UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996; OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHA
NGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____________ TO
______________.
COMMISSION FILE NUMBER 0-24750
PROFESSIONAL SPORTS CARE MANAGEMENT, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 22-3315575
- - - ------------------------------- -----------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
550 MAMARONECK AVENUE, SUITE 308, HARRISON, NEW YORK 10528
----------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(ZIP CODE)
(914) 777-2400
--------------
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL
REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 DURING THE PRECEDING 12 MONTHS ( OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS.
YES X NO
--- ---
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S
CLASSES OF COMMON STOCK, AS OF THE LAST PRACTICABLE DATE.
CLASS OUTSTANDING AT AUGUST 7, 1996
- - - ------------------------ -----------------------------
COMMON STOCK, PAR VALUE 7,774,298 SHARES
$.01 PER SHARE
<PAGE>
PROFESSIONAL SPORTS CARE MANAGEMENT, INC.
FORM 10-Q
INDEX
PART I - FINANCIAL INFORMATION:
ITEM 1. FINANCIAL STATEMENTS
Page
----
Consolidated Balance Sheets June 30,
1996 (unaudited) and December 31, 1995 1
Consolidated Statements of Income -
(unaudited) Three months ended June 30,
1996 and 1995; six months ended June 30,
1996 and 1995 2
Consolidated Statements of Cash Flows -
(unaudited) Six months ended June 30,
1996 and 1995 3
Notes to Consolidated Financial
Statements - June 30, 1996 (unaudited) 4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF 8
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PART II - OTHER INFORMATION:
ITEM 1. LEGAL PROCEEDINGS 9
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 10
SIGNATURES 11
<PAGE>
PROFESSIONAL SPORTS CARE MANAGEMENT, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31
1996 1995
----------- -----------
(unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............................................ $ 7,534,000 $ 14,560,000
Patient service receivables, net..................................... 7,661,000 5,605,000
Notes receivable..................................................... 95,000 284,000
Income tax receivable................................................ 362,000 78,000
Prepaid expenses..................................................... 381,000 664,000
------------ ------------
Total current assets................................................... 16,033,000 21,191,000
Property and equipment, net............................................ 5,590,000 5,109,000
Intangible assets, net................................................. 31,506,000 22,151,000
Notes receivable....................................................... 283,000 339,000
Other assets........................................................... 428,000 327,000
------------- -------------
Total assets........................................................... $ 53,840,000 $ 49,117,000
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of debt.............................................. $ 2,331,000 $ 1,323,000
Current portion of obligations under capital leases.................. 103,000 149,000
Accounts payable..................................................... 134,000 219,000
Accrued liabilities.................................................. 985,000 695,000
Deferred income taxes payable........................................ 1,151,000 1,037,000
------------- -------------
Total current liabilities.............................................. 4,704,000 3,423,000
Deferred income taxes payable.......................................... 741,000 519,000
Long-term portion of debt.............................................. 4,209,000 3,152,000
Obligations under capital leases....................................... 92,000 73,000
Accrued rent and other................................................. 713,000 821,000
Minority interests..................................................... 151,000 ---
------------- -------------
Total liabilities...................................................... 10,610,000 7,988,000
------------- -------------
Stockholders' Equity:
Common stock, $.01 par value, 15,000,000 shares......................
authorized; 7,774,298 and 7,669,565 issued and.....................
outstanding at June 30, 1996 and December 31, 1995,................
respectively....................................................... 78,000 77,000
Preferred Stock, $.01 par value, 2,000,000 shares
authorized; none issued and outstanding............................ --- ---
Additional paid-in capital........................................... 39,469,000 38,720,000
Deferred stock grants................................................ (47,000) (93,000)
Retained earnings.................................................... 3,730,000 2,425,000
------------- -------------
Total stockholders' equity............................................. 43,230,000 41,129,000
------------- -------------
Total liabilities and stockholders' equity............................. $ 53,840,000 $ 49,117,000
============= =============
</TABLE>
See accompanying notes to the consolidated financial statements.
-1-
<PAGE>
PROFESSIONAL SPORTS CARE MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
1996 1995 1996 1995
--------------- -------------- ---------------
- - - --------------
<S> <C> <C> <C> <C>
Net revenue.......................................... $ 10,037,000 $ 7,155,000 $ 19,327,000
$13,079,000
Center operating costs............................... 6,213,000 4,187,000 12,124,000
7,656,000
--------------- -------------- ---------------
- - - --------------
Gross profit......................................... 3,824,000 2,968,000 7,203,000
5,423,000
Operating expenses:
Selling and administrative
expenses......................................... 1,863,000 1,139,000 3,653,000
2,179,000
Depreciation....................................... 296,000 212,000 574,000
395,000
Amortization....................................... 292,000 179,000 552,000
331,000
--------------- -------------- ---------------
- - - --------------
Income from operations............................... 1,373,000 1,438,000 2,424,000
2,518,000
Interest expense..................................... 139,000 54,000 268,000
187,000
Interest income...................................... (75,000) (137,000) (208,000)
(224,000)
---------------- -------------- ---------------
- - - -------------
Income before minority interests, equity
in earnings of investments and
income taxes....................................... 1,309,000 1,521,000 2,364,000
2,555,000
Minority interests................................... 38,000 55,000 152,000
52,000
Equity in earnings of investments.................... --- (76,000) ---
(50,000)
--------------- -------------- ---------------
- - - --------------
Income before income taxes........................... 1,271,000 1,542,000 2,212,000
2,553,000
Provision for income taxes........................... 521,000 632,000 907,000
1,047,000
--------------- -------------- ---------------
- - - --------------
Net income........................................... $ 750,000 910,000 1,305,000
1,506,000
============== ============== ===============
==============
Earnings per common share............................ $ 0.10 $ 0.12 $ 0.17 $
0.22
============== ============= ==============
=============
Weighted average shares outstanding.................. 7,791,000 7,804,000 7,779,000
6,974,000
============== ============= ==============
=============
</TABLE>
See accompanying notes to the consolidated financial statements.
-2-
<PAGE>
PROFESSIONAL SPORTS CARE MANAGEMENT, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months
Ended
June 30,
1996 1995
-------------- ---------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income....................................................... $ 1,305,000 $ 1,506,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation..................................................... 574,000 395,000
Amortization..................................................... 552,000 331,000
Deferred income taxes............................................ 152,000 50,000
Provision for doubtful accounts.................................. 336,000 544,000
Minority interests............................................... 376,000 160,000
Equity in earnings of investments................................ --- (50,000)
Amortization of deferred stock grants............................ 46,000 47,000
Amortization of debt discounts................................... 201,000 94,000
Change in assets and liabilities:
Patient service receivables, net................................. (1,956,000) (1,547,000)
Due from Partnership............................................. --- 53,000
Income tax receivable............................................ (284,000) (170,000)
Prepaid expenses................................................. 293,000 241,000
Intangibles and other assets..................................... (175,000) (131,000)
Accounts payable................................................. (85,000) (184,000)
Accrued liabilities.............................................. (51,000) 84,000
Accrued rent and other........................................... (108,000) ---
----------- ----------
Total adjustments............................................ (129,000) (81,000)
----------- ----------
Net cash provided by operating activities........................ 1,176,000 1,425,000
----------- ----------
Cash flows from investing activities:
Purchase of property and equipment............................... (563,000) (1,113,000)
Investment in Partnership........................................ --- (209,000)
Notes receivable................................................. 170,000 (200,000)
Business acquisitions............................................ (7,020,000) (4,021,000)
------------ ----------
Net cash used in investment activities........................... (7,413,000) (5,543,000)
------------ ----------
Cash flows from financing activities:
Proceeds from issuance of stock, net............................. --- 17,222,000
Proceeds from minority interests contributions................... 247,000 84,000
Distributions to minority interests.............................. (33,000) (58,000)
Principal payments of notes payable.............................. (894,000) (198,000)
Principal payments under capital lease obligations............... (109,000) (82,000)
------------ ----------
Net cash provided (used) by financing activities................. (789,000) 16,968,000
------------ ----------
Net increase (decrease) in cash and cash equivalents................... (7,026,000) 12,850,000
Cash and cash equivalents at beginning of period....................... 14,560,000 3,112,000
------------ -----------
Cash and cash equivalents at end of period............................. $ 7,534,000 $ 15,962,000
============ ===========
</TABLE>
See accompanying notes to the consolidated financial statements.
-3-
<PAGE>
PROFESSIONAL SPORTS CARE MANAGEMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, such financial statements 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 adjustments) considered necessary for a
fair presentation have been included. Operating results for the six months ended
June 30, 1996 are not necessarily indicative of the results that may be expected
for the year ending December 31, 1996. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's Form 10-K (Commission File No. 0-24750) as filed with the Securities
and Exchange Commission on March 25, 1996.
NOTE 2 - BUSINESS ACQUISITIONS
Effective at the dates noted below, the Company purchased substantially all of
the operating assets of certain companies' physical therapy or corporate
wellness centers. The acquisitions were accounted for as purchases. Accordingly,
the results of operations of the acquired companies were included with those of
the Company for periods subsequent to the dates of the acquisitions.
COMPANY LOCATION DATE OF ACQUISITION
------- -------- -------------------
Pro-Fitness, Inc.
(51% interest) Connecticut January 1996
Healthworks of Brooklyn
Rehabilitation Treatment Center
(two facilities) New York January 1996
Morristown Sports Medicine
Center, Inc. New Jersey February 1996
Neurosurgery Associates of
Northwest Connecticut (physical
therapy practice only) ConnecticuT February 1996
Institute of Rehabilitation, Inc. New Jersey March 1996
The above acquisitions were consummated for an aggregate purchase price of
approximately $10,200,000 which was financed through the use of cash
($6,600,000), debt, assumed liabilities and stock ($3,600,000). As a result of
these acquisitions, the Company recorded approximately $8,700,000 of goodwill.
-4-
<PAGE>
During all of 1995, the Company consummated six acquisitions and purchased, in
whole or in part, the minority interests of three limited partnerships for an
aggregate purchase price of approximately $9,300,000 which was financed through
the use of cash ($4,500,000), debt, assumed liabilities and stock ($4,800,000).
As a result of these acquisitions, the Company recorded approximately $7,700,000
of goodwill.
The unaudited pro forma consolidated condensed results of operations for the six
months ended June 30, 1996 and the year ended December 31,1995 of the Company
and the acquired companies noted above, after giving effect to certain pro forma
adjustments, are as follows:
JUNE 30, DECEMBER 31,
1996 1995
---- ----
(unaudited) (unaudited)
Net revenue.......................... $ 19,786,000 $ 38,179,000
Net income (adjusted for
pro forma tax provision)............. $ 1,333,000 $ 2,392,000
Net income per common share.......... $ 0.17 $ 0.31
The foregoing unaudited pro forma consolidated condensed results of operations
reflect amortization of the goodwill resulting from these acquisitions as well
as the interest expense from the related debt as if (x) the acquisitions had
occurred as of January 1, 1995 and (y) the related debt issued to sellers as
part of the transaction consideration was outstanding since that date.
NOTE 3 - PATIENT SERVICE RECEIVABLES, NET
Patient service receivables, net are comprised of the following:
JUNE 30, DECEMBER 31,
1996 1995
---- ----
Patient service
receivables................................. $ 9,552,000 $ 6,588,000
Less: Allowance for doubtful accounts and
contractual adjustments................... 1,891,000 983,000
-------------- --------------
$ 7,661,000 $ 5,605,000
============== ==============
The increase in allowance for doubtful accounts and contractual adjustments as a
percentage of patient service receivables is attributable to reserves recorded
during the first quarter of 1996, in order to reflect acquired accounts
receivable at their net realizable value.
