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 March 31, 1996; or
o Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _____________ to
______________.
Commission File Number 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 May 1, 1996
----- --------------------------
Common Stock, par value 7,774,500 shares
$.01 per share
<PAGE>
PROFESSIONAL SPORTS CARE MANAGEMENT, INC.
FORM 10-Q
INDEX
Part I - Financial Information:
Page
Item 1. Financial Statements
Consolidated Balance Sheets - 2
March 31, 1996 (unaudited) and December 31, 1995
Consolidated Statements of Income - (unaudited) 3
Three months ended March 31, 1996 and 1995
Consolidated Statements of Cash Flows - (unaudited) 4
Three months ended March 31, 1996 and 1995
Notes to Consolidated Financial 5
Statements - March 31, 1996 (unaudited)
Item 2. Management's Discussion and Analysis of 9
Financial Condition and Results of Operations
Part II - Other Information:
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 14
<PAGE>
PROFESSIONAL SPORTS CARE MANAGEMENT, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
---- ----
ASSETS (unaudited)
<C> <C> <C>
Current Assets:
Cash and cash equivalents . . . . . . . . . $ 7,931,000 $ 14,560,000
Patient service receivables, net . . . . . 6,916,000 5,605,000
Notes receivable . . . . . . . . . . . . .. 93,000 284,000
Income tax receivable . . . . . . . . . . . 69,000 78,000
Prepaid expenses . . . . . . . . . . . . .. 497,000 664,000
-------------- --------------
Total current assets . . . . . . . . . . . . 15,506,000 21,191,000
Property and equipment, net . . . . . . . .. 5,589,000 5,109,000
Intangible assets, net . . . . . . . . . . . 31,376,000 22,151,000
Notes receivable . . . . . . . . . . . . . . 307,000 339,000
Other assets . . . . . . . . . . . . . . . . 407,000 327,000
-------------- --------------
Total assets . . . . . . . . . . . . . . . . $ 53,185,000 $ 49,117,000
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of debt . . . . . . . . . . $ 2,208,000 $ 1,323,000
Current portion of obligations under
capital leases . . . . . . . . . . . . 125,000 149,000
Accounts payable . . . . . . . . . . . . . 403,000 219,000
Accrued liabilities . . . . . . . . . . . . 1,251,000 695,000
Deferred income taxes payable . . . . . . 996,000 1,037,000
-------------- --------------
Total current liabilities . . . . . . . . . 4,983,000 3,423,000
Deferred income taxes payable . . . . . . . 515,000 519,000
Long-term portion of debt . . . . . . . . . 4,327,000 3,152,000
Obligations under capital leases . . . . . . 113,000 73,000
Accrued rent and other . . . . . . . . . . . 723,000 821,000
Minority interests . . . . . . . . . . . . 67,000 ---
-------------- --------------
Total liabilities . . . . . . . . . . . . . 10,728,000 7,988,000
-------------- --------------
Stockholders' Equity:
Common stock, $.01 par value, 15,000,000
shares authorized; 7,774,500 and
7,669,565 issued and outstanding at
March 31, 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 . . . . . . . . . . . (70,000) (93,000)
Retained earnings. . . . . . . . . . . . .. 2,980,000 2,425,000
-------------- --------------
Total stockholders' equity . . . . . . . . . 42,457,000 41,129,000
-------------- --------------
Total liabilities and stockholders' equity . $ 53,185,000 $ 49,117,000
============== ==============
</TABLE>
See accompanying notes to the consolidated financial statements.
