARENT AND THE SURVIVING CORPORATION......................... 33
SECTION 11.6 NOTICE AND DEFENSE OF INDEMNIFICATION CLAIMS.................................... 33
SECTION 11.7 LIMITATION ON RIGHT OF SET-OFF AND INDEMNIFICATION.............................. 35
ARTICLE XII
DISPUTE RESOLUTION
................................................................................................................ 35
SECTION 12.1 NEGOTIATED RESOLUTION........................................................... 35
SECTION 12.2 MEDIATION....................................................................... 36
SECTION 12.3 ARBITRATION..................................................................... 36
ARTICLE XIII
GENERAL PROVISIONS
................................................................................................................ 36
SECTION 13.1 EXPENSES......................................................................... 36
SECTION 13.2 COUNTERPARTS..................................................................... 36
SECTION 13.3 CONSENT TO JURISDICTION; APPLICABLE LAW.......................................... 36
SECTION 13.4 ANNOUNCEMENTS.................................................................... 37
SECTION 13.5 NOTICES.......................................................................... 37
SECTION 13.6 ASSIGNMENT....................................................................... 38
SECTION 13.7 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES; RIGHTS OF OWNERSHIP.............. 38
SECTION 13.8 CAPTIONS......................................................................... 38
</TABLE>
<PAGE>
AGREEMENT AND PLAN OF MERGER
Agreement and Plan of Merger dated as of October 31, 1996, by and
among PHC, Inc., a Massachusetts corporation ("Parent"), BSC-NY, Inc., a New
York corporation and a direct, wholly-owned subsidiary of Parent ("Merger Sub"),
Behavioral Stress Center, Inc., a New York corporation (the "Company"),
Irwin Mansdorf, a shareholder of the Company and resident of New York State
("Mansdorf"), and Yakov Burstein, a shareholder of the Company and resident of
New York State ("Burstein") (Mansdorf and Burstein sometimes are referred to
hereinafter collectively as the "Stockholders" and individually each as a
"Stockholder").
ARTICLE I
THE MERGER
THE MERGER. Subject to the terms and conditions hereof, and in accordance
with the New York Business Corporation Law (the "Corporation Law"), the Company
will be merged with and into the Merger Sub (the "Merger"), as soon as
practicable following the satisfaction or waiver of the conditions set forth in
Article VIII hereof. Following the Merger, the Merger Sub shall continue as the
surviving corporation (the "Surviving Corporation") and the separate corporate
existence of the Company shall cease.
EFFECTIVE TIME. The Merger shall be consummated by the filing by the New York
Department of State of a certificate of merger in substantially such form as is
annexed hereto as Exhibit A, and executed in accordance with the relevant
provisions of the New York Business Corporation Law (the time of such filing
being the "Effective Time").
EFFECTS OF THE MERGER. The Merger shall have the effects set forth in
Section 906 of the New York Business Corporation Law. As of the Effective Time,
the Merger Sub shall be a wholly owned subsidiary of Parent.
CERTIFICATE OF INCORPORATION AND BYLAWS. The Certificate of Incorporation
and Bylaws of Merger Sub as in effect at the Effective Time shall be the
Certificate of Incorporation and Bylaws of the Surviving Corporation, provided
that Article "FIRST" of the Certificate of Incorporation of the Surviving
Corporation shall be amended to read in its entirety as follows: "The name of
the Corporation is "Behavioral Stress Center, Inc."
DIRECTORS. The directors of Merger Sub at the Effective Time shall be the
directors of the Surviving Corporation and shall hold office from the Effective
Time until their respective successors are duly elected or appointed and
qualified in the manner provided in the Bylaws of the Surviving Corporation, or
as otherwise provided by law.
OFFICERS. The officers of the Merger Sub at the Effective Time shall be the
officers of the Surviving Corporation and shall hold office from the Effective
Time until their respective successors are duly elected or appointed in the
manner provided in the Bylaws of the Surviving Corporation, or as otherwise
provided by law.
CONVERSION OF SHARES. (a) Each share of common stock, no par value per share, of
the Company (the "Company Common Stock") issued and outstanding immediately
prior to the Effective Time (other than shares held by the Company or any
subsidiary of the Company, which shall be cancelled, by virtue of the Merger and
without any action on the part of the holder thereof) shall be converted into
the right to receive the Merger Consideration (as hereinafter defined), payable
to the holder thereof, without any interest thereon, upon surrender of the
certificate representing such share of the Company Common Stock.
(b) As used in this Agreement, "Merger Consideration" per share of
Company Common Stock shall mean:
(i) the greater of (x) 625 shares of Class A Common Stock of Parent
("Parent Stock") or (y) that number of shares of Parent Stock equal to $5,625
divided by the Market Price (as hereinafter defined) per share on the date of
closing (the "Closing") which shall take place at 10:00 a.m. at the offices of
Arent Fox Kintner Plotkin & Kahn, 1675 Broadway, 25th Floor, New York, NY 10019
as of October 31, 1996 (the "Closing Date"). For purposes of this Agreement,
Market Price shall mean the average per share closing price on the principal
stock exchange or market where Parent Stock is then traded during the 10
consecutive trading days ending on the trading day prior to the date "Market
Price" is being determined, plus
(ii) an amount of Parent Stock and cash with respect to each of th
first three (3) Fiscal Years (as hereinafter defined) of the Surviving
Corporation after the Closing Date payable on the ninetieth (90th) day following
the end of such Fiscal Year (each, a "Payout Date") equal to (.49) multiplied by
the Earn Out Income (as hereinafte defined) for such Fiscal Year divided by
(160), plus
(iii) an additional amount of Parent Stock and cash payable on the
Payout Date following the third Fiscal Year of the Surviving Corporation after
the Closing Date, equal to (.49) multiplied by (4), multiplied by the Earn Out
Income for such Fiscal Year divided by (160) (the "Third Year Payment") plus
(iv) an additional cash amount payable on the date ninety (90) day
after the closing Date equa l to the amount of the accounts receivable of the
Company and the Company Sub (as hereinafter defined) as of the Closing Date
("A/R") to the extent A/R have been collected on or prior to such ninetieth day
divided by (160) plus (v) an additional cash amount payable on the date one
hundred eighty (180) days after the Closing Date (and each six month period
thereafter) equal to A/R to the extent A/R have been collected after the
ninetieth day following the Closing Date but on or prior to such 180th day
divided by (160) (or during such six month period).
(c) The payment on each Payout Date shall consist of one-half cash and
one-half Parent Stock provided such payment shall include no more than $200,000
of Parent Stock. Notwithstanding the foregoing, (i) to the extent the total
Merger Consideration (including amounts payable pursuant to Section 1.7(b)(i),
(ii), (iii), (iv) and (v)) at any time would result in 50% or more of such
Merger Consideration being non-stock in nature, the excess of the Merger
Consideration above such 50% threshold will be payable in Parent Stock, and (ii)
each Stockholder may elect to receive any higher percentage of Parent Stock.
Parent Stock shall be valued when issued based on the Market Price on each
Payout Date or issue date for purposes of this section.
(d) The term "Earn Out Income" for any Fiscal Year shall mean the
consolidated net income before taxes of the Surviving Corporation and its
subsidiary, Professional Health Associates, Inc. (the "Company Sub"), for such
Fiscal Year, determined in accordance with generally accepted accounting
principles ("GAAP"). In no event shall any management or similar fee charged by
Parent or any of its Subsidiaries (as such term is defined in Rule 405
promulgated under the Securities Act of 1933, as amended (the "Securities Act"))
to the Surviving Corporation or any of its Subsidiaries be deemed an expense in
determining such consolidated net income. Any management or similar fee charged
by the Surviving Corporation or any of its Subsidiaries to Perlow Physicians,
P.C., a New York corporation (the "PC"), shall be included in revenue in
determining such consolidated net income. In no event shall any obligations of
(i) the PC, Parent and any of their Subsidiaries (including Merger Sub) to the
Stockholders, Clinical Associates or Clinical Diagnostics under that certain
agreement for purchase and sale of assets of even date herewith among Parent,
Merger Sub, the PC, Clinical Associates, Clinical Diagnostics and the
Stockholders and (ii) Parent and any of its Subsidiaries to the Stockholders
under this Agreement, other than under the Burstein Employment Agreement and the
Mansdorf Consulting Agreement or any payment for psychotherapy services by the
PC, be deemed an expense in determining such consolidated net income; provided,
however, that depreciation and amortization arising out of the transactions
referred to in clauses (i) and (ii) above may be deducted as an expense in
computing Earn Out Income to the extent that such depreciation and amortization
does not exceed $250,000 in each of the first two (2) Fiscal Years of the
Surviving Corporation and $500,000 in the third Fiscal Year of the Surviving
Corporation. Notwithstanding the foregoing, all direct out-of-pocket ordinary
and necessary costs and expenses paid or incurred by Parent or any of its
Subsidiaries on behalf of the Surviving Corporation and the Company Sub shall be
reflected as an expense of the Surviving Corporation and the Company Sub. The
term "Fiscal Year" shall mean the twelve month period ended on the first
anniversary of Closing Date and each successive twelve month period thereafter.
(e) In the event the Surviving Corporation or any of its Subsidiaries
plans to acquire (by merger, consolidation, purchase or otherwise) any
psychotherapy practice or provider of management services in connection
therewith (an "Acquisition"), Parent shall provide the Stockholders with a
notice ("Acquisition Notice") including the terms of the Acquisition and the
parties thereto in reasonable detail, copies of any agreements or instruments to
be executed in connection with the Acquisition and, if then available, a
computation (the "Computation") of the maximum depreciation and amortization
expenses per year to be borne by the Surviving Corporation or any of its
Subsidiaries in connection with the Acquisition. Promptly (but no more than 10
business days) after receipt of any Acquisition Notice for an Acquisition, the
Stockholders shall elect whether or not such Acquisition shall be reflected in
Earn Out Income. If the Stockholders elect to include such Acquisition in Earn
Out Income, the operating results resulting from such Acquisition including
depreciation and amortization shall be reflected in Earn Out Income. If the
Stockholders elect not to include such Acquisition in Earn Out Income, such
operating results, depreciation and amortization shall not be reflected in Earn
Out Income. If the Stockholders elect to include in Earn Out Income any
Acquisition the Acquisition Notice for which did not include a Computation,
Parent shall provide the Stockholders with a supplemental Acquisition Notice
including a Computation as soon as it is available. Promptly (but no more than
10 business days) after receipt of such supplemental Acquisition Notice, the
Stockholders may change their election as to whether or not such Acquisition
shall be reflected in Earn Out Income. If Parent or any of its Affiliates (as
such term is defined in Rule 405 promulgated under the Securities Act) (other
than the Surviving Corporation or any of its Subsidiaries) plans to acquire
(either by merger, consolidation, purchase or otherwise) any psychotherapy
practice or provider of management services in connection therewith located more
than 100 miles from New York City that was introduced to Parent by Mansdorf or
Burstein, Parent shall provide the Stockholders with an Acquisition Notice with
respect thereto in accordance with this Section 1.7(e) as if the Surviving
Corporation or any of its Subsidiaries were making the acquisition and the
Stockholders shall have the election rights with respect thereto specified
above.
(f) Any dispute as to the determination of Earn Out Income shall be
settled in the manner provided in Article XII.
CHANGE OF CONTROL; ESTABLISHMENT OF MERGER CONSIDERATION FLOOR. In the event of
a "change of control" with OR respect to Parent, Parent's minimum obligation to
pay the Merger Consideration shall be immediately determined and fixed. A
"change of control" with respect to Parent means the occurrence of one or more
of the following: (a) Bruce A. Shear ceases to be the chief executive officer of
Parent; (b) Bruce A. Shear ceases to be the president of Parent; (c) Parent
ceases to own at least 51% of the voting securities of the Surviving
Corporation; or (d) the sale, exchange, transfer, assignment or other
disposition, whether voluntary or involuntary (but not including a pledge or
grant of another form of security interest) of the assets constituting the
business of the Company as such assets exist on the Closing Date by the
Surviving Corporation. In the event Parent's minimum obligation to pay the
Merger Consideration is determined pursuant to this section as a result of a
change in control, any Merger Consideration for any Fiscal Year not yet ended at
the time of such change in control shall be calculated based on the greater of
(i) Earn Out Income for such Fiscal Year as set forth in Section 1.7 and (ii)
Earn Out Income for the Fiscal Year ended immediately prior to such change in
control (or, if no full Fiscal Year has yet ended, an annualized amount based on
the partial Fiscal Year ended on the date of the change of control). E.G., if a
change in control occurs nine months after the Closing Date, the Merger
Consideration per share of Company Common Stock pursuant to Section 1.7(b) (ii &
iii) shall be no less than an amount equal to (.49) multiplied by (7),
multiplied by the Earn Out Income of the Company and the Company Sub for such
nine month period multiplied by (12) divided by (9) divided by (160). Nothing in
this section affects the time Parent shall be obligated to pay Merger
Consideration, it being understood that this section merely establishes the
minimum amount of such Merger Consideration upon the occurrence of a change in
control with respect to Parent.
CONVERSION OF MERGER SUB COMMON STOCK. Each share of common stock, no par value
per share, of Merger Sub issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Merger and without any action on the part
of the holder thereof, be converted into and exchangeable for one share of
common stock of the Surviving Corporation.
ARTICLE II
EXCHANGE OF SHARES
EXCHANGE OF CERTIFICATES. (a) EXCHANGE PROCEDURES. At the Effective Time, Parent
shall deliver the Parent Stock to the holders of record of Company Common Stock
upon surrender of the certificates representing such shares of Company Common
Stock in accordance with Section 1.7(a). On each Payout Date, Parent shall pay
to the shareholders of the Company immediately prior to the Effective Time
Merger Consideration in the form of cash or Parent Stock, as the case may be, in
accordance with Section 1.7(b)(ii) and (iii). For purposes of this Agreement,
all payments of cash shall be made by bank or certified check or by wire
transfer into the account or accounts designated by the shareholders of the
Company immediately prior to the Effective Time.
NO FURTHER OWNERSHIP RIGHTS IN THE COMPANY COMMON STOCK. After the surrender for
exchange of shares of the Company Common Stock in accordance with the terms
hereof, there shall be no further registration of transfers on the stock
transfer books of the Surviving Corporation of the shares of the Company Common
Stock which were outstanding immediately prior to the Closing Date. If, after
the Effective Time, Certificates are presented to Parent or the Surviving
Corporation for any reason, they shall be cancelled and exchanged as provided in
this Article II.
NO FRACTIONAL SHARES. No certificate or scrip representing fractional shares of
Parent Stock shall be issued upon the surrender for exchange of Certificates. In
lieu of any fractional share of Parent Stock which a holder of the Company
Common Stock otherwise would be entitled to receive, such holder shall receive
one full share of Parent Stock.
NO LIABILITY. None of Parent, Merger Sub, the Company, the Company Sub or the
Surviving Corporation shall be liable to any holder of shares of the Company
Common Stock for any Merger Consideration (or dividends or distributions with
respect to Parent Stock included therein) delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby represent and warrant to the Company as of the
date hereof follows:
DUE ORGANIZATION. Parent is a business corporation duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Massachusetts, with full power and authority and all requisite licenses, permits
and franchises to own, lease and operate its assets and to carry on the business
in which it is engaged. Merger Sub is a business corporation duly organized and
validly existing under the laws of the State of New York, with full power and
authority and all requisite licenses, permits and franchises to own, lease and
operate its assets and to carry on the business in which it is engaged. Each of
Parent and Merger Sub has delivered to the Company a true, correct and complete
copy of its respective Certificate of Incorporation and Bylaws. Parent is duly
qualified as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of its properties owned or leased or the
nature of its activities makes such qualification necessary, except where the
failure so to qualify or to be in good standing would not have a material
adverse effect on its business or the results of its operations or its financial
condition.
INTERIM OPERATION OF MERGER SUB. Merger Sub was formed solely for the purpose
of engaging in the transactions contemplated hereby, has engaged in no other
business activities and has conducted its operations only as contemplated
hereby.
AUTHORITY. Each of Parent and Merger Sub has full right, power and authority,
without the consent of any other person, to execute and deliver this Agreement
and to carry out the transactions contemplated hereby. Each of Parent, Merger
Sub and (as of the Closing) the PC has full right, power and authority, without
the consent of any other person, to execute and deliver all other agreements
being delivered in connection herewith to which it is a party, including an
employment agreement with Burstein (the "Employment Agreement"), a consulting
agreement with Mansdorf (the "Consulting Agreement"), and a registration rights
agreement (the "Registration Rights Agreement" and collectively with all other
agreements, the "Ancillary Agreements"), and to carry out the transactions
contemplated thereby. All corporate and other acts or proceedings required to be
taken by Parent and Merger Sub to authorize the execution, delivery and
performance of this Agreement and all transactions contemplated hereby have been
duly and properly taken.
BOARD AND SHAREHOLDER APPROVAL. This Agreement and the Ancillary Agreements and
the transactions contemplated hereby and thereby have been approved and adopted
by the requisite vote of the board of directors of Parent and the board of
directors and shareholders of Merger Sub. No vote of Parent's shareholders is
required in connection with this Agreement and the Ancillary Agreements or the
transactions contemplated hereby or thereby.
CAPITALIZATION. As of the date hereof, the authorized capital stock of Parent
consists of (i) 10,000,000 shares of Parent Stock, of which, as of the date
hereof, 2,327,624 shares are issued and outstanding and no shares are held in
treasury; (ii) 2,000,000 shares of Class B Common Stock, of which, as of the
date hereof, 806,556 shares are issued and outstanding and no shares are in
treasury; (iii) 200,000 shares of Class C Common Stock, of which, as of the date
hereof, 199,816 shares are issued and outstanding and no shares are in treasury;
and (iv) 1,000,000 shares of preferred stock, of which, as of the date hereof,
no shares are issued and outstanding. As of the date hereof, there are
outstanding pursuant to Parent's incentive and stock option plans (the "Parent
Stock Plans") and other agreements, options to purchase 79,875 shares of Parent
capital stock. All the outstanding shares of Parent capital stock are, and all
shares of Parent capital stock which are to be issued pursuant to the Merger or
which may be issued pursuant to the Parent Stock Plans when issued in accordance
with the respective terms thereof will be, duly authorized, validly issued,
fully paid and nonassessable and free of any preemptive rights in respect
thereto. As of the date hereof, no bonds, debentures, notes or other
indebtedness having the right to vote (or convertible into securities having the
right to vote) ("Voting Debt") of Parent are issued or outstanding. Except as
set forth above and except for this Agreement, as of the date hereof, there are
no existing options, warrants, calls, subscriptions or other rights or
agreements or commitments of any character relating to the issued or unissued
capital stock or Voting Debt of Parent or any of its Subsidiaries or obligating
Parent or any of its Subsidiaries to issue, transfer or sell or cause to be
issued, transferred or sold any shares of capital stock or Voting Debt of, or
other equity interests in, Parent or of any of its Subsidiaries or securities
convertible into or exchangeable for such shares or equity interests or
obligating Parent or any of its Subsidiaries to grant, extend or enter into any
such option, warrant, call, subscription or other right, agreement or
commitment. As of the date hereof, the authorized capital stock of Merger Sub
consists of 200 shares of Common Stock, no par value per share, of which 100
shares are validly issued, fully paid and nonassessable and are owned directly
by Parent.
SEC REPORTS AND FINANCIAL STATEMENTS. Parent has filed with the Securities and
Exchange Commission (the "SEC"), and has heretofore made available to the
Company, true and complete copies of all forms, reports, schedules, statements
and other documents required to be filed by it under the Securities Exchange Act
of 1934, as amended (the "Exchange Act") or the Securities Act since its initial
public offering (as such documents have been amended since the time of such
filing, collectively, the "Parent SEC Documents"). The Parent SEC Documents,
including without limitation, any financial statements or schedules included
therein, at the time filed, (a) did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading and (b) complied in all material
respects with the applicable requirements of the Exchange Act and the Securities
Act, as the case may be, and the applicable rules and regulations of the SEC
thereunder, except, in each case, to the extent any Parent SEC Document has been
amended prior hereto by a subsequent Parent SEC Document delivered to the
Company. The financial statements of Parent included in the Parent SEC Documents
comply as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto or, in the case of the
unaudited statements, as permitted by Form 10-QSB of the SEC), and fairly
present (subject, in the case of the unaudited statements, to normal year-end
audit adjustments) the consolidated financial position of Parent and its
consolidated Subsidiaries as at the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended.
VALIDITY. This Agreement has been, and the documents to be delivered at Closing
will be, duly executed and delivered by Parent and Merger Sub and constitute
lawful, valid and legally binding obligations of Parent and Merger Sub,
enforceable in accordance with their respective terms, except as the same may be
limited by bankruptcy, insolvency and other laws affecting creditors' rights
generally and by general equity principles. None of the execution, delivery or
performance of this Agreement and the Ancillary Agreements and the consummation
of the transactions contemplated hereby or thereby by Parent or Merger Sub will,
with or without the giving of notice or the passage of time, or both, result in
the creation of any lien, charge or encumbrance of any kind or the acceleration
of any indebtedness or other obligation of Parent or Merger Sub and are not
prohibited by, do not violate or conflict with any provision of, and do not
result in a default under or a breach of (A) the Certificate of Incorporation or
Bylaws of either Parent or Merger Sub, (B) any note, bond, indenture, contract,
agreement, permit, license or other instrument to which Parent or Merger Sub is
a party or by which they are bound, (C) any order, writ, injunction, decree or
judgment of any court or governmental agency, or (D) any law, rule or regulation
applicable to Parent or Merger Sub, except, in each case, for such liens,
charges, encumbrances, violations, conflicts or defaults the creation or
occurrence of which would not have a material adverse effect on the consolidated
business or results of operations or financial condition of Parent. No approval,
authorization, consent or other order or action of or filing with any person,
including any court, administrative agency or other governmental authority is
required for the execution and delivery by Parent or Merger Sub of this
Agreement or its obligations hereunder or the consummation by Parent or Merger
Sub of the transactions contemplated hereby, except for such approvals,
authorizations, registrations, consents, orders, actions or filings the failure
of which to obtain or make would not have a material adverse effect on the
consolidated business or results of operations or financial condition of Parent.
LEGAL PROCEEDINGS. Neither Parent nor Merger Sub is engaged in or a party to or,
to the knowledge of Parent or Merger Sub, threatened with any action, suit or
other legal proceeding involving the Merger or affecting their ability to engage
in the transactions contemplated hereby. Parent and Merger Sub have no knowledge
of any investigation involving the Merger and the transactions contemplated
hereby pending or threatened by any governmental or regulatory authority, and to
the knowledge of Parent and Merger Sub, the Merger or transactions contemplated
hereby are not subject to any judgment, order, writ, injunction, stipulation or
decree of any court or any governmental agency.
HART-SCOTT-RODINO. With the meaning of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (15 U.S.C. ss.18a), Bruce A. Shear (including all
entities the assets or sales of which are attributable to Mr. Shear for purposes
of such Act) has total assets of less than $100,000,000 and total annual net
sales of less than $100,000,000, and therefore no party to this Agreement is
required to file notification pursuant to such Act in connection with the
Merger.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub as of the
date hereof as follows:
DUE ORGANIZATION. The Company is a corporation which is duly organized, validly
existing and in good standing under the laws of the State of New York and has
full power and authority to conduct its business. The Company has delivered to
Parent and Merger Sub a true, correct and complete copy of its Certificate of
Incorporation and Bylaws.
SUBSIDIARY. The Company Sub is the sole, wholly-owned subsidiary of the Company.
The Company Sub is a corporation which is duly organized, validly existing and
in good standing under the laws of the State of Delaware. The Company has
delivered to Parent and Merger Sub a true, correct and complete copy of the
Company Sub's Certificate of Incorporation and Bylaws.
AUTHORITY. The Company has full legal right, power and authority, without the
consent of any other person, to execute and deliver this Agreement, the
Ancillary Agreements to which it is a party and to carry out the transactions
contemplated hereby and thereby, except as noted on Schedule 4.3. All acts or
proceedings required to be taken by the Company to authorize the execution,
delivery and performance of this Agreement, the Ancillary Agreements and all
transactions contemplated hereby and thereby including, without limitation, any
required shareholder approval, have been duly and properly taken.
BOARD AND SHAREHOLDER APPROVAL. This Agreement and the transactions contemplated
hereby have been approved and adopted by the requisite vote of the board of
directors and shareholders of the Company.
CAPITALIZATION. The authorized capital stock of the Company consists of 200
shares of the Company Common Stock, of which, as of the date hereof, 160 shares
are issued and outstanding and 40 shares are held in treasury. All of the
outstanding shares of the Company Common Stock are duly authorized, validly
issued, fully paid and nonassessable and free of any preemptive rights in
respect thereto. As of the date hereof, no Voting Debt of the Company or the
Company Sub is issued or outstanding. As of the date hereof, there are no
existing options, warrants, calls, subscriptions or other rights or other
agreements or commitments of any character relating to the issued or unissued
capital stock or Voting Debt of the Company or the Company Sub or obligating the
Company or any of its Subsidiaries to issue, transfer or sell or cause to be
issued, transferred or sold any shares of capital stock or Voting Debt of, or
other equity interests in, the Company or the Company Sub or securities
convertible into or exchangeable for such shares of equity interests or
obligating the Company or the Company Sub to grant, extend or enter into any
such option, warrant, call, subscription or other right, agreement or
commitment. The Company is not a party to any voting trust or other arrangement
or understanding with respect to the voting of the Company Common Stock. As of
the date hereof, there are no outstanding contractual obligations of the Company
or the Company Sub to repurchase, redeem or otherwise acquire any shares of
capital stock of the Company or the Company Sub. All shares of capital stock of
the Company Sub are owned by the Company free and clear of any liens,
encumbrances, claims, charges, limitations or restrictions (including any
restriction on the right to vote, sell or otherwise dispose of such capital
stock or other ownership interests). As of the Closing Date and at the Closing,
the Stockholders are and will be record and beneficial owners of all of the
outstanding shares of the Company Common Stock.
EXECUTION, DELIVERY AND PERFORMANCE. This Agreement and the documents executed
and delivered by the Company, the Company Sub and the Stockholders pursuant
hereto have been duly executed and delivered and constitute lawful, valid and
legally binding obligations of the Company, the Company Sub and the
Stockholders, enforceable in accordance with their respective terms, except as
the same may be limited by bankruptcy, insolvency and other laws affecting
creditors' rights generally and by general equity principles. None of the
execution, delivery or performance of this Agreement and the Ancillary
Agreements and the consummation of the transactions contemplated hereby or
thereby by the Company, the Company Sub or the Stockholders will, with or
without the giving of notice or the passage of time, or both, result in the
creation of any lien, charge or encumbrance of any kind or the termination or
acceleration of any indebtedness or other obligation of the Company, the Company
Sub or the Stockholders and are not prohibited by, do not violate or conflict
with any provision of, and do not constitute a default under or a breach of (A)
the Certificate of Incorporation of the Company or the Company Sub, (B) any
note, bond, indenture, contract, agreement, permit, license or other instrument
to which the Company, the Stockholders or the Company Sub or their assets are
bound, (C) any order, writ, injunction, decree or judgment of any court or
governmental agency, or (D) any law, rule or regulation applicable to the
Company, the Stockholders or the Company Sub, except, in each case, for such
liens, charges, encumbrances, violations, conflicts or defaults the occurrence
of which would not have a material adverse effect on the business or results of
operations or financial condition of the Company and the Company Sub, taken as a
whole. No approval, authorization, registration, consent, order or other action
of or filing with any person, including any court, administrative agency or
other governmental authority, is required for the execution and delivery by the
Company and the Stockholders of this Agreement, the Ancillary Agreements or the
performance of its obligations hereunder or the consummation by the Company and
the Company Sub of the Merger and the transactions contemplated hereby, except
for such approvals, authorizations, registrations, consents, orders, actions or
filings the failure of which to obtain or make would not have a material adverse
effect on the business or results of operations or financial condition of the
Company and the Company Sub, taken as a whole.