-5-
<PAGE>
NOTE 4 - PROPERTY AND EQUIPMENT, NET
Property and equipment, net is comprised of the following:
JUNE 30, DECEMBER 31,
1996 1995
---- ----
Medical equipment.................. $ 4,801,000 $ 4,279,000
Computer equipment................. 1,027,000 848,000
Leasehold improvements............. 1,573,000 1,446,000
Furniture and fixtures............. 694,000 502,000
Vehicles........................... 42,000 18,000
---------------- ----------------
8,137,000 7,093,000
Less: Accumulated depreciation.... 2,547,000 1,984,000
---------------- ----------------
$ 5,590,000 $ 5,109,000
================ ================
NOTE 5 - INTANGIBLE ASSETS, NET
Intangible assets, net consists of the following:
JUNE 30, DECEMBER 31,
1996 1995
---- ----
Goodwill........................... $ 30,469,000 $ 21,451,000
Covenants not to compete........... 2,145,000 1,510,000
Other.............................. 498,000 239,000
---------------- ----------------
33,112,000 23,200,000
Less: Accumulated amortization 1,606,000 1,049,000
---------------- ----------------
$ 31,506,000 $ 22,151,000
================ ================
-6-
<PAGE>
NOTE 6 - DEBT
Debt, substantially all of which is secured by the Company's assets, is
comprised of the following:
JUNE 30, DECEMBER 31,
1996 1995
---- ----
Notes payable bearing interest at 6% to 8%
requiring quarterly, semi-annual, or
annual payments ranging from $15,000 to
$450,000 through January 1997 to
January 2001 .............................. $3,378,000 $1,646,000
Non-interest bearing notes payable in quarterly
or annual installments ranging from $5,000 to
$200,000 through May 1997 to July 2000
(discounted at 8% - 9%) ................... 3,162,000 2,829,000
---------- ----------
6,540,000 4,475,000
Less: current portion ....................... 2,331,000 1,323,000
---------- ----------
Long-term portion ........................... $4,209,000 $3,152,000
========== ==========
Maturities of debt at June 30, 1996 are as follows:
1997.......................................... $ 2,449,000
1998.......................................... 1,730,000
1999.......................................... 1,704,000
2000.......................................... 867,000
2001.......................................... 298,000
---------------
$ 7,048,000
NOTE 7 - DEFINITIVE MERGER AGREEMENT
On May 16, 1996, Professional Sports Care Management, Inc. ("PSCM") entered in a
definitive merger agreement (the "Agreement") with Empire Acquisition
Corporation, a wholly owned subsidiary of HealthSouth Corporation
("HealthSouth"). Upon consummation of the merger (the "Merger") outstanding
share of common stock of PSCM will be canceled, and the holders of such shares
will be entitled to receive 0.233 shares of HealthSouth common stock for each
PSCM share held; provided, however, that if the base period trading price of
HealthSouth is greater than $38.625, then the exchange ratio will be equal to
the quotient obtained by dividing $9.00 by the base period trading price,
computed to four decimal places. A special meeting of PSCM's stockholders will
be held on August 20, 1996 to consider, vote, and approve the Agreement.
-7-
<PAGE>
PROFESSIONAL SPORTS CARE MANAGEMENT, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
NET REVENUE. Net revenue consists primarily of physical therapy revenue and, to
a significantly lesser degree, revenue from occupational therapy, athletic
trainer contract services, and other ancillary services. For the three months
ended June 30, 1996, net revenue increased 40% to $10,037,000 from $7,155,000
for the same period a year ago. For the six months ended June 30, 1996, net
revenue increased 48% to $19,327,000 from $13,079,000 for the same period a year
ago. For all periods, this increase is due to the addition of 7 physical therapy
clinics (6 through acquisitions and 1 from a start-up clinic) and the
acquisition of Pro-Fitness, LLC, a provider of health enhancement, corporate
fitness and wellness programs, subsequent to June 30, 1995 offset, to some
extent, by a reduction in average reimbursement rates.
GROSS PROFIT. Gross profit comprises net revenue less all facility personnel and
occupancy costs. The Company's gross profit margin for the three months ended
June 30, 1996 decreased to 38.1% from 41.5% for the comparable period of 1995.
The Company's gross profit margin for the six months ended June 30, 1996
decreased to 37.3% from 41.5% for the comparable period of 1995. For all
periods, this decrease is attributable to a reduction in average reimbursement
rates as well as lower margins at certain recently acquired clinics.
SELLING AND ADMINISTRATIVE EXPENSES. Selling and administrative expenses include
non-personnel- related marketing and administrative costs, all corporate
personnel costs, and a provision for doubtful accounts. For the three months
ended June 30, 1996, selling and administrative expenses, as a percentage of
revenue, increased to 18.6% from 15.9% for the comparable period of 1995. For
the six months ended June 30, 1996, selling and administrative expenses, as a
percentage of revenue, increased to 18.9% from 16.7% for the comparable period
of 1995. For all periods, this increase is attributable to the hiring of
additional administrative personnel, annual salary adjustments for all
administrative personnel and a lower than anticipated net revenue base.
DEPRECIATION AND AMORTIZATION EXPENSE. Depreciation and amortization consists
primarily of equipment depreciation and amortization of leasehold improvements
and intangible assets. For the three and six months ended June 30, 1996, both
depreciation and amortization, as a percentage of revenue, remained consistent
at approximately 3%.
INTEREST (INCOME) EXPENSE, NET. Interest (income) expense, net, changed from
($83,000) of interest income to $64,000 of interest expense for the three month
period ended June 30, 1995 and 1996 respectively, and changed from ($37,000) of
interest income to $60,000 of interest expense for the six month period ended
June 30, 1995 and 1996, respectively. For all periods, this change is
attributable to a reduction in the average invested cash balance, mainly as a
result of the acquisitions
-8-
<PAGE>
subsequent to June 30, 1995, as well as an increase in the Company's total debt
outstanding from these acquisitions.
LIQUIDITY & CAPITAL RESOURCES
Net cash flow from operations decreased from $1,425,000 for the six months ended
June 30, 1995 to $1,176,000 for the six months ended June 30, 1996 primarily due
to an increase in the Company's accounts receivable balance which is
attributable to the added accounts receivable balances from its recently
acquired clinics.
Net cash used in investing activities increased from $5,543,000 for the six
months ended June 30, 1995 to $7,413,000 for the comparable period in 1996,
mainly due to the acquisition of larger volume clinics during the first six
months of 1996.
Net cash provided (used) by financing activities changed from $16,968,000 for
the six months ended June 30, 1995 to ($789,000) for the comparable period of
1996. Such change was primarily attributable to the net proceeds received from
the Company's second public offering of its common stock in March 1995.
As of June 30, 1996, the Company had working capital of $11,329,000, including
cash and cash equivalents of $7,534,000. Working capital at December 31, 1995
was $17,768,000, including cash and cash equivalents of $14,560,000. Patient
service receivables, net at June 30, 1996 were $7,661,000 and the average days
outstanding were 72 days.
The Company believes that existing cash balances, cash flow from operations,
future seller financing and availability under existing bank lines of credit
will be sufficient to meet its capital requirements for the foreseeable future.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On May 22, 1996, an action styled Tammy Newman v. Russell F. Warren,
et al. (Civil Action No. 15008) was filed in the Delaware Chancery Court. The
Complaint, which purports to be a class action filed on behalf of the
stockholders of PSCM, alleges that the PSCM Board of Directors breached its
fiduciary duties in approving the Merger and that the consideration offered is
unfair and does not maximize shareholder value. PSCM, its directors
individually, and HEALTHSOUTH are named as defendants in the suit. An amended
complaint was filed on or about August 6, 1996. The amended complaint alleges
that the Company's July 23, 1996 proxy statement was materially false and
misleading in failing adequately to describe the reasons why Mr. Steven F.
Wiggins, a director, voted against proceeding with the negotiation of a
definitive merger agreement, the issues raised by Mr. Wiggins and Robert B.
Milligan, a director, at the meeting of the Board of Directors on May 12, 1996,
the reason why Mr. Milligan abstained from voting at that meeting and the reason
why
-9-
<PAGE>
Mr. Wiggins, Mr. Milligan and Mr. Ronnie P. Barnes, a director, were not in
attendance at the meeting of the Board on May 16, 1996. In addition, the amended
complaint alleges that the proxy statement is false and misleading in failing to
disclose, in connection with the disclosure of the consulting and noncompetition
agreements being entered into by Messrs. Warren and Wack; that Dr. Russell F.
Warren, the Chairman of the Board, is Russell F. Warren, Jr.'s father and that
John Sculley, a director, is Mr. Warren's uncle and Mr. Wacks father-in-law and
that Dr. Warren and Mr. Sculley are brothers-in-law. The amended complaint also
alleges that the proxy statement was deficient in failing to disclose the
projections used by Unterberg Harris in rendering its opinion of the fairness of
the terms of the Merger. The Complaint seeks injunctive relief and unspecified
damages. A hearing on an application for a temporary restraining order is
currently scheduled for August 15, 1996. The defendants are vigorously defending
the claims asserted. A complaint substantially identical to the original Newman
complaint, styled Francine Frechter v. Russell F. Warren, et al.(Civil Action
No. 15070) was filed in the same court on June 17, 1996, but has not been served
on the defendants.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
Exhibit
No.
- - - -------
2.22 - Plan and Agreement of Merger by and among HealthSouth Corporation,
Empire Acquisition Corporation and the Company, dated as of May 16,
1996 (incorporated herein by reference to the Company's Current Report
on Form 8-K, dated May 16, 1996)
10.93 - Amended and Restated Limited Partnership Agreement of Professional
Sports Care Queens, L.P. dated as of June 28, 1996
10.94 - Management and License Agreement between Professional Sports Care
Queens, L.P. and Kevin Kennedy, PT, P.C. dated as of June 28, 1996
(with Schedule A, Schedule B and Exhibit A only)
27.1 - Financial Data Schedule
(B) REPORTS ON FORM 8-K
Current Report on Form 8-K, dated May 16, 1996, filed on June 5, 1996
to report (Item 5) the signing by the Company of a definitive
agreement to be acquired by HEALTHSOUTH through the merger of Empire
Acquisition Corporation, a wholly-owned subsidiary of HEALTHSOUTH,
with and into the Company.
-10-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PROFESSIONAL SPORTS CARE MANAGEMENT, INC.
(REGISTRANT)
AUGUST 14, 1996 BY /S/ MICHAEL P. NEUSCHELER
-------------------------
MICHAEL P. NEUSCHELER
EXECUTIVE VICE PRESIDENT
AND CHIEF FINANCIAL OFFICER
-11-
<PAGE>
INDEX OF EXHIBITS
NUMBER DESCRIPTION PAGE
- - - ------ ----------- ----
10.93 - Amended and Restated Limited Partnership Agreement of
Professional Sports Care Queens, L.P. dated as of
June 28, 1996
10.94 - Management and License Agreement between Professional
Sports Care Queens, L.P. and Kevin Kennedy, PT, P.C.
dated as of June 28, 1996 (with Schedule A, Schedule B
and Exhibit A only)
27.1 - Financial Data Schedule 13
-12-
AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT
OF
PROFESSIONAL SPORTS CARE QUEENS, L.P.
THIS AGREEMENT is made as of the 28th day of June, 1996 by and among
PROFESSIONAL SPORTS CARE MANAGEMENT, INC., a Delaware corporation with offices
at 550 Mamaroneck Avenue, Harrison, New York 10528, (hereinafter referred to as
the "General Partner") and ADAM ELBERG with an address at 522 Shore Road,
Apartment 6P, Long Beach, New York 11561 and RONALD LINFONTE with an address at
79-3A Richmond Boulevard, Ronkonkoma, New York 11779 and KEVIN KENNEDY with an
address a 7 Fox Run Drive, Englewood, New Jersey 07631 (hereinafter collectively
referred to as the "Limited Partners" or individually as a "Limited Partner").
The General Partner and the Limited Partners are hereinafter sometimes
collectively referred to as the "Partners" or individually as a "Partner".
WHEREAS, the General Partner, Answorth A. Allen, M.D., Ronald Linfonte
and Creative Medical Technologies, Inc. executed a certain Limited Partnership
Agreement of Professional Sports Care Queens, L.P. dated as of June 28, 1995
(hereinafter referred to as the "Initial Agreement"); and
WHEREAS, the Initial Agreement required that initial capital
contributions be made to the Partnership by each party to the Initial Agreement;
and
WHEREAS, neither Answorth A. Allen, M.D. nor Creative Medical
Technologies, Inc. made its respective capital contribution to the Partnership
as required by
<PAGE>
the Initial Agreement and therefore never became Limited Partners and never
acquired any rights under or pursuant to the Initial Agreement; and
WHEREAS, Answorth A. Allen, M.D. and Creative Medical Technologies,
Inc. have advised the General Partner that each has elected not to participate
in the Partnership; and
WHEREAS, the Partners desire to amend and restate the Initial
Agreement; and
NOW, THEREFORE, in consideration of the mutual covenants, promises,
agreements, representations and warranties hereinafter contained, the parties
hereto do hereby covenant, promise, agree, represent and warrant as follows:
ARTICLE I
FORMATION, NAME AND PURPOSE
Section 1.1 Formation
The parties hereto hereby agree to form a Limited Partnership known as
PROFESSIONAL SPORTS CARE QUEENS, L.P., pursuant to the provisions of the Revised
Uniform Limited Partnership Act of the State of New York.
Section 1.2 Name
The Partnership shall be conducted under the name and style of
PROFESSIONAL SPORTS CARE QUEENS, L.P. (hereinafter referred to as the
"Partnership"). The principal office of the Partnership shall be maintained at
176-60 Union Turnpike, Flushing, New York 11366. The mailing address shall be at
550 Mamaroneck Avenue, Harrison, New York 10528.
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Section 1.3 Purpose
The purpose of the partnership is to provide consulting in the
start-up of managing and administering the operations of and providing other
services to business entities which administer and deliver physical therapy and
other rehabilitative and therapeutic programs.