-2-
<PAGE>
PROFESSIONAL SPORTS CARE MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
<TABLE>
<CAPTION>
Three Months
Ended
March 31,
1996 1995
---- ----
<S> <C> <C>
Net revenue . . . . . . . . . . . . $ 9,290,000 $ 5,924,000
Center operating costs . . . . . .. 5,911,000 3,469,000
-------------- ---------------
Gross profit . . . . . . . . . . .. 3,379,000 2,455,000
Operating expenses:
Selling and administrative expen. 1,790,000 1,040,000
Depreciation . . . . . . . . . . 278,000 183,000
Amortization. . . . . . . . . . . 260,000 152,000
-------------- --------------
Income from operations . . . . . .. 1,051,000 1,080,000
Interest expense. . . . . . . . . . 129,000 133,000
Interest income. . . . . . . . . .. (133,000) (87,000)
-------------- --------------
Income before minority interests, equity in losses
of investments and income taxes . 1,055,000 1,034,000
Minority interests . . . . . . . .. 114,000 (3,000)
Equity in losses of investments . . --- 26,000
-------------- --------------
Income before income taxes . . . .. 941,000 1,011,000
Provision for income taxes . . . .. 386,000 415,000
-------------- --------------
Net income . . . . . . . . . . . .. $ 555,000 $ 596,000
============== ==============
Earnings per common share . . . . . $ 0.07 $ 0.10
============== ==============
Weighted average shares outstanding. 7,768,000 6,133,000
============== ==============
</TABLE>
See accompanying notes to the consolidated financial statements.
-3-
<PAGE>
PROFESSIONAL SPORTS CARE MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
---------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . $ 555,000 $ 596,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation . . . . . . . . . . . . 278,000 183,000
Amortization. . . . . . . . . . . . . 260,000 152,000
Deferred income taxes . . . . . . . . (45,000) 52,000
Provision for doubtful accounts . . . 171,000 88,000
Minority interests . . . . . . . . .. 114,000 (3,000)
Equity in losses of investments . .. --- 26,000
Amortization of deferred stock grant. 23,000 23,000
Amortization of debt discounts . . .. 124,000 42,000
Change in assets and liabilities:
Patient service receivables, net . .. (1,227,000) (788,000)
Due from Partnership . . . . . . . .. --- (95,000)
Income tax receivable. . . . . . . .. 9,000 199,000
Prepaid expenses . . . . . . . . . .. 174,000 184,000
Intangibles and other assets . . . .. (50,000) (89,000)
Accounts payable . . . . . . . . . .. 184,000 (115,000)
Accrued liabilities . . . . . . . . . 183,000 321,000
Accrued rent and other. . . . . . . . (98,000) (27,000)
--------- ---------
Total adjustments . . . . . 100,000 153,000
--------- ---------
Net cash provided by operating activities 655,000 749,000
--------- ---------
Cash flows from investing activities:
Purchase of property and equipment .. (359,000) (653,000)
Notes receivable . . . . . . . . . .. 23,000 ---
Business acquisitions . . . . . . . . (6,473,000) (2,450,000)
---------- ----------
Net cash used in investing activities. (6,809,000) (3,103,000)
---------- ----------
Cash flows from financing activities:
Proceeds from issuance of stock, net --- 17,904,000
Proceeds from minority interests contributions. 197,000 84,000
Distributions to minority interests . (29,000) (30,000)
Principal payments of notes payable . (617,000) (13,000)
Principal payments under capital lease obligations. (26,000) (23,000)
---------- ----------
Net cash provided (used) by financing activities. (475,000) 17,922,000
---------- ----------
Net increase (decrease) in cash and cash equivalents. (6,629,000) 15,568,000
Cash and cash equivalents at beginning or period. 14,560,000 3,112,000
---------- ----------
Cash and cash equivalents at end of period $7,931,000 $18,680,000
========== ==========
</TABLE>
See accompanying notes to the consolidated financial statements.
- 4 -
<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 three months
ended March 31, 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.
Date of
Company Location 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.
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
<PAGE>
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
three months ended March 31, 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:
March 31, December 31,
1996 1995
--------- ------------
(unaudited) (unaudited)
Net revenue . . . . . . . . . . . $9,749,000 $38,179,000
Net income (adjusted for pro forma tax
provision) . . . . . . . . . . . . $ 598,000 $ 2,392,000
Net income per common share . . . $ 0.08 $ 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:
March 31, December 31,
1996 1995
--------- ------------
Patient service receivables . . . . . $8,805,000 $6,588,000
. . .