INCOME TAX RETURNS. The federal and state income tax returns of the Company and
the Company Sub for the three years ended December 31, 1995 (except New York
State and City returns for 1995) attached hereto as Schedule 4.7 are in
accordance with the books of account and records of the Company, which are in
compliance with law in all material respects, as of the dates and for the
periods indicated.
ERISA. (a) Schedule 4.8 contains a true and complete list of each bonus,
deferred compensation, incentive compensation, stock purchase, stock option,
severance or termination pay, vacation, sick leave, hospitalization or other
medical, life or other insurance, supplemental unemployment benefits,
profit-sharing, pension, or retirement plan, program, agreement or arrangement,
and each other employee benefit plan, program, agreement or arrangement,
sponsored, maintained or contributed to or required to be contributed to within
two years prior to the date hereof by the Company or by any trade or business,
whether or not incorporated (an "ERISA Affiliate"), that together with the
Company would be deemed a 'single employer' within the meaning of Section
4001(b) of the Employee Retirement Income Security Act of 1974, as amended, and
the rules and regulations promulgated thereunder ("ERISA"), for the benefit of
any employee or former employee of the Company or any ERISA Affiliate, whether
formal or informal and whether legally binding or not (the "Plans"). Schedule
4.8 identifies each of the Plans that is an "employee benefit plan," as that
term is defined in Section 3(3) of ERISA (such plans being hereinafter referred
to collectively as the "ERISA Plans"). Except as disclosed in Schedule 4.8,
neither the Company nor any ERISA Affiliate has any formal plan or commitment,
whether legally binding or not, to create any additional Plan or modify or
change any existing Plan that would affect any employee or terminated employee
of the Company or any ERISA Affiliate or to increase the cost or obligation of
any existing Plan to the Company or any ERISA Affiliate. Each Plan is being
terminated immediately prior to the Closing without liability to the Company as
a result of such termination or for the payment of any benefits prior to such
termination.
(b) With respect to each of the Plans, the Company has heretofore
delivered or made available to Parent and Merger Sub true and complete copies of
each of the following documents:
(i) a copy of the Plan currently in effect (if it is in writing);
(ii) a copy of the annual report, if required under ERISA, with
respect to each such Plan for the last two Plan years for which such a report is
due as of the date hereof;
(iii) a copy of the most recent Summary Plan Description, together
with each subsequent Summary of Material Modifications, if required under ERISA
with respect to such Plan;
(iv) if the Plan is funded through a trust or any third party funding
vehicle, a copy of the trust or other funding agreement as currently in effect
and the latest financial statements thereof;
(v) all contracts relating to the Plans with respect to which the
Company or any ERISA Affiliate may have any material liability, including,
without limitation, insurance contracts, investment management agreements,
subscription and participation agreements and record keeping agreements; and
(vi) the most recent determination letter received from the Internal
Revenue Service with respect to each Plan that is intended to be qualified under
Section 401 of the Internal Revenue Code of 1986, as from time to time amended
(the "Code").
(c) None of the ERISA Plans are (or ever have been) subject to Title
IV of ERISA.
(d) Neither the Company nor any ERISA Affiliate, nor any of the ERISA
Plans, nor any trust created thereunder, has engaged in a transaction in
connection with which the Company or any ERISA Affiliate, any of the ERISA
Plans, any such trust, or any trustee or administrator thereof, or any party
dealing with the ERISA Plans or any such trust could be subject to either a
material civil penalty assessed pursuant to Section 409, 502(i) or 502(l) of
ERISA or a tax imposed pursuant to Section 4975 or 4976 of the Code.
(e) Full payment has been made, or will be made in accordance with
Section 404(a)(6) of the Code, of all amounts which the Company or any ERISA
Affiliate is required to pay under the terms of each of the ERISA Plans and
Section 412 of the Code, and all such amounts properly accrued through the
Effective Time with respect to the current plan year thereof will be paid by the
Company prior to the Effective Time or will be properly recorded on the
Company's financial statements.
(f) None of the ERISA Plans is a "multiemployer pension plan," as such
term is defined in Section 3(37) of ERISA.
(g) Each of the Plans has been operated and administered in all
material respects in accordance with applicable laws, including but not limited
to ERISA and the Code.
(h) (1) Each of the ERISA Plans that is intended to be "qualified"
within the meaning of Section 401(a) of the Code satisfies in all material
respects the requirements of such Section; and
(2) Each of the ERISA Plans that is intended to satisfy the
requirements of Section 125 or 501(c)(9) of the Code satisfies in all material
respects the requirements of such Section.
(i) Except as disclosed in Schedule 4.8, no "leased employee," as that
term is defined in Section 414(n) of the Code, performs services for the Company
or any ERISA Affiliate.
(j) Except as disclosed in Schedule 4.8, no Plan provides benefits,
including without limitation death or medical benefits (whether or not insured),
with respect to current or former employees after retirement or other
termination of service other than (i) coverage mandated by applicable law, (ii)
death, retirement or other benefits under any "employee pension plan," as that
term is defined in Section 3(2) of ERISA, (iii) deferred compensation benefits
accrued as liabilities on the financial statements of the Company or the ERISA
Affiliates or (iv) benefits the full cost of which is borne by the current or
former employee (or his beneficiary).
(k) The consummation of the transactions contemplated by this
Agreement will not (i) entitle any current or former employee of the Company to
severance pay, employment compensation or any other payment, benefit or award,
(ii) accelerate the time of payment, or vesting, or increase the amount of any
benefit, award or compensation due any such employee or (iii) constitute a
"prohibited transaction" under ERISA or the Code for which an exemption is
unavailable. No amounts payable under the Plans will fail to be deductible for
federal income tax purposes by virtue of Section 28OG of the Code.
(l) There are no pending, threatened or anticipated claims or
proceedings against any Plan or otherwise involving any such Plan by any
employee or beneficiary covered under any such Plan (other than routine claims
for benefits under the Plans) or by or before any governmental agency.
REAL PROPERTY AND REAL ESTATE LEASES. Schedule 4.9 sets forth a true, correct
and complete list of all real estate owned, leased or used by the Company and
the Company Sub including identification of the street address and list of
contracts, agreements, leases, subleases, options and commitments, oral or
written, affecting such real estate or any interest therein to which the Company
or the Company Sub is a party or by which any of its interests in such real
property is bound (the "Real Estate Leases"). The Company has delivered to
Parent and Merger Sub accurate, correct and complete copies of each Real Estate
Lease. Any consents or approvals of any parties required in connection with the
assignment of the Real Estate Leases will be obtained prior to the Closing,
except as noted on Schedule 4.9. Each Real Estate Lease is in full force and
effect and, to the knowledge of the Company and the Company Sub, there exists no
default or event, occurrence, condition or act which, with the giving of notice,
the lapse of time or the happening of any further event or condition, would
become a default under such lease.
OPERATING EQUIPMENT. Set forth on Schedule 4.10 is a true, correct and complete
list of all of the equipment, furnishings, fixtures and other property owned,
leased or used by the Company and the Company Sub in the conduct and operation
of their business (the "Operating Equipment"). The Operating Equipment owned by
the Company and the Company Sub is owned by the Company or the Company Sub, free
and clear of all liens and encumbrances. The Operating Equipment, taken as a
whole, is in good operating condition and repair in all material respects
(reasonable wear and tear excepted) and is suitable for the purposes for which
it is presently being used. Each lease of Operating Equipment is in full force
and effect and, to the knowledge of the Company and the Company Sub, there
exists no default or event, occurrence, condition or act which, with the giving
of notice, the lapse of time or the happening of any further event or condition,
would become a default under such lease.
EMPLOYEE MATTERS. (a) CONTRACTS. Schedule 4.11(a) sets forth a true, correct and
complete list and summary description of all agreements, arrangements or
understandings, written or oral, with officers, directors and employees of the
Company and the Company Sub regarding services to be rendered, terms and
conditions of employment, and compensation (the "Employment Contracts"), each of
which will be terminated at or prior to Closing except as noted on Schedule
4.11.
(b) COMPENSATION. Schedule 4.11(b) sets forth a true, correct and
complete list of all employees of the Company and the Company Sub, including
name, title or position, the present annual compensation (including bonuses,
commissions, vacation, sick leave and deferred compensation), years of service
and any interests in any incentive compensation plan. Schedule 4.11(b) sets
forth a correct and complete list of each employee who may become entitled to
receive supplementary retirement benefits or allowances, whether pursuant to a
contractual obligation or otherwise, and the estimated amounts of such payments.
(c) DISPUTES. There are no controversies pending or, to the knowledge
of the Company or the Company Sub, threatened involving any employee or group of
employees. Neither the Company nor the Company Sub has suffered or sustained any
work stoppage and no such work stoppage is, to the knowledge of the Company or
the Company Sub, threatened. No union organizing or election activities
involving any nonunion employees of the Company or the Company Sub are in
progress or, to the knowledge of the Company or the Company Sub, threatened.
Neither the Company nor the Company Sub is obligated under any agreement to
recognize or bargain with any labor or employee organization or union on behalf
of any employees.
LICENSES AND PERMITS. Schedule 4.12 contains a true, correct and complete list
and summary description of each license, permit, certificate, approval,
exemption, franchise, registration, variance, accreditation or authorization
issued to the Company and the Company Sub (collectively, the "Licenses and
Permits"). All such Licenses and Permits remain in full force and effect, and
there are no notices relating to the withdrawal of any such approval or
requiring any modification of a product in order to preserve any such approval.
The Licenses and Permits are valid and in full force and effect and there are
not pending, or, to the knowledge of the Company or the Company Sub, threatened,
any proceedings which could result in the termination, revocation, limitation or
impairment of any of the Licenses and Permits. The Company and the Company Sub
have all licenses, permits, certificates, approvals, exemptions, franchises,
registrations, variances, accreditations and other authorizations as are
necessary, required or appropriate in order to enable them to own and conduct
business and, except as set forth in Schedule 4.9, to occupy and lease the real
property subject to the Real Estate Leases. No violations have been recorded in
respect of any Licenses and Permits, and neither the Company nor the Company Sub
knows of any meritorious basis therefor.
CONTRACTS AND COMMITMENTS. The following Schedules set forth certain information
with respect to contracts and commitments of the Company and the Company Sub:
(a) Schedule 4.13(a) sets forth a true, complete and correct list of
all written or oral leases of personal property utilized by the Company and the
Company Sub in the conduct of their business as of the date hereof.
(b) Schedule 4.13(b) sets forth (i) a true, complete and correct list
as of the date hereof of all written or oral customer contracts to which the
Company or the Company Sub is a party and pursuant to which the Company or the
Company Sub performs services in the ordinary course of business.
(c) Schedule 4.13(c) sets forth a true, correct and complete list of
all written or oral contracts and agreements between the Company and the Company
Sub, on the one hand, and any suppliers, vendors and the like, on the other
hand.
(d) Schedule 4.13(d) sets forth a true, correct and complete list of
all guarantees and loans entered into by the Company or the Company Sub. Each
contract on Schedule 4.13 is in full force and effect and, to the knowledge of
the Company and the Company Sub, there exists no default or event, occurrence,
condition or act which, with the giving of notice, the lapse of time or the
happening of any further event or condition, would become a default under such
contract.
TAXES. All federal, foreign, state, county and other tax returns, reports and
declarations required to be filed by or on behalf of the Company or the Company
Sub for the three year period ended December 31, 1995 (except New York State and
City returns for 1995) have been filed and such returns are complete and
accurate in all material respects. As of the time of filing, the foregoing
returns correctly reflected in all material respects the facts regarding the
income, business, assets, operations, activities, status or other matters of the
Company and the Company Sub or any other information required to be shown
thereon and complied in all material respects with applicable law. No issues
have been raised and are currently pending by any taxing authority in connection
with any of the returns. No extension of time in which to file any such returns
and reports is in effect. All taxes, including estimated taxes and all
deficiency assessments, penalties and interest relating to any period ending
prior to the date hereof have been paid. All taxes required by law to be
withheld or collected for payment have been duly withheld and collected, and
have been paid to the proper governmental entity or are being held by the
Company or the Company Sub for such payment.
LEGAL PROCEEDINGS. Except as set forth in Schedule 4.15, neither the Company nor
the Company Sub is engaged in or a party to or, to the knowledge of the Company
or the Company Sub, threatened with any action, suit, proceeding, complaint,
charge, hearing, investigation or arbitration or other method of settling
disputes or disagreements; and, upon due inquiry, neither the Company nor the
Company Sub knows of, anticipates or has notice of any reasonable basis for any
such action. Neither the Company nor the Company Sub has received notice of any
investigation threatened or contemplated by any foreign, federal, state or local
governmental or regulatory authority, including those involving the safety of
products, the working conditions of employees, the employment practices or
policies, or compliance with environmental or tax regulations. Neither the
Company nor the Company Sub is subject to any judgment, order, writ, injunction,
stipulation or decree of any court or any governmental agency or any arbitrator.
INVESTMENTS. Neither the Company nor the Company Sub owns any securities issued
by any business organization or governmental authority, other than certain
certificates of deposit and money market fund shares in which the Company and
the Company Sub invest liquid funds in the ordinary course of their respective
businesses.
CONDUCT OF BUSINESS. Except as set forth on Schedule 4.17, since December 31,
1995 (the "Balance Sheet Date"), each the Company and the Company Sub has:
(a) used its best efforts to promote its successful operations and
earning power, and to conduct its business only in the ordinary course, and has
used its best efforts to preserve its business, including without limitation (i)
the servicing of all customer needs, (ii) the maintenance of customers',
suppliers' and employees' goodwill and (iii) the maintenance of all real estate
used by the Company and the Company Sub including all maintenance, repair and
replacements which are required in order for the continued operation of
business;
(b) not sold or otherwise disposed of any of its material fixed assets
or equipment, except for replacements and dispositions in the ordinary course;
(c) not made any material change or incurred any obligation to make a
change in its Certificate of Incorporation, Bylaws, or authorized or issued
capital stock other than as contemplated by this Agreement;
(d) not made any change with respect to its executive personnel and
banking arrangements and other than as disclosed in this Agreement or the
Schedules attached hereto;
(e) not incurred or become subject to, or agreed to incur or become
subject to, any obligations or liabilities (absolute or contingent), except
current liabilities incurred, and obligations entered into, in the ordinary
course of business;
(f) not suffered any extraordinary loss;
(g) not made, paid or agreed to make any increases in the salaries,
wages or fringe benefits (including bonus arrangements and deferred compensation
plans) payable or to become payable, to any employee or shareholder, above the
scales existing on the Balance Sheet Date other than with respect of the
Stockholders;
(h) not incurred any obligations, other than in the ordinary course of
its business, or borrowed or agreed to borrow any funds;
(i) not introduced any new method of accounting in respect of its
business or any of the assets, properties or rights applicable thereto; or
(j) not made any distributions or transferred any property to or for
the account of any Stockholder or any associate thereof nor declared or paid any
dividend in respect of any stock of the Company or the Company Sub, other than
cash; provided, the real property located at 9419 59th Street, Elmhurst, New
York may be sold or otherwise disposed of, to or for the account of any
Stockholder or any associate thereof.
COMPLIANCE WITH APPLICABLE LAWS. Except as set forth on Schedule 4.18, neither
the Company nor the Company Sub is in violation of any applicable law,
regulation, ordinance, decree, judgment, order or requirement relating to its
assets or properties or the operation of its business, including, without
limitation, any law, regulation, ordinance, decree, order or requirement
relating to zoning, employment, occupational safety or public health matters,
the failure with which to comply would have a material adverse effect on its
business. Without limitation of the foregoing, neither the Company nor the
Company Sub has taken or omitted to take any action, and no situation or
condition has occurred or exists prior to or on the Closing Date, in violation
or noncompliance with any statute, law, regulation, directive or permit
requirement promulgated or adopted by any governmental authority (whether
federal, state or local) or under common law with respect to health or
occupational safety, including, but not limited to, the Occupational Safety and
Health Act and regulations and publications promulgated pursuant to such
statute, as amended from time to time until the Closing Date.
UNDISCLOSED LIABILITIES. Except as set forth on Schedule 4.19 or otherwise in
this Agreement, neither the Company nor the Company Sub has any debt, liability
or obligation of any nature (whether accrued, absolute, contingent, or
otherwise).
BANKING RELATIONSHIPS. All arrangements which the Company or the Company Sub has
with any banking institution are set forth in Schedule 4.20, which Schedule
describes in general the nature of each of such arrangements.
INSURANCE. All insurance policies and arrangements of the Company and the
Company Sub are set forth on Schedule 4.21. Said insurance is consistent with
that maintained by the Company and the Company Sub in the past. All such
insurance is in force and neither the Company nor the Company Sub has received
notice of cancellation of, or of an intent to cancel, any of its policies of
insurance. No claims are pending under such insurance coverage.
MINUTE BOOKS. The minute books of the Company do not omit records required to be
in such minute books of any material action taken by its shareholders and board
of directors, and such minute books are accurate in all material respects.
CASH FLOW. The average monthly cash receipts less cash disbursements in the
ordinary course of business of the Company and the Company Sub on a consolidated
basis, determined in accordance with generally accepted accounting principles,
consistently applied, during the nine month period ended September 30, 1996
exceeds $100,000. For purposes of the foregoing sentence, (i) cash disbursements
include compensation in favor of Mansdorf, his spouse and Burstein at annual
rates of $125,000, $35,000 and $125,000, respectively, and (ii) additional cash
disbursements in favor of Mansdorf, Burstein and their spouses have been
disregarded.
DISCLOSURE. No representation or warranty of the Company and the Company Sub in
this Agreement, and no information, statement or certificate furnished or to be
furnished by or on behalf of the Company and the Company Sub pursuant to this
Agreement, or in connection with the transactions contemplated hereby, contains
or shall contain any untrue statement of material fact or omits or shall omit to
state a material fact necessary to make the statements contained therein, in
light of the circumstances under which they were made, not misleading.
ABSENCE OF CERTAIN CHANGES. Since the Balance Sheet Date, there has been no
material adverse change in the financial condition or business prospects,
properties, assets, liabilities, business or operations of the Company and the
Company Sub, taken as a whole.
SUFFOLK COUNTY. The Company currently provides services to the Suffolk County
Municipal Employees Benefit Fund ("Fund") pursuant to an oral month-to-month
contract which is a successor to a written contract between the Company and the
Fund which expired in 1992 and receives monthly income pursuant to such oral
contact of approximately $6,500, which amount has been received within 30 days
of billing. Services provided to the Fund pursuant to the oral Fund contract,
and the predecessor written contract, are limited to assessment counseling
referral and follow-up. No professional psychological services are provided
under such contract.
ARTICLE V
CONDUCTIVE OF BUSINESS PENDING THIS MERGER
The Company covenants and agrees that, prior to the Effective Time,
the business of the Company and the Company Sub shall have been conducted in the
ordinary and usual course in substantially the same manner as heretofore
conducted, and reasonable efforts have been made to preserve intact their
respective business organizations and their working capital, to continue the
accuracy of the representations and warranties contained in Article IV and to
keep available the services of their present directors, officers and employees
and preserve their relationships with customers, suppliers and others having
business dealings with them to the end that their goodwill and ongoing business
shall not be impaired in any material respect pending the Merger.
ARTICLE VI
ADDITIONAL AGREEMENTS
ACCESS TO INFORMATION. Upon reasonable notice and subject to applicable law and
appropriate security regulations and restrictions, the Company shall (and shall
cause the Company Sub to) afford to the officers, employees, accountants,
counsel and other representatives of Parent and Merger Sub, access, during
normal business hours during the period prior to the Effective Time, to all its
properties, books, contracts, commitments and records and, during such period,
subject to applicable law, the Company shall (and shall cause the Company Sub
to) furnish promptly to Parent and Merger Sub all information concerning its
business, properties and personnel as Parent or Merger Sub may reasonably
request. Unless otherwise required by law, Parent and Merger Sub will hold any
such information which is nonpublic in confidence until such time as such
information otherwise becomes publicly available through no wrongful act of
Parent or Merger Sub, and in the event of termination of this Agreement for any
reason Parent or Merger Sub shall promptly return all nonpublic documents
obtained from the Company and Company Sub, and any copies made of such
documents, to the Company and Company Sub. Paragraph H of the letter of
agreement between Parent and the shareholders of the Company immediately prior
to the Effective Time dated July 31, 1996, a copy of which is annexed hereto as
Exhibit B, is incorporated by reference herein and shall be binding upon and
enforceable against the parties hereto.
LEGAL CONDITIONS TO MERGER. Each of the Company, the Company Sub, Parent and
Merger Sub will take all reasonable actions necessary to comply promptly with
all legal requirements which may be imposed on itself with respect to the Merger
(which actions shall include, without limitation, furnishing all information in
connection with approvals of or filings with any other governmental entity) and
will promptly cooperate with and furnish information to each other in connection
with any such requirements imposed upon any of them or any of their Subsidiaries
in connection with the Merger. Each of the Company, the Company Sub, Parent and
Merger Sub will, and will cause its Subsidiaries to, take all reasonable actions
necessary to obtain (and will cooperate with each other in obtaining) any
consent, authorization, order or approval of, or any exemption by, any
governmental entity or other public or private third party, required to be
obtained or made by Parent, Merger Sub, the Company or any of their Subsidiaries
in connection with the Merger or the taking of any action contemplated thereby
or by this Agreement or the Ancillary Agreements.
STOCK EXCHANGE LISTING. Parent shall use its reasonable best efforts to cause
the shares of Parent Stock to be issued in the Merger to be registered under the
Securities Act in accordance with the Registration Rights Agreement, subject to
the limitations thereof, and to be approved for trading or listing, as
applicable, on the principal stock exchange on which such shares are traded and
any other national securities exchange or market on which shares of Parent Stock
may at such time be listed, subject to official notice of issuance.
NOTIFICATION OF CERTAIN MATTERS. SECTION 6.4
(a) The Company shall promptly notify Parent of:
(i) any notice of, or other communication relating to, a default or
event which, with notice or lapse of time or both, would become a default,
received by the Company or the Company Sub subsequent to the date of this
Agreement and prior to the Effective Time, under any agreement to which the
Company or the Company Sub is a party or to which the Company or the Company Sub
or any of their respective properties or assets may be subject or bound;
(ii) any notice or other communication from any third party alleging
that the consent of such third party is or may be required in connection with
the transactions contemplated by this Agreement;
(iii) any notice or other communication from any governmental entity
in connection with the transactions contemplated hereby;
(iv) any actions, suits, claims, investigations, rule-making
initiatives or proceedings commenced or, to the best of its knowledge,
threatened against, relating to or involving or otherwise affecting the Company
and the Company Sub which, if pending on the date hereof, would have been
required to have been disclosed by the Company or which relate to the
consummation of the Merger; and
(v) any event having a material adverse effect on the Company and the
Company Sub taken as a whole or which renders inaccurate in any material respect
any representation or warranty contained in Article IV.
(b) Parent shall promptly notify the Company of:
(i) any notice or other communication from any third party alleging
that the consent of such third party is or may be required in connection with
the transactions contemplated by this Agreement; or
(ii) any notice or other communication from any governmental entity in
connection with the transactions contemplated hereby.
SUPPLEMENTAL DISCLOSURE. The Company shall promptly supplement or amend the
documents or information disclosed herein with respect to any material matter
hereafter arising or discovered which, if existing or known at the date hereof,
would have been required to be disclosed; PROVIDED, HOWEVER, that any such
supplemental or amended disclosure shall not be deemed to have been disclosed as
of the date hereof unless so agreed to in writing by Parent and Merger Sub in
their sole discretion.
ADDITIONAL AGREEMENTS; BEST EFFORTS. Subject to the terms and conditions of this
Agreement, each of the parties hereto agrees to use reasonable best efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement
and the Ancillary Agreements. In case at any time after the Effective Time any
further action is necessary or desirable to carry out the purposes of this
Agreement, the proper officers and directors of each party to this Agreement
shall take all such necessary action. To the extent any consent or approval of
any party required in connection with the assignment of the Real Estate Leases
has not been obtained, and the Surviving Corporation or the Company Sub is
adversely affected, the Stockholders shall pay any losses resulting therefrom.
RECORD RETENTION. Parent will retain and maintain, in an organized and
retrievable manner, in accordance with past practice of the Company prior to the
Merger, all documents and records of the Company and the Company Sub pertaining
to the periods before the Closing Date transferred hereunder and shall not
destroy any such records or documents. Parent will retain and maintain all
machine-sensible records, such as computer tapes, disks, diskettes, etc., which
are considered books and records within the meaning of Internal Revenue Code
Section 6001, in accordance with Internal Revenue Service Revenue Procedure
91-59. Parent will make available such documents and records, machine-sensible
records, computer time, and, at the reasonable expense of the requesting
Stockholder, reasonable assistance from Parent's personnel as may be reasonably
requested by Mansdorf or Burstein in order to expeditiously comply with all
pertinent requests from the Internal Revenue Service and state taxing
authorities which relate to periods prior to the Closing Date. In addition to
the foregoing, following the Closing Date, Parent shall grant to Mansdorf or
Burstein, and his representatives, at their reasonable request, reasonable
access to and the right to make copies of those records and documents related to
the Company and the Company Sub prior to the Closing Date. Mansdorf and Burstein
shall prepare and file the federal, state and city tax returns of the Company
and the Company Sub with respect to periods prior to the Closing Date in
accordance with the books and records of such companies and in accordance with
applicable laws and shall pay any tax due therewith.
EMPLOYMENT WITH THE BUSINESS. Prior to the Closing, Parent shall offer
employment in the Surviving Corporation and the Company Sub, without term
certain, to each of the individuals listed in Schedule 6.8, and at the same or
greater cash rate of compensation as that provided by the Company or the Company
Sub immediately before the Closing Date, without requiring relocation of such
individuals. The Surviving Corporation has the right to terminate any employee
in accordance with any agreement entered into by such employee and the Surviving
Corporation from and after the closing and applicable law.
(b) Prior to the Closing, Parent shall offer employment in the
Surviving Corporation to Burstein pursuant to the terms of the Employment
Agreement, substantially in such form as is annexed hereto as Exhibit C.
CONSULTING AGREEMENTS. Prior to the Closing Date, Parent shall offer a
consulting arrangement in the Surviving Corporation to Mansdorf pursuant to the
terms of the Consulting Agreement, substantially in such form as is annexed
hereto as Exhibit D.
ACCOUNTS RECEIVABLE. The Surviving Corporation shall employ commercially
reasonable methods consistent with the past practices of the Company to collect
within one hundred eighty (180) days after the Closing Date all accounts
receivable of the Company and Company Sub for all periods prior to and including
the Closing Date. Such methods shall be employed be at no charge to the
Stockholders and shall include no more than the following number of hours of
those continuing employees of the Surviving Corporation previously engaged in
collection activities: (i) unlimited hours during the 30- day period after the
Closing Date; (ii) 20 hours during the next 30-day period; (iii) 15 hours during
the next 30-day period; and (iv) 10 hours during each successive 30-day period
thereafter until the 180th day after the Closing Date. The Surviving Corporation
shall not be required to initiate any claim, suit or proceeding to collect such
accounts or to take any action which materially interferes with the business
relationship of the obligor of any such account.