Section 1.4 Authorized Acts
In furtherance of its purposes, but subject to all other provisions of this
Agreement, the Partnership is hereby authorized:
i. To acquire by purchase, lease or otherwise, any real or personal
property which may be necessary, convenient or incidental to the accomplishment
of the purposes of the Partnership;
ii. To construct, operate, maintain, finance and improve, and to own,
sell, convey, assign, mortgage or lease any real estate and any personal
property necessary, convenient or incidental to the accomplishment of the
purposes of the Partnership;
iii. To borrow money and issue evidences of indebtedness in
furtherance of any or all of the purposes of the Partnership, and to secure the
same by mortgage, pledge or other lien on the Property or any other assets of
the Partnership;
iv. To enter into, perform and carry out contracts of any kind,
including contracts with affiliated persons, necessary to, in connection with or
incident to, the accomplishment of the purposes of the Partnership, specifically
including, but not limited to, the execution and delivery of all agreements,
certificates, instruments or documents required by or in connection with the
acquisition, construction, development, improvements, maintenance and operation
of Partnership property; and
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v. To enter into any kind of activity and to perform and carry out
contracts of any kind necessary to, or in connection with, or incidental to, the
accomplishment of the purposes of the Partnership, so long as said activities
and contracts may be lawfully carried on or performed by a partnership under the
laws of the State.
Section 1.5 Term
The term of the Partnership shall commence on the date on which a
Certificate of Limited Partnership shall be filed with the Office of the New
York Secretary of State and shall continue in full force and effect until
December 31, 2045, unless terminated prior to such date as provided elsewhere in
this Agreement.
ARTICLE II
PARTNERS AND CAPITAL
Section 2.1 General Partner
The General Partner of the Partnership is PROFESSIONAL SPORTS CARE
MANAGEMENT, INC., a Delaware corporation.
Section 2.2 Limited Partners
The Limited Partners shall be ADAM ELBERG, RONALD LINFONTE and KEVIN
KENNEDY.
Section 2.3 Partnership Capital
The capital of the Partnership shall be the aggregate amount of the
cash contributed or exclusive services provided by the General Partner and the
Limited Partners, as hereinafter set forth. The original capital account of each
Partner shall for all purposes of this
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Agreement be deemed the amount of his capital contribution (the "Capital
Contribution"). No interest shall be paid on any Capital Contribution to the
Partnership.
Section 2.4 Withdrawal of Capital
Except as may be specifically provided in this Agreement, no Partner
shall have the right to withdraw from the Partnership all or any part of his
Capital Contribution.
Section 2.5 Liability of Limited Partners
No Limited Partner shall be liable for any debts, liabilities, contracts, or
obligations of the Partnership. After his Capital Contribution shall be fully
paid no Limited Partner shall be required to make any further capital
contribution nor lend any funds to the Partnership.
Section 2.6 Special Rights of Limited Partners
A. Notwithstanding any provisions to the contrary herein, and subject
to the provisions set forth in this Section 2.6, the Limited Partners, by a
unanimous vote of the Limited Partners, shall have the right to remove any
General Partner who is found by a court of competent jurisdiction, and such
finding is beyond appeal or otherwise final, to have willfully violated his
fiduciary responsibility as a General Partner; provided, however, that no such
removal of a General Partner shall affect the vested rights (including, without
limitation, the right to receive any fees payable to any General Partner, income
profits and losses and net proceeds from a sale or refinancing) or increase any
of the obligations or liabilities of any General Partner, without his consent;
and, provided, further, that the attempted exercise of rights provided for in
this paragraph shall be ineffective unless and until such consenting Limited
Partners shall have first obtained an opinion of counsel in a form satisfactory
to
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100% in interest of the Limited Partners stating that such action or consent (a)
would not affect the classification of or result in a termination of the
Partnership for Federal income tax purposes and (b) would not cause the Limited
Partners to lose the limited liability under the laws of the State.
B. Any General Partner removed pursuant to this Section 2.6 shall,
upon such removal, become a Limited Partner with the following restricted
rights, and as such shall not have any right to participate in the management of
the affairs of the Partnership or vote in any vote requiring the Consent of the
Limited Partners, and shall not be entitled to any portion of the profits and
losses, cash or other assets distributable to the Limited Partners, but such
person shall retain the share of the capital, profits and losses, cash or other
assets of the Partnership distributable to the General Partner in the same
proportion to which he was entitled in his capacity as a General Partner
hereunder; provided, however, that the Limited Partners or any successor General
Partner proposed by them shall have the option, but not the obligation, to
acquire the interest in the Partnership (For purposes of this Agreement,
"interest in the Partnership", "interest" or "partnership interest" shall mean
the entire interest of a partner as a partner in the Partnership, including his
interest in distributions of Cash Flow, his Capital Account, and his interest in
the Profits and Losses, all as provided in this Agreement, and his right to
participate as a Partner) of any General Partner so removed upon payment of the
fair market value of such interest as of the date of removal of the General
Partner which fair market value shall be determined by the then independent
public accountant of the Partnership in accordance with the same accounting
practices and principles used by said accountant in connection with the
preparation and filing of the Partnership's Federal Income
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Tax Returns. The then accountant's decision shall be promptly rendered and shall
be final and binding upon the parties hereto and any successor General Partner.
With respect to any other transfer of an interest in the Partnership, the then
accountants shall value said interest as of the date of notice of such transfer.
Said amount shall accrue interest from such date of notice to the date of
payment at the rate of 6% per annum. Notwithstanding the foregoing provisions of
this Section 2.6, the Partnership shall not be required to make payments to a
General Partner so removed to the extent of any damages suffered by the
Partnership as a result of any material breach of the obligations of such
General Partner hereunder. A General Partner so removed will not be liable for
any obligations of the Partnership which arise after the effective date of his
removal. ARTICLE III
CAPITAL CONTRIBUTION
DEATH, TRANSFER, TERMINATION AND DISABILITY
OF LIMITED PARTNERS
Section 3.1 Capital Contributions and Partnership Interest (3.1.2)
3.1.1 Simultaneously with the execution of this Agreement, the
Limited Partners have made the following initial Capital Contribution to the
Partnership:
ADAM ELBERG $25,000.00
RONALD LINFONTE In exchange for services
rendered in connection with the
formation of the partnership, and
subject to the restrictions on
transferability of his partnership
interest contained in this Agreement,
Ronald Linfonte's capital contribution
is valued at $12,000.00
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KEVIN KENNEDY In exchange for services
rendered in connection with the
formation of the partnership, and
subject to the restrictions on
transferability of his partnership
interest contained in this Agreement,
Kevin Kennedy's capital contribution is
valued at $4,000.00
3.1.2 (a) ADAM ELBERG as a Limited Partner has a 25% interest in the
Partnership.
(b) RONALD LINFONTE as a Limited Partner has the following
interest in the Partnership.
i) during the first 12 month period after the date of this
Agreement: 8%.
ii) during and after the second 12 month period after the date of
this Agreement: 12%.
(c) KEVIN KENNEDY as a Limited Partner has the following interest
in the Partnership.
i) during the first 12 month period after the date of this
Agreement: 2%.
ii) during and after the second 12 month period after the date of
this Agreement: 4%.
3.1.3 At any time from and after the 12 month period following the
date of this Agreement, the General Partner shall have the right to purchase a
portion or all of the interests of the Limited Partners in the Partnership. Such
right shall be exercised by the
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General Partner by giving written notice of such exercise to each Limited
Partner. Any such notice shall set forth the interests being purchased and the
effective date of any such purchase. The purchase price for any such acquisition
shall be equal to the greater of (a) the amount determined by the then
independent public accountant of the Partnership by valuing the Partnership at
four (4) times the taxable earnings from the immediately prior twelve (12) month
period from the date of such notice multiplied by the interest to be transferred
and (b) the initial capital contribution made by the Limited Partner
transferring its interest towards the interest to be transferred. At the closing
of any such acquisition, the Limited Partner(s) transferring its interest shall,
upon payment of the required purchase price, execute and deliver to the General
Partner any and all documentation reasonably required to accomplish such
transfer. In the event the General Partner acquires all of the interests in the
Partnership, the Partnership shall dissolve and terminate, effective upon the
date of such acquisition.
Section 3.2 Purchase Obligations Upon Death
3.2.1 Upon the death of a Limited Partner who is an individual, his
estate shall sell and the Partnership shall purchase the interest which was
owned by the deceased Limited Partner at his death for the price and upon the
other terms hereinafter provided.
3.2.2 To the extent that the Partnership is prevented by law from
purchasing any interest owned by the deceased Limited Partner's estate or at the
option of all of the surviving Partners, each surviving Partner shall purchase
from the deceased Limited Partner's estate and the latter shall sell for the
price and upon the other terms hereinafter provided that proportion of such
unpurchased interest which equals the proportion which the interest owned
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by each such surviving Partner at the deceased Limited Partner's death is of the
total interest then owned by all the surviving Partners.
Section 3.3 Option upon Voluntary Transfer
3.3.1 Notice of Transfer If a Limited Partner intends to transfer its
partnership interest of which he is owner to any person other than the
Partnership, he shall give 30 days' written notice to the Partnership and the
remaining Partners of his intention to so transfer. The notice, in addition to
stating the fact of the intention to transfer the interest, shall state (i) the
interest to be transferred, (ii) the name, business and residence address of the
proposed transferee, (iii) whether or not the transfer is for a valuable
consideration, and if so, the amount of the consideration and the other terms of
the sale.
3.3.2 Primary Option to Purchase Within 30 days of the Partnership's
receipt of the notice, the Partnership may exercise an option to purchase all or
any portion of the interest proposed to be transferred for the price and upon
the other terms hereinafter provided. If the Partnership does not exercise its
option to purchase all or any portion of such interest, each remaining Partner
within 45 days of his receipt of the notice of the proposed transfer, may
exercise an option to purchase that proportion of the unpurchased interest which
equals the proportion which the interest owned by each such remaining Partner at
the time of the Partnership's receipt of said notice is of the total interest
then owned by all such remaining Partners. The purchase option granted in this
paragraph is sometimes hereinafter referred to as the "Primary Option."
3.3.3 Secondary Option to Purchase If neither the Partnership nor a
Partner exercises its or his Primary Option to purchase such interest, each
other Partner who is
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granted and who exercises a Primary Option may within ten days after the
expiration of the 45 day option period provided for in paragraph 3.3.2 exercise
an option to purchase the interest with respect to which the Partnership or such
Partner has failed to exercise his Primary Option (hereinafter "the Option
Interest"). In the case of a single other Partner his option shall be to
purchase all of the Option Interest. In the case of two or more other Partners,
each other Partner's option shall be to purchase the amount of the Option
Interest which bears the same proportion to the total amount of the Option
Interest as the interest owned by each such other Partner at the time of the
Partnership's receipt of the notice provided for in paragraph 3.3.2 bears to the
total interest then owned by all such other Partners, provided that all other
Partners may by agreement among themselves determine the proportions in which
some or all of their number may exercise the option granted in this paragraph
3.3.3. The Purchase Option granted by this paragraph is sometimes hereinafter
referred to as the "Secondary Option."
3.3.4 The Partnership and the remaining Partners must in the aggregate
exercise their options to purchase all of the interest proposed to be
transferred or forfeit their options.
3.3.5 If a Partner who proposes to transfer his interest dies prior to
the closing of the sale and purchase contemplated by this paragraph 3.3, his
interest shall be the subject of sale and purchase under paragraph 3.2.
Section 3.4 Option upon Involuntary Transfer
If other that by reason of a Partner's death a Partnership interest is
transferred by operation of law to any person other than the Partnership (such
as but not limited to a Partner's trustee in bankruptcy, a purchaser at any
creditor's or court sale or the
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guardian or conservator of an incompetent Partner), the Partnership or the
remaining Partners, within 45 days of the Partnership's receipt of actual notice
of the transfer in the case of a Primary Option and within 60 days of such event
in the case of a Secondary Option may exercise an option to purchase all but not
less than all of the interest so transferred in the same manner and upon the
same terms as provided in paragraph 3.3, with respect to the partnership
interest proposed to be transferred.
Section 3.5 Purchase Obligations Upon Disability
If a Limited Partner who is an individual shall become totally
disabled, the Partnership or the remaining Partners, within 60 days of the date
of the commencement of such total disability shall purchase all but not less
than all of the interest owned by the disabled Limited Partner at the time of
the commencement of his total disability. A Limited Partner shall be deemed
totally disabled within the meaning of this paragraph 3.5 if as a result of
sickness, accident or injury, he becomes wholly and continuously unable to
perform his duties for a period of twelve consecutive months, and his disability
shall be deemed to have commenced at the end of said twelve month period.
However, if such Limited Partner is covered by a disability insurance policy
provided by the Partnership, the definition and determination of disability made
by such insurance company shall be controlling.
Section 3.6 Exercise of Options and Effect of Non-Exercise of Options
3.6.1 The Partnership and the Partners who exercise the Primary Option
or Secondary Option granted in paragraphs 3.3 or 3.4 shall do so by delivering
written notice of the exercise of the options within the times provided in said
paragraphs to the proposed
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transferor in case of a paragraph 3.3 option, to the transferee in the case of a
paragraph 3.4 option, and to the remaining Partners in all of said cases.