Less: Allowance for doubtful accounts and
contractual adjustments . . . . . . 1,889,000 983,000
--------- -------
$ 6,916,000 $ 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.
<PAGE>
Note 4 - Property and equipment, net
Property and equipment, net is comprised of the following:
March 31, December 31,
1996 1995
--------- ------------
Medical equipment . . . . . . . . . . . . $ 4,695,000 $ 4,279,000
Computer equipment . . . . . . . . . . . 934,000 848,000
Leasehold improvements . . . . . . . . . 1,509,000 1,446,000
Furniture and fixtures . . . . . . . . . 654,000 502,000
Vehicle . . . . . . . . . . . . . . . . 51,000 18,000
----------- -----------
7,843,000 7,093,000
Less: Accumulated depreciation . . . . . 2,254,000 1,984,000
----------- -----------
$ 5,589,000 $5,109,000
=========== ==========
Note 5 - Intangible assets, net
Intangible assets, net consists of the following:
March 31, December 31,
1996 1995
--------- ------------
Goodwill . . . . . . . . . . . . . . . . $ 30,118,000 $ 21,451,000
Covenants not to compete . . . . . . . . 2,115,000 1,510,000
Other . . . . . . . . . . . . . . . . . 456,000 239,000
------------ ------------
32,689,000 23,200,000
Less: Accumulated amortization . . . . . 1,313,000 1,049,000
------------ ------------
$ 31,376,000 $ 22,151,000
============ ============
<PAGE>
<PAGE>
Note 6 - Debt
Debt, substantially all of which is secured by the Company's assets, is
comprised of the following:
March 31, 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 . . . . . . . . . . . . . . . . $3,475,000 $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%) . . . 3,060,000 2,829,000
---------- ----------
6,535,000 4,475,000
Less: current portion. . . . . . . . . . . . . 2,208,000 1,323,000
---------- ----------
Long-term portion . . . . . . . . . . . . . . $4,327,000 $3,152,000
========== ==========
Maturities of debt at March 31, 1996 are as follows:
1996 . . . . . . . . . . . . . . . . . . . . . $ 2,364,000
1997 . . . . . . . . . . . . . . . . . . . . . 1,756,000
1998 . . . . . . . . . . . . . . . . . . . . . 1,647,000
1999 . . . . . . . . . . . . . . . . . . . . . 941,000
2000 and after . . . . . . . . . . . . . . . 336,000
$7,044,000
<PAGE>
<PAGE>
PROFESSIONAL SPORTS CARE MANAGEMENT, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Despite the severe weather conditions experienced throughout the New York, New
Jersey and Connecticut tri-state area ("tri-state") during the first quarter of
1996 and continued pressure on reimbursement rates, the Company was able to
continue its trend of improved profitability when compared to the operating
results for the third and fourth quarters of 1995. Specifically, gross profit
margins increased to 36% for the current quarter in comparison to 32% and 35%
for the third and fourth quarters of 1995, respectively. Pre-tax income margins
improved to 10.1% for the current quarter in comparison to 4.8% and 7.8% for the
third and fourth quarters of 1995, respectively. Cost containment programs as
well as operating improvements at certain acquired facilities have contributed
to the Company's improved profitability.
The Company added six facilities during the first quarter of 1996, five through
acquisitions and one start-up, and now operates a total of thirty-six outpatient
physical therapy practices located throughout the tri-state area. Consistent
with the Company's philosophy of broadening its business model within the
tri-state area, the Company acquired a 51% interest in Pro-Fitness, LLC
("Pro-Fitness"), a provider of health enhancement, corporate fitness and
wellness programs to many of the tri-state areas leading corporations.