ARTICLE VII
COVENANTS
CONDUCT OF BUSINESS BY PARENT AND SURVIVING CORPORATION. Parent and its
Subsidiaries shall operate their businesses in a commercially reasonable manner
so as to preserve the business of the Surviving Corporation and the Company Sub
and their working capital, and to preserve the goodwill of its customers,
suppliers and others having business dealings with the Surviving Corporation and
Company Sub to the end that the goodwill and ongoing business of the Surviving
Corporation and the Company Sub shall not be impaired in any material respect
after the Effective Time. Parent covenants that neither Parent, its
Subsidiaries, the Surviving Corporation nor the Company Sub shall, directly or
indirectly, engage in any activity that knowingly would impact negatively on the
business of the Surviving Corporation and the Company Sub and the right of the
shareholders of the Company immediately prior to the Closing Date to receive the
Merger Consideration described in Section 1.7 hereof. The provisions of this
Section 7.1 shall survive until any and all obligations of Parent to pay the
Merger Consideration, including that based on Earn Out Income, terminate.
NO SOLICITATION BY PARENT AND SURVIVING CORPORATION. Each party hereto covenants
that it shall not, directly or indirectly, induce, influence or attempt to
induce or influence any person, firm or corporation to terminate their patronage
with the Surviving Corporation or the Company Sub, or in any way attempt to
divert or influence patients from professionals or professional entities served
by the Surviving Corporation. The provisions of this Section 7.2 shall survive
until the fourth anniversary of the Closing Date.
CERTAIN OPERATIONAL MATTERS. Except as noted below, the following
actions shall require the written approval of
Mansdorf and Burstein:
(a) engagement by the Surviving Corporation or any Subsidiary
thereof in any trade, business or activity other than
providing psychotherapy services or the management of such
services or any other services provided by the Company and the
Company Sub as of the Closing; and
(b) the acquisition, either by merger, consolidation, purchase
or otherwise, by Parent or any of its Affiliates of any
psychotherapy practice or provider of management services
thereto located within 100 miles of New York City unless
Mansdorf and Burstein shall have received an Acquisition
Notice with respect thereto in accordance with Section 1.7(e)
as if the Surviving Corporation or any of its Subsidiaries
were making the acquisition; and
(c) transactions between the Surviving Corporation or any of
its Subsidiaries, on the one hand, and Parent or its
Affiliates or any of their Officers or Directors (or any
Associates of any such person) (as such terms are defined in
Rule 405 promulgated under the Securities Act), on the other
hand, (i) except no approval is required to the extent the
only obligation of the Surviving Corporation and its
Subsidiaries is to pay management or similar fees not
reflected in Earn Out Income, (ii) except no approval is
required for transactions where any expenses arising therefrom
represent arm's-length arrangements, and (iii) except no
approval is required for transactions that result in no
expense reflected in Earn Out Income; and
(d) the guarantee by the Surviving Corporation or any of its
Subsidiaries of the indebtedness of others, except no approval
is required where any expenses of the Surviving Corporation or
any of its Subsidiaries arising out of such guarantee are
disregarded in calculating Earn Out Income; and
(e) the borrowing of money or the assumption of the
indebtedness of others (except for working capital or in
connection with Acquisitions for which Mansdorf and Burstein
shall have received an Acquisition Notice in accordance with
Section 1.7(e)) or the lending of money by the Surviving
Corporation or any of its Subsidiaries, except no approval is
required where any expenses of the Surviving Corporation or
any of its Subsidiaries arising out of such borrowing,
assumption or lending are disregarded in calculating Earn Out
Income; and
(f) contracts or obligations other than in the ordinary course
of business binding on the Surviving Corporation or any of its
Subsidiaries (except for Acquisitions for which Mansdorf and
Burstein shall have received an Acquisition Notice in
accordance with Section 1.7(e)), except no approval is
required where expenses of the Surviving Corporation or any of
its Subsidiaries arising out of such contracts or obligations
are disregarded in calculating Earn Out Income; and
(g) increase in number of, or compensation payable to,
officers, directors or employees of the Surviving Corporation
or any of its Subsidiaries, except no approval is required for
hiring or retention of any additional officer or employee, or
any additional compensation, where any expenses arising
therefrom represent an arm's-length arrangement; and
(h) capital expenditures by the Surviving Corporation and its
Subsidiaries (except with respect to Acquisitions for which
Mansdorf and Burstein shall have received an Acquisition
Notice in accordance with Section 1.7(e)), (i) except no
approval is required for capital expenditures reasonably
necessary for the business of the Surviving Corporation and
its Subsidiaries to the extent aggregate depreciation and
amortization resulting from such capital expenditures do not
exceed $37,500 in any Fiscal Year, and (ii) except no approval
is required where any depreciation, amortization or other
expenses of the Surviving Corporation or any of its
Subsidiaries arising out of such expenditures are disregarded
in calculating Earn Out Income.
ARTICLE VIII
CONDITIONS
CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The respective
obligations of each party to effect the Merger shall be subject at its option to
the fulfillment at or prior to the Closing Date of the following conditions:
(a) the Closing shall be contingent upon consummation of the asset
purchase agreement among Clinical Associates, a New York partnership owned by
the Stockholders, Clinical Diagnostics, a sole proprietorship owned by Mansdorf,
and the PC, and Parent of even date herewith (the "Asset Purchase Agreement");
(b) except as disclosed herein, there is no suit, claim, action,
proceeding or investigation pending or, to the best knowledge of Parent, Merger
Sub, the Company Sub or the Company, threatened against Parent, Merger Sub, the
Company Sub or the Company or any of their Subsidiaries before any governmental
entity which if adversely determined, individually or in the aggregate, would
have a material adverse effect on Parent, Merger Sub, the Company Sub or the
Company or prohibit, delay or interfere with the consummation by Parent, Merger
Sub, the Company Sub or the Company of the transactions contemplated by this
Agreement. Except as disclosed herein, neither Parent, Merger Sub, the Company
Sub nor the Company, nor any of their Subsidiaries, are subject to any
outstanding order, writ, injunction or decree which, insofar as can be
reasonably foreseen, individually or in the aggregate, in the future would have
a material adverse effect on Parent, Merger Sub, the Company Sub or the Company
or prohibit, delay or interfere with the consummation by Parent, Merger Sub, the
Company Sub or the Company of the transactions contemplated by this Agreement;
and
(c) all waivers, consents, approvals and actions of any governmental
authority, commission, board or other regulatory body or third party required in
connection with the consummation of the Merger and the transactions contemplated
hereby shall have been obtained by Parent, Merger Sub or the Company, as the
case may be, and (i) shall not have been reversed, stayed, enjoined, set aside,
annulled or suspended, (ii) shall not be subject to any timely request for stay,
petition for reconsideration or appeal or SUA SPONTE action with comparable
effect, and (iii) the time for filing any such request, petition or appeal or
for the taking of any such SUA SPONTE action shall have expired.
CONDITIONS TO OBLIGATION OF THE COMPANY TO EFFECT THE MERGER. The obligation of
the Company to effect the Merger shall be subject at the option of the Company
to the fulfillment at or prior to the Closing Date of the following conditions:
(a) Parent and Merger Sub shall have performed in all material
respects their obligations contained in this Agreement required to be performed
on or prior to the Closing Date and the Company shall have received a
certificate signed on behalf of Parent and Merger Sub signed by the Chief
Executive Officer and the Chief Financial Officer of each of Parent and Merger
Sub to such effect; and
(b) the representations and warranties of Parent and Merger Sub set
forth in Article III of this Agreement shall be true and correct in all material
respects as of the Closing Date as if made as of such time, except as permitted
by this Agreement, and the Company shall have received a certificate signed on
behalf of Parent and Merger Sub by the Chief Executive Officer and the Chief
Financial Officer of each of Parent and Merger Sub to such effect; and
(c) the Company's obligations hereunder are expressly conditioned upon
delivery by Parent and Merger Sub and receipt by the Company at the Closing of
the following items:
(i) Parent shall deliver the Merger Consideration due at Closing
pursuant to Section 1.7 and in accordance with Article II hereof;
(ii) Parent shall execute and deliver the Registration Rights
Agreement in substantially such form as is annexed hereto as Exhibit E;
(iii) the Surviving Corporation shall have offered employment in the
Surviving Corporation to Burstein in accordance with Section 6.8 hereof, and in
accordance with the terms of the Employment Agreement, substantially in such
form as is annexed hereto as Exhibit C;
(iv) the Surviving Corporation shall have offered a consulting
arrangement in the Surviving Corporation to Mansdorf in accordance with Section
6.9 hereof, and in accordance with the terms of the Consulting Agreement,
substantially in such form as is annexed hereto as Exhibit D;
(v) Parent and Merger Sub shall deliver x) a copy of the Certificate
of Incorporation of Parent certified as to its authenticity by the Secretary of
State of the Commonwealth of Massachusetts certifying the existence of Parent as
a business corporation and y) a copy of the Certificate of Incorporation of the
Merger Sub certifying the existence of Merger Sub as a business corporation in
the State of New York; and
(vi) Parent and Merger Sub shall deliver (x) a certificate of the
Secretary or an assistant Secretary of each of Parent and Merger Sub,
respectively certifying that the Certificates of Incorporation provided pursuant
to subsection 8.2(c)(v) and are true and correct, that no action has been taken
to amend such Certificates of Incorporation since the last amendment set forth
therein, and that neither Parent nor Merger Sub has taken action to dissolve,
liquidate or wind-up their businesses, (y) attached thereto shall be true and
complete copies of the Bylaws of Parent and Merger Sub and that such Bylaws are
in full force and effect on the date thereof and have not been amended since
June 30, 1996, and (z) attached thereto shall be true and complete copy of the
resolutions adopted by the board of directors and shareholders of the Merger Sub
and directors of Parent relating to the Merger and transactions contemplated
hereby, that such resolutions are the only resolutions adopted by the board of
directors and shareholders of Parent and Merger Sub relating to the Merger and
transactions contemplated hereby and which resolutions remain in full force and
effect.
SECTION 8.3 CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER SUB TO EFFECT
THE MERGER. The obligations of Parent and Merger Sub to effect the Merger shall
be subject at the option of Parent and Merger Sub to the fulfillment at or prior
to the Closing Date of the following conditions:
(a) the Company and the Stockholders shall have performed in all
material respects their agreements contained in this Agreement required to be
performed on or prior to the Closing Date and Parent and Merger Sub shall have
received a certificate signed on behalf of the Company by the President of the
Company to such effect; and
(b) the representations and warranties of the Company set forth in
Article IV of this Agreement shall be true and correct in all material respects
as of the Closing Date as if made as of such time, except as permitted by this
Agreement, and Parent and Merger Sub shall have received a certificate signed on
behalf of the Company by the President of the Company to such effect; and
(c) Parent and Merger Sub's obligations hereunder are expressly
conditioned upon delivery by the Company and receipt by Parent or Merger Sub at
the Closing of the following items:
(i) Burstein shall execute and deliver the Employment Agreement in
accordance with Section 6.8 hereof and substantially in such form as is annexed
hereto as Exhibit C;
(ii) Mansdorf shall execute and deliver the Consulting Agreement in
accordance with Section 6.9 hereof and substantially in such form as is annexed
hereto as Exhibit D;
(iii) (X) a copy of the Certificate of Incorporation of the Company
certified as to its authenticity by the Secretary of State of the State of New
York, and (Y) a certificate of the Secretary of State of the State of New York,
certifying the existence of the Company as a business corporation in the State
of New York.
OTHER AGREEMENTS. At the Closing, the parties shall execute, acknowledge and
deliver such other instruments and documents as may be reasonably necessary or
appropriate to carry out the transactions contemplated by this Agreement.
ARTICLE IX
TERMINATION
TERMINATION. This Agreement may be terminated at any time prior to the
Effective Time:
(a) by mutual written consent of Parent, Merger Sub and the Company;
(b) by either Parent or the Company if (i) there shall have been a
material breach of any representation, warranty, covenant or agreement on the
part of the other set forth in this Agreement which breach shall not have been
cured, in the case of a representation or warranty, prior to the Closing or, in
the case of a covenant or agreement, within five (5) business days following
receipt by the breaching party of notice of such breach, or (ii) any permanent
injunction or other order of a court or other competent authority preventing the
consummation of the Merger shall have become final and non-appealable; or
(c) by either Parent or the Company if the Merger shall not have been
consummated on or before December 15, 1996; provided however, that the right to
terminate this Agreement pursuant to this Section 9.1(c) shall not be available
to any party whose failure to fulfill any obligation under this Agreement has
been the cause of, or resulted in, the failure of the Merger to have occurred on
or before the aforesaid date.
EFFECT OF TERMINATION. In the event of a termination of this Agreement by either
the Company, Parent or Merger Sub as provided in Section 9.1, this Agreement
shall forthwith become void and there shall be no liability or obligation on the
part of Parent, Merger Sub or the Company or their respective officers or
directors, except for the second sentence of Section 6.1 which shall survive
such termination. Nothing contained in this Section 9.2 shall relieve any party
hereto from any liability for any breach of this Agreement.
AMENDMENT. This Agreement may be amended by the parties hereto, by action taken
or authorized by their respective boards of directors, but, no amendment shall
be made which by law requires further approval by shareholders of the Company
without such further approval. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
EXTENSION; WAIVER. At any time prior to the Effective Time, the parties hereto,
by action taken or authorized by their respective boards of directors, may (i)
extend the time for the performance of any of the obligations or other acts of
the other parties hereto, (ii) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant thereto and
(iii) waive compliance with any of the agreements or conditions contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in a written instrument signed on behalf
of such party.
ARTICLE X
COVENANT NOT TO COMPETE
COVENANTS. In consideration of the execution and delivery of this Agreement and
in recognition that Parent was induced to enter into this Agreement based on the
covenants and assurances made by the Stockholders, each Stockholder covenants
and agrees that, for a period of four (4) years after the Closing, he will not
(i) directly or indirectly (whether as a sole proprietor, partner, stockholder,
director, officer, employee, consultant, independent contractor, or in any
capacity as principal or agent or in any other individual or representative
capacity) engage in Competition (as such term is defined below) with the
Surviving Corporation or be interested in or associated with or render services
to or sell any ideas, inventions or products to any party in Competition with
the Surviving Corporation or (ii) make known or disclose the name or address of
(x) any of the clients, customers or patrons of the Surviving Corporation or (y)
any persons having a contractual relationship with the Surviving Corporation
(except where the facts of such relationships are generally available to or
known by the public other than as a result of a disclosure by such Stockholder)
or (iii) call upon, solicit, divert or take away, or attempt to solicit, divert
or take away, any such clients, customers or patrons or employees of the
Surviving Corporation or any persons having a contractual relationship with the
Surviving Corporation or (iv) request or advise any present or future client,
customer or patron of the Surviving Corporation or any persons having a
contractual relationship with the Surviving Corporation to withdraw, curtail or
cancel their business relationship with the Surviving Corporation. For purposes
hereof, the term "Competition" shall mean the providing of (i) psychotherapy
services to individuals either individually or in group settings in out-patient
clinics, nursing homes or hospitals, or (ii) management services in connection
therewith, in any case, within a radius of twenty five (25) miles from any
location in which psychotherapy services or management services in connection
therewith are then being provided by the Surviving Corporation or the Company
Sub; provided, however, that the Stockholders may engage in private practice and
may provide such services to the Hempstead Hospital, administrative divisions of
the State of New York, Upstate Clinical Associates and, with respect only to
administrative and management services provided to governments or municipalities
("GMC Contracts"), BSC Health Management ("BSCHM"). In the event Upstate
Clinical Associates plans to render psychotherapy services at a location more
than twenty five (25) miles from Monroe County, New York, it shall provide
Parent with notice of such location. If Parent or any of its Subsidiaries
engages in such services or provides management services in connection therewith
within twenty five (25) miles of such location during the sixty (60) days
following the date of such notice, then Upstate Clinical Associates shall
discontinue such plans for so long as Parent is so engaged. BSCHM will obtain
clinical services from the PC or from an authorized provider associated with PHC
under the GMC Contracts except (A) in the Capital District (as defined in the
"GMC Contracts"), (B) to the extent BSCHM's partner or joint venturer as of the
date hereof (which is a national behavioral health care provider identified to
PHC) or the governmental entity withholds its consent and/or (C) to the extent
prices and services proposed by the PC or from an authorized provider associated
with PHC in connection with the GMC Contracts are not competitive. For purposes
hereof, "Competition" shall not preclude the ownership of less than ten (10)
percent of the common stock, or other class of voting stock, or any percentage
of non-voting securities, of any publicly traded company.
ANCILLARY OBLIGATIONS. This covenant shall be construed as an obligation
ancillary to the other provisions of this Agreement and the existence of any
claim or cause of action by the Stockholders, or any one of them, whether
predicated on a breach of this Agreement or of the Ancillary Agreements or
otherwise, shall not constitute a defense to the enforcement by Parent,
Surviving Corporation or any party to the Ancillary Agreements of this covenant.
ENFORCEMENT. Each Stockholder agrees that the remedies at law for any breach of
the covenants contained in this Article X will be inadequate and that Parent or
the Surviving Corporation shall be entitled to appropriate equitable remedies
including injunctive relief in any action or proceeding brought to prevent the
taking or continuation of any action which would constitute or result in a
breach of such covenant. Such remedies shall not be exclusive and shall be in
addition to any and all remedies which may be available, directly or indirectly,
without limiting the recovery of any incidental, consequential and/or punitive
damages. Each Stockholder further agrees that if any restriction in this Article
is held by any court to be unenforceable or unreasonable, a lesser restriction
will be enforced in its place and the remaining restrictions will be enforced
independently of each other. The attorneys' fees, court costs and other expenses
incurred by the prevailing party to enforce any rights under any provision of
this Article X, or to defend any such attempted enforcement, shall be paid by
the non-prevailing party.
SUCCESSORS AND ASSIGNS. The rights of Parent and the Surviving Corporation under
this covenant shall inure to the benefit of and shall be binding upon their
successors and assigns. In the event of any such assignment, any and all
references to Parent and the Surviving Corporation in this Article shall be
deemed to mean and include such assignee or assignees.
ARTICLE XI
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
SURVIVAL. All covenants and agreements of the parties contained in this
Agreement or expressly incorporated herein by reference shall survive the
Closing and continue in full force and effect following the Closing. All
representations and warranties of the parties contained in this Agreement or
expressly incorporated herein by reference shall be deemed to be made as of the
date hereof and as of the Closing Date and shall survive the Closing hereunder
and any investigation made by or on behalf of any party hereto for a period of
three (3) years.
STATEMENTS AS REPRESENTATIONS. All statements contained herein or in any
Exhibit, agreement, certificate or instrument executed and delivered pursuant to
this Agreement shall be deemed representations and warranties within the meaning
of this Article XI.
CLAIMS AGAINST PROMISSORY OBLIGATIONS AND EARN OUT PAYMENTS
(a) RIGHT OF SET-OFF. Subject to the provisions and conditions of this
Article XI, any and all amounts to be paid to the Stockholders pursuant to
Section 1.7 of this Agreement, or to the Stockholders pursuant to the Ancillary
Agreements, shall be reduced for any losses sustained or liabilities,
obligations, expenses, claims, liens, judgments, damages or other amounts
asserted by any third party and any and all reasonable costs or expenses of
defending against any of the foregoing including costs of settlements (herein
collectively, "Damages") asserted against, imposed upon or incurred by Parent or
Surviving Corporation or any other Subsidiary of either of them, or any of their
respective directors, officers or employees (collectively, the "Indemnitees,"
and each individually, an "Indemnitee") resulting from, relating to or arising
out of:
(i) any breach of any representation, warranty or agreement of
the Company or the Company Sub contained in or made pursuant
to this Agreement, the Ancillary Agreements or any agreement,
contract or instrument required to be executed by the Company
or the Company Sub or by the Stockholders pursuant to this
Agreement or the Ancillary Agreements or the transactions
contemplated thereby; or
(ii) any act or omission of the Company or the Company Sub or
the Stockholders or their Affiliates, trustees, directors,
officers, employees, agents or representatives relating to the
property, business, operations and activities of the Company
or the Company Sub or the Stockholders which occurred, existed
or failed to occur or exist before the Closing (including,
without limitation, such acts or omissions as are described or
enumerated in this Agreement); or
(iii) any event, state of facts, circumstances or conditions
occurring or existing (or not occurring or not existing if the
absence of such fact, circumstances or condition forms a basis
for Damages) relating to the property, business, operations or
activities of the Company or the Company Sub or the
Stockholders with respect to their business, operations or
services performed before the Closing (including, without
limitation, such events, state of facts, circumstances or
conditions described in this Agreement); or
(iv) any liability of or relating to the Company or the
Company Sub or the Stockholders, whether accrued, absolute,
contingent or otherwise, arising out of their businesses or
operations before the Closing Date whether first asserted
before or after the Closing Date (or whether known by or
disclosed to Parent or the Surviving Corporation); or
(v) without limiting the generality of (i) through (iv) above,
(1) any taxes assessed against and payable or asserted to be
payable by Parent or Surviving Corporation on behalf of the
Company or the Company Sub or the Stockholders for any taxable
period ending on or prior to the Closing Date, (2) any
deficiencies in any tax payable by or on behalf of the Company
or the Company Sub or the Stockholders arising from any audit
by any taxing agency or authority with respect to any period
ending on or prior to the Closing Date, (3) taxes with respect
to any period ending on or prior to the Closing Date of any
member of a consolidated or combined tax group of which the
Company or the Company Sub is, or was at any time, a member,
for which the Company or the Company Sub is jointly or
severally liable as a result of its inclusion in such group
and (4) any claim or demand for reimbursement or
indemnification resulting from any transfer by the Company or
the Company Sub prior to the Closing of any tax benefits or
credits to any other person;
PROVIDED, HOWEVER, that no indemnity shall be made for any portion of any
liability arising in the ordinary course of business of the Company or the
Company Sub prior to the Closing Date for which the Surviving Corporation or the
Company Sub or any of their successors and assigns receives or is entitled to
receive a comparable benefit at any time subsequent to the Closing Date and
PROVIDED FURTHER that no indemnity shall be made for any portion of any
liability arising in the ordinary course of business of the Company or the
Company Sub from contracts and agreements identified in this Agreement
(including the schedules hereto) for which the Surviving Corporation or the
Company Sub or any of their successors and assigns receives or is entitled to
receive any benefit at any time subsequent to the Closing Date. The matters and
events set forth in subparagraphs (a)(i) through (v) above, subject to the
foregoing proviso, are referred to herein as the "Buyer Indemnification Events."
(b) PROCEDURE IN EVENT OF CLAIMED SET-OFF. If Parent or the Surviving
Corporation asserts a claim for set-off pursuant to Section 11.3(a), it promptly
shall provide notice to the Stockholders in accordance with the procedures set
forth in Section 11.6 hereof setting forth the nature of the claim for set-off
and the amount thereof. Within thirty (30) days after such notice, the
Stockholders (by a written notice to be signed by both of them) either shall
approve the claim for set-off and the amount thereof ("Approved Claim") or shall
disapprove such claim for set-off or the amount thereof ("Rejected Claim"), or
both. If the Stockholders fail to approve or disapprove a claim for set-off or
the amount thereof within the requisite period, such claim for set-off shall be
deemed to be an Approved Claim. Parent or the Surviving Corporation shall be
entitled to set-off the amount of any Approved Claims. Parent or the Surviving
Corporation and the Stockholders shall resolve any disagreements with respect to
any Rejected Claim in accordance with the dispute resolution procedures set
forth in Article XII. Parent or the Surviving Corporation shall be entitled to
withhold the stated amount of the Rejected Claims pending resolution of the
Rejected Claim. If, pursuant to the procedures set forth in Article XII, it
ultimately is determined that any further portion of the amount withheld is then
due to the Stockholders or either one of them, Parent or the Surviving
Corporation immediately shall pay to the Stockholder or either of one of them,
as the case may be, such additional portion of the amount withheld.
INDEMNIFICATION BY THE STOCKHOLDERS. In addition to Parent's or the Surviving
Corporation's right to deduct the aggregate amount of Damages pursuant to
Section 11.3, subject to the provisions and conditions of this Article XI, the
Stockholders (the "Indemnifying Party") shall, jointly and severally, indemnify,
defend and hold harmless each of Parent or the Surviving Corporation and any of
their Subsidiaries, and any of their respective directors, officers or employees
(collectively, "Indemnitees," and each individually, an "Indemnitee") from and
against all Damages (but only to the extent Parent or the Surviving Corporation
has not previously set-off or reduced the amounts withheld pursuant to Section
11.3 above by the amount of such Damages) asserted against, imposed upon or
incurred by the Indemnitees or any Indemnitee, resulting from, relating to or
arising out of a Buyer Indemnification Event.
INDEMNIFICATION BY PARENT AND THE SURVIVING CORPORATION. Subject to the
provisions and conditions of this Article XI, Parent and the Surviving
Corporation (the "Indemnifying Party") shall, jointly and severally, indemnify,
defend and hold harmless each Stockholder (collectively, "Indemnitees," and each
individually, an "Indemnitee") from and against all Damages asserted against,
imposed upon or incurred by the Indemnitees or any Indemnitee, resulting from,
relating to or arising out of any breach of any representation, warranty or
agreement of Parent or the Surviving Corporation contained in or made pursuant
to this Agreement, the Ancillary Agreements or any agreement, contract or
instrument required to be executed by Parent or the Surviving Corporation
pursuant to this Agreement, the Ancillary Agreements or the transactions
contemplated thereby.
1.6 NOTICE AND DEFENSE OF INDEMNIFICATION CLAIMS
(a) NOTICE OF CLAIMS. If either (i) a claim is made or brought by a
third party against any Indemnitee (as defined in Section 11.3, 11.4 or 11.5
hereof) and if such Indemnitee reasonably believes that such claim, if
successful, would give rise to a right of set-off or indemnification under this
Article XI against an Indemnifying Party, or (ii) an Indemnitee becomes aware of
facts or circumstances establishing that an Indemnitee has experienced or
incurred Damages or may experience or incur Damages which will give rise to a
right of set-off or indemnification under this Article XI, then such Indemnitee
shall give written notice to the Indemnifying Party of such claim for
indemnification ("Indemnification Notice") as soon as reasonably practicable but
in no event more than thirty (30) days after the Indemnitee has received written
notice or actual knowledge of such claim or such facts or circumstances
(provided that failure to give an Indemnification Notice shall not limit the
Indemnifying Party's indemnification obligation hereunder except to the extent
that the delay in giving, or failure to give, the Indemnification Notice
adversely affects the Indemnifying Party's ability to defend against a claim
described in clause (i) above). To the extent reasonably practicable, the
Indemnification Notice will describe the nature, basis and amount of the
indemnification claim and include any relevant supporting documentation. If the
Indemnifying Party does not object within thirty (30) days after receipt of the
Indemnification Notice to the propriety of (i) the indemnification claim
described on the Indemnification Notice as being subject to set-off or
indemnification pursuant to Section 11.3, 11.4 and (or) 11.5 and (ii) the amount
of Damages specified in the Indemnification Notice, the indemnification claim
described in the Indemnification Notice shall be deemed to be final and binding
upon the Indemnifying Party(ies) (hereinafter, "Permitted Indemnification
Claim"). Any undisputed set-off or indemnification claim described in the
Indemnification Notice shall be deemed to be final and binding upon the
Indemnifying Party(ies) and shall constitute a Permitted Indemnification Claim.