3.6.2 If the purchase options are forfeited or not exercised in
compliance with paragraph 3.3 or 3.4, then in the case of a proposed transfer
under paragraph 3.3, the interest may be transferred within ten days after the
expiration of the 60 day Secondary Option period granted to each remaining
Partner under paragraph 3.3.3 to the transferee named in the notice required by
paragraph 3.3, and upon the terms therein stated subject to the terms of this
Agreement; and in the case of a transfer of interest under paragraph 3.4, the
interest after the expiration of the 60 day Secondary Option period granted to
each remaining Partner under paragraph 3.4 shall remain in the ownership of the
transferee, and shall be subject to the terms of this Agreement.
3.6.3 If in the case of a paragraph 3.3 transfer, the transfer is not
upon the terms or is not to the transferee stated in the notice required of the
transferring Limited Partner by paragraph 3.3, or is not within the aforesaid
ten day period, or the transferor, after the transfer, reacquires all or any
portion of the transferred interest, the interest transferred or reacquired, as
the case may be, shall remain subject to this Agreement as if no transfer had
been made.
Section 3.7 Purchase Price
The purchase price of an interest transferred under Article III hereto
(other than a transfer pursuant to Section 3.13 hereof) shall be determined in
the same manner or valuation of a General Partner interest under Section 2.6(B).
Section 3.8 Payment of Purchase Price
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The payment of a purchase price for an interest hereunder shall be
paid in cash except that at the option of the purchasing party or Partner, 80%
of the purchase price may be deferred by a self-amortizing five (5) year note at
the then lowest applicable federal interest rate as defined in ss.1274 of the
Internal Revenue Code. In the event the purchasing party is the Partnership, the
amount to be paid in cash shall be no less than the amount of the initial
capital contribution made by the Partner selling its interest towards the
interest being sold.
Section 3.9 Transfer to Immediate Family Members Notwithstanding any
other provision of this Agreement any Limited Partner who is an individual may
transfer his interest in the limited partnership to an "Immediate Family Member"
or "Immediate Family Members" ("Immediate Family Member" defined as any parent,
adult sibling, adult child, adult stepchild, spouse, grandparent or adult
grandchild), without complying with the terms of Article III, provided such
family member(s) executes the limited partnership agreement and any amendments
thereto which are in force and effect at such time.
ARTICLE IV
CAPITAL CONTRIBUTION
RIGHTS, POWERS AND DUTIES OF THE GENERAL PARTNER
Section 4.1 Capital Contribution
4.1.1 Simultaneously with the execution of this Agreement, the General
Partner has made a $59,000.00 initial Capital Contribution to the Partnership.
4.1.2 The General Partner has the following interest in the
Partnership:
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i) during the first 12 month period after the date of this
Agreement: 65%.
ii) during and after the second 12 month period after date of
this Agreement: 59%.
Section 4.2 Authority
The General Partner shall have all the powers of a general partner
under the Revised Uniform Limited Partnership Act of the State of New York
including, but not limited to, all those powers enumerated in Section 1.4.
Section 4.3 Other Activities
The General Partner may engage independently or with others in other
business ventures of every nature and description and neither the Partnership
nor any other Partner shall have any rights by virtue of this Agreement in and
to such independent ventures or the income or profits derived therefrom.
Section 4.4 Business Management and Control
The General Partner shall have the exclusive right to manage the
business of the Partnership. No Limited Partner (except one who may also be a
General Partner, and then only in his capacity as General Partner) shall
participate in or have any control over the Partnership business, except as
required by law or otherwise provided in this Agreement. The Partners hereby
consent to the exercise by the General Partner of the powers conferred on them
by this Agreement. No Limited Partner (except one who may also be a General
Partner) shall have any authority or right to act for or to bind the
Partnership.
Section 4.5 Delegation of General Partners' Authority
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If there shall be more than one General Partner serving hereunder,
each General Partner may from time to time, by an instrument in writing,
delegate all or any of his powers or duties hereunder to another General Partner
or Partners. Such writing shall fully authorize such other General Partner to
act alone without the requirement of any act or signature of the other General
Partner, to take any action permitted by the authorization and to do anything
and everything which the General Partner is so authorized to take or do
thereunder, provided, however, that any such delegation shall not relieve the
General Partner making such delegation of the obligations under this Agreement.
Every contract, deed, mortgage, lease and other instrument executed by any
General Partner so authorized shall be conclusive evidence in favor of every
person relying thereon or claiming thereunder that at the time of the delivery
thereof (a) this Partnership was in existence, (b) this Agreement had not been
terminated or canceled or amended in any manner so as to restrict such authority
(except as shown in certificates or other instruments duly filed as required by
the Act), and (c) the execution and delivery of such instruments were duly
authorized by the General Partners. Any person dealing with the Partnership or
the General Partners may always rely on a certificate signed by any General
Partner hereunder:
i. as to who are the General Partner(s) or Limited Partner(s)
hereunder;
ii. as to the existence or nonexistence of any fact or facts which
constitute conditions precedent to acts by the General Partner(s)
or in any other manner germane to the affairs of this
Partnership;
iii. as to who is authorized to execute and deliver any instrument or
document of the Partnership;
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iv. as to the authenticity of any copy of this Agreement and
amendments thereto; or
v. as to any act or failure to act by the Partnership or as to any
other matter whatsoever involving the Partnership or any Partner.
Section 4.6 Duties and Obligations
A. The General Partner shall devote to the Partnership such time as it
shall deem to be necessary for the proper performance of its duties. The General
Partner shall use reasonable business judgment in managing all business affairs
of the Partnership.
B. The General Partner shall obtain and keep in force at Partnership
expense during the term of the Partnership fire and extended coverage, worker's
compensation and public liability insurance in favor of the Partnership with
such companies and in such amounts as are customary for properties similar to
the Partnership's.
Section 4.7 Indemnification
To the extent permitted by the Law, the Partnership shall indemnify
and hold harmless the General Partner, to the extent of the Partnership's
assets, from and against any loss, damage or expense incurred by reason of the
fact that it is or was a General Partner of the Partnership or by reason of any
act performed by it on behalf of the Partnership or in furtherance of the
interests of the Partnership except where the General Partner has acted with
gross negligence or willful misconduct or where the General Partner is adjudged
to have been in default or breached their duty to the Partnership or Partners
under this Agreement.
Section 4.8 Liability of General
Partner to Limited Partners
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No General Partner shall be liable to the Partnership or to any
Limited Partner for any loss damage or expense incurred in connection with the
affairs of the Partnership unless such loss, damage, or expense results from
willful misconduct or gross negligence of such Partner.
Section 4.9 Obligations of the General Partner
In the event there is more than one General Partner, each obligation
of the General Partners hereunder shall be the joint and several obligation of
each General Partner.
Section 4.10 Sale of Interest
The General Partner shall have the right to sell a portion of its
Partnership interest to additional limited partners and/or existing limited
partners. The General Partner shall not have the right to sell his entire
interest or otherwise retire as a General Partner without the consent of a
majority of the Limited Partners as specified in Article V.
ARTICLE V
RETIREMENT OR RESIGNATION OF A GENERAL PARTNER;
NEW GENERAL PARTNERS
Section 5.1 Retirement and Resignation
Except as hereinafter provided, no General Partner shall have the
right to retire or resign (as used herein, the terms "retirement" or "retiring"
shall be deemed to include and refer to a "resignation" and a "resigning")from
the Partnership or sell, assign, transfer or encumber his interest as a General
Partner without the consent of a majority of the Limited Partners. Each General
Partner may assign the proceeds of any Partnership distribution in respect of
his interest as a General Partner. In the event of the retirement of a General
Partner, the retiring General Partner shall transfer its interest in the
Partnership in accordance
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with Section 5.4. In addition, such retiring General Partner shall remain liable
for the performance of all its obligations under this Agreement, arising on or
before the date of retirement.
Section 5.2 Obligation to Continue
Upon the retirement of a General Partner, the retired General Partner
or his heirs, successors or assigns, shall immediately send notice of such
retirement (the"Retirement Notice") to each Limited Partner, and the Partnership
shall be (i) terminated if there is no remaining General Partner and if the
Partnership is not reconstituted as provided in Section 5.3 or (ii) continued by
the remaining or newly-designated General Partner(s).
Section 5.3 Retirement of General Partner
A. In the event the General Partner retires, the Partnership shall
dissolve and terminate unless the Limited Partners elect, pursuant to the
provisions of Section 5.3(B), to continue the Partnership, in which event the
Partnership shall be reconstituted, without liquidation, and shall continue
under the same name and upon all of the terms and conditions of this Agreement.
B. In the event of the retirement of the General Partner, the Limited
Partners, by the affirmative vote of two-thirds in interest thereof, shall have
the right, but not the obligation, to elect to reconstitute the Partnership with
one of the Limited Partners as the General Partner(s) thereof and to continue
the business thereof, upon all the terms and conditions of this Agreement,
except as modified by this Section 5.3(B). Such election, which shall be
effective as of the date of such retirement, shall be exercised by the Limited
Partners or a designated representative thereof sending a notice to that effect
to all Partners
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within sixty (60) days after the later of (i) the date of retirement; or (ii)
the date on which the Limited Partners receive notice of such retirement. In
lieu of becoming General Partner(s) of the partnership, the Limited Partner may
elect, either by the aforesaid notice, or at any time thereafter, to assign a
portion of their interests in the Partnership to one or more third parties who
shall agree to act as General Partner, and the Limited Partners shall remain
Limited Partners with respect to the portion of their interests not so assigned.
Section 5.4 Interest of Retired General Partner
A. Each General Partner hereby agrees that at the time of his
retirement all his General Partnership interest shall be automatically converted
to that of a Limited Partner in accordance with Section 2.6(B); provided,
however, that the Limited Partners shall not have the right to purchase the
interest of the General Partner so converted for any reason other than the
removal of such General Partner as provided in Section 2.6.
B. For the purpose of Article VI hereof, the effective date of the
transfer pursuant to the provisions of Paragraph A of this Section 5.4 of the
General Partner's interest of a retired General Partner shall be deemed to be
the date on which such retirement occurs.
Section 5.5 Retirement Plan
The Partnership shall not sponsor a Qualified Retirement Plan under
Section 401(a) of the Internal Revenue Code of 1986 without the unanimous
consent of all partners.
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Section 5.6 Designation of New General Partners
The General Partner may, with the unanimous consent of the Limited
Partners, at any time designate one or more additional General Partners (which
may be corporations) each to possess such proportion of the aggregate General
Partner's interest in the Partnership as may be agreed to by such General
Partners, and any such newly added General Partners shall agree to be bound by
the Partnership obligations and any other documents required in connection
therewith and by the provisions of this Agreement, to the same extent and on the
same terms as any other than General Partner(s).
Section 5.7 Amendment of Certificate
Upon the admission of an additional General Partner, such admission
and an amendment to the Certificate of Limited Partnership shall be filed in
accordance with Law. Each General Partner is hereby irrevocably constituted and
empowered to act alone as the attorney-in-fact of each Limited Partner, with
authority to execute, acknowledge, swear to, and deliver such instruments as may
be necessary or appropriate to carry out the foregoing provisions of this
Article V, including amendments to the Certificate of Limited Partnership
required by Law, business certificates and the like.
ARTICLE VI
PROFITS & LOSSES; DISTRIBUTIONS; CAPITAL ACCOUNTS
Section 6.1 Allocation of Profits and Losses
A. For each fiscal year or portion thereof, profits and losses
incurred and/or accrued from and after the date hereof other than those arising
from the sale or other disposition of all or substantially all of the assets of
the Partnership as set forth in Paragraph
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B below, shall be allocated 41% (or such lesser percentage until such time as
Ronald Linfonte's interest shall be 12% and Kevin Kennedy's interest shall be
4%) to the Limited Partners, in the ratio in which the paid-in Capital
Contribution of each Limited Partner bears to the total Limited Partner Class
Contribution, and 59% (or such greater amount until such time as the General
Partner's interest shall be 59%) to the General Partners, for each fiscal year.
B. All profits and those losses arising from sale or other disposition
of all or substantially all the assets of the Partnership shall be allocated to
the Partners as follows:
i. Any profits shall be allocated:
a. first to the Partners with negative Capital Accounts pro rata
in accordance with such Capital Accounts determined as of the date
such allocation is made and without giving effect to distributions of
Capital Items (as defined in Paragraph 6.2 A(iv), until the Capital
Account of each Partner is raised to zero, but no gains shall be
allocated to a Partner under this Section 6.1(B) once his Capital
Account is brought to zero; and
b. then, to the Partners in the same ratio that Capital Items are
distributed to them, pursuant to 6.2 (D), but if no cash from Capital
Events is distributable to the Partners then in the manner set forth
in Section 6.1 (A) hereof.
ii. Any losses shall be allocated:
a. first, to the Partners with positive Capital Accounts pro rata
in accordance with such Capital Accounts until the Capital Account of
each
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Partner is brought to zero, but no loss shall be allocated to a
Partner under this Section 6.1(B) after his Capital Account is brought
to zero; and
b. then, to the Partners in the manner set forth in Section 6.1
(A) hereof.
iii. Notwithstanding the foregoing of this Section 6.1, where a
Partner's Capital Account has a deficit balance, such partner shall be
charged back with not less than the Minimum Gain as provided in Treas. Reg.