Additionally, the Company exercised its purchase option to acquire a majority
interest in OrthoNet, LLC ("OrthoNet"), a disease management company
specializing in providing comprehensive orthopedic care through its network of
leading orthopedic surgeons. With over one hundred orthopedists currently
enrolled as members and the addition of Roger S. Shedlin, M.D., J.D. as
President and Chief Executive Officer, OrthoNet is continuing to develop in
accordance with the Company's timetable.
RESULTS OF OPERATIONS
Net revenue. Net revenue consists primarily of physical and occupational therapy
revenue, and, to a significantly lesser degree, revenue earned by Pro-Fitness
under corporate fitness and wellness contracts as well as membership fee income
recognized by OrthoNet. For the three months ended March 31, 1996, net revenue
increased 56.8 % to $9,290,000 from $ 5,924,000 for the same period a year ago.
Revenue growth is due to the addition of fourteen facilities subsequent to March
31, 1995, and the inclusion of Pro-Fitness and OrthoNet revenue, offset by a
reduction in average reimbursement rates.
-9-
<PAGE>
<PAGE>
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
March 31, 1996 decreased to 36.4 % from 41.4 % for the comparable period of
1995. This decrease is attributable to lower than anticipated visits due to the
severe weather experienced throughout the tri-state area during the first
quarter, coupled with a reduction in average reimbursement rates to $71.50 per
visit versus $78.50 per visit for the comparable quarter of 1995.
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 March 31, 1996, selling and administrative expenses, as a percentage of
revenue, increased to 19.3 % from 17.6 % for the comparable period of 1995. This
increase is attributable to the hiring of additional corporate personnel in
order to strengthen the Company's management infrastructure, exacerbated by a
lower than anticipated net revenue base due to the reasons previously cited.
Depreciation and amortization expense. Depreciation and amortization consists
primarily of equipment depreciation and amortization of leasehold improvements
and intangible assets. For the three months ended March 31, 1996, depreciation
and amortization increased to $538,000 from $335,000 for the comparable period
of 1995 as a result of the facilities acquired subsequent to March 31, 1995,
which have increased the Company's fixed and intangible asset base resulting in
higher depreciation and amortization charges.
Interest (income) expense, net. Interest (income) expense, net changed to
($4,000) for the three months ended March 31, 1996 from $46,000 for the
comparable period of 1995. This is principally due to a higher average invested
cash balance during the period as a result of the Company's public offering of
common stock in March 1995.
Liquidity & capital resources
Net cash flow from operations decreased to $655,000 for the three months ended
March 31, 1996 from $749,000 for the comparable period of 1995 primarily as a
result of an increase in the Company's accounts receivable balance given the
addition of fourteen facilities subsequent to the first quarter of 1995 offset,
to some degree, by an increase in liabilities.
Net cash used in investing activities increased to $6,809,000 for the three
months ended March 31, 1996 from $3,103,000 for the comparable period of 1995.
This increase is attributable to the acquisition of five facilities and the
start-up of one facility during the first quarter of 1996, compared to one
acquisition and one start-up during the same period in 1995.
Net cash provided (used) by financing activities changed to $(475,000) for the
three months ended March 31, 1996 from $17,922,000 for the comparable period of
1995 . Such change was primarily attributable to the net proceeds received from
the Company's second public offering of its common stock in March 1995.
-10-
<PAGE>
As of March 31, 1996, the Company had working capital of $10,523,000, including
cash and cash equivalents of $7,931,000. Working capital at December 31, 1995
was $17,768,000, including cash and cash equivalents of $14,560,000. Patient
service receivables, net at March 31, 1996 were $6,916,000 and the average days
outstanding was 70 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.
The Company intends to continue its acquisition strategy and, if successful,
there can be no assurance that at some point in the future the Company will not
require additional sources of financing.
-11-<PAGE>
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
No.
- - -------
2.22 - Agreement of Sale between Brett Richman, P.T. and the Company, dated
as of December 12, 1995.