If the Indemnifying Party contests the propriety of a set-off or indemnification
claim described in the Indemnification Notice and/or the amount of Damages
alleged to be associated with such claim, then the Indemnifying Party shall
deliver to the Indemnitee an Indemnification Objection Notice detailing all
specific objections the Indemnitee has with respect to the indemnification claim
described in the Indemnification Notice. If the Indemnifying Party and the
Indemnitee are unable to resolve the disputed issues concerning the set-off or
indemnification claim within fifteen (15) business days after the date the
Indemnifying Party received the Indemnification Objection Notice, the disputed
issues will be resolved pursuant to the dispute resolution procedures set forth
in Article XII hereof. If any disputed issues ultimately are resolved by an
arbitrator pursuant to Section 12.3, and if the arbitrator's determination of
the disputed issues results in all or any portion of the indemnification claim
properly being subject to set-off or indemnification pursuant to Section 11.3,
11.4 and (or) 11.5, (i) such claim or portion thereof shall be final and binding
upon the Indemnifying Party(ies) and shall constitute a Permitted
Indemnification Claim, and (ii) the Indemnifying Party(ies) shall pay to the
Indemnitee all Damages associated with any Permitted Indemnification Claim
within ten (10) days after such claim is determined to be a Permitted
Indemnification Claim pursuant thereto. If, however, the disputed issues
ultimately are resolved by the arbitrator and (x) the arbitrator determines that
the claim is not properly subject to set-off or indemnification and (y) Parent
or Surviving Corporation has withheld payment of any amount, then Parent or
Surviving Corporation immediately shall pay to the Stockholders such amount
improperly withheld. The Stockholders acknowledge and agree that the right to
receive the payments improperly withheld as described herein shall be their
exclusive remedy with respect thereto.
(b) DEFENSE OF THIRD PARTY CLAIMS. The Indemnitee against whom a third
party claim is made or brought shall give the Indemnifying Party an opportunity
to defend such claim, at the Indemnifying Party's own expense and with counsel
selected by the Indemnifying Party and reasonably satisfactory to the
Indemnitee, provided that such Indemnitee at all times also shall have the right
to participate fully in the defense at its own expense. Failure of an
Indemnifying Party to give the Indemnitee written notice of its election to
defend such claim within thirty (30) days after receipt of notice thereof shall
be deemed a waiver by such Indemnifying Party of its right to defend such claim.
If the Indemnifying Party shall elect not to assume the defense of such claim
(or if Indemnifying Party shall be deemed to have waived its right to defend
such claim), the Indemnitee against whom such claim is made shall have the
right, but not the obligation, to undertake the sole defense of and to
compromise or settle the claim on behalf, for the account and at the risk and
expense of the Indemnifying Party (including without limitation the payment by
the Indemnifying Party of the attorneys' fees of the Indemnitee); provided,
however, that if the Indemnitee undertakes the sole defense of such claim on
behalf, for the account and at the risk and expense of the Indemnifying Party,
it shall defend such claim in good faith and shall apprise the Indemnifying
Party from time to time as the Indemnitee deems appropriate of the progress of
such defense. If one or more of the Indemnifying Parties assumes the defense of
such claim, the obligation of such Indemnifying Party hereunder as to such claim
shall include taking all steps reasonably necessary in the defense or settlement
of such claim. The Indemnifying Party, in the defense of such claim, shall not
consent to the entry of any judgment or enter into any settlement (except with
the written consent of the Indemnitee) which does not include as an
unconditional term thereof the giving by the claimant to the Indemnitee against
who such claim is made of a release from all liability in respect of such claim
(which release shall exclude only any obligations incurred in connection with
such settlement). If the claim is one that cannot by its nature be defended
solely by the Indemnifying Party, then the Indemnitee shall make available, at
the Indemnifying Party's reasonable expense, all information and assistance that
the Indemnifying Party reasonably may request.
LIMITATION ON RIGHT OF SET-OFF AND INDEMNIFICATION. Notwithstanding the
foregoing provisions of this Article XI, set-off and indemnity rights for
Damages hereunder shall be limited as follows:
(a) No indemnity shall be made for Damages unless an Indemnification
Notice therefor shall have been given not later than three (3) years following
the Closing Date.
(b) No Indemnitee shall have any right of set-off and the Stockholders
shall not be obligated to indemnify any Indemnitee for any Damages for which
set-off is allowed or indemnification is required pursuant to this Article XI
unless the aggregate of all such Damages shall exceed $20,000. Parent, the
Surviving Corporation and other Indemnitees shall be entitled to claim against
the Stockholders only for Damages which exceed $20,000.
(c) The Stockholders shall not be obligated to indemnify the
Indemnitees for Damages, in the aggregate, exceeding the sum of the Merger
Consideration actually paid to the Stockholders plus $1,250,000.
ARTICLE XII
DISPUTE RESOLUTION
NEGOTIATED RESOLUTION. If any dispute arises (i) out of or relating to this
Agreement or any alleged breach thereof, or (ii) with respect to any of the
transactions or events contemplated hereby, the party desiring to resolve such
dispute shall deliver a Dispute Notice to the other parties of such dispute
(herein "Dispute"). If any party delivers a Dispute Notice pursuant to this
Section 12.1, or if any Indemnifying Party delivers to any Indemnitee an
Indemnification Objection Notice pursuant to Article XI, the parties involved in
the Dispute shall meet at least twice within the thirty (30) day period
commencing with the date of the Dispute Notice or the Indemnification Objection
Notice (as the case may be) and in good faith shall attempt to resolve such
Dispute or the Rejected Claim (as the case may be).
MEDIATION. If any Dispute or Rejected Claim is not resolved or settled by the
parties as a result of negotiation pursuant to Section 12.1 above, the parties
shall submit the Dispute or Rejected Claim to non-binding mediation before a
retired judge of either a federal District Court in New York or of a New York
State Court, or some similarly qualified, mutually agreeable individual. The
parties shall bear the costs of such mediation equally.
ARBITRATION. If the Dispute or Rejected Claim is not resolved by mediation
pursuant to Section 12.2 above, or if the parties fail to agree upon a mediator,
within sixty (60) days after the Dispute Notice or Indemnification Objection
Notice (as the case may be), the Dispute or Rejected Claim shall be settled by
arbitration conducted in the City of New York which shall be in accordance with
the rules of the American Arbitration Association then in effect with respect to
commercial disputes. The arbitration of such issues, including the determination
of any amount of damages suffered by any party hereto by reason of the acts or
omissions of any party, shall be final and binding upon all parties. Except as
otherwise set forth in this Agreement, the cost of any arbitration hereunder,
including the cost of the record or transcripts thereof, if any, administrative
fees, and all other fees involved including reasonable attorneys' fees incurred
by the party determined by the arbitrator to be the prevailing party, shall be
paid by the party determined by the arbitrator not to be the prevailing party,
or otherwise allocated in an equitable manner as determined by the arbitrator.
The parties shall instruct the arbitrator to render its decision no later than
sixty (60) days after the submission of the Dispute or Indemnification Objection
Notice.
ARTICLE XIII
GENERAL PROVISIONS
EXPENSES. Except as otherwise expressly provided herein, each party to this
Agreement shall pay its own costs and expenses in connection with the
transactions contemplated hereby.
COUNTERPARTS. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
CONSENT TO JURISDICTION; APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAW. FOR PURPOSES OF ENFORCING ANY ARBITRATION
AWARD, AND/OR OBTAINING INJUNCTIVE RELIEF, ALL PARTIES HEREBY IRREVOCABLY SUBMIT
TO THE JURISDICTION OF ANY STATE COURT SITTING IN NEW YORK CITY OR ANY FEDERAL
COURT SITTING IN NEW YORK CITY IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND EACH PARTY HERETO IRREVOCABLY
ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. EACH PARTY HERETO
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER
APPLICABLE LAW, TRIAL BY JURY AND ANY OBJECTION THAT IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT
IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT
IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
ANNOUNCEMENTS. No announcement of this Agreement or any transaction contemplated
hereby shall be made by any party prior to the Closing without the written
approval of the other parties hereto (which approval shall not be unreasonably
withheld), except as required by law.
NOTICES. All notices and other communications hereunder shall be in writing and
shall be deemed given if delivered personally, sent by facsimile transmission or
mailed by registered or certified mail (return receipt requested) to the parties
at the following addresses (or at such other address for a party as shall be
specified by like notice):
(a) if to Parent:
PHC, Inc.
200 Lake Street
Suite 102
Peabody, Massachusetts 01960
Fax: (508) 536-2677
with a copy to:
Arnold R. Westerman, Esq.
Arent Fox Kintner Plotkin & Kahn
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036-5339
Fax: (202) 857-6395
(b) if to Merger Sub:
PHC, Inc.
200 Lake Street
Suite 102
Peabody, Massachusetts 01960
Fax: (508) 536-2677
with a copy to:
Arnold R. Westerman, Esq.
Arent Fox Kintner Plotkin & Kahn
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036-5339
Fax: (202) 857-6395
(c) if to the Company or either Stockholder:
Behavioral Stress Center, Inc.
9419 59th Street
Elmhurst, New York 11373
Fax: (718) 760-3090
with a copy to:
Harvey Z. Werblowsky, Esq.
McDermott, Will & Emery
50 Rockefeller Plaza
New York, New York 10020
Fax: (212) 547-5444
ASSIGNMENT. This Agreement shall not be assigned by operation of law
or otherwise, except by the prior written consent of all parties.
SECTION 13.7 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES; RIGHTS OF
ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES; RIGHTS OF OWNERSHIP. This
Agreement (i) constitutes the entire agreement and supersedes all other prior
agreements and understandings, both written and oral, among the parties, or any
of them, with respect to the subject matter hereof, and (ii) is not intended to
confer upon any other person any rights or remedies hereunder.
CAPTIONS . The captions of the various Articles, Sections and Schedules of this
Agreement have been inserted only for convenience of reference and shall not be
deemed to modify, explain, enlarge or restrict any provision of this Agreement
or affect the construction hereof.
<PAGE>
IN WITNESS WHEREOF, Parent, Merger Sub, the Company, Mansdorf and
Burstein have caused this Agreement to be signed on the date first written above
personally or by their respective representatives thereunto duly authorized.
PHC, INC.
By:
BSC-NY, INC.
By:
BEHAVIORAL STRESS CENTER, INC.
BY:
Irwin Mansdorf
Yakov Burstein
<PAGE>
EXHIBIT 10.91
PROMISSORY NOTE
US$180,000.00 Dated October 31, 1996
FOR VALUE RECEIVED, PHC, INC., a Massachusetts corporation
located at 200 Lake Street, Peabody, Massachusetts 01960 (the "Borrower"),
promises to pay to the order of Yakov Burstein, a resident of New York State
(the "Lender"), or his registered assigns, in lawful money of the United States
of America and in immediately available funds, the principal amount of
$180,000.00, payable in installments of $45,000.00 on each of the first and
second anniversaries of the date hereof and $90,000 on the fourth anniversary of
the date hereof. The Borrower further agrees to pay interest, in like funds,
from the date hereof on the unpaid principal amount hereof from time to time
outstanding at an annual rate of eight percent calculated on a 360 day year
based on the actual number of days elapsed. Accrued interest shall be payable
quarterly on the last day of each calendar quarter commencing on December 31,
1996.
All payments made under this Note shall be applied first to the
payment of interest on the principal balance outstanding hereunder from time to
time, and second to the payment of principal.
Any or all interest or principal outstanding hereunder may be
prepaid at any time and from time to time without penalty. Any partial
prepayments of principal shall be applied against installments of principal in
the inverse order of maturity. All payments and prepayments on this Note shall
be made to the holder at 184-63 Aberdeen Road, Jamaica, New York 11432 or at
such other address of which the holder shall notify the Borrower in writing. The
holder of this Note is authorized to record the date and amount of each payment
or prepayment of principal hereof on the schedule annexed hereto and made a part
hereof, and any such recordation shall constitute PRIMA FACIE evidence of the
information so recorded, PROVIDED that the failure of the holder of this Note to
make such recordation (or any error in such recordation) shall not affect the
obligations of the Borrower hereunder.
If any payment under this Note is due on a day other than a
Business Day, such payment shall be made on the last Business Day preceding such
day. A "Business Day" shall mean any day other than a Saturday, Sunday or other
day on which commercial banks are required or authorized to be closed in New
York, New York.
If any payment of principal or interest which is due hereunder
is not paid, the Lender shall provide written notice of such failure to pay to
the Borrower specifying the amount overdue. If such amount has not been paid
within seven days after the receipt of said notice, there shall be an event of
default, and all amounts outstanding under this Note may be declared to be, and
shall become, upon such declaration, immediately due and payable.
The Borrower is obligated to pay the principal described herein
and any stated interest thereon only to the holder of this Note at the address
set forth above or as otherwise specified in writing, and only the person whose
name has been notified to the Borrower shall be entitled to payment of principal
and interest on the obligation evidenced hereby. The transfer of this Note may
be effected only by surrender of this Note by the holder to the Borrower, and,
as the Borrower elects, reissuance by the Borrower of this Note to the new
holder or issuance by the Borrower of a new instrument to the new holder.
In the event that Perlow Physicians, P.C. receives notice of
termination of any contract identified on Schedule 2.5 attached hereto during
the ninety (90) calendar day period commencing on the date hereof, the Lender
shall be entitled to reduce the principal amount of this Note by an amount equal
to $5,143 for each nursing home facility giving any such notice. Any such
reduction shall be applied to payments scheduled hereunder in the inverse order
of maturity. This Note is a note referred to in that certain agreement for
purchase and sale of assets dated the date hereof among the Lender, the Borrower
and others and shall be subject to the terms thereof.
The Borrower hereby expressly waives presentment, demand,
protest or notice of any kind. This Note shall inure to the benefit of, and be
binding upon, the successors and assigns of the Borrower.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ITS
PRINCIPLES OF CHOICE OF LAW.
PHC, INC.
By___________________________________
Bruce A. Shear
President
<PAGE>
SCHEDULE 1
TO NOTE
PAYMENTS OF PRINCIPAL
Amount
of Unpaid
Principal Principal Notation
DATE REPAID BALANCE MADE BY
<PAGE>
EXHIBIT 10.92
PROMISSORY NOTE
US$570,000.00 Dated October 31, 1996
FOR VALUE RECEIVED, PHC, INC., a Massachusetts corporation
located at 200 Lake Street, Peabody, Massachusetts 01960 (the "Borrower"),
promises to pay to the order of Irwin Mansdorf, a resident of New York State
(the "Lender"), or his registered assigns, in lawful money of the United States
of America and in immediately available funds, the principal amount of
$570,000.00, payable in installments of $142,500.00 on each of the first and
second anniversaries of the date hereof and $285,000 on the fourth anniversary
of the date hereof. The Borrower further agrees to pay interest, in like funds,
from the date hereof on the unpaid principal amount hereof from time to time
outstanding at an annual rate of eight percent calculated on a 360 day year
based on the actual number of days elapsed. Accrued interest shall be payable
quarterly on the last day of each calendar quarter commencing on December 31,
1996.
All payments made under this Note shall be applied first to the
payment of interest on the principal balance outstanding hereunder from time to
time, and second to the payment of principal.
Any or all interest or principal outstanding hereunder may be
prepaid at any time and from time to time without penalty. Any partial
prepayments of principal shall be applied against installments of principal in
the inverse order of maturity. All payments and prepayments on this Note shall
be made to the holder at 198-17 Pompei Avenue, Holliswood, New York 11423 or at
such other address of which the holder shall notify the Borrower in writing. The
holder of this Note is authorized to record the date and amount of each payment
or prepayment of principal hereof on the schedule annexed hereto and made a part
hereof, and any such recordation shall constitute PRIMA FACIE evidence of the
information so recorded, PROVIDED that the failure of the holder of this Note to
make such recordation (or any error in such recordation) shall not affect the
obligations of the Borrower hereunder.
If any payment under this Note is due on a day other than a
Business Day, such payment shall be made on the last Business Day preceding such
day. A "Business Day" shall mean any day other than a Saturday, Sunday or other
day on which commercial banks are required or authorized to be closed in New
York, New York.
If any payment of principal or interest which is due hereunder
is not paid, the Lender shall provide written notice of such failure to pay to
the Borrower specifying the amount overdue. If such amount has not been paid
within seven days after the receipt of said notice, there shall be an event of
default, and all amounts outstanding under this Note may be declared to be, and
shall become, upon such declaration, immediately due and payable.
The Borrower is obligated to pay the principal described herein
and any stated interest thereon only to the holder of this Note at the address
set forth above or as otherwise specified in writing, and only the person whose
name has been notified to the Borrower shall be entitled to payment of principal
and interest on the obligation evidenced hereby. The transfer of this Note may
be effected only by surrender of this Note by the holder to the Borrower, and,
as the Borrower elects, reissuance by the Borrower of this Note to the new
holder or issuance by the Borrower of a new instrument to the new holder.
In the event that Perlow Physicians, P.C. receives notice of
termination of any contract identified on Schedule 2.5 attached hereto during
the ninety (90) calendar day period commencing on the date hereof, the Lender
shall be entitled to reduce the principal amount of this Note by an amount equal
to $16,286 for each nursing home facility giving any such notice. Any such
reduction shall be applied to payments scheduled hereunder in the inverse order
of maturity. This Note is a note referred to in that certain agreement for
purchase and sale of assets dated the date hereof among the Lender, the Borrower
and others and shall be subject to the terms thereof.
The Borrower hereby expressly waives presentment, demand,
protest or notice of any kind. This Note shall inure to the benefit of, and be
binding upon, the successors and assigns of the Borrower.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ITS
PRINCIPLES OF CHOICE OF LAW.
PHC, INC.
By___________________________________
Bruce A. Shear
President
<PAGE>
G:\KAYSER\PIONEER\BURSTEIN.BSC
SCHEDULE 1
TO NOTE
PAYMENTS OF PRINCIPAL
Amount
of Unpaid
Principal Principal Notation
DATE REPAID BALANCE MADE BY
<PAGE>
EXHIBIT 10.96
ASSIGNMENT AND ASSUMPTION AGREEMENT
This Agreement is entered into as of this 31st day of October, 1996,
by and between CLINICAL ASSOCIATES, a New York partnership (hereinafter referred
to as the "Assignor"), and PERLOW ASSOCIATES, P.C., a New York professional
corporation (the "Assignee").
W I T N E S S E T H
WHEREAS, the Assignor has this day sold and transferred to the
Assignee certain personal property used in connection with the operation of
Clinical Associates which is a provider of professional psychotherapy services
(the "Business"); and
WHEREAS, as a part of the sale and transfer of the Business, the
Assignor has agreed to transfer and assign to the extent transfer and assignment
are permissible, and the Assignee has agreed to receive and assume, to the
extent assumption is permissible, ALL contracts, leases and other agreements
identified in that certain Asset Purchase Agreement dated as of the date hereof
among the Assignor, Assignee and others (the "Contracts").
NOW THEREFORE, in consideration of the mutual covenants herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:
The Assignor hereby assigns and transfers to the Assignee all of the
Assignor's rights and interest with respect to the Contracts, to the extent such
rights are assignable.
<PAGE>
G:\KAYSER\PIONEER\ASSAGT.004
2
The Assignee hereby assumes the Assignor's rights and obligations
arising after the date hereof with respect to the Contracts.
The Assignor warrants that (a) it has the authority to execute and
deliver this Assignment and Assumption Agreement, (b) it has not made any prior
assignment of its rights under the Contracts, and (c) it will execute and
deliver to the Assignee such additional documents as the Assignee may reasonably
request to secure its rights under this Assignment and Assumption Agreement.
The Assignee warrants that it is a valid New York professional
corporation authorized to transact business in the State of New York and that it
has the authority to execute and deliver this Assignment and Assumption
Agreement and perform the assumed obligations under the Contracts.
Assignor: Clinical Associates
By: __________________________
Irwin Mansdorf
Partner
Assignee: Perlow Physicians, P.C.
By: ____________________________
Name:
Title:
<PAGE>
G:\KAYSER\PIONEER\CA-CD.14
14
G:\KAYSER\PIONEER\CA-CD.14
The obligations of the Assignee set forth herein are hereby unconditionally and
absolutely guaranteed by PHC, Inc.
Guarantor: PHC, Inc.
By:_____________________________
Name:
Title:
<PAGE>
EXHIBIT 10.97
BILL OF SALE
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of
which is hereby acknowledged, CLINICAL DIAGNOSTICS, a sole proprietorship owned
by Irwin Mansdorf (hereinafter referred to as "Seller"), does hereby sell,
assign, transfer and convey to PERLOW PHYSICIANS, P.C., a duly organized and
existing New York professional corporation (hereinafter referred to as
"Purchaser"), all right, title and interest in and to the specified assets (as
defined below), free and clear of any lien or encumbrances, except as disclosed
herein or in the Asset Purchase Agreement (as hereinafter defined). The term
"Specified Assets" shall mean all of the assets owned by Seller or in which
Seller has any rights or interests comprising and used by Seller in connection
with or related to the ownership, management or operation of its business known
as Clinical Associates (the "Business"), as of the date hereof, tangible and
intangible, wheresoever situated and whether or not specifically referred to,
and any and all of Seller's right, title and interest therein and thereto as
noted in that certain Asset Purchase Agreement dated as of October 31, 1996
among Seller, PHC, Inc. and others (the "Asset Purchase Agreement"), including,
without limiting the generality of the foregoing, the following:
(a) all (I) rights of the Seller under contracts, arrangements, Real
Estate Leases (as defined in the Asset Purchase Agreement) and agreements set
forth on Schedules 1.2(b) and (c) of the Asset Purchase Agreement, including,
without limitation, all rights to receive goods and services rendered pursuant
thereto, and to assert claims and take other rightful actions in respect of
breaches, defaults and other violations thereof (collectively, the "Contracts"),
(II) machinery, equipment, furniture, furnishings, tools, or similar property
used in the Business, (iii) the employee roster of the Seller, (IV) all books,
records, manuals, price lists, correspondence, patient lists, mailing or
distribution lists, and lists of customers of the Seller, (V) all research and
development, financial, accounting and operational data and records used
exclusively in the Business, (VI) the intangible goodwill of Seller, and (VII)
all such other assets as specified on Schedule 1.2 of the Asset Purchase
Agreement.
(b) Notwithstanding anything to the contrary herein provided, the
Specified Assets shall not include (I) all cash, cash equivalents including cash
on hand or in bank accounts, and certificates of deposit, and commercial paper
held by Seller, (II) all notes receivable held by each Seller, (III) all patient
accounts receivable held by Seller on the Closing Date (as defined in subsection
2.1 of the Asset Purchase Agreement), including fees earned for patients treated
prior to the Closing Date but not yet billed, (IV) the organizational and
capitalization documents of the Seller, (V) all contracts and agreements
specified in Schedule 1.3 of the Asset Purchase Agreement (VI) the personal
property of the partners of the Seller that has been used in connection with the
operation of the Business and is set forth in Schedule 1.3 of the Asset Purchase
Agreement and (VII) the assets specified in Schedule 1.3 of the Asset Purchase
Agreement.
IN WITNESS WHEREOF, this Bill of Sale has been executed by Seller as
of the 31st day of October, 1996.
Seller: Clinical Diagnostics
By: __________________________
Irwin Mansdorf
Owner
<PAGE>
EXHIBIT 10.98
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is entered into this 1st day of November, 1996,
(the "Effective Date") by and between Perlow Physicians, P.C., a New York
professional corporation (the "Corporation"), and Yakov Burstein, Ph.D.
(the "Clinical Director").
W I T N E S S E T H:
WHEREAS, the Corporation is a New York professional corporation which
provides mental health services to the general public in the New York
metropolitan area; and
WHEREAS, concurrent with the execution of this Agreement, the Corporation
is purchasing the practice jointly operated by the Clinical Director and Irwin
Mansdorf, Ph.D.; and
WHEREAS, in order to promote continuity of patient care, the Corporation
desires to employ Clinical Director on the terms and conditions hereafter set
forth, and the Clinical Director desires to accept such employment;
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein contained, the Corporation hereby employs Clinical Director and Clinical
Director hereby agrees to work for the Corporation, upon the following terms and
conditions:
1. EMPLOYMENT DUTIES. Clinical Director is hereby employed by the
Corporation to serve as its Clinical Director to provide professional services
in connection with psychotherapy. In performing duties hereunder, Clinical
Director shall at all times comply with all policies and procedures of the
Corporation, copies of which shall be provided to the Clinical Director by the
Corporation, and incorporated by reference into this Agreement when initialed by
the Clinical Director.
2. TIME REQUIREMENTS. Subject to the provisions of Section 7 hereof,
Clinical Director agrees to devote forty (40) hours per week during the term of
this Agreement to the affairs and activities of the Corporation, on such days
and at such times as are consistent with his past practices at Clinical
Associates, a partnership owned by Irwin Mansdorf, Ph.D. ("Mansdorf") and
Clinical Director ("Clinical Associates") and Clinical Diagnostics, a sole
proprietorship owned by Mansdorf ("Clinical Diagnostics").
3. COMPENSATION. Subject to the provisions of Section 7 hereof, the
Corporation agrees to pay to Clinical Director as compensation for his services
hereunder a salary at an annual rate of one hundred twenty five thousand dollars
($125,000.00) per year. Any and all compensation due to be paid to the Clinical
Director pursuant to this Section 3 and under the Employment Agreement between
the Clinical Director and BSC-NY, Inc. of even date herewith (the "BSC-NY
Agreement") shall be paid by the Corporation.
4. BENEFITS. Subject to the provisions of Section 7 hereof, the
Corporation shall provide and the Clinical Director shall be entitled to
participate in all of the employee benefit programs and plans which are
applicable to clinical directors of the Corporation in accordance with the terms
of said programs and plans. Such programs and plans shall include, without
limitation, group health, insurance, life insurance, short and long-term
disability insurance and a 401(k) plan.
5. REIMBURSEMENT OF EXPENSES. Subject to the provisions of Section 7
hereof, the Corporation will provide the Clinical Director with an automobile
allowance of $475.00 per month. The Corporation shall also reimburse the
Clinical Director for all reasonable and necessary business expenses incurred by
him in the performance of his duties hereunder including parking expenses,
cellular phone expenses and beepers. The Corporation shall also reimburse the
Clinical Director for membership dues in professional organizations bearing
direct relationship to Clinical Director's duties in connection with this
Agreement.
6. VACATIONS AND CLINICAL DIRECTOR MEETINGS. Subject to the provisions of
Section 7 hereof, the Clinical Director shall be entitled to (a) four (4) weeks'
vacation during each calendar year, and (b) one (1) week each year to attend
professional meetings and seminars as may be mutually agreed upon by Clinical
Director and the Corporation's Chief Executive Officer ("CEO"). The Clinical
Director shall be paid his normal salary during vacation and while in attendance
at professional meetings and seminars.
7. DUPLICATION OF TIME REQUIREMENTS, COMPENSATION AND BENEFITS. Any hours
of time devoted by Clinical Director to his responsibilities pursuant to Section
2 of this Agreement shall offset the number of hours he is required to devote to
his responsibilities under the terms of the BSC-NY Agreement . Any right to
compensation, item of benefit, reimbursement of item of expense, or
vacation/seminar time to be provided by the Corporation to the Clinical Director
pursuant to Sections 3, 4, 5 and 6 of this Agreement shall be offset by such
compensation, such item of benefit, such reimbursement of item of expense, or
such vacation/seminar time to be provided by the Corporation to the Clinical
Director under the BSC-NY Agreement.
8. REPRESENTATIONS AND WARRANTIES OF THE CLINICAL DIRECTOR. The Clinical
Director hereby represents and warrants at all times during the term of this
Agreement that he is duly authorized, licensed and in good standing under the
laws of the State of New York to engage in the practice of psychology, that said
license is not suspended, revoked or restricted in any manner and that, to his
knowledge, there is not presently pending or threatened against him any action,
claim or proceeding the outcome of which could result in revocation, suspension
or restriction of his license.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE CORPORATION.
The Corporation represents and warrants at all times during the term of this
Agreement that:
9.1 The Corporation is a duly formed professional corporation
organized, validly existing and in good standing under the laws of the State of
New York.