Section 1.704-1(b).
C. All profits and losses shared by the Partners shall be credited or
charged, as the case may be, to their Capital Accounts.
D. For purposes of this Agreement, the term "profits" and "losses"
shall mean the profits and losses of the Partnership as determined in accordance
with the same accounting practices and principles used by the Partnership in
connection with the preparation and filing of the Partnership's federal income
tax returns.
Section 6.2 Distributions
A. Distributions Prior to Termination: Subject to any Mortgages, and
after the payment of or reserve for (in such reasonable amounts as may be
determined by the General Partners) all current debts, including expenses, fees
and capital improvements, Cash Flow (as defined below) for each fiscal year (or
fractional portion thereof), shall be distributed, to the extent available, 41%
(or such lesser percentage until such time as Ronald Linfonte's interest shall
be 12% and Kevin Kennedy's interest shall be 4%) to the Limited Partners, in the
ratio in which the paid-in Capital Contribution of each Limited Partner bears to
the total Limited Partner Class Contribution, and 59% (or such greater amount
until such time as the General
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Partner's interest shall be 59%) to the General Partners (subject to any payment
due to the Limited Partners under Section 6.2(B)). Definition of Cash Flow: For
all purposes of this Agreement, the term "Cash Flow" shall mean the profits of
the Partnership from and after the date hereof (as determined by the cash
receipts and disbursements method) but subject to the following:
i. Depreciation of building, improvements and personal property and
amortization of any financing fee shall not be considered as a deduction.
ii. If the General Partners shall so determine, a reasonable reserve
shall be deducted to provide for working capital needs, funds for improvements
or replacements or for any other contingencies of the Partnership.
iii. Any amounts paid by the Partnership for capital expenditures
shall be considered as a deduction, unless paid by cash withdrawal from any
replacement reserve for capital expenditures.
iv. "Capital Items", which is hereby defined to mean the proceeds of
any mortgage financing or refinancing, and gain or loss from any sale, exchange,
eminent domain taking, damage or destruction by fire or other casualty, or other
disposition of all or any part of the Property (other than the proceeds of any
business or rental interruption insurance), shall not be included.
v. Proceeds of insurance on account of business interruption or lost
rents shall be included as income in Cash Flow.
B. Capital Items: The General Partner, in the exercise of reasonable
business judgment, shall determine the amount of all cash held by the
Partnership derived from Capital
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Items that is available for distribution to the Partners. Such cash shall be
distributed at such times as the General Partner shall determine, to be
allocated to each Partner in the same manner, to the same extent and with the
same priorities and distributions made under Section 6.2 (D).
C. Distributions Upon Termination or Sale of the Partnership Assets
Upon the termination and dissolution of the Partnership upon sale of all or
substantially all of the Partnership's assets, or otherwise, the cash and other
assets available for distribution ("Partnership Assets") after provision for
payment of all liabilities, including expenses, fees, capital improvements,
service or repayment of debts, and after the establishment of reserves with the
General Partners shall be distributed in the following order of priority:
(1) To the Limited Partners - 41% (or such lesser percentage
until such time as Ronald Linfonte's interest shall be 12% and Kevin Kennedy's
interest shall be 4%)
(2) To the General Partner - 59% (or such greater amount until
such time as the General Partner's interest shall be 59%)
D. Allocation Amount Limited Partners: All distributions to Limited
Partners shall be shared by each Limited Partner in the ratio in which his
paid-in Capital Contribution bears to the paid-in Limited Partner Class
Contribution. The Capital Account of each Partner shall be charged with his
allocable share of all distributions.
Section 6.3 Distribution in Kind
If any assets of the Partnership are to be distributed in kind, such
assets shall be distributed on the basis of the fair market value thereof and
any Partner entitled to any interest in such assets shall receive such interest
therein as a tenant-in-common with all other
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Partners so entitled. The fair market value of such assets shall be determined
by the General Partner.
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CAPITAL ACCOUNTS
----------------
Section 6.4 General Rules
Each Partner's Capital Account shall be maintained in accordance with
the following provisions:
6.4.1. Each Partner's Capital Account shall initially equal such
Partner's Capital Contribution as set forth in Section 3.1.1 for the Limited
Partner and Section 4.1.1 for the General Partner.
6.4.2. Each Partner's Capital Account shall be increased by (a) the
amount of any additional cash and the fair market value of any property
subsequently contributed by such Partner to the capital of the Partnership; and
(b) the amount of any Profits or item thereof allocated to such Partner pursuant
to Section 6.1.
6.4.3. Each Partner's Capital Account shall be reduced by (a) the
amount of all Cash Distributions made to such Partner pursuant to Section 6.2;
(b) the fair market value of any property distributed by the Partnership to such
Partner; and (c) the amount of any Losses or item thereof allocated to such
Partner pursuant to Section 6.1
6.5 Effect of Transfer of Partnership Interest In the event that any
Partnership Interest is transferred in accordance with the terms of this
Agreement, the transferee shall succeed to the Capital Account of the transferor
to the extent it relates to the transferred Partnership Interest.
6.6 Compliance with Regulations; Permitted Adjustments The foregoing
provisions relating to the maintenance of Capital Accounts are intended to
comply with Regulation ss.1.704-1(b), and (to the extent possible) shall be
interpreted and applied in a manner consistent with such Regulation. If the
General Partner determines that it is necessary
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or appropriate to modify the manner in which Capital Accounts are computed in
order (i) to comply with said Regulation, or (ii) to select any options
available under said Regulation not otherwise specified in this Agreement
(including, without limitation, an election under Regulation ss.1.704-1(b) (2)
(iv) (f) to adjust the "book values" of the Partnership assets and Capital
Accounts), or (iii) to make adjustments that it deems equitable or practicable
and consistent with the Partners' economic interests in the Partnership, then
the General Partner may make such modification or adjustment or select such
option, provided that it is not likely to have a material adverse effect on any
Partner.
ARTICLE VII
BOOKS AND RECORDS, ACCOUNTING, TAX ELECTIONS, ETC.
Section 7.1 Books and Records
The General Partner shall keep or cause to be kept complete and
accurate books and records of the Partnership which shall be maintained in
accordance with sound accounting practices and shall be maintained and be
available at the office of the General Partner for examination by any Partner,
or his duly authorized representatives, at any and all reasonable times. The
Partnership may maintain such books and records and may provide such financial
or other statements, including those required from time to time by any other
appropriate administrative agency, as the General Partner deems advisable.
Section 7.2 Bank Accounts
The bank accounts of the Partnership shall be maintained in such
banking institutions as the General Partner shall determine, and withdrawals
shall be made only in the regular course of business on such signatures as the
General Partner shall determine.
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Section 7.3 Accountants
The accountants for the Partnership shall be chosen by the General
Partner. The accountant(s) shall prepare, for execution by the General Partner,
all tax returns of the Partnership.
Section 7.4 Reports to Limited Partners
Within 75 days after the end of each fiscal year, the General Partner
shall cause to be delivered to the Limited Partners and to all persons who were
Limited Partners at any time during the fiscal year, all necessary tax
information and, within 120 days after the end of each fiscal year, a financial
report of the Partnership for the prior fiscal year, including a balance sheet
and profit and loss statement, together with a certification of the accountants
covering the results of their review of the books of the Partnership.
Section 7.5 Elections
All elections required or permitted to be made by the Partnership
under the Code shall be made by the General Partner in such manner as will, in
the opinion of the Partnership's accountants, be most advantageous to the
Limited Partners.
Section 7.6 Special Basis Adjustments
In the event of a transfer of all or any part of the interest of any Partner,
the Partnership may elect, pursuant to Section 754 of the Code (or corresponding
provisions of succeeding law), to adjust the basis of the Partnership's
property. Notwithstanding anything contained in Article VII of this Agreement,
any adjustments made pursuant to said Section 754 shall affect only the
successor in interest to the transferring Partner. Each Partner will furnish the
Partnership with all information necessary to give effect to such election.
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Section 7.7 Fiscal Year and Accounting Method
The Fiscal year of the Partnership shall be the calendar year. The
books of the Partnership shall be kept on an accrual basis.
ARTICLE VIII
TERMINATION
Section 8.1 Disposition of Property
In addition to termination pursuant to Paragraphs 1.5 and 5.3, the
Partnership shall terminate upon the sale of all or substantially all of the
Partnership Assets, unless the Partnership, as part of the consideration for
such sale, acquires a mortgage or lease on the Property, in which case the
Partnership shall be terminated upon the sale by it or termination of its entire
interest in such mortgage or lease.
Section 8.2 Condemnation
A taking of all or substantially all of the Partnership Assets in
condemnation or by eminent shall be treated in all respects as a sale of the
Property so as to effect the dissolution and liquidation of the Partnership,
pursuant to this Article VIII. In such event, any portion of the Property and
assets of the Partnership not so taken shall be sold and the proceeds, together
with the condemnation award, distributed in the manner provided for in Article
VI.
Section 8.3 Liability to Return
Capital Contributions
The General Partner shall not be personally liable for the return of
the Capital Contributions of any Limited Partner, or any portion thereof, it
being expressly understood
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that any return shall be made solely from available Partnership assets; and no
Partner shall be liable to any other Partner for a deficit in his Capital
Account.
ARTICLE IX
GENERAL PROVISIONS
Section 9.1 Restrictions
A. Notwithstanding any other provision of this Agreement, except as
otherwise provided in this paragraph, no sale or exchange of any Partner's
interest in the Partnership may be made if the interest sought to be sold or
exchanged, when added to the total of all other interests in the Partnership
sold or exchanged within the period of twelve consecutive months prior to the
proposed date of sale or exchange, would result in the termination of the
Partnership under Section 708 of the Code (or any successor statute). However,
such a sale or exchange may be made if, prior to the date of transfer, a ruling
of the Internal Revenue Service (or its successors) to the effect that such
proposed sale or exchange transfer will result in such termination shall have
been published in the Internal Revenue Bulletin or a private ruling to the same
effect shall have been granted to the transferring Partner or the Partnership
upon the application and at the expense of the Partner desiring to sell or
exchange his interest in the Partnership.
B. No sale, transfer, exchange or other disposition of any interest in
the Partnership may be made except in compliance with the then applicable rules
and regulations of the governmental authority with jurisdiction over such
disposition, and the General Partners may require as a condition of any transfer
of such interest that the transferor furnish an
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opinion of qualified counsel that the proposed transfer complied with applicable
Federal and state securities laws.
C. Any sale, exchange or other transfer in contravention of any of the
provisions of this Section 9.1 shall be void and ineffectual, and shall not bind
or be recognized by the Partnership.
Section 9.2 Appointment of the Corporate General Partner as
Attorney-in-Fact
Without limiting the effect of provisions elsewhere in this Agreement,
each Limited Partner (including a substitute or additional Limited Partner)
hereby irrevocably appoints and empowers the General Partner, and the President,
Executive Vice-President, Treasurer, Secretary and Assistant Secretary of any
corporate General Partner, his true and lawful attorney-in-fact and agent, with
power of substitution, to effectuate (with full power and authority to act in
his name, place and stead in effectuating and requisite to carrying out) the
intention and purposes of the Partnership and this Agreement, including, but not
limited to, the execution, acknowledgement, swearing to, delivering, filing and
recording of all certificates (including the Certificate of Limited Partnership)
and amendments thereto, documents, conveyances, leases, contracts, loan
documents and/or counterparts hereof, the execution and filing of appropriate
documents with the holders of the Mortgages, and all other documents which the
General Partner deems necessary or reasonably appropriate, including, without
limitation, the following:
i. To qualify or continue the Partnership as a Limited Partnership;
ii. To reflect a modification of the Partnership or an amendment of
this Agreement and/or the Certificate of Limited Partnership;
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iii. To accomplish the purposes and carry out the powers of the
Partnership as set forth in Article II and Article IV; or
iv. To reflect the dissolution and termination of the Partnership.
No General Partner shall take any action as an attorney-in-fact for
any Limited Partner which would in any way increase the liability of such
Limited Partner beyond the liability expressly set forth in this Agreement. The
appointment by each Limited Partner or each General Partner and the
aforementioned corporate officers of any corporate General Partner as aforesaid
as attorneys-in-fact shall be deemed to be a power coupled with an interest, in
recognition of the fact that each of the Limited Partners and the General
Partner under this agreement will be relying upon the power of each General
Partner and the said officers to act as contemplated by this Agreement will be
relying upon the power of each General Partner and the said officers to act as
contemplated by this Agreement in such filing and other action by them on behalf
of the Partnership. The foregoing power of attorney shall be irrevocable and
shall survive the assignment by any Limited Partner of the whole or any part of
his interest hereunder, shall be binding on any assignee or vendee of a Limited
Partnership interest hereunder or any portion thereof, including any assignee or
vendee of only the distribution rights relating thereto, and shall survive the
death, incompetency or legal disability of any Limited Partner who is an
individual.