2.23 - Agreement of Sale between Minutemen, Inc., Daron Shepard, Kenneth
Shepard, Fred Shepard and the Company dated as of December 29, 1995.
2.24 - Agreement of Sale between Neurosurgery Associates of Northwest
Connecticut, James E. Finn, M.D., Michael E. Karnasiewicz, M.D., Jarob
N. Mushaweh, M.D., Stephen A. Torrey, M.D. and the Company, dated as
of February 7, 1996.
2.25 - Stock Purchase Agreement between Frank Pavlisko and the Company,
dated as of February 9, 1996.
2.26 - Stock Purchase Agreement between Manuel Banzon, M. D., Randall
Krakauer, M. D., Cary Skolnick, M. D., and the Company, dated as of
February 14, 1996.
2.27 - Agreement of Sale between Business HealthCare, Nathaniel Selleck,
M.D. and Professional Work Care, L.L.C. dated April 22, 1996.
10.81 - Promissory Note issued by the Company to Daron Shepard for the
principal sum of $300,000 dated January 1, 1996.
10.82 - Operating Agreement of Pro Fitness, L.L.C., a New York limited
liability Company, adopted as of January 1, 1996.
10.83 - Promissory Note issued by Pro Fitness, L.L.C. to the Company for the
principal sum of $125,000 dated January 1, 1996.
10.84 - Promissory Note issued by Pro Fitness, L.L.C. to Minutemen, Inc. for
the principal sum of $125,000 dated January 1, 1996.
10.85 - Promissory Note issued by the Company to Brett Richman, P.T. for the
principal sum of $450,000 dated January 11, 1996.
10.86 - Operating Agreement of Professional Work Care, L.L.C., a New York
limited liability Company, adopted as of February 12, 1996.
10.87 - Promissory Note issued by the Company to Frank Pavlisko for the
principal sum of $789,000 dated February 9, 1996. 10.88 - Promissory
Note issued by the Company to Neurosurgery Associates of Northwest
Connecticut for the principal sum of $875,000 dated February 20, 1996.
-12-
<PAGE>
<PAGE>
10.89 - Limited Partnership Agreement of Professional Sports Care
Huntington, L.P. dated as of March 16, 1996.
10.90 - Management and License Agreement between the Company and Brett
Richman PT, P.C. dated as of April 10, 1996.
10.91 - Management and License Agreement between Professional Sports Care
Huntington, L.P. and Robert Panariello PT, P.C. dated as of April 17,
1996.
10.92 - Promissory Note issued by Professional Work Care, L.L.C. to Business
HealthCare for the principal sum of $245,000 dated April 22, 1996.
(b) Reports on Form 8-K
The Company filed no reports on Form 8-K during the period covered by
this Quarterly Report on Form 10-Q.
-13-
<PAGE>
<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)
By /S/ Michael P. Neuscheler
--------------------------------------
Michael P. Neuscheler
Executive Vice President
and Chief Financial Officer
-14-
AGREEMENT OF SALE
AGREEMENT OF SALE, dated as of December 12, 1995 (hereinafter,
the "Agreement"), by and among BRETT RICHMAN, P.T., having an address at 5402
Avenue N, Brooklyn, New York 11234 (hereinafter referred to as the "Seller"),
and PROFESSIONAL SPORTS CARE MANAGEMENT, INC., a Delaware corporation, having an
address at 550 Mamaroneck Avenue, Harrison, New York 10528 ("Purchaser").