9.2 The Corporation has the corporate power and authority to enter
into this Agreement and carry on its business as currently conducted.
10. TERM; BASIS FOR TERMINATION. Subject to the provisions of this
Section 10, the term of this Agreement shall be for three (3) years,
commencing on the Effective Date. This Agreement shall terminate earlier on
the first to occur of the following:
10.1 The death of Clinical Director;
10.2 The permanent disability of the Clinical Director at any time.
The Clinical Director shall be deemed to have become permanently "disabled" when
by reason of a physical or mental disability or incapacity he shall have failed
or is unable to perform his customary duties and activities on behalf of the
Corporation for a consecutive period of four (4) months or for any six (6)
months within any twelve (12) month period; or
10.3 At any time by the Corporation for "cause" which, for purposes
of this Agreement, shall mean (a) willful and serious or habitual failure of the
Clinical Director to perform his duties hereunder in all material respects which
is not remedied within 30 days after the receipt of notice thereof from the
Corporation; (b) legal disqualification of the Employee from practicing
psychology within the State of New York; or (c) gross misconduct, fraud or
embezzlement by the Clinical Director.
11. PROTECTION OF THE CORPORATION. In consideration of the Clinical
Director's initial and/or continued employment and other good and valuable
consideration provided by the Corporation, the adequacy of which is hereby
acknowledged, the parties agree to the following:
11.1 COVENANTS. In consideration of the execution and delivery of
this Agreement and in recognition that the Corporation was induced to enter into
this Agreement based on the covenants and assurances made by the Clinical
Director, Clinical Director covenants and agrees that, for a period of four (4)
years after the Closing, he will not (i) directly or indirectly (whether as a
sole proprietor, partner, stockholder, director, officer, employee, consultant,
independent contractor, or in any capacity as principal or agent or in any other
individual or representative capacity) engage in Competition (as such term is
defined below) with the Corporation or be interested in or associated with or
render services to or sell any ideas, inventions or products to any party in
Competition with the Corporation or (ii) make known or disclose the name or
address of (x) any of the clients, customers or patrons of the Corporation or
(y) any persons having a contractual relationship with the Corporation (except
where the facts of such relationships are generally available to or known by the
public other than as a result of a disclosure by Clinical Director) or (iii)
call upon, solicit, divert or take away, or attempt to solicit, divert or take
away, any such clients, customers or patrons or employees of the Corporation or
any persons having a contractual relationship with the Corporation or (iv)
request or advise any present or future client, customer or patron of the
Corporation or any persons having a contractual relationship with the
Corporation to withdraw, curtail or cancel their business relationship with the
Corporation. For purposes hereof, the term "Competition" shall mean the
providing of (i) psychotherapy services to individuals either individually or in
group settings in out-patient clinics, nursing homes or hospitals, or (ii)
management services in connection therewith, in any case, within a radius of
twenty-five (25) miles from any location in which psychotherapy services or
management services in connection therewith are then being provided by the
Corporation; provided, however, that the Clinical Director may engage in private
practice and may provide such services to the Hempstead Hospital, administrative
divisions of the State of New York, Upstate Clinical Associates and, with
respect only to administrative and management services provided to governments
or municipalities ("GMC Contracts"), BSC Health Management ("BSCHM"). In the
event Upstate Clinical Associates plans to render psychotherapy services at a
location more than twenty five (25) miles from Monroe County, New York, it shall
provide PHC, Inc. ("PHC") with notice of such location. If PHC or any of its
subsidiaries engages in such services or provides management services in
connection therewith within twenty five (25) miles of such location during the
sixty (60) days following the date of such notice, then Upstate Clinical
Associates shall discontinue such plans for so long as PHC is so engaged. BSCHM
will obtain clinical services from an authorized provider associated with PHC
under the GMC Contracts except (A) in the "Capital District" (as defined in the
GMC Contracts), (B) to the extent BSCHM's partner or joint venturer as of the
date hereof (which is a national behavioral health care provider identified to
PHC) or the governmental entity withholds its consent and/or (C) the extent
prices and services proposed by the PC or an authorized provider associated with
PHC in connection with the GMC Contracts are not competitive. For purposes
hereof, "Competition" shall not preclude the ownership of less than ten (10)
percent of the common stock, or other class of voting stock or any percentage of
non-voting securities, of any publicly traded company.
11.2 ENFORCEMENT. The Clinical Director agrees that the remedies at
law for any breach of the covenants contained in this Section 11 will be
inadequate and that the Corporation shall be entitled to appropriate equitable
remedies including injunctive relief in any action or proceeding brought to
prevent the taking or continuation of any action which would constitute or
result in a breach of such covenant. Such remedies shall not be exclusive and
shall be in addition to any and all remedies which may be available, directly or
indirectly, without limiting the recovery of any incidental, consequential
and/or punitive damages. Clinical Director further agrees that if any
restriction in this Section 11 is held by any court to be unenforceable or
unreasonable, a lesser restriction will be enforced in its place and the
remaining restrictions will be enforced independently of each other. The
attorneys' fees, court costs and other expenses incurred by the prevailing party
in any proceeding to enforce any rights under any provision of this Section 11,
or to defend any such attempted enforcement, shall be paid by the non-prevailing
party.
11.3 ANCILLARY OBLIGATIONS. This covenant shall be construed as an
obligation ancillary to the other provisions of this Agreement and the existence
of any claim or cause of action by the Clinical Director, whether predicated on
a breach of this Agreement or otherwise, shall not constitute a defense to the
enforcement by the Corporation of this covenant.
11.4 JURISDICTION. The Clinical Director hereby irrevocably and
unconditionally consents to submit to the exclusive jurisdiction of the courts
of the State of New York located in New York City for any actions, suits or
proceedings arising out of or relating to this covenant and each further agrees
that service of any process, summons, notices or document by U.S. registered
mail to the address set forth herein shall be effective service of process for
any action, suit or proceeding brought against him in any such court.
12. INSURANCE. The Clinical Director shall maintain professional liability
coverage covering him for acts and omissions in the normal course of his
employment hereunder, in an amount of not less than three million dollars
($3,000,000) aggregate coverage and one million dollars ($1,000,000) coverage
per wrongful act or occurrence. The Corporation shall reimburse the Clinical
Director for the costs of such professional liability insurance and for the
costs of so-called "tail insurance" covering Clinical Director in the amount of
the policy limits, if the insurance being provided is on a claims-made basis and
the insurance carrier or coverage is changed or terminated for any reason
whatsoever. In addition, the Corporation shall maintain a policy of
comprehensive general liability insurance coverage in an amount of not less than
one million dollars ($1,000,000) aggregate coverage and one million dollars
($1,000,000) coverage per wrongful act or occurrence.
13. GOVERNING LAW. This Agreement shall be construed under the laws
of the State of New York without giving effect to the conflict of laws
provisions thereof.
14. ASSIGNMENT. Neither this Agreement nor any right, duty or obligation
arising under it may be assigned by either party without the prior written
consent of the other party. Notwithstanding the foregoing, in the event of the
merger or consolidation of the Corporation with any other corporation or
corporations, the sale by the Corporation of a major portion of its assets or of
its business and good will, or any other corporate reorganization involving the
Corporation, this Agreement may, without the Clinical Director's written
consent, be assigned and transferred to such successor in interest as an asset
of the Corporation upon such assignee assuming the Corporation's obligation
hereunder, in which event the Clinical Director agrees to continue to perform
his duties and obligations, according to the terms hereof, to or for such
assignee or transferee of this Agreement; provided, however, that the
Corporation will remain secondarily liable as guarantor of such assignee or
transferee's obligations to the Clinical Director hereunder.
15. NATURE OF RELATIONSHIP. Nothing in this Agreement shall be
construed as establishing the parties as partners or joint venturers.
16. BINDING NATURE OF AGREEMENT; ENTIRE AGREEMENT. This Agreement shall be
binding upon and inure to the benefit of the parties and their respective heirs,
representatives and successors. This Agreement supersedes all prior agreements,
representations or understandings, oral or written, express or implied with
respect to the subject matter hereof.
17. AMENDMENTS. No amendment to this Agreement shall be valid unless
in writing signed by both of the parties.
18. RESOLUTION OF DISPUTES. The rights of the parties under this Agreement
and concerning the employment relationship shall be determined, in the event of
a dispute, by an independent arbitrator selected in accordance with the rules of
the American Arbitration Association and the decision of the arbitrator shall be
final and binding on both parties. To the maximum extent permitted by law, the
parties waive their rights to a determination of any such issues by a court or
jury. In the event either party resorts to arbitration or other legal action to
resolve a dispute arising under this Agreement, the prevailing party shall be
entitled to recover the costs and expenses incurred in connection with such
arbitration or action from the other party, including, without limitation,
reasonable attorneys' fees. For purposes of this Section 18, the term "dispute"
means all controversies or claims relating to terms, conditions or privileges of
employment, including, without limitation, claims for breach of contract,
discrimination, harassment, wrongful discharge, misrepresentation, defamation,
emotional distress or any other personal injury, but excluding claims for
unemployment compensation or worker's compensation.
19. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be considered an original and all of which
shall constitute one and the same agreement. This Agreement shall not become
effective until it has been executed by both of the parties hereto.
20. HEADINGS. The headings used in this Agreement are for
convenience of reference only and shall have no force or effect in the
construction or interpretation of the provisions of this Agreement.
21. NOTICES. All notices, requests, demands, and other communications
required or permitted by this Agreement shall be in writing (unless otherwise
specifically provided herein) to the addresses of the parties set forth below
and shall be deemed to have been received: (a) three (3) days after deposit in
the U.S. mail, postage prepaid, registered or certified, and addressed to either
party at the addresses set forth below, or to such changed address as either
party may have given to the other by notice in the manner herein provided; or
(b) upon personal delivery.
If to the Corporation: Perlow Physicians, P.C.
c/o Arent Fox Kintner Plotkin & Kahn
1675 Broadway
New York, NY 10019
Attn: Jerome Levy, Esq.
If to the Clinical Director: Yakov Burstein, Ph.D.
54-19 59th Ave.
Elmhurst, N.Y. 11373
With a copy to:
Harvey Z. Werblowsky, Esq.
McDermott, Will & Emery
50 Rockefeller Plaza
New York, N.Y. 10020
22. SEVERABILITY. Nothing contained in this Agreement shall be construed
to require the commission of any act contrary to law, and whenever there is any
conflict between any provision of this Agreement and any statute, law, ordinance
or regulations the statute, law, ordinance or regulation shall prevail. In such
event, and in any case in which any provision of this Agreement is determined to
be in violation of a statute, law, ordinance or regulation, the affected
provision(s) shall be limited only to the extent necessary to bring it within
the requirements of the law and, insofar as possible under the circumstances, to
carry out the purposes of this Agreement. The other provisions of this Agreement
shall remain in full force and effect, and the invalidity or unenforceability of
any provision hereof shall not affect the validity and enforceability of the
other provisions of this Agreement.
23. NO WAIVER. The waiver by any party to this Agreement of any
breach of any term or condition of this Agreement shall not constitute a
waiver of subsequent breaches. No waiver by any party of any provision of
this Agreement shall be deemed to constitute a waiver of any other provision.
24. SURVIVAL. All of the provisions in Section 12 and 18 shall
survive any termination or expiration of the term of this Agreement.
25. NO REQUIREMENT TO REFER. It is not a purpose of this Agreement to
induce or encourage the referral of patients, and there is no requirement under
this Agreement, or under any other agreement between the practice and the
Clinical Director, that the Clinical Director refer any patient to the
Corporation or to any other entity for the delivery of health care items or
services. The compensation paid to the Clinical Director under this Agreement is
made for professional services and obligations as set forth in this Agreement,
and no payment made under this Agreement is in return for the referral of
patients or in return for purchasing, leasing, ordering or arranging for any
good, facility, item or service from the Corporation or any other entity.
<PAGE>
IN WITNESS WHEREOF, the parties hereby have executed this Agreement as of
the date first above written.
CLINICAL DIRECTOR PERLOW PHYSICIANS, P.C.
By: By:
Yakov Burstein, Ph.D. President
<PAGE>
EXHIBIT 10.99
AGREEMENT FOR PURCHASE AND SALE OF ASSETS
This AGREEMENT, effective as of October 31,
1996, between CLINICAL ASSOCIATES, a New York partnership, CLINICAL DIAGNOSTICS,
a sole proprietorship owned by Irwin Mansdorf, Ph.D. (collectively referred to
herein as the "Sellers"), PHC, INC., a Massachusetts corporation ("PHC"),
BSC-NY, INC., a New York corporation and a direct, wholly-owned subsidiary of
PHC ("BSC"), PERLOW PHYSICIANS, P.C., a New York corporation (the "PC") (BSC and
the PC sometimes are referred to hereinafter collectively as the "Purchasers"
and separately each as a "Purchaser"), IRWIN MANSDORF, a partner in Clinical
Associates and a resident of New York State ("Mansdorf"), and YAKOV BURSTEIN, a
partner in Clinical Associates and a resident of New York State ("Burstein")
(Mansdorf and Burstein sometimes are referred to hereinafter collectively as the
"Partners" and individually each as a "Partner").
W I T N E S S E T H :
WHEREAS, the Sellers are comprised of a
partnership and a sole proprietorship, engaged in the business of providing
professional services for psychotherapy (collectively, the "Business"); and
WHEREAS, the Purchasers desire to purchase from
the Sellers and the Sellers desire to sell to the Purchasers certain specified
assets, properties, rights and claims of the Business (constituting
substantially all of the assets of Sellers) as a going concern on the terms and
conditions set forth herein;
NOW, THEREFORE, in consideration of the
premises and the mutual covenants and agreements hereinafter set forth, the
parties hereby agree as follows:
<PAGE>
. . PURCHASE AND SALE OF ASSETS
PURCHASE AND SALE OF ASSETS. Subject to and upon the conditions set
forth in this Agreement, the Sellers will sell, transfer, convey, assign and
deliver to Purchasers, and Purchasers will purchase and acquire from the Sellers
at the Closing (defined in subsection 2.1 hereof) provided for herein all right,
title and interest of Sellers in and to the Specified Assets (defined in
subsection 1.2 hereof), but shall not include the Excluded Assets (defined in
subsection 1.3 hereof).
SPECIFIED ASSETS. The "Specified Assets" are:ASSETS
(A) All machinery, equipment,
furniture, furnishings, computers, telephones, supplies, and all tangible assets
used in connection with the operation of the Business, wherever located, more
particularly described in Schedule 1.2(a) attached hereto;
<PAGE>
G:\KAYSER\PIONEER\CA-CD.14
23
(B) All of Sellers' right, title
and interest in, to, or under the written or oral contracts, agreements, leases,
licenses, permits, approvals, purchase orders and commitments, and any other
intangible assets used in connection with the operation of the Business, through
the Closing Date (as hereinafter defined) (the "Contracts"), which will be
assumed by Purchasers as enumerated and described in Schedule 1.2(b) attached
hereto;
(C) All leasehold interests in
real property used in connection with the Business (the "Property"), which will
be assumed by Purchasers as enumerated and described in Schedule 1.2(c) attached
hereto;
(D) All leasehold improvements
owned or made to the Property by Sellers;
(E) All of Sellers' books,
records, files and correspondence, display and promotional material relating to
or utilized in connection with the operation of the Business, wherever located,
through the Closing Date, together with all of the goodwill attached to the
Business, and any other intangibles, including trademarks, corporate names,
trade names, all customer lists, consent to the rights to use the telephone
numbers and listings pertaining to same, the entire inventory of office and
maintenance supplies, if any; and
(F) Except as expressly provided
herein to the contrary, all other assets, tangible or intangible, wherever
located, held or used in connection with the ownership, operation and management
of the Business, whether or not included in or reflected on the books of
Sellers.
EXCLUDED ASSETS. The "Excluded Assets" are (I) all cash, cash
equivalents including cash on hand or in bank accounts, and certificates of
deposit, and commercial paper held by each Seller, (II) all notes receivable
held by each Seller, (III) all patient accounts receivable held by each Seller
on the Closing Date including fees earned for patients treated on or prior to
the Closing Date but not yet billed, (IV) the organizational and capitalization
documents of each Seller, (V) all contracts and agreements specified in Schedule
1.3, (VI) the personal property of the partners or sole proprietor of each
Seller that has been used in connection with the operation of the Business and
is set forth in Schedule 1.3 and (VII) the assets specified in Schedule 1.3.
ALLOCATION. All Specified Assets will be purchased and acquired by
BSC, except the PC will purchase and acquire contracts with nursing home
facilities, goodwill attached thereto, patient records and other Specified
Assets that BSC is not permitted to acquire under applicable law.
.I. CLOSING AND PURCHASE PRICE
A. TIME AND PLACE OF CLOSING
The closing of the sale of the Specified
Assets contemplated by this Agreement (the "Closing") shall take place at 10:00
a.m. at the offices of Arent Fox Kintner Plotkin & Kahn, 1675 Broadway, 25th
Floor, New York, NY 10019 as of October 31, 1996 (the "Closing Date"). Upon
consummation, the Closing shall be deemed to take place as of the close of
business on the Closing Date.
PURCHASE PRICE.
2.2.1. PURCHASE PRICE. On the
terms and subject to the conditions set forth in this Agreement, the Purchasers,
jointly and severally, agree to deliver to the Sellers the following (together,
the "Purchase Price") in consideration of the sale of the Specified Assets:
(a) cash (by certified or bank
check) in the amount of $1,500,000, plus
(b) promissory notes (each, a "Note") made by
PHC, in substantially such form as is annexed hereto as Exhibit A,
in the original aggregate principal amount of $750,000 bearing
interest at 8% per annum and payable, in the aggregate, as follows:
$187,500 on each of the first and second anniversaries of the
Closing Date and $375,000 on the fourth anniversary of the Closing
Date, plus
(c) a cash amount (by certified or bank check)
with respect to each of the first three (3) Fiscal Years (as
hereinafter defined) of the PC after the Closing Date payable on the
ninetieth (90th) day following the end of such Fiscal Year (each, a
"Payout Date") equal to (.49) multiplied by the Earn Out Income (as
hereinafter defined) for such Fiscal Year, plus
(d) an additional cash amount (by certified or
bank check) payable on the Payout Date following the third Fiscal
Year of the PC after the Closing Date, equal to (.49) multiplied by
(4), multiplied by the Earn Out Income for such Fiscal Year (the
"Third Year Payment").
2.2.2. EARN OUT INCOME. (a)
The term "Earn Out Income" for any Fiscal Year shall mean the net income before
taxes of the PC for such Fiscal Year, determined in accordance with generally
accepted accounting principles ("GAAP"). In no event shall any management or
similar fee charged by PHC or any of its Subsidiaries (as such term is defined
in Rule 405 promulgated under the Securities Act of 1933, as amended (the
"Securities Act")) (other than Behavioral Stress Center, Inc.) to the PC or any
of its Subsidiaries be deemed an expense in determining such net income. Any
management or similar fee charged by Behavioral Stress Center, Inc. or any of
its Subsidiaries to the PC shall be deemed an expense in determining such net
income. In no event shall any obligations of (i) the PC, PHC and any of their
Subsidiaries to the Partners or Sellers under this Agreement and (ii) PHC and
any of its Subsidiaries to the Partners under the Agreement and Plan of Merger
of even date herewith among PHC, the Partners and others, other than obligations
under the Burstein Employment Agreement and the Mansdorf Consulting Agreement or
any payment for psychotherapy services by the PC, be deemed an expense in
determining such net income. E.g., depreciation and amortization arising out of
the transactions referred to in clauses (i) and (ii) above may not be deducted
as an expense in computing Earn Out Income. Notwithstanding the foregoing, all
direct out-of-pocket ordinary and necessary costs and expenses paid or incurred
by PHC or any of its Subsidiaries on behalf of the PC shall be reflected as an
expense of the PC. The term "Fiscal Year" shall mean the twelve month period
ended on the first anniversary of the Closing Date and each successive twelve
month period thereafter.
(b) In the event the PC or any of its
Subsidiaries plans to acquire (by merger, consolidation, purchase or otherwise)
any psychotherapy practice or provider of management services in connection
therewith (an "Acquisition"), PHC shall provide the Partners with a notice
("Acquisition Notice") including the terms of the Acquisition and the parties
thereto in reasonable detail, copies of any agreements or instruments to be
executed in connection with the Acquisition and, if then available, a
computation (the "Computation") of the maximum depreciation and amortization
expenses per year to be borne by the PC or any of its Subsidiaries in connection
with the Acquisition. Promptly (but no more than 10 business days) after receipt
of any Acquisition Notice for an Acquisition, the Partners shall elect whether
or not such Acquisition shall be reflected in Earn Out Income. If the Partners
elect to include such Acquisition in Earn Out Income, the operating results
resulting from such Acquisition including depreciation and amortization shall be
reflected in Earn Out Income. If the Partners elect not to include such
Acquisition in Earn Out Income, such operating results, depreciation and
amortization shall not be reflected in Earn Out Income. If the Partners elect to
include in Earn Out Income any Acquisition the Acquisition Notice for which did
not include a Computation, PHC shall provide the Partners with a supplemental
Acquisition Notice including a Computation as soon as it is available. Promptly
(but no more than 10 business days) after receipt of such supplemental
Acquisition Notice, the Partners may change their election as to whether or not
such Acquisition shall be reflected in Earn Out Income. If PHC or any of its
Affiliates (as such term is defined in Rule 405 promulgated under the Securities
Act) (other than Behavioral Stress Center, Inc., the PC or any of their
Subsidiaries) plans to acquire (either by merger, consolidation, purchase or
otherwise) any psychotherapy practice or provider of management services in
connection therewith located more than 100 miles from New York City that was
introduced to PHC by Mansdorf or Burstein, PHC shall provide the Partners with
an Acquisition Notice with respect thereto in accordance with this Section
2.2.2(b) as if the PC or any of its Subsidiaries were making the acquisition and
the Partners shall have the election rights with respect thereto specified
above.
(c) Any dispute as to the determination of
Earn Out Income shall be settled in the manner provided in Section 9.
C. ALLOCATION OF PURCHASE PRICE
The Purchase Price shall be allocated
among the Specified Assets of the Sellers, and paid to each Seller, as set forth
in Schedule 2.3.
D. CHANGE OF CONTROL; ACCELERATION OF PAYMENT OF PURCHASE PRICE.
In the event of a "change of control" with respect to PHC, the minimum
obligation of Purchasers and PHC to pay the Earn Out Income portion of the
Purchase Price shall be immediately determined and fixed. A "change of control"
with respect to PHC means the occurrence of one or more of the following: (a)
Bruce A. Shear ceases to be the chief executive officer of PHC; (b) Bruce A.
Shear ceases to be the president of PHC; or (c) the sale, exchange, transfer,
assignment or other disposition, whether voluntary or involuntary (but not
including a pledge or grant of another form of security interest) of the assets
constituting the Business as such assets exist on the Closing Date by the
Purchasers. In the event the minimum obligation to pay the Earn Out Income
portion of the Purchase Price is determined pursuant to this section as a result
of a change in control, any Earn Out Income portion of the Purchase Price for
any Fiscal Year not yet ended at the time of such change in control shall be
calculated based on the greater of (i) Earn Out Income for such Fiscal Year as
set forth in Section 2.2.1(c) and (d) and (ii) Earn Out Income for the Fiscal
Year ended immediately prior to such change in control (or, if no full Fiscal
Year has yet ended, an annualized amount based on the partial Fiscal Year ended
on the date of the change of control). E.g., if a change in control occurs nine
months after the Closing Date, the Earn Out Income portion of the Purchase Price
of pursuant to Section 2.2.1(c) and (d) shall be no less than an amount equal to
(.49) multiplied by (7), multiplied by the Earn Out Income of the PC for such
nine month period multiplied by (12) divided by (9). Nothing in this section
affects the time PHC and the Purchasers shall be obligated to pay the Purchase
Price, it being understood that this section merely establishes the minimum
amount of the Earn Out Income portion of such Purchase Price upon the occurrence
of a change in control with respect to PHC.
SET-OFF. In the event the PC receives notice of termination of any
contract identified on Schedule 2.5 during the ninety (90) calendar day period
commencing on the Closing Date, PHC shall be entitled to reduce the principal
amount of each Note on a pro rata basis in accordance with the initial principal
amount of the Notes by an amount equal to $21,429 for each nursing home facility
giving any such notice. Any such reduction to a Note shall be applied to
payments scheduled thereunder in the inverse order of maturity.
NO LIABILITIES. The Purchasers are not assuming any liabilities
or obligations of the Sellers except as explicitly set forth in this
Agreement.
III. . CONDITIONS
A. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE ASSET PURCHASE The
respective obligations of each party to this Agreement are expressly conditioned
upon the following:
(a) the Closing shall be contingent upon
consummation of the transactions contemplated by the agreement and plan
of merger among PHC, BSC, Behavioral Stress Center, Inc. and the
Partners.
(b) except as disclosed herein, there is no
suit, claim, action, proceeding or investigation pending or, to the best
knowledge of the Sellers or PHC, threatened against PHC, either Purchaser
or either Seller before any governmental entity which if adversely
determined, individually or in the aggregate, would have a material
adverse effect on PHC, the Sellers or Purchasers or prohibit, delay or
interfere with the consummation by PHC, the Sellers or Purchasers of the
transactions contemplated by this Agreement. Except as disclosed herein,
neither PHC, the Sellers nor Purchasers are subject to any outstanding
order, writ, injunction or decree which, insofar as can be reasonably
foreseen, individually or in the aggregate, in the future would have a
material adverse effect on PHC, the Sellers or Purchasers or prohibit,
delay or interfere with the consummation by PHC, the Sellers or Purchasers
of the transactions contemplated by this Agreement; and
(c) all waivers, consents, approvals and
actions of any governmental authority, commission, board or other
regulatory body or third party required in connection with this Agreement
and the transactions contemplated hereby shall have been obtained by
Sellers or Purchasers, as the case may be, and (i) shall not have been
reversed, stayed, enjoined, set aside, annulled or suspended, (ii) shall
not be subject to any timely request for stay, petition for
reconsideration or appeal or SUA SPONTE action with comparable effect, and
(iii) the time for filing any such request, petition or appeal or for the
taking of any such SUA SPONTE action shall have expired.
DELIVERY BY SELLER. The obligation of the Purchasers to purchase the
Specified Assets and to pay the Purchase Price are expressly conditioned upon
the fulfillment at or prior to the Closing and the delivery by each Seller and
receipt by PHC at the Closing of the following items:
(a) Sellers shall have performed in all
material respects their obligations contained in this Agreement required
to be performed on or prior to the Closing Date and PHC shall have
received a certificate signed by a duly authorized representative of each
Seller to such effect; and
(b) the representations and warranties of
each Seller set forth in Section 4 of this Agreement shall be true and
correct in all material respects as of the Closing Date as if made as of
such time, except as contemplated or permitted by this Agreement, PHC
shall have received a certificate signed by a duly authorized
representative of each Seller to such effect; and
(c) a bill of sale, in substantially such
form as is annexed hereto as Exhibit B (the "General Assignment and Bill
of Sale"), executed and delivered by each Seller and transferring the
Specified Assets (other than the Contracts) to the Purchasers; and
(d) an assignment and assumption agreement,
in substantially such form as is annexed hereto as Exhibit C (the
"Assignment and Assumption Agreement"), executed and delivered by each
Seller and assigning to the Purchasers all the Contracts and Property
leases; and
(e) copies of all consents necessary for the
assignment of the Contracts, unless the requirement to obtain such
consents has been waived by PHC; and
(f) copies of all Property leases, and any
consents and approvals in connection with the assignment of the
Property leases to BSC; and
(g) Burstein shall execute and deliver the
Employment Agreement in accordance with Section 6.2(c) hereof and
substantially in such form as is annexed hereto as Exhibit D; and
(h) Mansdorf shall execute and deliver the
Consulting Agreement in accordance with Section 6.2(c) hereof and
substantially in such form as is annexed hereto as Exhibit E.