Section 9.3 Amendments to Certificate of Limited Partnership
Within 120 days after the end of any fiscal year in which the Limited
Partners shall have received any distributions under Article VI hereof, the
General Partner shall file as
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required under the laws of the State and elsewhere, as the General Partner deem
appropriate or required, an amendment to the Certificate of Limited Partnership
reducing by the amount of his allocable share of such distribution the amount of
Capital Contribution of each Limited Partner as stated in the last previous
amendment to the Certificate of Limited Partnership. No such amendment shall
affect a Partner's capital account or his obligations for future Capital
Contributions.
Section 9.4 Notices
Any and all notices called for under this Agreement shall be deemed
adequately given only if in writing and sent by registered or certified mail,
postage prepaid, to the party or parties for whom such notices are intended.
All such notices, in order to be effective, shall be addressed to the
last address of record on the Partnership books when given by the Partnership or
by the General Partner and intended for the other Partners; and to the address
of the Partnership when given by one or more of the Limited Partners and
intended for the Partnership or the General Partner.
Section 9.5 Word Meanings
The words such as "herein", "hereinbefore", "hereinafter", "hereof"
and "hereunder" refer to this Agreement as a whole and not merely to a
subdivision in which such words appear, unless the context otherwise requires.
The singular shall include the plural and the masculine gender shall include the
feminine and neuter, and vice versa, unless the context otherwise requires.
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Section 9.6 Binding Provisions
The covenants and agreements contained herein shall be binding upon,
and inure to the benefit of, the heirs, legal representatives, successors and
assigns of the respective parties hereto.
Section 9.7 Applicable Law
This Agreement shall be construed and enforced in accordance with the laws of
the State of New York.
Section 9.8 Counterparts
This Agreement may be executed in several counterparts and all so
executed shall constitute one agreement binding on all parties hereto,
notwithstanding that all the parties have not signed the original or the same
counterpart, except that no counterpart shall be binding unless signed by the
General Partner.
Section 9.9 Separability of Provisions
Each provision of this Agreement shall be considered separable, and if
for any reason any provision or provisions herein are determined to be invalid
and contrary to any existing or future law, such invalidity shall not impair the
operation of or effect those portions of this Agreement which are valid.
Section 9.10 Investment Representation
Each person who becomes a Limited Partner does hereby represent and
warrant by the signing of a counterpart of this Agreement that:
i. the interest acquired by him was acquired for investment and not
for resale or distribution;
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ii. he is qualified by his personal experience to analyze the risks
and the advantages and disadvantages of an investment in such interest
or has relied upon the advice of a person so qualified.
Section 9.11 Paragraph Titles
Paragraph titles are for descriptive purposes only and shall not
control or alter the meaning of the Agreement as set forth in the text.
Section 9.12 Amendments and Other Actions
This Agreement may be amended or modified by the General Partner
without the consent of the Limited Partners, provided, however, that all the
Limited Partners must give their consent in writing to any amendment which would
(i) extend the term of the Partnership as set forth in Section 2.5 hereof; (ii)
amend this Section 9.12; (iii) increase the liability of the Limited Partners;
or (iv) amend any Section of this Agreement under which any action expressly
requires the consent of all Partners.
Section 9.13 Restrictive Covenants
The Partnership and the Limited Partners acknowledge and agree that
the Limited Partners' relationships are of a special and unusual character which
have a unique value to the Partnership, the loss of which cannot be adequately
compensated by damages in an action at law and if used in competition with the
Partnership could cause serious harm to the Partnership. Further, the Limited
Partner and the Partnership also recognize that an important part of the Limited
Partners' relationship will be to develop good will for the Partnership through
his personal contact with the clients, patients, agents and others having
business relationships with the Partnership, and that there is a danger that
this good will, a proprietary
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asset of the Partnership, may follow the Limited Partner if and when their
relationship with the Partnership is terminated. Accordingly, the Limited
Partner covenants that for a period of two (2) years after the later to occur of
a Limited Partner's or, in the case of a Limited Partner who is an individual,
such Limited Partner's Immediate Family Member's relationship with the
Partnership ceases, the original Limited Partners (i.e., Adam Elberg, Ron
Linfonte and Kevin Kennedy) shall not (as an employee, owner, partner, agent,
shareholder, director or officer, or otherwise), directly or indirectly, without
the prior written consent of the Partnership, do any of the following within two
(2) miles from 176-60 Union Turnpike, Flushing, New York.
9.13.1 Offer to render any services or solicit the rendition of any
services which were rendered by the Partnership to any clients, patients,
customers or accounts of the Partnership to or for the benefit or account of the
Limited Partner or to or for the benefit or account of any other person or
entity.
9.13.2 Render or attempt to render any services which were rendered by
the Partnership to any clients, patients, customers or accounts of the
Partnership to or for the benefit or account of the Limited Partner or to or for
the benefit or account of any other person or entity.
9.13.3 Solicit for employment or employ to or for the benefit or
account of the Limited Partner or to or for the benefit or account of any other
person or entity any employee of the Partnership, nor shall the Limited Partner
urge, directly or indirectly, any client or referee of clients, patients,
customers, or accounts of the Partnership to discontinue, in whole or in part,
business with the Partnership or not to do business with the Partnership. For
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purposes of this Section 9.13.3 of this Agreement, the term "referee of clients"
shall mean any person or entity who or which referred a client, patient,
customer or account to the Partnership at any time prior to such cessation of
the Limited Partner's relationship with the Partnership.
9.13.4 Engage, either as a consultant, independent contractor,
proprietor, shareholder, partner, officer, director, employee or otherwise, in
any business which provides services similar to those marketed by Partnership
herein or otherwise competes with the Partnership.
9.13.5 The parties hereto agree that to the extent that any provision
or portion of Section 9.13 of this Agreement shall be held, found or deemed to
be unreasonable, unlawful or unenforceable by a court of competent jurisdiction,
then any such provision or portion thereof shall be deemed to be modified to the
extent necessary in order that any such provision or portion thereof shall be
legally enforceable to the fullest extent permitted by applicable law; and the
parties hereto do further agree that any court of competent jurisdiction shall,
and the parties hereto do hereby expressly authorize, request and empower any
court of competent jurisdiction to, enforce any such provision or portion
thereof or to modify any such provision or portion thereof in order that any
such provision or portion thereof shall be enforced by such court to the fullest
extent permitted by applicable law.
9.13.6 As the violation by a Limited Partner of the provisions of
Section 9.13 of this Agreement would cause irreparable injury to the
Partnership, and there is no adequate remedy at law for such violation, the
Partnership shall have the right, in addition to any other remedies available at
law or in equity, to enjoin the Limited Partner in a court of equity from
violating such provisions.
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WITNESS, the execution hereof under seal as of the __ day of June, 1996.
PROFESSIONAL SPORTS CARE
MANAGEMENT, INC.
ATTEST: General Partner
By:
- - - -------------------------- ------------------------------
PATRICK J. WACK, JR. RUSSELL F. WARREN, JR.
Secretary President
- - - -------------------------- ------------------------------
Witness ADAM ELBERG
Limited Partner
- - - -------------------------- ------------------------------
Witness RONALD LINFONTE
Limited Partner
- - - -------------------------- ------------------------------
Witness KEVIN KENNEDY
Limited Partner
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MANAGEMENT AND LICENSE AGREEMENT
THIS MANAGEMENT AND LICENSE AGREEMENT (the "Agreement") is made and entered
into as of this 28th day of June, 1996, by and between PROFESSIONAL SPORTS CARE
QUEENS, L.P. a New York limited partnership, with offices at 550 Mamaroneck
Avenue, Harrison, New York 10528 ("Management") and KEVIN KENNEDY, PT, P.C., a
New York Professional Corporation with offices at 1926 Broadway, New York, New
York 10023 ("Kennedy, PT, P.C.").
WHEREAS, Kennedy, PT, P.C. is in the business of providing physical therapy
and other rehabilitative and therapeutic services to its patients and clients at
the locations listed in Schedule A attached hereto; and
WHEREAS, Kennedy, PT, P.C. is interested in licensing the use of certain
office space leased by Management; and
WHEREAS, Management is in the business of consulting in the start up of,
managing and administering the non-professional operations of, and providing
other non-professional services to business entities which provide physical
therapy and other rehabilitative and therapeutic programs; and
NOW, THEREFORE, in consideration of the mutual covenants, promises,
agreements, representations and warranties hereinafter contained, the parties
hereto do hereby covenant, promise, agree, represent and warrant as follows:
1. ENGAGEMENT OF MANAGER; TERM
Kennedy, PT, P.C. hereby engages Management as the sole and exclusive
manager to manage in accordance with this Agreement the day-to-day
non-professional operations of Kennedy, PT, P.C. and to render such further
non-professional services to, or for the benefit of Kennedy, PT, P.C. as shall
be hereinafter described in this Agreement. Management hereby accepts such
engagement and agrees to exert and furnish customary levels of skill, judgment,
effort and care in furthering the interests of Kennedy, PT, P.C. in
<PAGE>
the management of the day-to-day non-professional operations of Kennedy, PT,
P.C. and in rendering such further non-professional services to, or for the
benefit of Kennedy, PT, P.C. as shall be hereinafter described in this
Agreement, all in accordance with the terms and subject to the conditions of
this Agreement. The term of this Agreement shall be for a period of one (1) year
commencing on July 1, 1996 and shall automatically renew for additional one (1)
year increments unless terminated in accordance with Paragraph 8 of this
Agreement. Notwithstanding anything to the contrary contained herein, this
Agreement shall relate only to Kennedy, PT, P.C.'s operations at the Facilities,
as said term is defined in Paragraph 6 of this Agreement.
2. REPRESENTATIONS AND WARRANTIES .
2.1 Representations and Warranties of Kennedy, PT, P.C. Kennedy, PT,
P.C. represents and warrants to Management that:
2.1.1 Due Organization; Good Standing; Power.
Kennedy, PT, P.C. is a professional corporation duly organized,
validly existing, and in good standing under the laws of the State of New York.
Kennedy, PT, P.C. has all requisite corporate power to enter into this Agreement
and to perform its obligations hereunder.
2.1.2 Authorization and Validity of Document.
The execution, delivery and performance of this Agreement by Kennedy,
PT, P.C. has been duly and validly authorized by Kennedy, PT, P.C. This
Agreement has been duly executed and delivered by Kennedy, PT, P.C. and is a
legal, valid and binding obligation of Kennedy, PT, P.C. fully enforceable
against Kennedy, PT, P.C. in accordance with its terms, except as such
enforceability may be limited by general principles of equity, bankruptcy,
insolvency, moratorium and similar laws relating to creditors' rights generally.
2.2 Representations and Warranties of Management.
Management represents and warrants to Kennedy, PT, P.C. that:
2
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2.2.1 Due Organization; Good standing; Power.
Management is a limited partnership duly organized, validly existing,
and in good standing under the laws of the State of New York. Management has all
requisite power to enter into this Agreement and to perform its obligations
hereunder.
2.2.2 Authorization and Validity of Document.
The execution, delivery and performance of this Agreement by
Management has been duly and validly authorized by Management. This Agreement
has been duly executed and delivered by Management and is a legal, valid, and
binding obligation of Management, fully enforceable against Management in
accordance with its terms, except as such enforceability may be limited by
general principles of equity, bankruptcy, insolvency, moratorium and similar
laws relating to creditors' rights generally.
3. OPERATING ACCOUNTS.
Management shall establish, in Kennedy, PT, P.C.'s name, one or more
checking accounts at a national bank that shall at all times be fully insured by
the Federal Deposit Insurance Corporation (the "Operating Accounts") and at
least one of the aforementioned checking accounts shall be established at a bank
with a branch in Queens, New York. Those officers of Kennedy, PT, P.C. and
Management (the "Authorized Signatories") listed on Exhibit A attached hereto
and incorporated by reference herein shall have authority to draw checks on the
Operating Accounts. All moneys collected by Management arising out of or in
connection with Management's performance under and pursuant to this Agreement
shall be deposited by Management promptly in the Operating Accounts. All drafts
drawn upon the Operating Accounts by the Authorized Signatories shall be signed
in a representative capacity as the authorized representative of Kennedy, PT,
P.C.
4. POWERS AND DUTIES OF MANAGEMENT.
Upon the terms and subject to the conditions of this Agreement and to any
specific instruction given to Management by Kennedy, PT, P.C. during the term of
this
3
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Agreement, Management shall have exclusive authority and the obligation and duty
to manage and administer the non-professional operations of Kennedy, PT, P.C.