WITNESSETH:
WHEREAS, Purchaser desires to acquire, and Seller desires to
sell, the assets hereinafter specified of the businesses known as HEALTHWORKS OF
BROOKLYN REHABILITATION TREATMENT CENTER and STARRETT CITY PHYSICAL THERAPY,
upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the covenants and
agreements hereafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which hereby are acknowledged, the parties hereto
agree as follows:
1. Agreement to Sell. Seller agrees to sell, transfer and
deliver to Purchaser, and Purchaser agrees to purchase, upon the terms and
conditions hereinafter set forth, all of the assets (other than cash, accounts
receivable, securities and cash equivalents and other than the medical records
and patient lists of the physical therapy business which medical records and
patient lists shall be placed in the custody of a licensed physical therapist of
Purchaser's choosing following receipt of consent from the respective patients)
of the physical therapy practices operated by Seller under the names HEALTHWORKS
OF BROOKLYN REHABILITATION TREATMENT CENTER and STARRETT CITY PHYSICAL THERAPY
(the "Assets"), including without limitation the following:
a. the Seller's physical therapy business (the
"Business");
b. the inventory of merchandise, parts and supplies of
the Business and all similar items acquired or owned
by the business on or before the closing date (as
defined below); and the equipment and furniture
described in Exhibit A hereto and all similar
equipment and/or furniture acquired or owned by the
business on or before the closing date (the
"Equipment and Furniture"). All of the Equipment and
Furniture shall be sold in "as is" condition as of
the date of this Agreement, subject to reasonable
wear and tear;
c. Seller's rights under the leases described in Exhibit
B hereto (the "Leases"); and
d. the goodwill of the Business, including, but not
limited to the names "Healthworks of Brooklyn
Rehabilitation Treatment Center" and "Starrett City
Physical Therapy", which shall be placed in the
custodianship of a licensed physical therapist of
Purchaser's choosing (the "Goodwill").
<PAGE>
<PAGE>
2. Purchase Price. A. The purchase price to be paid by
Purchaser for the Assets is Two Million Two Hundred Twelve Thousand Five Hundred
Eighty and 00/100 Dollars ($2,212,580.00) (subject to changes due to the market
price of the Securities pursuant to paragraph c of Article 2), plus one-half
(1/2) of the security deposit being held by the lessor pursuant to the lease for
the premises located at 1390 Pennsylvania Avenue, Brooklyn, New York, payable as
follows:
a. One Million Two Hundred Fifty Thousand and 00/100
Dollars ($1,250,000.00) at the Closing by wire
transfer of immediately available federal funds;
b. Four Hundred Fifty Thousand and 00/100 Dollars
($450,000.00) by the execution and delivery at the
Closing of a Promissory Note by Purchaser to Seller
in said amount, in the form of Exhibit C hereto;
c. Approximately Five Hundred Thousand and 00/100
Dollars ($500,000.00) by the issuance and delivery to
Seller at the Closing of 71,400 restricted shares of
common stock of Professional Sports Care Management,
Inc. (the "Securities"). The actual value of the
Securities shall be determined by the market price of
the Securities on the Closing Date (as said term is
defined below); and
d. Twelve Thousand Five Hundred Eighty and 00/100
Dollars ($12,580.00) together with one- half (1/2) of
the security deposit being held by the lessor
pursuant to the lease for the premises located at
1390 Pennsylvania Avenue, Brooklyn, New York (the
exact amount of which shall be agreed upon by the
parties hereto prior to Closing) at the Closing by
wire transfer of immediately available federal funds.
This amount represents reimbursement to Seller for
one-half (1/2) of the security deposits outstanding
with respect to the Business as set forth on Exhibit
D.
B. The purchase price is comprised of the following
components:
Equipment: $ 150,000.00
Non-Compete Covenant of Seller and
other intangible Assets: $2,117,500.00
The parties agree to use the foregoing allocation, which was
the result of arm's length negotiations, only for accounting, tax and financial
purposes.
3. Leases. Seller shall arrange for the assignment to
Purchaser of its interest in the lease, described in Exhibit B, for premises in
the building located at 5402 Avenue N, Brooklyn, New York and Seller shall also
arrange for the assignment to Purchaser of Seller's interest in the lease,
described in Exhibit B, for premises in the building located at 1390
Pennsylvania Avenue, Brooklyn, New York, pursuant to the terms
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and substantially in the form of the Assignment and Assumption Agreements
attached hereto as Exhibit E.