C. DELIVERIES BY THE PURCHASER. Each Seller's obligations to sell the
Specified Assets are expressly conditioned upon the following and upon
fulfillment at or prior to the Closing and the delivery by the Purchasers and
receipt by each Seller at the Closing of the following items:
(a) PHC and Purchasers shall have performed
in all material respects their obligations contained in this Agreement
required to be performed on or prior to the Closing Date and the Sellers
shall have received a certificate signed by a duly authorized
representative of PHC and the Purchasers to such effect; and
(b) the representations and warranties of PHC
and Purchasers set forth in Section 5 of this Agreement shall be true and
correct in all material respects as of the Closing Date as if made as of
such time, except as contemplated or permitted by this Agreement, and the
Sellers shall have received a certificate signed by a duly authorized
representative of PHC and the Purchasers to such effect; and
(c) the Notes and a bank or certified check
or other immediately available funds in the amount of the cash
consideration due at the Closing pursuant to Section 2.2.1; and
(d) the Assignment and Assumption Agreement,
executed and delivered by each Purchaser pursuant to which the Purchasers
assume the obligations of each Seller under all the Contracts and the
Property leases; and
(e) (I) a copy of the Certificate of
Incorporation of each Purchaser certified as to its authenticity by the
Secretary of State of the State of New York, and (II) a certificate of the
Secretary of State of the State of New York certifying the existence of
the PC as a professional corporation in the State of New York; and
(f) a certificate of the Secretary or an
assistant Secretary of each Purchaser certifying (i) that the Certificate
of Incorporation provided pursuant to subsection 3.3(e) is true and
correct, that no action has been taken to amend such Certificate of
Incorporation since the last amendment set forth therein, and that such
Purchaser has not taken action to dissolve, liquidate or wind-up its
businesses, (ii) true and complete copies of the Bylaws of such Purchaser
as in full force and effect on the date thereof, and (iii) a true and
complete copy of the resolutions adopted by the board of directors and
shareholders of such Purchaser relating to the transactions contemplated
hereby, which resolutions are the only resolutions adopted by the board of
directors and shareholders of such Purchaser relating to the transactions
contemplated hereby and which resolutions remain in full force and effect;
and
(h) a copy of the license to practice
medicine or psychology, as the case may be, in the State of New York and a
copy of Federal Drug Enforcement Agency ("DEA") registration for each
shareholder and/or employee of the PC and DEA licensure; and
(i) the PC shall have offered employment to
Burstein in accordance with Section 6.2(c) hereof, and in accordance with
the terms of the Employment Agreement, substantially in such form as is
annexed hereto as Exhibit D; and
(j) the PC shall have offered a
consulting arrangement to Mansdorf in accordance with Section 6.2(c)
hereof, and in accordance with the terms of the Consulting Agreement,
substantially in such form as is annexed hereto as Exhibit E.
D. ACCESS TO PATIENT FILES. At the Closing, the custody of all medical
records of patients of each Seller shall be transferred to the PC, which shall
hold such records in confidence and utilize the same only for its appropriate
purposes or as may be necessary to identify such records for forwarding to
another physician at the written direction of a patient. Each Seller shall be
authorized to have access to such records, or a copy thereof, upon request.
OTHER AGREEMENTS. At the Closing, the parties shall execute, acknowledge
and deliver such other instruments and documents as may be reasonably necessary
or appropriate to carry out the transactions contemplated by this Agreement.
SV. . REPRESENTATIONS AND WARRANTIES OF SELLER
The Sellers, jointly and severally,
hereby represent and warrant to the Purchasers as of the date hereof as
follows:
DUE ORGANIZATION. Clinical Associates represents that it is a
partnership which is duly organized and validly existing and in good standing
under the laws of the State of New York, and has full power and authority to
conduct its business, and operate its assets including its Specified Assets.
Mansdorf represents that he is the sole proprietor of Clinical Diagnostics and
that he has full power and authority to conduct the business of Clinical
Diagnostics and operate its assets, including its Specified Assets.
AUTHORITY. Each Seller has full legal right, power and authority,
without the consent of any other person, to execute and deliver this Agreement,
and all other agreements being delivered in connection herewith (the "Ancillary
Agreements"), and to carry out the transactions contemplated hereby and thereby,
except as noted in Schedule 4.2. All acts or proceedings required to be taken by
each Seller to authorize the execution, delivery and performance of this
Agreement and all transactions contemplated hereby including, without
limitation, any required partnership or sole proprietor approval, have been duly
and properly taken.
APPROVALS. This Agreement and the transactions contemplated hereby
have been approved and adopted by the requisite vote of the partners or the sole
proprietor of each Seller, as the case may be.
D. EXECUTION, DELIVERY AND PERFORMANCE . This Agreement, the Ancillary
Agreements, and the documents executed and delivered by each Seller pursuant
hereto have been duly executed and delivered and constitute lawful, valid and
legally binding obligations of such Seller, enforceable against such Seller in
accordance with their respective terms, except as the same may be limited by
bankruptcy, insolvency and other laws affecting creditors' rights generally and
by general equity principles. None of the execution, delivery or performance of
this Agreement, the Ancillary Agreements and the consummation of the
transactions contemplated hereby or thereby by such Seller will, with or without
the giving of notice or the passage of time, or both, result in the creation of
any lien, charge or encumbrance of any kind or the termination or acceleration
of any indebtedness or other obligation of such Seller. The execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated hereby is not prohibited by, do not violate or conflict with any
provision of, and do not constitute a default under or a breach of (A) the
Certificate for Partners of Clinical Associates, (B) any note, bond, indenture,
contract, agreement, permit, license or other instrument to which either Seller
or its assets is bound, (C) any order, writ, injunction, decree or judgment of
any court or governmental agency, or (D) any law, rule or regulation applicable
to either Seller, except, in each case, for such liens, charges, encumbrances,
violations, conflicts or defaults the occurrence of which would not have a
material adverse effect on the business or results of operations or financial
condition of the Sellers. No approval, authorization, registration, consent,
order or other action of or filing with any person, including any court,
administrative agency or other governmental authority, is required for the
execution and delivery by either Seller of this Agreement or the performance of
its obligations hereunder or the consummation by such Seller of the transactions
contemplated hereby, except for such approvals, authorizations, registrations,
consents, orders, actions or filings the failure of which to obtain or make
would not have a material adverse effect on the business or results of
operations or financial condition of such Seller.
TITLE TO ASSETS. The Sellers are the sole and exclusive legal and
equitable owners of all right, title and interest in and have good and
marketable title to all of the Specified Assets. Except as set forth in Schedule
4.5, none of the Specified Assets which Sellers purport to own are subject to
(A) any title defect or objection; (B) any contract of lease, license or sale;
(C) any security interest, mortgage, pledge, lien, charge or encumbrance of any
kind or character, direct or indirect, whether accrued, absolute, contingent or
otherwise; (D) any royalty or commission arrangement; or (e) any claim, covenant
or restriction. The Specified Assets, taken as a whole, are in good operating
condition and repair in all material respects (reasonable wear and tear
excepted) and are suitable for the purposes for which they are presently being
used. EXCEPT FOR THE SPECIFIC REPRESENTATIONS AND WARRANTIES SET FORTH HEREIN,
THE SPECIFIED ASSETS ARE BEING SOLD "AS IS WHERE IS" WITH NO WARRANTIES AS TO
CONDITION OR SUFFICIENCY, AND ALL OTHER WARRANTIES EXPRESS OR IMPLIED ARE HEREBY
DISCLAIMED INCLUDING ANY WARRANTIES OF MERCHANTABILITY, SUITABILITY OR FITNESS
FOR A PARTICULAR PURPOSE.
F. REAL PROPERTY AND REAL ESTATE LEASES. The Sellers have delivered to PHC
accurate, correct and complete copies of each Property lease. At the Closing,
the Sellers shall deliver to PHC any consents or approvals of any parties
required in connection with the assignment of the Property leases, except as
noted on Schedule 4.6. Each Property lease is in full force and effect and, to
the knowledge of the Sellers, there exists no default or event, occurrence,
condition or act which, with the giving of notice, the lapse of time or the
happening of any further event or condition, would become a default under such
lease.
EMPLOYEE MATTERS.
(a) CONTRACTS. Schedule 4.7(a) sets
forth a true, correct and complete list and summary description of all
agreements, arrangements or understandings, written or oral, with employees of
each Seller regarding services to be rendered, terms and conditions of
employment, and compensation (the "Employment Contracts"), each of which will be
terminated at or prior to Closing except as noted on Schedule 4.7.
(b) COMPENSATION. Schedule 4.7(b) sets
forth a true, correct and complete list of all employees of each Seller,
including name, title or position, the present annual compensation (including
bonuses, commissions, vacation, sick leave and deferred compensation), years of
service and any interests in any incentive compensation plan.
(c) DISPUTES. There are no
controversies pending or, to the knowledge of the Sellers, threatened involving
any employee or group of employees, except individual grievances under any
collective bargaining agreement which, in the aggregate, are not material.
Neither Seller has not suffered or sustained any work stoppage and no such work
stoppage is, to the knowledge of such Seller, threatened. No union organizing or
election activities involving any nonunion employees of either Seller are in
progress or, to the knowledge of such Seller, threatened. Neither Seller is
obligated under any agreement to recognize or bargain with any labor or employee
organization or union on behalf of any employees.
LICENSES AND PERMITS. Schedule 4.8 contains a true, correct and
complete list and summary description of each license, permit, certificate,
approval, exemption, franchise, registration, variance, accreditation or
authorization issued to the Sellers and assigned to the Purchasers
(collectively, the "Licenses and Permits"). All such Licenses and Permits remain
in full force and effect, and there are no notices relating to the withdrawal of
any such approval or requiring any modification of a product in order to
preserve any such approval. The Licenses and Permits are valid and in full force
and effect and there are not pending, or, to the knowledge of the Sellers,
threatened, any proceedings which could result in the termination, revocation,
limitation or impairment of any of the Licenses and Permits. Each Seller has all
licenses, permits, certificates, approvals, franchises, registrations,
accreditation and other authorizations as are necessary or appropriate in order
to enable it to own and conduct its business and, except as set forth in
Schedule 4.8, to own, occupy and lease its real property. Unless otherwise
specified in Schedule 4.8, all Licenses and Permits are freely assignable to the
Purchasers. No violations have been recorded in respect of any Licenses and
Permits, and the Sellers know of no meritorious basis therefor.
MATERIAL CONTRACTS. All agreements, commitments, instruments and
leases related to the Business to which either Seller is a party or is bound, or
by which any of the Specified Assets of the Business are subject or bound and
which Purchasers are assuming (the "Material Contracts") are listed on Schedule
4.9 hereto. All Material Contracts are valid, binding and enforceable in
accordance with their terms and are in full force and effect and to each
Seller's knowledge, none of the parties to any Material Contract is in breach of
any provision of, violation of, or in default under the terms of any such
Material Contract. No event has occurred which with notice or passage of time or
both would result in a breach of any provision of, or default under, the terms
of any Material Contract. At the Closing, the Sellers shall deliver to PHC any
consents or approvals of any parties required in connection with the assignment
of the Material Contracts, except as noted on Schedule 4.9.
LEGAL PROCEEDINGS. Except as set forth in Schedule 4.10, neither
Seller is engaged in or a party to or, to the knowledge of such Seller,
threatened with any action, suit, proceeding, complaint, charge, hearing,
investigation or arbitration or other method of settling disputes or
disagreements; and, upon due inquiry, such Seller does not know of, anticipate
or have notice of any reasonable basis for any such action. Neither Seller has
received notice of any investigation threatened or contemplated by any foreign,
federal, state or local governmental or regulatory authority, including those
involving the safety of products, the working conditions of employees, the
Seller's employment practices or policies, or compliance with environmental
regulations. Neither the Sellers, nor the Business nor any of the Specified
Assets is subject to any judgment, order, writ, injunction, stipulation or
decree of any court or any governmental agency or any arbitrator.
CONDUCT OF BUSINESS. Except as set forth on Schedule 4.11, since
December 31, 1995, the Sellers have:
(a) used their best efforts to promote
the Business, and to conduct the Business only in the ordinary course, and have
used their best efforts to preserve Business, including without limitation (i)
the servicing of all customer needs, (ii) the maintenance of customers',
suppliers' and employees' goodwill and (iii) the maintenance of all real estate
used by the Business including all maintenance, repair and replacements which
are required in order for the continued operation of Business;
(b) not sold or otherwise disposed of
any of their material fixed assets or equipment, except for replacements and
dispositions in the ordinary course; and
(c) not suffered any extraordinary loss.
4.12 COMPLIANCE WITH APPLICABLE LAWS. Except as set forth on Schedule 4.12,
the Sellers are not in violation of any applicable law, regulation, ordinance,
decree, judgment, order or requirement relating to the Business, including,
without limitation, any law, regulation, ordinance, decree, order or requirement
relating to zoning, employment, occupational safety or public health matters,
the failure with which to comply would have a material adverse effect on the
Business. Without limitation of the foregoing, the Sellers have not taken or
omitted to take any action, and no situation or condition has occurred or exists
prior to or on the Closing Date, in violation or noncompliance with any statute,
law, regulation, directive or permit requirement promulgated or adopted by any
governmental authority (whether federal, state or local) or under common law
with respect to health or occupational safety, including, but not limited to,
the Occupational Safety and Health Act and regulations and publications
promulgated pursuant to such statute, as amended from time to time until the
Closing Date.
INSURANCE. All insurance policies and arrangements of the Sellers are set forth
on Schedule 4.13. Said insurance is consistent with that maintained by the
Business in the past. All such insurance is in force and the Sellers have not
received notice of cancellation of, or of an intent to cancel, any of their
policies of insurance. No claims are pending under such insurance coverage.
4.14 ABSENCE OF CERTAIN CHANGES 4.14
ABSENCE OF CERTAIN CHANGES. Since December 31, 1995, there has been no
material adverse change in the Business.
V. REPRESENTATIONS AND WARRANTIES OF PURCHASERS AND PHC
The Purchasers and PHC, jointly and severally, hereby represent and warrant
to the Sellers as of the date hereof as follows:
DUE ORGANIZATION. The PC is a professional corporation duly
organized and validly existing under the laws of the State of New York, with
full power and authority and all requisite licenses, permits and franchises to
own, lease and operate its assets and to carry on the business in which it is
engaged. BSC is a business corporation duly organized and validly existing under
the laws of the State of New York, with full power and authority and all
requisite licenses, permits and franchises to own, lease and operate its assets
and to carry on the business in which it is engaged. PHC has delivered to the
Sellers a true, correct and complete copy of the Certificate of Incorporation
and Bylaws of the PC and BSC.
AUTHORITY. Each of PHC and the Purchasers has full right, power and
authority, without the consent of any other person, to execute and deliver this
Agreement, and the Ancillary Agreements, and to carry out the transactions
contemplated hereby and thereby. All corporate and other acts or proceedings
required to be taken by each of PHC and the Purchasers to authorize the
execution, delivery and performance of this Agreement and all transactions
contemplated hereby have been duly and properly taken.
C. BOARD AND SHAREHOLDER APPROVAL BOARD AND
SHAREHOLDER BOARD AND SHAREHOLDER APPROVAL. This Agreement, the Ancillary
Agreements and the transactions contemplated thereby have been approved by the
requisite vote of the board of directors and the shareholders of Purchasers and
the board of directors of PHC.
D. PAYMENT OF PURCHASE PRICE. The Notes, when delivered, shall be valid and
duly executed and shall constitute binding obligations of PHC in accordance with
the terms thereof.
LICENSURE. Shareholders and employees of the PC are duly
registered and licensed, and in good standing to practice medicine in the
State of New York.
VALIDITY. This Agreement has been, and the documents to be delivered
at Closing will be, duly executed and delivered by PHC and the Purchasers and
constitute lawful, valid and legally binding obligations of PHC and the
Purchasers, as the case may be, enforceable in accordance with their respective
terms, except as the same may be limited by bankruptcy, insolvency and other
laws affecting creditors' rights generally and by general equity principles.
None of the execution, delivery or performance of this Agreement and the
consummation of the transactions contemplated hereby will, with or without the
giving of notice or the passage of time, or both, result in the creation of any
lien, charge or encumbrance or the acceleration of any indebtedness or other
obligation of PHC or the Purchasers and are not prohibited by, do not violate or
conflict with any provision of, and do not result in a default under or a breach
of (A) the Certificate of Incorporation or Bylaws of PHC or the Purchasers, (B)
any note, bond, indenture, contract, agreement, permit, license or other
instrument to which PHC or either Purchaser is a party or by which either of
them is bound, (C) any order, writ, injunction, decree or judgment of any court
or governmental agency, or (D) any law, rule or regulation applicable to PHC or
the Purchasers, except, in each case, for such liens, charges, encumbrances,
violations, conflicts or defaults the creation or occurrence of which would not
have a material adverse effect on the consolidated business or results of
operations or financial condition of PHC. No approval, authorization, consent or
other order or action of or filing with any person, including any court,
administrative agency or other governmental authority is required for the
execution and delivery by PHC or the Purchasers of this Agreement or their
obligations hereunder or the consummation by them of the transactions
contemplated hereby, except for such approvals, authorizations, registrations,
consents, orders, actions or filings the failure of which to obtain or make
would not have a material adverse effect on the consolidated business or results
of operations or financial condition of PHC.
LEGAL PROCEEDINGS. Neither PHC nor the Purchasers are engaged in or
a party to or, to the knowledge of PHC and the Purchasers, threatened with any
action, suit or other legal proceeding involving the Specified Assets or
affecting their ability to engage in the transactions contemplated hereby.
H. SEC REPORTS AND FINANCIAL STATEMENTS . PHC has filed with the Securities
and Exchange Commission (the "SEC"), and has heretofore made available to the
Company, true and complete copies of all forms, reports, schedules, statements
and other documents required to be filed by it under the Securities Exchange Act
of 1934, as amended (the "Exchange Act") or the Securities Act since its initial
public offering (as such documents have been amended since the time of such
filing, collectively, the "PHC SEC Documents"). The PHC SEC Documents, including
without limitation, any financial statements or schedules included therein, at
the time filed, (a) did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading and (b) complied in all material respects with
the applicable requirements of the Exchange Act and the Securities Act, as the
case may be, and the applicable rules and regulations of the SEC thereunder,
except, in each case, to the extent any PHC SEC Document has been amended prior
hereto by a subsequent PHC SEC Document delivered to the Company. The financial
statements of PHC included in the PHC SEC Documents comply as to form in all
material respects with applicable accounting requirements and with the published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto or, in the case of the unaudited statements, as permitted by Form 10-QSB
of the SEC), and fairly present (subject, in the case of the unaudited
statements, to normal year-end audit adjustments) the consolidated financial
position of PHC and its consolidated Subsidiaries as at the dates thereof and
the consolidated results of their operations and cash flows for the periods then
ended.
HART-SCOTT-RODINO. With the meaning of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (15 U.S.C. ss.18a), Bruce A. Shear (including all
entities the assets or sales of which are attributable to Mr. Shear for purposes
of such Act) has total assets of less than $100,000,000 and total annual net
sales of less than $100,000,000, and therefore no party to this Agreement is
required to file notification pursuant to such Act in connection with the
transactions contemplated by this Agreement.
VI. . COVENANTS
PATIENT RECORDS. The PC will retain all patient records purchased
pursuant to the terms hereof for a period of time equal to the longer of (I) the
period of time required by applicable law and (II) ten (10) years from the last
day on which such patient was examined by any employee of either Seller. If the
PC no longer desires to retain such records, the PC may deliver such records to
the Sellers or any successor of the Sellers to be retained by the Sellers or
such successor as required by applicable law. Delivery of such records to the
Sellers or such successor will satisfy the obligations of the PC under this
Section 6.1.
B. EMPLOYMENT WITH THE BUSINESS
(a) Prior to the Closing, the PC will offer employment, without term
certain, to the employees of each Seller listed on Schedule 6.2, and at the same
or greater cash rate of compensation as that provided by Sellers immediately
before the Closing Date, without requiring relocation of employees. The PC has
the right to terminate any employee in accordance with any agreement entered
into by such employee and the PC from and after the Closing and applicable law.
(b) The Sellers shall terminate all the
employees of the Sellers (the "Terminated Employees"). The Sellers shall use
commercially reasonable efforts to encourage the Terminated Employees to accept
and retain employment with the PC.
(c) Prior to the Closing Date, the PC
shall offer a consulting arrangement to Mansdorf pursuant to the terms of the
Consulting Agreement, substantially in such form as is annexed hereto as Exhibit
E. Prior to the Closing Date, the PC shall offer employment to Burstein pursuant
to the terms of the Employment Agreement, substantially in such form as is
annexed hereto as Exhibit D.
C. COLLECTION OF RECEIVABLES. The PC agrees to assist Sellers in collecting
through commercially reasonable methods accounts receivable arising from the
Sellers' operation of the Business prior to the Closing Date. Such assistance
shall be at no charge to the Sellers and shall include no more than the
following number of hours of those continuing employees of the Business
previously engaged in collection activities: (i) unlimited hours during the 30-
day period after the Closing Date; (ii) 20 hours during the next 30-day period;
(iii) 15 hours during the next 30-day period; and (iv) 10 hours during each
successive 30-day period thereafter until the 180th day after the Closing Date.
The PC shall not be required to initiate any claim, suit or proceeding to
collect such accounts or to take any action which materially interferes with the
business relationship of the obligor of any such account.
D. CONDUCT OF BUSINESS BY THE PURCHASERS . Purchasers shall operate their
business in a commercially reasonable manner so as to preserve the Business, and
to preserve the goodwill of its customers, suppliers and others having dealings
with the Business to the end that the goodwill and ongoing performance of the
Business shall not be impaired in any material respect after the Closing Date.
Neither PHC, its Subsidiaries nor the Purchasers shall, directly or indirectly,
engage in any activity that knowingly would impact negatively on the Business
and the right of the Partners to receive the Earn Out Income portion of the
Purchase Price. The provisions of this Section 6.4 shall survive until any and
all obligations of PHC and the PC to pay the Purchase Price, including that
based on Earn Out Income, terminate.
E. NO SOLICITATION BY PHC AND THE PURCHASERS . Each party hereto covenants
that neither it nor any of its Affiliates shall, directly or indirectly, induce,
influence or attempt to induce or influence any person, firm or corporation to
terminate their patronage with the Business, or in any way attempt to divert or
influence patients from professionals or professional entities served by the
Business. The provisions of this Section 6.5 shall survive until the fourth
anniversary of the date hereof.
F. CERTAIN OPERATIONAL MATTERS CERTAIN OPERATIONAL
MATTERS CERTAIN OPERATIONAL MATTERS. Except as noted below, the
following actions shall require the written approval of Mansdorf and
Burstein:
(a) engagement by either Purchaser or any Subsidiary
thereof in any trade, business or activity other than providing
psychotherapy services or the management of such services and any
other services provided by the Sellers as of the Closing; and
(b) the acquisition, either by merger, consolidation,
purchase or otherwise, by PHC or any of its Affiliates of any
psychotherapy practice or provider of management services thereto
located within 100 miles of New York City unless Mansdorf and
Burstein shall have received an Acquisition Notice with respect
thereto in accordance with Section 2.2.2(b) as if the PC or any of
its Subsidiaries were making the acquisition; and
(c) transactions between the Purchasers or any of their
Subsidiaries, on the one hand, and PHC or its Affiliates or any of
their Officers or Directors (or any Associates of any such person)
(as such terms are defined in Rule 405 promulgated under the
Securities Act), on the other hand, (i) except no approval is
required to the extent the only obligation of the Purchasers and
their Subsidiaries is to pay management or similar fees not
reflected in Earn Out Income, (ii) except no approval is required
for transactions where any expenses arising therefrom represent
arm's-length arrangements and (iii) except no approval is required
for transactions that result in no expense reflected in Earn Out
Income; and
(d) the guarantee by the Purchasers or any of their
Subsidiaries of the indebtedness of others, except no approval is
required where any expenses of the Purchasers or any of their
Subsidiaries arising out of such guarantee are disregarded in
calculating Earn Out Income; and
(e) the borrowing of money or the assumption of the
indebtedness of others (except for working capital or in connection
with Acquisitions for which Mansdorf and Burstein shall have
received an Acquisition Notice in accordance with Section 2.2.2(b))
or the lending of money by the Purchasers or any of their
Subsidiaries, except no approval is required where any expenses of
the Purchasers or any of their Subsidiaries arising out of such
borrowing, assumption or lending are disregarded in calculating Earn
Out Income; and
(f) contracts or obligations other than in the ordinary
course of business binding on the Purchasers or any of their
Subsidiaries (except for Acquisitions for which Mansdorf and
Burstein shall have received an Acquisition Notice in accordance
with Section 2.2.2(b)), except no approval is required where
expenses of the Purchasers or any of their Subsidiaries arising out
of such contracts or obligations are disregarded in calculating Earn
Out Income; and
(g) increase in number of, or compensation payable to,
officers, directors or employees of the Purchasers or any of their
Subsidiaries, except no approval is required for hiring or retention
of any additional officer or employee, or any additional
compensation, where any expenses arising therefrom represent an
arm's-length arrangement; and
(h) capital expenditures by the Purchasers and their
Subsidiaries (except with respect to Acquisitions for which Mansdorf
and Burstein shall have received an Acquisition Notice in accordance
with Section 2.2.2(b)), (i) except no approval is required for
capital expenditures reasonably necessary for the business of the
Purchasers and their Subsidiaries to the extent aggregate
depreciation and amortization resulting from such capital
expenditures do not exceed $37,500 in any Fiscal Year, and (ii)
except no approval is required where any depreciation, amortization
or other expenses of the Purchasers or any of their Subsidiaries
arising out of such expenditures are disregarded in calculating Earn
Out Income.
VII. COVENANT NOT TO COMPETE
COVENANTS. In consideration of the execution and delivery of this
Agreement and in recognition that PHC was induced to enter into this Agreement
based on the covenants and assurances made by the Partners, each Partner
covenants and agrees that, for a period of four (4) years after the Closing, he
will not (i) directly or indirectly (whether as a sole proprietor, partner,
stockholder, director, officer, employee, consultant, independent contractor, or
in any capacity as principal or agent or in any other individual or
representative capacity) engage in Competition (as such term is defined below)
with the PC or be interested in or associated with or render services to or sell
any ideas, inventions or products to any party in Competition with the PC or
(ii) make known or disclose the name or address of (x) any of the clients,
customers or patrons of the PC or (y) any persons having a contractual
relationship with the PC (except where the facts of such relationships are
generally available to or known by the public other than as a result of a
disclosure by such Partner) or (iii) call upon, solicit, divert or take away, or
attempt to solicit, divert or take away, any such clients, customers or patrons
or employees of the PC or any persons having a contractual relationship with the
PC or (iv) request or advise any present or future client, customer or patron of
the PC or any persons having a contractual relationship with the PC to withdraw,
curtail or cancel their business relationship with the PC. For purposes hereof,
the term "Competition" shall mean the providing of (i) psychotherapy services to
individuals either individually or in group settings in out-patient clinics,
nursing homes or hospitals, or (ii) management services in connection therewith,
in any case, within a radius of twenty-five (25) miles from any location in
which psychotherapy services or management services in connection therewith are
then being provided by the PC; provided, however, that the Partners may engage
in private practice and may provide such services to the Hempstead Hospital,
administrative divisions of the State of New York, Upstate Clinical Associates
and, with respect only to administrative and management services provided to
governments or municipalities ("GMC Contracts"), BSC Health Management
("BSCHM"). In the event Upstate Clinical Associates plans to render
psychotherapy services at a location more than twenty five (25) miles from
Monroe County, New York, it shall provide PHC with notice of such location. If
the PC or any of its Subsidiaries engages in such services or provides
management services in connection therewith within twenty five (25) miles of
such location during the sixty (60) days following the date of such notice, then
Upstate Clinical Associates shall discontinue such plans for so long as PHC is
so engaged. BSCHM will obtain clinical services from PHC or from an authorized
provider associated with PHC under the GMC Contracts except (A) in the "Capital
District" (as defined in the GMC Contracts), (B) to the extent BSCHM's partner
or joint venturer as of the date hereof (which is a national behavioral health
care provider identified to PHC) or the governmental entity withholds its
consent and/or (C) the extent prices and services proposed by the PC or an
authorized provider associated with PHC in connection with the GMC Contracts are
not competitive. For purposes hereof, "Competition" shall not preclude the
ownership of less than ten (10) percent of the common stock, or other class of
voting stock r any percentage of non-voting securities, of any publicly traded
company.