Management's specific obligations and duties shall include, but not be limited
to, the following:
4.1 Collection of Accounts
Management shall train, supervise and regulate Kennedy, PT, P.C.'s
nonprofessional personnel, if any, with respect to computing the amount of,
generating, and, in the name of Kennedy, PT, P.C., issuing and mailing by
first-class United States mail, billing statements (the "Bills") to all patients
and/or clients of Kennedy, PT, P.C. for whom Kennedy, PT, P.C. has provided
services. When and if appropriate, Management shall also assist in, subject to
the control of Kennedy, PT, P.C., the provision of Bills together with other
required documentation to third-party payers for reimbursement for services
provided to patients and/or clients. Management shall assist in, subject to the
control of Kennedy, PT, P.C., the collection of all monies owed to Kennedy, PT,
P.C. as evidenced by the Bills and all such moneys shall be deposited into the
Operating Account not later than by the close of business on the day of receipt
of such moneys. Subject to the control of Kennedy, PT, P.C., Management shall
exert all reasonable commercial efforts, in accordance with all applicable laws,
statutes, ordinances, rules and regulations ("Laws") of all federal, state and
local governments ("Governments") and all agencies, bureaus, commissions and
other instrumentalities ("Governmental Agencies") of Governments having
jurisdiction to collect all amounts owed to Kennedy, PT, P.C. under the service
contracts; provided, however, that when Management shall reasonably determine
that legal assistance or action shall be required for such collection (or for
any other matter related to Management's duties hereunder), such assistance or
action shall be taken, as the case may be, through counsel selected by
Management and approved by Kennedy, PT, P.C. The legal expenses incurred as a
result of any such assistance or action shall be paid by Kennedy, PT, P.C.
4.2 Payment of Expenses.
4
<PAGE>
The costs and expenses that shall be paid by Kennedy, PT, P.C.
hereunder shall include compensation of all physical therapists and physical
therapy assistants employed by Kennedy, PT, P.C. at fair market value which
compensation shall include salaries, wages, fringe benefits, worker's
compensation insurance, health insurance, social security and unemployment
taxes. It is understood that all out-of-pocket expenses of Management in
connection with this management agreement shall be paid by Kennedy, PT, P.C.
pursuant to Paragraph 7(d) of this Agreement.
4.3 Financial Records.
Subject to Kennedy, PT, P.C.'s control, Management shall supervise the
maintenance on a current basis of true, correct and complete books and records
of all monies received and disbursed from the services provided by Kennedy, PT,
P.C., and all matters relating thereto, and all such records shall be available
for inspection by Kennedy, PT, P.C. and Kennedy, PT, P.C.'s representatives at
all reasonable times. Management shall prepare and deliver the following to
Kennedy, PT, P.C. at the following times:
Annual Report. An annual written report (the "Annual Report"), showing
the revenues and expenses for the immediately preceding calendar year, on an
accrual basis. The Annual Report shall report revenues and expenses on an annual
basis and on a calendar quarterly basis, including year-to-date results and
shall compare such amounts with the amounts incurred for the same periods during
the calendar year immediately preceding the calendar year with respect to which
the Annual Report was prepared and submitted. Management shall coordinate the
preparation of all Kennedy, PT, P.C. tax returns and respond to all audits of
Kennedy, PT, P.C. and its business. Any expenses incurred for independent
certified public accountants in connection with the preparation or auditing of
annual financial statements and tax returns of Kennedy, PT, P.C. shall be paid
either directly by Kennedy, PT, P.C. or by Management from Kennedy, PT, P.C.'s
funds within the Operating Accounts.
5
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Kevin Kennedy, PT shall arrange for the preparation of his personal tax returns
and make all payments for any expenses incurred in connection therewith.
4.4 Operation and Regulatory Reports .
Management shall deliver to Kennedy, PT, P.C. a monthly report which
lists all patients of Kennedy, PT, P.C., utilization of services provided by
Kennedy, PT, P.C. and contains such other and further information as Kennedy,
PT, P.C. may reasonably request. Management shall timely assist Kennedy, PT,
P.C. in the preparation of all written reports and information that shall be
lawfully required by any Government or Governmental Agency having jurisdiction
over Kennedy, PT, P.C., Kennedy, PT, P.C.'s properties, assets or business (or
any business of Management which relates to Management's management of Kennedy,
PT, P.C.). Kennedy PT, P.C. shall review and approve all such required reports
and/or information before any dissemination of the same.
4.5 Processing Disputes.
Management shall assist Kennedy, PT, P.C. in administration and
processing of all disputes, grievances and complaints between Kennedy, PT, P.C.
and all third parties, subject at all times to the review and final approval of
Kennedy PT, P.C.
4.6 Budget.
Management shall prepare a written annual budget (the "Budget") for
Kennedy, PT, P.C. which sets forth major operating objectives, anticipated
revenue, expenses, cash flow and capital expenditures. Management shall deliver
a copy of the Budget to Kennedy, PT, P.C. for acceptance, rejection or
modification, within thirty (30) days prior to the commencement of each of
Kennedy, PT, P.C.'s calendar years. The Budget shall delineate all management
and administrative costs and expenses.
4.7 Insurance.
Management shall procure on behalf of (and with the prior written
approval of) Kennedy, PT, P.C., insurance of such kinds, in such amounts, with
such companies and on
6
<PAGE>
such terms and conditions as Kennedy, PT, P.C. shall determine in the exercise
of its reasonable judgment. All such policies shall name Management and Kennedy,
PT, P.C. as coinsureds, as their respective interests may appear.
4.8 Government Regulations; Licenses.
To the extent known, and material to the operation of Kennedy, PT,
P.C.'s business, Management shall promptly notify Kennedy, PT, P.C. of any
material changes which may occur in, relevant Laws of any Government or
Governmental Agency having jurisdiction over Kennedy, PT, P.C., its properties,
assets, agents or business. The foregoing shall not in any way limit Kennedy,
PT, P.C.'s continuing professional and legal responsibility to comply with, and
be aware of, all licensing, regulatory, professional or other requirements
applicable to individuals licensed to provide physical therapy service.
4.9 Confidentiality of Records.
Subject to review and approval of Kennedy, PT, P.C., Management shall
adopt procedures that shall assure maximum confidentiality to the records of
Kennedy, PT, P.C. and shall comply with the applicable laws of all Governments
and Governmental Agencies relating to the records of Kennedy, PT, P.C.
Information, documents and data on patient medical records may not be disclosed
to any person or entity without the consent of a patient except for use
reasonably connected with the administration of this Agreement or when required
or permitted by applicable law and in any case, only with the consent of
Kennedy, PT, P.C.
4.10 Location of Operations.
Management shall perform its management and administrative services
for Kennedy, PT, P.C. at and from offices of Kennedy, PT, P.C. and Management.
4.11 Contracts with Patients.
Kennedy, PT, P.C. shall have ultimate responsibility for reaching
agreement with patients regarding the terms of treatment and all aspects of the
professional rendering of such treatment.
7
<PAGE>
4.12 Contract Compliance.
Management shall, for and on behalf of Kennedy, PT, P.C., assist in
the compliance with the provisions of all contracts and other agreements to
which Kennedy, PT, P.C. is or becomes a party during the term of this Agreement.
Kennedy, PT, P.C. shall at all times retain responsibility and control over the
delivery of professional services to patients.
4.13 Access; Financial Reports
Management shall at all times during normal business hours provide
Kennedy, PT, P.C. with access to all Management facilities applicable to
professional services provided by Kennedy, PT, P.C. and to the books and records
of Kennedy, PT, P.C. Management shall respond promptly to all reasonable
requests by Kennedy, PT, P.C. for information, documents or data.
4.14 Marketing.
Management shall advertise, promote and market Kennedy, PT, P.C. in
accordance with Section 6 of this Agreement.
4.15 Upon the termination or expiration of the term of this Agreement,
Management shall deliver to Kennedy, PT, P.C. all books, records, insurance
policies, contracts, funds, invoices, receipts, and all other records,
information, data, instruments and documents in Management's possession solely
relating to professional services provided by Kennedy, PT, P.C. Within 29 days
after such expiration or termination Management shall render a final accounting
and statement to Kennedy, PT, P.C.
5. EMPLOYEES AND INDEPENDENT CONTRACTORS. s, other than those specified in
Paragraph 4.2, if any, employed or retained as agents, employees, servants or
independent contractors in connection with the management of Kennedy, PT, P.C.
(collectively, the "Management Employees") shall be employees of or independent
contractors engaged by Management.
6. LICENSING, MARKETING AND PROMOTION.
8
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Management hereby grants to Kennedy, PT, P.C. the right and license to use
the office space leased by Management at the locations listed in Schedule A
hereto in connection with the operation of Kennedy, PT, P.C.'s business at such
locations (the "Facilities") and the right and license to operate its business
at the Facilities. In connection therewith, Kennedy P.T., P.C. agrees to pay the
fixed rental amounts set forth in paragraphs (a) and (b) of Schedule B hereto.
The failure of Kennedy P.T., P.C. to pay such fixed rental amounts in accordance
with this Agreement shall be deemed a default hereunder pursuant to the
provisions of Paragraph 10.1 hereof. Management hereby further grants to Kennedy
P.T., P.C. the right and license to use the name "Professional Sports Care" in
connection with the Facilities and with the operation of Kennedy P.T., P.C.'s
business therein. Kennedy, PT, P.C. agrees to maintain the highest professional
standards of quality in providing physical therapy services. The term of the
license granted herein shall be coextensive with the term of this Agreement.
Nothing herein shall give Kennedy, PT, P.C. any right, title or interest in the
licensed name or Facility except the right to use the licensed name and Facility
in accordance with the terms of this Agreement.
Subject to all times to the direction, review and final approval of
Kennedy, PT, P.C., Management shall exert reasonable commercial efforts to seek
new business for Kennedy, PT, P.C. and to advertise, promote and market or cause
to be advertised, promoted and marketed, Kennedy, PT, P.C.'s services through
any and all media determined to be beneficial to Kennedy, PT, P.C.'s business
and consistent with the applicable laws and regulations governing Kennedy, PT,
P.C.'s professional practice (the "Promotion Campaign"). The Promotion Campaign
may include, but shall not necessarily be limited to, advertisements in
magazines, newspapers and other publications, mailings, seminars and
telemarketing. Management shall consult with Kennedy, PT, P.C. in connection
with the Promotion Campaign prior to implementing each part thereof.
9
<PAGE>
Kennedy P.T., P.C. shall not use any of the following words, or words
similar thereto, to describe, advertise or promote any professional or other
service rendered by Kennedy P.T., P.C. therein: "Facility," "Institution,"
"Clinic" or "Center" or any other words that could cause the appropriate
regulatory bodies to deem Kennedy P.T., P.C. to be operating a health care
facility subject to state facility licensing statutes.
7. COMPENSATION OF MANAGEMENT.
Management shall be compensated for the goods, services and facilities
provided hereunder according to Schedule B attached hereto.
To the extent that Kennedy, PT, P.C. shall not generate adequate revenues
to timely compensate Management as provided hereinabove, Management may, in its
discretion, advance amounts required to meet Kennedy, PT, P.C.'s ongoing
operating expenses for Kennedy, PT, P.C.'s benefit. Such advances shall be
evidenced by a demand Note(s) in the form attached hereto as Exhibit B, and
secured by the Collateral described in the Security Agreement attached hereto as
Exhibit C.
8. TERMINATION.
Management or Kennedy, PT, P.C. may terminate this Agreement, with or
without cause, upon ninety (90) days' prior notice to the other party.
9. INDEMNIFICATION.
Kennedy, PT, P.C. shall indemnify and hold harmless Management from and
against any and all damages, liabilities, actions, suits, proceedings, claims,
threats, demands, losses, costs and expenses (including attorney's and expert's
fees) arising out of or in connection with: (a) the negligent or intentionally
wrongful acts or omissions of Kennedy, PT, P.C., its agents, servants, employees
and independent contractors whether or not in connection with the services to be
exclusively provided by Kennedy, PT, P.C. under this Agreement; and (b) any
breach of or default of Kennedy, PT, P.C. under any covenant, promise,
agreement, representation or warranty set forth in this Agreement.
10
<PAGE>
Management shall indemnify and hold harmless Kennedy, PT, P.C. from and
against any and all damages, liabilities, actions, suits, proceedings, claims,
threats, demands, losses, costs and expenses (including attorney's and expert's
fees) arising out of or in connection with: (a) the negligent or intentionally
wrongful acts or omissions of Management, its agents, servants, employees and
independent contractors in connection with the services to be provided by
Management under this Agreement; and (b) any breach of or default by Management
under any covenant, promise, agreement, representation or warranty set forth in
this Agreement.
10. EVENTS OF DEFAULT.
The following shall constitute events of default under this Agreement:
10.1 Failure to Perform.
The breach by either Management or Kennedy, PT, P.C. of any covenants,
promises, agreements, representations and warranties provided by this Agreement,
and the failure of Management or Kennedy, PT, P.C., as the case may be, to cure
any such breach within ten days following receipt of written notice thereof from
the other party, provided that there shall be no more than three opportunities
to cure a breach within any consecutive 12- month period during the term of this
Agreement.