ANCILLARY OBLIGATIONS. This covenant shall be construed as an
obligation ancillary to the other provisions of this Agreement and the existence
of any claim or cause of action by the Partners, or any one of them, whether
predicated on a breach of this Agreement or of the Ancillary Agreements or
otherwise, shall not constitute a defense to the enforcement by PHC, Purchasers
or any party to the Ancillary Agreements of this covenant.
ENFORCEMENT. Each Partner agrees that the remedies at law for any
breach of the covenants contained in this Section 7 will be inadequate and that
PHC or the Purchasers shall be entitled to appropriate equitable remedies
including injunctive relief in any action or proceeding brought to prevent the
taking or continuation of any action which would constitute or result in a
breach of such covenant. Such remedies shall not be exclusive and shall be in
addition to any and all remedies which may be available, directly or indirectly,
without limiting the recovery of any incidental, consequential and/or punitive
damages. Each Partner further agrees that if any restriction in this Section 7
is held by any court to be unenforceable or unreasonable, a lesser restriction
will be enforced in its place and the remaining restrictions will be enforced
independently of each other. The attorneys' fees, court costs and other expenses
incurred by the prevailing party in any proceeding to enforce any rights under
any provision of this Section 7, or to defend any such attempted enforcement,
shall be paid by the non-prevailing party.
SUCCESSORS AND ASSIGNS. The rights of PHC and the Purchasers under
this covenant shall inure to the benefit of and shall be binding upon their
successors and assigns. In the event of any such assignment, any and all
references to PHC and the Purchasers in this Section 7 shall be deemed to mean
and include such assignee or assignees.
VIII. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
SURVIVAL. All covenants and agreements of the parties contained in
this Agreement or expressly incorporated herein by reference shall survive the
Closing and continue in full force and effect following the Closing. All
representations and warranties of the parties contained in this Agreement or
expressly incorporated herein by reference shall be deemed to be made as of the
date hereof and as of the Closing Date and shall survive the Closing hereunder
and any investigation made by or on behalf of any party hereto for a period of
three (3) years.
B. STATEMENTS AS REPRESENTATIONS . All statements contained herein or in
any Exhibit, agreement, certificate or instrument executed and delivered
pursuant to this Agreement shall be deemed representations and warranties within
the meaning of this Section 8.
C. CLAIMS AGAINST PROMISSORY OBLIGATIONS AND EARN OUT PAYMENTS
(a) RIGHT OF SET-OFF. Subject to the provisions and conditions of this
Section 8, any and all amounts to be paid to the Sellers pursuant to Section 2.2
of this Agreement shall be reduced for any losses sustained or liabilities,
obligations, expenses, claims, liens, judgments, damages or other amounts
asserted by any third party and any and all reasonable costs or expenses of
defending against any of the foregoing including costs of settlements (herein
collectively, "Damages") asserted against, imposed upon or incurred by PHC or
Purchasers or any other Subsidiary of any of them, or any of their respective
directors, officers or employees (collectively, the "Indemnitees," and each
individually, an "Indemnitee") resulting from, relating to or arising out of:
(i) any breach of any representation, warranty or agreement of Sellers
contained in or made pursuant to this Agreement, the Ancillary Agreements or any
agreement, contract or instrument required to be executed by Sellers pursuant to
this Agreement or the Ancillary Agreements or the transactions contemplated
thereby; or
(ii) any act or omission of Sellers which occurred,
existed or failed to occur or exist before the Closing (including,
without limitation, such acts or omissions as are described or
enumerated in this Agreement); or
(iii) any event, state of facts, circumstances or
conditions occurring or existing (or not occurring or not existing
if the absence of such fact, circumstances or condition forms a
basis for Damages) relating to the property, business, operations or
activities of Sellers with respect to the Business performed before
the Closing (including, without limitation, such events, state of
facts, circumstances or conditions described in this Agreement); or
(iv) any liability of or relating to Sellers, whether
accrued, absolute, contingent or otherwise, arising out of the
Business before the Closing Date whether first asserted before or
after the Closing Date (or whether known by or disclosed to PHC or
the Purchasers);
PROVIDED, HOWEVER, that no indemnity shall be made
for any portion of any liability arising in the ordinary course of business of
either Seller prior to the Closing Date for which PHC or the Purchasers or any
of their successors or assignees receives or is entitled to receive a comparable
benefit at any time subsequent to the Closing Date and PROVIDED FURTHER that no
indemnity shall be made for any portion of any liability arising in the ordinary
course of business of either Seller from contracts and agreements identified in
this Agreement (including the schedules hereto) for which either Purchaser or
any of their successors and assigns receives or is entitled to receive any
benefit at any time subsequent to the Closing Date. The matters and events set
forth in subparagraphs (a)(i) through (iv) above, subject to the foregoing
proviso, are referred to herein as the "Buyer Indemnification Events."
(b) PROCEDURE IN EVENT OF CLAIMED
SET-OFF. If PHC or the Purchasers asserts a claim for set-off pursuant to
Section 8.3(a), it promptly shall provide notice to the Partners in accordance
with the procedures set forth in Section 8.6 hereof setting forth the nature of
the claim for set-off and the amount thereof. Within thirty (30) days after such
notice, the Partners (by a written notice to be signed by both of them) either
shall approve the claim for set-off and the amount thereof ("Approved Claim") or
shall disapprove such claim for set-off or the amount thereof ("Rejected
Claim"), or both. If the Partners fail to approve or disapprove a claim for
set-off or the amount thereof within the requisite period, such claim for
set-off shall be deemed to be an Approved Claim. PHC and the Purchasers shall be
entitled to set-off the amount of any Approved Claims. PHC or the Purchasers and
the Partners shall resolve any disagreements with respect to any Rejected Claim
in accordance with the dispute resolution procedures set forth in Section 9. PHC
or the Purchasers shall be entitled to withhold the stated amount of the
Rejected Claims pending resolution of the Rejected Claim. If, pursuant to the
procedures set forth in Section 9, it ultimately is determined that any further
portion of the amount withheld is then due to the Partners or either one of
them, PHC or the Purchasers immediately shall pay to the Partner or either of
one of them, as the case may be, such additional portion of the amount withheld.
D. INDEMNIFICATION BY THE SELLERS. Y . In addition to PHC's or the
Purchasers' right to deduct the aggregate amount of Damages pursuant to Section
8.3, subject to the provisions and conditions of this Section 8, Sellers (the
"Indemnifying Party") shall indemnify, defend and hold harmless each of PHC or
the Purchasers and any of their Subsidiaries, and any of their respective
directors, officers or employees (collectively, "Indemnitees," and each
individually, an "Indemnitee") from and against all Damages (but only to the
extent PHC or the Purchasers has not previously set-off or reduced the amounts
withheld pursuant to Section 8.3 above by the amount of such Damages) asserted
against, imposed upon or incurred by the Indemnitees or any Indemnitee,
resulting from, relating to or arising out of a Buyer Indemnification Event.
E. INDEMNIFICATION BY PHC AND THE PURCHASERS . Subject to the provisions
and conditions of this Section 8, PHC and the Purchasers (the "Indemnifying
Party") shall, jointly and severally, indemnify, defend and hold harmless each
Seller and any of its Subsidiaries, and any of their respective partners and
employees (collectively, "Indemnitees," and each individually, an "Indemnitee")
from and against all Damages asserted against, imposed upon or incurred by the
Indemnitees or any Indemnitee, resulting from, relating to or arising out of:
(i) any breach of any representation, warranty or agreement of PHC or the
Purchasers contained in or made pursuant to this Agreement, the Ancillary
Agreements or any agreement, contract or instrument required to be executed by
PHC or the Purchasers pursuant to this Agreement, the Ancillary Agreements or
the transactions contemplated thereby; (ii) any obligation of Sellers expressly
assumed by the Purchasers pursuant to this Agreement or the Assignment and
Assumption Agreement; and (iii) any operations of the Business after the Closing
Date.
F. NOTICE AND DEFENSE OF INDEMNIFICATION CLAIMS
(a) NOTICE OF CLAIMS. If either (i) a claim is made or brought by a third
party against any Indemnitee (as defined in Section 8.3, 8.4 or 8.5 hereof) and
if such Indemnitee reasonably believes that such claim, if successful, would
give rise to a right of set-off or indemnification under this Section 8 against
an Indemnifying Party, or (ii) an Indemnitee becomes aware of facts or
circumstances establishing that an Indemnitee has experienced or incurred
Damages or may experience or incur Damages which will give rise to a right of
set-off or indemnification under this Section 8, then such Indemnitee shall give
written notice to the Indemnifying Party of such claim for indemnification
("Indemnification Notice") as soon as reasonably practicable but in no event
more than thirty (30) days after the Indemnitee has received written notice or
actual knowledge of such claim or such facts or circumstances (provided that
failure to give an Indemnification Notice shall not limit the Indemnifying
Party's indemnification obligation hereunder except to the extent that the delay
in giving, or failure to give, the Indemnification Notice adversely affects the
Indemnifying Party's ability to defend against a claim described in clause (i)
above). To the extent reasonably practicable, the Indemnification Notice will
describe the nature, basis and amount of the indemnification claim and include
any relevant supporting documentation. If the Indemnifying Party does not object
within thirty (30) days after receipt of the Indemnification Notice to the
propriety of (i) the indemnification claim described on the Indemnification
Notice as being subject to set-off or indemnification pursuant to Section 8.3,
8.4 and (or) 8.5 and (ii) the amount of Damages specified in the Indemnification
Notice, the indemnification claim described in the Indemnification Notice shall
be deemed to be final and binding upon the Indemnifying Party(ies) (hereinafter,
"Permitted Indemnification Claim"). Any undisputed set-off or indemnification
claim described in the Indemnification Notice shall be deemed to be final and
binding upon the Indemnifying Party(ies) and shall constitute a Permitted
Indemnification Claim. If the Indemnifying Party contests the propriety of a
set-off or indemnification claim described in the Indemnification Notice and/or
the amount of Damages alleged to be associated with such claim, then the
Indemnifying Party shall deliver to the Indemnitee an Indemnification Objection
Notice detailing all specific objections the Indemnitee has with respect to the
indemnification claim described in the Indemnification Notice. If the Indemnity
Party and the Indemnitee are unable to resolve the disputed issues concerning
the set-off or indemnification claim within fifteen (15) business days after the
date the Indemnifying Party received the Indemnification Objection Notice, and
the disputed issues will be resolved pursuant to the dispute resolution
procedures set forth in Section 9 hereof. If any disputed issues ultimately are
resolved by an arbitrator pursuant to Section 9.3, and if the arbitrator's
determination of the disputed issues results in all or any portion of the
indemnification claim properly being subject to set-off or indemnification
pursuant to Section 8.3, 8.4 and (or) 8.5, (i) such claim or portion thereof
shall be final and binding upon the Indemnifying Party(ies) and shall constitute
a Permitted Indemnification Claim, and (ii) the Indemnifying Party(ies) shall
pay to the Indemnitee all Damages associated with any Permitted Indemnification
Claim within ten (10) days after such claim is determined to be a Permitted
Indemnification Claim pursuant thereto. If, however, the disputed issues
ultimately are resolved by the arbitrator and (x) the arbitrator determines that
the claim is not properly subject to set-off or indemnification and (y) PHC or
either Purchaser has withheld payment of any amount, then PHC or such Purchaser
immediately shall pay to the Partners such amount improperly withheld. The
Sellers acknowledge and agree that the right to receive the payments improperly
withheld as described herein shall be their exclusive remedy with respect
thereto.
(b) DEFENSE OF THIRD PARTY CLAIMS. The Indemnitee against whom a third
party claim is made or brought shall give the Indemnifying Party an opportunity
to defend such claim, at the Indemnifying Party's own expense and with counsel
selected by the Indemnifying Party and reasonably satisfactory to the
Indemnitee, provided that such Indemnitee at all times also shall have the right
to participate fully in the defense at its own expense. Failure of an
Indemnifying Party to give the Indemnitee written notice of its election to
defend such claim within thirty (30) days after receipt of notice thereof shall
be deemed a waiver by such Indemnifying Party of its right to defend such claim.
If the Indemnifying Party shall elect not to assume the defense of such claim
(or if Indemnifying Party shall be deemed to have waived its right to defend
such claim), the Indemnitee against whom such claim is made shall have the
right, but not the obligation, to undertake the sole defense of and to
compromise or settle the claim on behalf, for the account and at the risk and
expense of the Indemnifying Party (including without limitation the payment by
the Indemnifying Party of the attorneys' fees of the Indemnitee); provided,
however, that if the Indemnitee undertakes the sole defense of such claim on
behalf, for the account and at the risk and expense of the Indemnifying Party,
it shall defend such claim in good faith and shall apprise the Indemnifying
Party from time to time as the Indemnitee deems appropriate of the progress of
such defense. If one or more of the Indemnifying Parties assumes the defense of
such claim, the obligation of such Indemnifying Party hereunder as to such claim
shall include taking all steps reasonably necessary in the defense or settlement
of such claim. The Indemnifying Party, in the defense of such claim, shall not
consent to the entry of any judgment or enter into any settlement (except with
the written consent of the Indemnitee) which does not include as an
unconditional term thereof the giving by the claimant to the Indemnitee against
who such claim is made of a release from all liability in respect of such claim
(which release shall exclude only any obligations incurred in connection with
such settlement). If the claim is one that cannot by its nature be defended
solely by the Indemnifying Party, then the Indemnitee shall make available, at
the Indemnifying Party's reasonable expense, all information and assistance that
the Indemnifying Party reasonably may request.
G. LIMITATION ON RIGHT OF SET-OFF AND INDEMNIFICATION. ON Notwithstanding
the foregoing provisions of this Section 8, set-off and
indemnity rights for Damages hereunder shall be limited as follows:
(a) No indemnity shall be made for Damages unless an Indemnification Notice
therefor shall have been given not later than three (3) years following the
Closing Date.
(b) No Indemnitee shall have any right of set-off and the Sellers shall not
be obligated to indemnify any Indemnitee for any Damages for which set-off is
allowed or indemnification is required pursuant to this Section 8 unless the
aggregate of all such Damages shall exceed $20,000. PHC, the Purchasers and
other Indemnitees shall be entitled to claim against the Sellers only for
Damages which exceed $20,000.
(c) Sellers shall not be obligated to indemnify the Indemnitees for
Damages, in the aggregate, exceeding $1 million.
IX. . DISPUTE RESOLUTION
NEGOTIATED RESOLUTION. If any dispute arises (i) out of or relating
to this Agreement or any alleged breach thereof, or (ii) with respect to any of
the transactions or events contemplated hereby, the party desiring to resolve
such dispute shall deliver a Dispute Notice to the other parties of such dispute
(herein "Dispute"). If any party delivers a Dispute Notice pursuant to this
Section 9.1, or if any Indemnifying Party delivers to any Indemnitee an
Indemnification Objection Notice pursuant to Section 8, the parties involved in
the Dispute shall meet at least twice within the thirty (30) day period
commencing with the date of the Dispute Notice or the Indemnification Objection
Notice (as the case may be) and in good faith shall attempt to resolve such
Dispute or the Rejected Claim (as the case may be).
MEDIATION. If any Dispute or Rejected Claim is not resolved or
settled by the parties as a result of negotiation pursuant to Section 9.1 above,
the parties shall submit the Dispute or Rejected Claim to non-binding mediation
before a retired judge of either a federal District Court in New York or of a
New York State Court, or some similarly qualified, mutually agreeable
individual. The parties shall bear the costs of such mediation equally.
ARBITRATION. If the Dispute or Rejected Claim is not resolved by
mediation pursuant to Section 9.2 above, or if the parties fail to agree upon a
mediator, within sixty (60) days after the Dispute Notice or Indemnification
Objection Notice (as the case may be), the Dispute or Rejected Claim shall be
settled by arbitration conducted in the City of New York which shall be in
accordance with the rules of the American Arbitration Association then in effect
with respect to commercial disputes. The arbitration of such issues, including
the determination of any amount of damages suffered by any party hereto by
reason of the acts or omissions of any party, shall be final and binding upon
all parties. Except as otherwise set forth in this Agreement, the cost of any
arbitration hereunder, including the cost of the record or transcripts thereof,
if any, administrative fees, and all other fees involved including reasonable
attorneys' fees incurred by the party determined by the arbitrator to be the
prevailing party, shall be paid by the party determined by the arbitrator not to
be the prevailing party, or otherwise allocated in an equitable manner as
determined by the arbitrator. The parties shall instruct the arbitrator to
render its decision no later than sixty (60) days after the submission of the
Dispute or Indemnification Objection Notice.
X. . GUARANTY
PHC hereby unconditionally and absolutely guarantees the performance of any
and all obligations, responsibilities and duties of each Purchaser set forth
herein, including, without limitation, any obligation of each Purchaser to pay
the Purchase Price in the manner set forth herein. To the extent that either
Purchaser fails to perform any of the obligations, responsibilities or duties
required of it, before or after the Closing Date, PHC shall immediately take any
and all actions necessary to perform such action on the Purchaser's behalf.
XI. . TERMINATION
TERMINATION. This Agreement may be terminated at any time prior
to the Closing Date:
(a) by mutual written consent of PHC and Sellers;
(b) by either PHC or Sellers if (i) there
shall have been a material breach of any representation, warranty,
covenant or agreement on the part of the other set forth in this Agreement
which breach shall not have been cured, in the case of a representation or
warranty, prior to the Closing or, in the case of a covenant or agreement,
within five (5) business days following receipt by the breaching party of
notice of such breach, or (ii) any permanent injunction or other order of
a court or other competent authority preventing the consummation of the
transactions shall have become final and non-appealable; or
(c) by either PHC or Sellers if the
transaction shall not have been consummated on or before December 15;
provided however, that the right to terminate this Agreement pursuant to
this Section 11.1(c) shall not be available to any party whose failure to
fulfill any obligation under this Agreement has been the cause of, or
resulted in, the failure of the transaction to have occurred on or before
the aforesaid date.
EFFECT OF TERMINATION. In the event of a termination of this N
Agreement by either PHC or Sellers as provided in Section 11.1, this Agreement
shall forthwith become void and there shall be no liability or obligation on the
part of PHC or Sellers or their respective partners, officers or directors,
except for the second sentence of Section 12.1 which shall survive such
termination. Nothing contained in this Section 11.2 shall relieve any party
hereto from any liability for any breach of this Agreement.
AMENDMENT. This Agreement may be amended by the parties hereto, by
action taken or authorized by their respective partners, sole proprietor or
boards of directors. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto.
EXTENSION; WAIVER. At any time prior to the Closing, the parties
hereto may (i) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (ii) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant thereto and (iii) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party.
XII. . ADDITIONAL AGREEMENTS
ACCESS TO INFORMATION. Upon reasonable notice and subject to
applicable law, each Seller shall afford to the officers, employees,
accountants, counsel and other representatives of PHC and the Purchasers,
access, during normal business hours during the period prior to the Closing
Date, to all its properties, books, contracts, commitments and records and,
during such period, subject to applicable law, each Seller shall furnish
promptly to PHC and the Purchasers all information concerning its business,
properties and personnel as Purchasers may reasonably request. Unless otherwise
required by law, PHC and the Purchasers will hold any such information which is
nonpublic in confidence until such time as such information otherwise becomes
publicly available through no wrongful act of PHC or the Purchasers, and in the
event of termination of this Agreement for any reason PHC and the Purchasers
shall promptly return all nonpublic documents obtained from each Seller, and any
copies made of such documents, to each Seller. Paragraph H of the letter of
agreement between PHC and the Partners dated July 31, 1996, a copy of which is
annexed hereto as Exhibit F, is incorporated by reference herein.
B. LEGAL CONDITIONS TO ASSET PURCHASE . Each of the Purchasers and Sellers
will take all reasonable actions necessary to comply promptly with all legal
requirements which may be imposed on itself with respect to the purchase of
assets in connection with this Agreement, the Ancillary Agreements and the
transactions contemplated hereby and thereby (which actions shall include,
without limitation, furnishing all information in connection with approvals of
or filings with any other governmental entity) and will promptly cooperate with
and furnish information to each other in connection with any such requirements
imposed upon any of them or any of their Subsidiaries in connection herewith or
therewith. Each of the Purchasers and the Sellers will, and will cause its
Subsidiaries to, take all reasonable actions necessary to obtain (and will
cooperate with each other in obtaining) any consent, authorization, order or
approval of, or any exemption by, any governmental entity or other public or
private third party, required to be obtained or made by Purchasers and the
Sellers or any of their Subsidiaries in connection with the purchase of assets,
or the taking of any action contemplated by this Agreement, the Ancillary
Agreements or the transactions contemplated hereby and thereby.
C. NOTIFICATION OF CERTAIN MATTERS (a) Each Seller shall promptly notify
Purchasers of:
(i) any notice of, or other communication relating to, a default or event
which, with notice or lapse of time or both, would become a default, received by
such Seller subsequent to the date of this Agreement, under any material
agreement to which such Seller is a party or to which such Seller or any of its
respective properties or assets may be subject or bound;
(ii) any notice or other communication from any third party alleging that
the consent of such third party is or may be required in connection with the
transactions contemplated by this Agreement;
(iii) any notice or other communication from any governmental entity in
connection with the transactions contemplated hereby;
(iv) any actions, suits, claims, investigations, rule-making initiatives or
proceedings commenced or, to the best of its knowledge, threatened against,
relating to or involving or otherwise affecting such Seller which, if pending on
the date hereof, would have been required to have been disclosed by such Seller
or which relate to the consummation of the asset purchase; and
(v) any event, change or effect having a material adverse effect on such
Seller.
(b) Purchasers shall promptly notify the Sellers of:
(i) any notice or other communication from any third party alleging that
the consent of such third party is or may be required in connection with the
transactions contemplated by this Agreement; or
(ii) any notice or other communication from any governmental entity in
connection with the transactions contemplated hereby.
SUPPLEMENTAL DISCLOSURE. Each Seller shall promptly supplement or
amend the documents or information disclosed herein with respect to any material
matter hereafter arising or discovered which, if existing or known at the date
hereof, would have been required to be disclosed; PROVIDED, HOWEVER, that any
such supplemental or amended disclosure shall not be deemed to have been
disclosed as of the date hereof unless so agreed to in writing by Purchasers in
its sole discretion.
E. ADDITIONAL AGREEMENTS; BEST EFFORTS . Subject to the terms and
conditions of this Agreement, each of the parties hereto agrees to use
reasonable best efforts to take, or cause to be taken, all action and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated by this Agreement and the Ancillary Agreements. In case at any time
after the Closing any further action is necessary or desirable to carry out the
purposes of this Agreement, the proper partners, officers and directors of each
party to this Agreement shall take all such necessary action.
RECORDS RETENTION. Purchasers will retain and maintain, in an
organized and retrievable manner, in accordance with past practice of the
Sellers prior to Closing, all documents and records of the Business pertaining
to the periods before the Closing Date transferred hereunder and shall not
destroy any such records or documents without the consent of Sellers. Purchasers
will retain and maintain all machine-sensible records, such as computer tapes,
disks, diskettes, etc., which are considered books and records within the
meaning of Section 6001 of the Code, in accordance with Internal Revenue Service
Revenue Procedure 91-59. Purchasers will make available such documents and
records, machine-sensible records, computer time, and, at the reasonable expense
of the requesting Seller, reasonable assistance from PHC and Purchaser personnel
as may be reasonably requested by either Seller in order to expeditiously comply
with all pertinent requests from the Internal Revenue Service and state taxing
authorities which relate to periods prior to the Closing Date. In addition to
the foregoing, following the Closing Date, PHC and Purchasers shall grant to
each Seller and its representatives, at such Seller's reasonable request,
reasonable access to and the right to make copies of those records and documents
related to such Seller or the Business or the Specified Assets as may be
reasonably necessary for any activities required to be performed by such Seller
or its designees.
XIII. . GENERAL PROVISIONS
ANNOUNCEMENTS. No announcement of this Agreement or any transaction
contemplated hereby shall be made by any party prior to the Closing without the
written approval of the other parties hereto (which approval shall not be
unreasonably withheld), except as required by law.
NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be delivered in person or sent by
registered or certified mail, postage prepaid, or by telecopy as follows:
a) If to either Seller or either Partner:
Clinical Associates
94-19 5th Avenue
Elmhurst, New York 11373
Fax: (718) 760-3090
With a copy to:
Harvey Z. Werblowsky, Esq.
McDermott, Will & Emery
50 Rockefeller Plaza
New York, New York 10020
Fax: (212) 547-5444
b) If to either Purchaser or PHC:
PHC, Inc.
200 Lake Street
Suite 102
Peabody, Massachusetts 01960
Fax: (508) 536-2677
With a copy to:
Arnold R. Westerman, Esq.
Arent Fox Kintner Plotkin &
Kahn
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036
Fax: (202) 857-6395
Any party may change its address for receiving
notice by written notice given to the others named above.
COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
ASSIGNMENT. This Agreement shall not be assigned by operation of
law or otherwise, except by the written consent of all parties.
SEVERABILITY. If any provision of this Agreement is held by a court
of competent jurisdiction to be illegal, invalid or unenforceable, such
provision shall be construed and enforced, to the extent practicable and lawful,
as if it had been more narrowly drawn so as not to be illegal, invalid or
unenforceable; and the remaining provisions of this Agreement shall remain in
effect and be enforceable in accordance with their terms.
F. ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES; RIGHT OF OWNERSHIP
ENTIRE AGREEMENT; RIGHT OF Ownership. This Agreement (i) constitutes the entire
agreement and supersedes all other prior agreements and undertakings, both
written and oral, among the parties, or any of them, with respect to the subject
matter hereof, and (ii) is not intended to confer upon any other person any
rights or remedies hereunder.
G. CONSENT TO JURISDICTION; APPLICABLE LAW . THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. FOR PURPOSES OF ENFORCING ANY
ARBITRATION AWARD AND/OR OBTAINING INJUNCTIVE RELIEF, ALL PARTIES HEREBY
IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY STATE COURT SITTING IN NEW YORK
CITY OR ANY FEDERAL COURT SITTING IN NEW YORK CITY IN RESPECT OF ANY SUIT,
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND EACH
PARTY HERETO IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY,
GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. EACH PARTY
HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT EACH MAY EFFECTIVELY DO SO
UNDER APPLICABLE LAW, TRIAL BY JURY AND ANY OBJECTION THAT IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
H. TRANSFER TAXES AND RECORDING EXPENSES . Purchasers shall assume and pay
and shall indemnify each Seller against all sales, use, transfer and like taxes,
if any, required to be paid in connection with the transfer of the Specified
Assets.