10.2 Insolvency Proceedings.
The filing by either Kennedy, PT, P.C. or Management of a petition
commencing a voluntary case under the federal bankruptcy law; a general
assignment by either Kennedy, PT, P.C. or Management for the benefit of
creditors; an admission in writing by either Kennedy, PT, P.C. or Management of
its inability to pay its debts as they become due; the filing by either Kennedy,
PT, P.C. or Management of any petition or answer in any proceeding seeking for
itself, or consenting to, or acquiescing in, any insolvency, receivership,
composition, readjustment, liquidation, dissolution, or similar relief under any
present or future statute, law or regulation, or the filing by either Kennedy,
PT, P.C. or Management of
11
<PAGE>
an answer or other pleading admitting or failing to deny, or to contest, the
material allegations of the petition filed against it in any such proceeding;
the seeking or consenting to, or acquiescence by either Kennedy, PT, P.C. or
Management in the appointment of any trustee, receiver, or liquidator of it, or
any part of its property; and the commencement against either Kennedy, PT, P.C.
or Management, of an involuntary case under the Bankruptcy Code, or a proceeding
under any receivership, composition, readjustment, liquidation, insolvency,
dissolution or like law or statute, which case or proceeding is not dismissed or
vacated within 60 days. Upon any such default, this Agreement shall terminate
and the defaulting party shall thereafter be liable and responsible to the
non-defaulting party for all damages sustained or incurred by reason of such
default and for all other relief and remedies available to the non-defaulting
party by reason of such default.
11. RELATIONSHIP OF THE PARTIES.
The parties hereto agree that in performing its duties hereunder,
Management shall be acting as an independent contractor. Nothing contained in
this Agreement shall constitute Kennedy, PT, P.C. and Management as partners,
joint venturers, or either agents, servants or employees of one another, any
such intent being hereby expressly disclaimed.
12. RESTRICTIVE COVENANTS.
Management and Kennedy, PT, P.C. acknowledge and agree that their
relationship as set forth in this Agreement is of a special and unusual
character which has a unique value to them, the loss of which cannot be
adequately compensated by damages in an action of law, and if used in
competition with Management could cause serious harm to Management. Further, the
parties recognize that Management's marketing, accounting, billing, collection,
scheduling, reporting, quality control, educational, data processing and
procurement systems and methods have all been developed over an extended period
of time at great cost to Management and are proprietary in nature. Kennedy, PT,
P.C. also acknowledges and agrees that Management's contacts and reputation in
the physical therapy
12
<PAGE>
equipment, sports, rehabilitative medicine, financial and advertising industries
were developed over an extended period of time at great cost and are hereunder
made available to Kennedy, PT, P.C. Accordingly, Kennedy, PT, P.C. and Kevin
Kennedy, PT, covenant that for a period of two (2) years after the termination
of this Agreement or any extensions thereof, or ceasing relationship with
Management, neither Kennedy, PT, P.C. nor Kevin Kennedy, PT shall (as an
employee, owner, partner, agent, shareholder, director, officer or otherwise)
directly or indirectly, without the prior written consent of Management, do any
of the following within two (2) miles from the Facility.
12.1 Offer to render, solicit the rendition of, render or attempt to
render any services which were rendered by Management to or for the benefit or
account of Kennedy, PT, P.C. or Kevin Kennedy, PT to or for the benefit or
account of any other person or entity.
12.2 Retain or attempt to retain any entity to provide to Kennedy PT,
P.C. or Kevin Kennedy, PT or any services which were rendered by Management to
or for the account of Kennedy, PT, P.C. or Kevin Kennedy, PT or to or for the
benefit or account of any other person or entity.
12.3 Solicit for employment or employ to or for the benefit or account
of Kennedy, PT, P.C. or Kevin Kennedy, PT or to or for the benefit or account of
any other person or entity any employee of Management, nor shall Kennedy, PT,
P.C. or Kevin Kennedy, PT urge, directly or indirectly, any client, customers,
or account of Management to discontinue, in whole or in part, business with
Management or not to do business with Management.
12.4 Engage, either as a consultant, independent contractor,
proprietor, shareholder, partner, officer, director, employee or otherwise, in
any business which provides services similar to those rendered by Management
herein or otherwise competes with Management.
13
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12.5 The parties hereto agree that to the extent that any provision of
Paragraph 12 of this Agreement shall be held, found or deemed to be
unreasonable, unlawful or unenforceable by a court of competent jurisdiction,
then any such provision or portion thereof shall be deemed to be modified to the
extent necessary in order that any such provision or portion thereof shall be
legally enforceable to the fullest extent permitted by applicable law; and the
parties hereto do further agree that any court of competent jurisdiction shall,
and the parties hereto do hereby expressly authorize, request and empower any
court of competent jurisdiction to enforce any such provision or portion thereof
or to modify any such provision or portion thereof in order that any such
provision or portion thereof shall be enforced by such court to the fullest
extent permitted by applicable law.
12.6 As the violation by Kennedy, PT, P.C. or Kevin Kennedy PT of the
provisions of Paragraph 12 of this Agreement would cause irreparable injury to
Management, and there is no adequate remedy at law for such violation,
Management shall have the right, in addition to any other remedies available at
law or in equity, to enjoin Kennedy, PT, P.C. and Kevin Kennedy, PT in a court
of equity from violating such provisions. For purposes of Paragraph 12
"termination" or "ceasing" relationship with Management shall be defined as the
time when Management or Kennedy PT, P.C. exercise their option to cancel the
Management Agreement or when Kevin Kennedy, PT does not provide physical therapy
and therapeutic services exclusively for Kennedy, PT, P.C. or should Kevin
Kennedy, PT become disabled.
13. NOTICES.
All notices, requests, demands, consents and other communication, which are
required or may be given under this Agreement (collectively, the "Notices")
shall be in writing and shall be given either by (a) personal delivery against a
receipted copy; or (b) by certified or registered United States mail, return
receipt requested, postage prepaid, to the following address:
14
<PAGE>
13.1 If to Management:
Professional Sports Care Queens, L.P.
c/o Professional Sports Care Management, Inc.
550 Mamaroneck Avenue
Suite 308
Harrison, New York 10528
Attention: Mr. Russell F. Warren, Jr.
with copy to:
Andrew W. Bank, Esq.
Gould & Wilkie
One Chase Manhattan Plaza
New York, New York 10005
13.2 If to Kennedy, PT, P.C.
1926 Broadway
New York, New York 10023
Attention: Kevin Kennedy, PT
with a copy to:
Joseph A. Russo, Esq,
Hogan & Palace
20 Court Street
Hackensack, New Jersey 07601
or to such other address of which Notice in accordance with this Section shall
have been provided by such party. Notices may only be given in the manner
hereinabove described in this Section and shall be deemed received when given in
such manner.
14. SPECIFIC PERFORMANCE.
The parties hereto recognize that all parties' remedies at law for damages
in the event of breach of this Agreement may be inadequate. Accordingly, it is
the intention of the parties that the obligations and duties of the parties
hereunder shall be enforceable in a court of appropriate jurisdiction by
specific performance.
15. ENTIRE AGREEMENT: MODIFICATION.
15
<PAGE>
This Agreement represents the full, entire and integrated agreement of the
parties with respect to the subject matter hereof and supersedes any and all
prior agreements or understandings. This Agreement may not be modified, amended,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the parties hereto.
16. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
All of the representations, warranties, covenants, promises and agreements
of the parties contained in this Agreement shall survive the execution and
delivery of this Agreement.
17. ASSIGNABILITY.
This Agreement shall not be assignable by Kennedy, PT, P.C. without the
prior written consent of Management.
18. BINDING EFFECT: BENEFIT.
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and assigns. Nothing in this
Agreement, express or implied, is intended to confer upon any other person or
entity any rights, remedies, obligations or liabilities.
19. GENERAL.
19.1 Headings.
The section headings contained in this Agreement are for convenience
only and shall not affect in any way the meaning or interpretations of this
Agreement.
19.2 Governing Law.
This Agreement shall be construed and performed in accordance with,
and governed by, the laws of the State of New York.
19.3 Invalidity of Sections.
16
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If any provision of this Agreement is held to be invalid or
unenforceable, the remaining provisions shall not be affected, but shall
continue in full force and effect.
19.4 Use of Genders.
Whenever used in this Agreement, the singular shall include the plural
and vice versa, and the use of any gender shall include all genders and the
neuter.
19.5 Counterparts.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed,
sealed and delivered in their respective names on the date first above written.
ATTEST: KEVIN KENNEDY, PT, P.C.
By:___________________ By__________________________
President
PROFESSIONAL SPORTS CARE
QUEENS, L.P.
By: Professional Sports Care
Management, Inc.
General Partner
ATTEST:
By:____________________ By__________________________
PATRICK J. WACK, JR. RUSSELL F. WARREN, JR.
Secretary President
17
<PAGE>
SCHEDULE A
LIST OF FACILITIES PURSUANT TO PARAGRAPH 6
OF THE RESTATED AND AMENDED MANAGEMENT AND LICENSE AGREEMENT
1. Location: 176-60 Union Turnpike
Flushing, New York
18
<PAGE>
SCHEDULE B
SCHEDULE OF COMPENSATION DUE MANAGEMENT
UNDER SECTION 7 OF THE RESTATED AND AMENDED MANAGEMENT
AND LICENSE AGREEMENT ("AGREEMENT")
a) Fixed Rental of Facilities space and leasehold improvements,
pursuant to Paragraph 6 of the Agreement in the amount of $96,000.00 per year.
b) Fixed Rental of furniture, fixtures and equipment provided to the
Facilities in the amount of $31,000.00 per year.
c) A Management Fee of $30,000.00 per year, payable in equal monthly
installments of $2,500.00 per month on the first day of each and every month of
the Agreement and subject to renegotiation by either party thereto on each
yearly anniversary of the Agreement. Such Management Fee is intended to
compensate Management for its unallocated overhead and profit based upon the
parties' estimated volume of 5,000 patient treatments per year by Kennedy P.T.,
P.C. To the extent that Kennedy P.T., P.C.'s annual treatment volume exceeds
such amount, Management shall be entitled to an additional unallocated overhead
and profit compensation of $20.00 for each excess patient treatment. This
additional compensation to Management shall be due and owing without regard to
revenue and profits.
d) Monthly reimbursement of all Management's direct costs (i.e.,
payroll, supplies, travel, etc.) allocated to Kennedy P.T., P.C. in the absolute
discretion of Management.
e) Monthly reimbursement of all of Management's direct costs for
marketing and advertising under the Agreement as allocated to Kennedy P.T., P.C.
in the absolute discretion of Management, with a ten (10%) percent markup for
overhead and administration and a fifteen (15%) percent markup for profit on
such costs.
19
<PAGE>
f) A monthly License Fee of $1,600.00 for the license of the name
granted to Kennedy P.T., P.C. in Paragraph 6 of the Agreement.
20
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EXHIBIT A
AUTHORIZED SIGNATORIES
Russell F. Warren, Jr.
Patrick J. Wack, Jr.
Michael P. Neuscheler
Kevin Kennedy, PT.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Exhibit 27.1
FINANCIAL DATA SCHEDULE
This Schedule contains summary financial information extracted from
the Professional Sports Care Management, Inc. Form 10-Q for the period ended
June 30, 1996 and is qualified in its entirety by reference to such financial
statements.
<CAPTION>
At and for the
Three Months Six Months
Ending Ending
6/30/96 6/30/96
-------------- ----------
<S> <C> <C>
<PERIOD-TYPE> 3-mos 6-mos
<FISCAL-YEAR-END> Jun-30-1996 Jun-30-1996
<PERIOD-END> Jun-30-1996 Jun-30-1996
<CASH> 7,534,000 0
<SECURITIES> 0 0
<RECEIVABLES> 9,552,000 0
<ALLOWANCES> 1,891,000 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 6,033,000 0
<PP&E> 8,137,000 0
<DEPRECIATION> 2,547,000 0
<TOTAL-ASSETS> 53,840,000 0
<CURRENT-LIABILITIES> 4,704,000 0
<BONDS> 0 0
<COMMON> 78,000 0
0 0
0 0
<OTHER-SE> 43,152,000 0
<TOTAL-LIABILITY-AND-EQUITY> 53,840,000 0
<SALES> 10,037,000 19,327,000
<TOTAL-REVENUES> 10,037,000 19,327,000
<CGS> 6,213,000 12,124,000
<TOTAL-COSTS> 6,213,000 12,124,000
<OTHER-EXPENSES> 2,209,000 4,347,000
<LOSS-PROVISION> 205,000 376,000
<INTEREST-EXPENSE> 139,000 268,000
<INCOME-PRETAX> 1,271,000 2,212,000
<INCOME-TAX> 521,000 907,000
<INCOME-CONTINUING> 750,000 1,305,000
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 750,000 1,305,000
<EPS-PRIMARY> .10 .17
<EPS-DILUTED> .10 .17
</TABLE>