CAPTIONS. The captions of the various Articles, Sections and
Schedules of this Agreement have been inserted only for convenience of reference
and shall not be deemed to modify, explain, enlarge or restrict any provision of
this Agreement or affect the construction hereof.
<PAGE>
IN WITNESS WHEREOF, each of the parties
has caused this Agreement to be executed on its behalf by a duly authorized
representative all as of the date first written above.
CLINICAL ASSOCIATES
By:________________________________
Irwin Mansdorf
CLINICAL DIAGNOSTICS
By:________________________________
Irwin Mansdorf
PHC, INC.
By:_________________________________
Bruce A. Shear
President
BSC-NY, INC.
By:_________________________________
Name:
Title:
- -----------------------------------
Irwin Mansdorf, Ph.D.
- -----------------------------------
Yakov Burstein, Ph.D.
PERLOW PHYSICIANS, P.C.
BY:
Name:
Title:
<PAGE>
Agreement for Purchase and Sale of Assets
G:\KAYSER\PIONEER\CA-CD.14
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TABLE OF CONTENTS
PAGE
SECTION 1...................................PURCHASE AND SALE OF ASSETS
1
.............................................................. 1.1
Purchase and Sale of Assets.................................... 1
.............................................................. 1.2
Specified Assets............................................... 1
.............................................................. 1.3
Excluded Assets................................................ 2
.............................................................. 1.4
Allocation..................................................... 2
SECTION 2....................................CLOSING AND PURCHASE PRICE
2
.............................................................. 2.1
Time and Place of Closing...................................... 2
.............................................................. 2.2
Purchase Price................................................. 3
.............................................................. 2.3
Allocation of Purchase Price................................... 4
.............................................................. 2.4
Change of Control; Acceleration of Payment of Purchase Price... 4
.............................................................. 2.5
Set-Off........................................................ 5
.............................................................. 2.6
No Liabilities................................................. 5
SECTION 3. CONDITIONS.............................................. 5
3.1 Conditions to Each Party's Obligation to
Effect the Asset Purchase..................................... 5
3.2.
Delivery by Seller
6
.............................................................. 3.3
Deliveries by the Purchaser.................................... 7
.............................................................. 3.4
Access to Patient Files........................................ 8
.............................................................. 3.5
Other Agreements............................................... 8
SECTION 4................REPRESENTATIONS AND WARRANTIES OF SELLER
8
.............................................................. 4.1
Due Organization............................................... 8
.............................................................. 4.2
Authority...................................................... 8
.............................................................. 4.3
Approvals...................................................... 9
.............................................................. 4.4
Execution, Delivery and Performance............................ 9
.............................................................. 4.5
Title to Assets................................................ 9
.............................................................. 4.6
Real Property and Real Estate Leases........................... 10
.............................................................. 4.7
Employee Matters............................................... 10
.............................................................. 4.8
Licenses and Permits........................................... 10
.............................................................. 4.9
Material Contracts............................................. 11
............................................................. 4.10
Legal Proceedings.............................................. 11
............................................................. 4.11
Conduct of Business............................................ 11
.................................. 4.12 Compliance with Applicable Laws
12
........................................................ 4.13 Insurance
12
................................. 4.14 Absence of Certain Changes
12
SECTION 5. REPRESENTATIONS AND WARRANTIES OF PURCHASERS
..............................................................................
AND PHC............................................................... 12
.............................................................. 5.1
Due Organization............................................... 12
.............................................................. 5.2
Authority...................................................... 12
.............................................................. 5.3
Board and Shareholder Approval................................. 13
.............................................................. 5.4
Payment of Purchase Price...................................... 13
.............................................................. 5.5
Licensure...................................................... 13
.............................................................. 5.6
Validity....................................................... 13
.............................................................. 5.7
Legal Proceedings.............................................. 13
.............................................................. 5.8
SEC Reports and Financial Statements........................... 13
.............................................................. 5.9
Hart-Scott-Rodino.............................................. 14
SECTION 6.....................................................COVENANTS
14
.............................................................. 6.1
Patient Records................................................ 14
.............................................................. 6.2
Employment With the Business................................... 14
.............................................................. 6.3
Collection of Receivables...................................... 15
.............................................................. 6.4
Conduct of Business by the Purchasers.......................... 15
.............................................................. 6.5
No Solicitation by PHC and the Purchasers...................... 15
.............................................................. 6.6
Certain Operational Matters.................................... 15
SECTION 7. COVENANT NOT TO COMPETE.................................. 17
.............................................................. 7.1
Covenants...................................................... 17
.............................................................. 7.2
Ancillary Obligations.......................................... 18
.............................................................. 7.3
Enforcement.................................................... 18
.............................................................. 7.4
Successors and Assigns......................................... 18
SECTION 8. SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION............................................ 18
.............................................................. 8.1
Survival....................................................... 18
.............................................................. 8.2
Statements as Representations.................................. 18
.............................................................. 8.3
Claims Against Promissory Obligations and Earn Out Payments.... 19
.............................................................. 8.4
Indemnification by the Sellers. ............................... 20
.............................................................. 8.5
Indemnification by PHC and the Purchasers...................... 20
.............................................................. 8.6
Notice and Defense of Indemnification Claims................... 20
.............................................................. 8.7
Limitation on Right of Set-Off and Indemnification............. 22
SECTION 9............................................DISPUTE RESOLUTION
22
.............................................................. 9.1
Negotiated Resolution.......................................... 23
.............................................................. 9.2
Mediation...................................................... 23
.............................................................. 9.3
Arbitration.................................................... 23
SECTION 10. GUARANTY............................................... 23
SECTION 11. TERMINATION............................................ 24
................................................ 11.1 Termination
24
............................................................. 11.2
Effect of Termination.......................................... 24
................................................................... 11.3
Amendment............................................................ 24
................................................................... 11.4
Extension; Waiver.................................................... 24
SECTION 12. ADDITIONAL AGREEMENTS.................................. 25
...................................... 12.1 Access to Information
25
......................... 12.2 Legal Conditions to Asset Purchase
25
............................ 12.3 Notification of Certain Matters
25
.................................... 12.4 Supplemental Disclosure
26
........................ 12.5 Additional Agreements; Best Efforts
26
..............................................................................
12.6 Records Retention................................................... 26
SECTION 13. GENERAL PROVISIONS..................................... 27
............................................................. 13.1
Announcements.................................................. 27
............................................................. 13.2
Notices........................................................ 27
............................................................. 13.3
Counterparts................................................... 28
............................................................. 13.4
Assignment..................................................... 28
............................................................. 13.5
Severability................................................... 28
13.6 Entire Agreement; No Third Party
Beneficiaries; Right
..............................................................................
of Ownership........................................................... 28
............................................................. 13.7
CONSENT TO JURISDICTION; APPLICABLE LAW........................ 28
...................... 13.8 Transfer Taxes and Recording Expenses
29
................................................... 13.9 Captions
29
<PAGE>
G:\KAYSER\PIONEER\MANSDORF.PC
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G:\KAYSER\PIONEER\MANSDORF.PC
<PAGE>
AGREEMENT FOR PURCHASE AND SALE OF ASSETS
DATED AS OF: OCTOBER 31, 1996
<PAGE>
EXHIBIT 10.100
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT is entered into this 1st day of November, 1996,
(the "Effective Date") by and between Perlow Physicians, P.C., a New York
professional corporation (the "Corporation"), and Irwin Mansdorf, Ph.D (the
"Consultant").
W I T N E S S E T H:
WHEREAS, the Corporation is a New York professional corporation which
provides mental health services to the general public in the New York
metropolitan area; and
WHEREAS, concurrent with the execution of this Agreement, the Corporation
is purchasing the practice jointly operated by the Consultant and Yakov
Burstein, Ph.D.;
WHEREAS, the Corporation desires to retain the Consultant on the terms and
conditions hereafter set forth, and the Consultant desires to accept such
retention;
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein contained, the Corporation hereby retains the Consultant to provide
consulting services and the Consultant hereby agrees to provide such consulting
services to the Corporation, upon the following terms and conditions:
1. DUTIES. The Consultant is hereby retained by the Corporation to perform
professional services in connection with psychotherapy. The Consultant shall at
all times comply with all policies and procedures of the Corporation, copies of
which shall be provided to the Consultant by the Corporation, and incorporated
by reference into this Agreement when initialed by the Consultant.
2. TIME REQUIREMENTS. Subject to the provisions of Section 5
hereof, the Consultant agrees to devote one hundred (100) hours per month
during the term of this Agreement to the affairs and activities of the
Corporation as reasonably requested by the Corporation.
3. COMPENSATION. Subject to the provisions of Section 5 hereof, the
Corporation agrees to pay to the Consultant as compensation for his services
hereunder a salary at an annual rate of one hundred twenty five thousand dollars
($125,000.00) per year. Any and all compensation to be paid to Consultant
pursuant to this Section 3 and under the Consulting Agreement between Consultant
and BSC-NY, Inc. of even date herewith (the "BSC-NY Agreement") shall be paid by
the Corporation.
4. REIMBURSEMENT OF EXPENSES. Subject to the provisions of Section 5
hereof, the Corporation will provide the Consultant with an automobile allowance
of $475.00 per month. The Corporation also shall reimburse the Consultant for
all reasonable and necessary business expenses incurred by him in the
performance of his duties hereunder, including parking expenses, cellular phone
expenses and beeper expenses. The Corporation shall also reimburse Consultant
for membership dues in professional organizations bearing direct relationship to
Consultant's duties in connection with this Agreement.
5. DUPLICATION OF TIME REQUIREMENTS, COMPENSATION AND REIMBURSEMENT. Any
hours of time devoted by Consultant to his responsibilities pursuant to Section
2 of this Agreement shall offset the number of hours Consultant is required to
devote to his responsibilities in accordance with the terms of the BSC-NY
Agreement. Any right to compensation or reimbursement of item of expense paid by
the Corporation to the Consultant pursuant to Section 3 and 4 of this Agreement
shall be offset by such compensation or such reimbursement of item of expense to
be provided by the Corporation to Consultant under the BSC-NY Agreement.
6. REPRESENTATIONS AND WARRANTIES OF THE CONSULTANT. The Consultant hereby
represents and warrants at all times during the term of this Agreement that he
is duly authorized, licensed and in good standing under the laws of the State of
New York to engage in the practice of psychology, that said license is not
suspended, revoked or restricted in any manner and that, to his knowledge, there
is not presently pending or threatened against him any action, claim or
proceeding the outcome of which could result in revocation, suspension or
restriction of his license.
7. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE CORPORATION.
The Corporation represents and warrants at all times during the term of this
Agreement that:
7.1 The Corporation is a duly formed professional corporation
organized, validly existing and in good standing under the laws of the State of
New York.
7.2 The Corporation has the corporate power and authority to enter
into this Agreement and to carry on its business as currently conducted.
8. TERM; BASIS FOR TERMINATION. Subject to the provisions of this
Section 8, the term of this Agreement shall be for three (3) years,
commencing on the Effective Date. This Agreement shall terminate on the
earlier to occur of the following:
8.1 The death of the Consultant;
8.2 The permanent disability of the Consultant at any time. The
Consultant shall be deemed to have become permanently "disabled" when by reason
of a physical or mental disability or incapacity he shall have failed or is
unable to perform his customary duties and activities on behalf of the
Corporation for a consecutive period of four (4) months or for any six (6)
months within any twelve (12) month period; or
8.3 At any time by the Corporation for "cause" which, for purposes
of this Agreement, shall mean (a) willful and serious or habitual failure of the
Consultant to perform his duties hereunder in all material respects which is not
remedied within 30 days after the receipt of notice thereof from the
Corporation; (b) legal disqualification of the Consultant from practicing
psychology within the State of New York; or (c) gross misconduct, fraud or
embezzlement by the Consultant.
9. INSURANCE. The Consultant shall maintain professional liability
coverage covering him for acts and omissions in the normal course of his
employment hereunder, in an amount of not less than three million dollars
($3,000,000) aggregate coverage and one million dollars ($1,000,000) coverage
per wrongful act or occurrence. The Corporation shall reimburse the Consultant
for the costs of such professional liability insurance and for the costs of
so-called "tail insurance" covering Consultant in the amount of the policy
limits, if the insurance being provided is on a claims-made basis and the
insurance carrier or coverage is changed or terminated for any reason
whatsoever. In addition, the Corporation shall maintain a policy of
comprehensive general liability insurance coverage in an amount of not less than
one million dollars ($1,000,000) aggregate coverage and one million dollars
($1,000,000) coverage per wrongful act or occurrence.
10. GOVERNING LAW. This Agreement shall be construed under the laws
of the State of New York without giving effect to the conflict of laws
provisions thereof.
11. ASSIGNMENT. Neither this Agreement nor any right, duty or obligation
arising under it may be assigned by either party without the prior written
consent of the other party. Notwithstanding the foregoing, in the event of the
merger or consolidation of the Corporation with any other corporation or
corporations, the sale by the Corporation of a major portion of its assets or of
its business and good will, or any other corporate reorganization involving the
Corporation, this Agreement may, without the Consultant's written consent, be
assigned and transferred to such successor in interest as an asset of the
Corporation upon such assignee assuming the Corporation's obligation hereunder,
in which event the Consultant agrees to continue to perform his duties and
obligations, according to the terms hereof, to or for such assignee or
transferee of this Agreement; provided, however, that the Corporation will
remain secondarily liable as guarantor of such assignee or transferee's
obligations to the Consultant hereunder.
12. NATURE OF RELATIONSHIP. For the purposes of this Agreement and all
services to be provided hereunder, the parties shall be, and shall be deemed to
be independent contractors and not agents or employees of each party. Nothing in
this Agreement shall be construed as establishing the parties as partners or
joint venturers.
13. BINDING NATURE OF AGREEMENT; ENTIRE AGREEMENT. This Agreement shall be
binding upon and inure to the benefit of the parties and their respective heirs,
representatives and successors. This Agreement supersedes all previous
employment agreements and any amendments thereto entered into between the
Consultant and the Corporation concerning the subject matter of this Agreement,
prior agreements, representations or understandings, oral or written, express or
implied with respect to the subject matter hereof.
14. AMENDMENTS. No amendment to this Agreement shall be valid unless
in writing, signed by both of the parties.
15. RESOLUTION OF DISPUTES. The rights of the parties under this Agreement
and concerning the consulting relationship shall be determined, in the event of
a dispute, by an independent arbitrator selected in accordance with the rules of
the American Arbitration Association and the decision of the arbitrator shall be
final and binding on both parties. To the maximum extent permitted by law, the
parties waive their rights to a determination of any such issues by a court or
jury. In the even that either party resorts to arbitration or other legal action
to resolve a dispute arising under this Agreement, the prevailing party shall be
entitled to recover the costs and expenses incurred in connection with such
arbitration or action from the other party, including, without limitation,
reasonable attorney's fees. For purposes of this Section 15, the term "dispute"
means all controversies or claims relating to terms, conditions or privileges of
employment, including, without limitation, claims for breach of contract,
discrimination, harassment, wrongful discharge, misrepresentation, defamation,
emotional distress or any other personal injury, but excluding claims for
unemployment compensation or worker's compensation.
<PAGE>
- 5 -
16. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be considered an original and all of which
shall constitute one and the same agreement. This Agreement shall not become
effective until it has been executed by both of the parties hereto.
17. HEADINGS. The headings used in this Agreement are for
convenience of reference only and shall have no force or effect in the
construction or interpretation of the provisions of this Agreement.
18. NOTICES. All notices, requests, demands, and other communications
required or permitted by this Agreement shall be in writing (unless otherwise
specifically provided herein) to the addresses of the parties set forth below
and shall be deemed to have been received: (a) three (3) days after deposit in
the U.S. mail, postage prepaid, registered or certified, and addressed to either
party at the addresses set forth below, or to such changed address as either
party may have given to the other by notice in the manner herein provided; or
(b) upon personal delivery.
If to the Corporation: Perlow Physicians, P.C.
c/o Arent Fox Kintner Plotkin & Kahn
1675 Broadway
New York, NY 10019
Attn: Jerome T. Levy, Esq.
If to the Consultant: Irwin Mansdorf, Ph.D.
94-19 59th Ave.
Elmhurst, N.Y. 11373
With a copy to: Harvey Z. Werblowsky, Esq.
McDermott, Will & Emery
50 Rockefeller Plaza
New York, N.Y. 10020
19. SEVERABILITY. Nothing contained in this Agreement shall be construed
to require the commission of any act contrary to law, and whenever there is any
conflict between any provision of this Agreement and any statute, law, ordinance
or regulation, the statute, law, ordinance or regulation shall prevail. In such
event, and in any case any provision of this Agreement is determined to be in
violation of a statute, law, ordinance or regulation, the affected provision(s)
shall be limited only to the extent necessary to bring it within the
requirements of the law and, insofar as possible under the circumstances, to
carry out the purposes of this Agreement. The other provisions of this Agreement
shall remain in full force and effect, and the invalidity or unenforceability of
any provision hereof shall not affect the validity and enforceability of the
other provisions of this Agreement.
20. NO WAIVER. The waiver by any party to this Agreement of any breach of
any term or condition of this Agreement shall not constitute a waiver of
subsequent breaches. No waiver by any party of any provision of this Agreement
shall be deemed to constitute a waiver of any other provision.
21. SURVIVAL. All of the provisions in Section 9 and 15 shall survive any
termination or expiration of the term of this Agreement.
22. NO REQUIREMENT TO REFER. It is not a purpose of this Agreement to
induce or encourage the referral of patients, and there is no requirement under
this Agreement, or under any other agreement between the practice and the
Consultant, that the Consultant refer any patient to the Corporation or to any
other entity for the delivery of health care items or services. The compensation
paid to the Consultant under this Agreement is made for professional services
and obligations as set forth in this Agreement, and no payment made under this
Agreement is in return for the referral of patients or in return for purchasing,
leasing, ordering or arranging for any good, facility, item or service from the
Corporation or any other entity.
<PAGE>
IN WITNESS WHEREOF, the parties hereby have executed this Agreement as of
the date first above written.
CONSULTANT PERLOW PHYSICIANS, P.C.
By: By:
Irwin Mansdorf, Ph.D. President
<PAGE>
EXHIBIT 10.101
OPTION AGREEMENT
This OPTION AGREEMENT (the "Option Agreement") is made this 5th day of
November, 1996, by and between Pioneer Healthcare. ("Pioneer"), and Gerald M.
Perlow, M.D. ("Perlow").
W I T N E S S E T H
WHEREAS, Pioneer is in the business of providing management and
administrative services to medical practices and is acquiring Behavioral Stress
Centers, Inc., a mental health practice management company, through a merger
with BSC-NY, Inc., a wholly-owned subsidiary of Pioneer (the "Subsidiary"); and
WHEREAS, in conjunction with the merger, Pioneer is purchasing certain
assets of Clinical Associates and Clinical Diagnostics, a general partnership
and sole proprietorship respectively, which have been engaged in the provision
of psychotherapy services in the New York metropolitan area; and
WHEREAS, Perlow is the majority shareholder in Perlow Physicians, P.C., a
New York professional corporation (the "P.C.") that was formed in order to
provide psychotherapy services to the patients currently served by Clinical
Associates and Clinical Diagnostics; and
WHEREAS, Pioneer is advancing $750,000 to the P.C. in order to allow the
P.C. to purchase the professional assets of Clinical Associates and Clinical
Diagnostics, including the various contracts that those entities have with
health care facilities and third party payers for the provision of psychotherapy
services; and
WHEREAS, the P.C. will enter into a management agreement with the
Subsidiary (the "Management Agreement") pursuant to which the Subsidiary will
provide non-clinical management and administrative services to the P.C.; and
WHEREAS, it is a condition to the completion of the transactions described
above that this Option be granted to Pioneer.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth and for other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto, intending to be legally
bound hereunder, agree as follows:
<PAGE>
GRANT OF OPTION. Perlow hereby irrevocably grants to Pioneer the right and
option (hereinafter called the "Option") to designate a person who lawfully may
hold an ownership interest in the P.C. (the "Optionee") who shall be entitled to
purchase all of the shares of the P.C. owned by Perlow ("Perlow's Interest") at
the exercise price set forth in paragraph 2, during the period and subject to
the conditions herein set forth.
EXERCISE PRICE. The exercise price (the "Exercise Price") for Perlow's
Interest shall be One Thousand Dollars ($1,000.00).
OPTION TERM. The term of this Option shall expire on the fortieth (40th)
anniversary of the date hereof.
EXERCISE OF OPTION. The Option shall be exercisable only upon the
occurrence of one or more of the following events:
(a) Perlow's death;
(b) Perlow's disability which, for purposes of this Option Agreement,
shall be defined as Perlow's failure or inability to perform his customary
duties for a consecutive period of three (3) months or for any number of days
totalling 120 within a six (6) month period;
(c) The loss or suspension of Perlow's medical license, cancellation of the
P.C.'s medical malpractice insurance without replacement, commission of a felony
by the P.C. or by Perlow, or the loss or suspension, for more than ninety (90)
days, of the P.C.'s or Perlow's participation in the Medicare or Medicaid
programs or in any third-party payor contract which, in the reasonable
discretion of Pioneer, is a significant contract for the P.C.;
(d) Upon the default or termination of that certain Employment Agreement of
even date herewith between the P.C. and Perlow;
(e) Upon default or termination of that certain Management Agreement of
even date herewith between the Subsidiary and the P.C.; or
(f) The filing by Perlow of a petition in bankruptcy, an assignment for the
benefit of creditors, or other action taken voluntarily or involuntarily under
any state or federal statute for the protection of debtors.
5. MANNER OF EXERCISE. Each exercise of the Option shall be by written
notice to Perlow, and shall be accompanied by the designated Optionee's check
payable to Perlow for the amount of the Exercise Price. Upon delivery of such
notice and payment, the Optionee shall be deemed to have acquired Perlow's
Interest and shall be deemed to have become a member of the P.C. without any
further action on the part of the Optionee, Perlow or the P.C.. However, at the
Optionee's request, Perlow shall also deliver an assignment of his shares in the
P.C. to the Optionee in form and substance reasonably satisfactory to the
Optionee.
6. NO OBLIGATION TO EXERCISE OPTION. Pioneer shall be under no obligation
to exercise all or any part of the Option.
7. TRANSFERABILITY OF OPTION. The Option is freely transferable by Pioneer.
Pioneer shall notify the P.C and Perlow of the exercise or the revocation of any
assignment of the Option.
8. RESTRICTIONS ON TRANSFER OF PERLOW'S INTEREST; CONSENTS. During the
Option Period, no part of Perlow's Interest shall be transferred without the
prior written consent of Pioneer. For purposes of this Option Agreement, a
transfer shall include any dissolution or termination of the P.C. or any
assignment, mortgage, hypothecation, transfer, pledge, creation of a security
interest in or lien upon, encumbrance, gift or other disposition unless such
transfer is made subordinate to or subject to this Option. An authorized
assignee or transferee must consent in writing to be bound by the terms of this
Option Agreement. Further, the P.C. and Perlow shall not amend or modify the
P.C.'s Articles of Organization or Bylaws in any manner that would adversely
affect Pioneer's rights hereunder without Pioneer's prior written consent.
Perlow consents to the Option on his interests granted herein, and agrees to
recognize the Optionee as a substituted shareholder immediately upon the
exercise of this Option. Any provisions in the P.C.'s Bylaws that conflict with
this Option Agreement are superseded and shall be of no effect.
9. REPRESENTATIONS AND WARRANTIES OF PERLOW. Perlow hereby represents and
warrants to, and covenants with, Pioneer as follows:
Perlow has full power and authority to permit him to execute and deliver
this Option Agreement and to perform all of the obligations contained herein,
and none of such actions will violate any provisions of law or will violate or
constitute a default under any agreement or instrument to which Perlow is a
party.
This Option Agreement constitutes, and each instrument to be executed and
delivered by Perlow in connection with the exercise of the Option will
constitute, a valid and legally binding obligation of Perlow, enforceable
against him in accordance with its terms.
Except for Nissim Schliselberg, M.D., no other
person will be permitted to become a shareholder (other than pursuant to
the exercise of this Option) without prior written notice to the Pioneer and the
grant to Pioneer of an option of such person's interest in form and substance
comparable to this Option Agreement.
Perlow shall take, or cause to be taken, all steps necessary to maintain
the P.C. as a New York professional corporation in good standing and, without
the prior written consent of the Pioneer, shall not take, or cause or allow to
be taken, any steps to dissolve the P.C..
(e) A legend shall be placed on each stock certificate issued
by the P.C. to Perlow indicating that the shares represent by that certificate
are subject to this Option Agreement and may not be transferred without the
express written consent of Pioneer.
10. NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed to be properly given when personally delivered to
the party entitled to receive the notice or when sent by certified or registered
mail, postage prepaid, properly addressed to the party entitled to receive such
notice at the address stated below or at such other address as may be furnished
in writing by any party hereto to the other:
<PAGE>
G:\KAYSER\PIONEER\ASSAGT.004
15
If to a Perlow: Gerald M. Perlow, M.D
================================
If to Pioneer: Pioneer Healthcare
200 Lake Street
Suite 102
Peabody, MA 01960
Attn: President
11. SUCCESSORS AND ASSIGNS. This Option Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective executors, administrators, heirs, and assigns.
12. GOVERNING LAW. This Option Agreement shall be governed by
and construed under the laws of the State of New York without regard to the
conflicts of laws provisions of that state.
13. COUNTERPARTS. This Option Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
14. AMENDMENT. This Option Agreement may not be amended except
by an instrument in writing signed by all the parties.
15. SPECIFIC PERFORMANCE. The parties hereto agree that Perlow's
Interest in the P.C. is unique and that failure to honor the rights granted by
this Option Agreement will result in irreparable damage, and that in addition to
all other remedies of which Pioneer may avail itself at law or in equity,
Pioneer shall have the right of specific performance.
16. ENTIRE AGREEMENT. This Option Agreement embodies the entire
agreement between the parties with respect to its subject matter. There are no
restrictions, promises, representations, warranties, covenants or undertakings
other than those expressly set forth herein. This Option Agreement supersedes
any and all prior agreements and understandings between the parties with respect
to its subject matter.
IN WITNESS WHEREOF, the parties hereto have duly executed this Option
Agreement as of the date first written above.
PIONEER HEALTHCARE, INC.:
By:
Name:
Its:
Gerald M. Perlow, M.D.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedile contains summary financial information extracted from the
consolidated balance sheet and the consolidated statement of income filed as
part of the report on Form 10-Q and is qualified in its entirety by reference to
such report on Form 10-Q.
</LEGEND>
<CIK> 0000915127
<NAME> PHC, Inc.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Jun-30-1997
<PERIOD-START> Jul-01-1996
<PERIOD-END> Sep-30-1996
<CASH> 6,547
<SECURITIES> 0
<RECEIVABLES> 11,708,123
<ALLOWANCES> 1,591,393
<INVENTORY> 0
<CURRENT-ASSETS> 11,308,314
<PP&E> 9,561,720
<DEPRECIATION> 1,574,193
<TOTAL-ASSETS> 22,506,221
<CURRENT-LIABILITIES> 5,772,467
<BONDS> 0
0
0
<COMMON> 33,340
<OTHER-SE> 6,579,737
<TOTAL-LIABILITY-AND-EQUITY> 22,506,221
<SALES> 0
<TOTAL-REVENUES> 5,918,060
<CGS> 0
<TOTAL-COSTS> 5,596,231
<OTHER-EXPENSES> 295,344
<LOSS-PROVISION> 269,943
<INTEREST-EXPENSE> 295,344
<INCOME-PRETAX> 109,875
<INCOME-TAX> 44,133
<INCOME-CONTINUING> 65,742
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 65,742
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