Seller promptly shall notify the lessors under the Leases
(the "Lessors") of the proposed assignment of the Leases to Purchaser and shall
request the consent of the Lessors thereto. Seller and Purchaser shall furnish
to the Lessors such information as may reasonably be required in connection with
procuring such consents and shall otherwise cooperate in an effort to
expeditiously procure such consents. Neither Seller nor Purchaser shall be
obligated to make any payment to obtain such consents. If after Seller's making
of a good faith request for consent, any one of the Lessors shall fail or refuse
to grant any required consent in writing on or before the closing date, then
either party may terminate this Agreement.
If this Agreement is terminated as provided above in this
Article 3, Seller shall return any payments made by Purchaser on account of the
purchase price, whereupon all rights of Purchaser hereunder to the Business
shall terminate, and neither party shall have any further claim against the
other hereunder.
4. The Closing. The "Closing" means the settlement of the
obligations of Seller and Purchaser to each other under this Agreement,
including the payment of the purchase price to Seller as provided in Article 2
hereof and the delivery of the closing documents provided for in Article 5
hereof. The closing shall be held at the offices of Gould & Wilkie, One Chase
Manhattan Plaza, New York, New York 10005 on a mutually convenient date which is
no later than January 3, 1996 (the "Closing Date"). Notwithstanding the
foregoing, the parties agree that the Closing Date may be adjourned by either
party hereto for a period not to exceed thirty (30) days for purposes of forming
the P.C. referenced in Article 11 hereto.
5. Closing Documents. At the closing, Seller shall execute
and deliver or cause to be executed and delivered to Purchaser:
a. an assignment of the rights of Seller under the
Leases, substantially in the form of the Assignment
and Assumption Agreements set forth as Exhibit E
hereto;
b. a Bill of Sale substantially in the form of Exhibit F
hereto;
c. an Employment Agreement between Seller and Brett
Richman, P.T., P.C. substantially in the form of
Exhibit G hereto;
d. an opinion of Seller's counsel, Schulte Roth & Zabel,
dated as of the Closing Date, in form and substance
satisfactory to Purchaser's counsel, stating in the
opinion of Seller's counsel that: (i) no further
action or approval is required in order to constitute
this Agreement and the Assignment and Assumption
Agreements as the valid and binding obligations of
Seller, enforceable in accordance with their terms,
except as enforceability may be limited by
bankruptcy, moratorium, insolvency or other laws
affecting creditor's rights generally; (ii) the
execution and delivery of this Agreement and the
Assignment and Assumption Agreements and the
performance by Seller of its obligations hereunder do
not and will not violate any applicable existing
laws, rules or regulations of the
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State of New York; and (iii) except as may
be set forth in this Agreement, such counsel
is not representing Seller in, nor, having
made no independent inquiry, has knowledge
of, any suit, action or proceeding against
Seller which, if adversely determined, would
prohibit the consummation of the
transactions contemplated by this Agreement;
e. Covenant Not To Compete executed by the Seller, in
the form attached hereto as Exhibit H;
f. such other instruments in form and substance
reasonably satisfactory to Purchaser's attorneys as
may be necessary or proper to transfer to Purchaser
good and marketable title to the Assets to be
transferred under this Agreement and to otherwise
carry out the intentions of the parties to this
Agreement;
g. such other instruments in form and substance
reasonably satisfactory to Purchaser's attorney
including, but not limited to, evidence of occurrence
or claims based insurance or the purchase of tail
insurance to cover any and all exposure for alleged
acts of negligence by Seller and/or Seller's
employees occurring prior to the Closing (with
coverage amounts consistent with those set forth in
the certificate of insurance attached hereto as
Exhibit M);
h. Seller shall do all further acts and things as may be
necessary, or reasonably requested by Purchaser, to
consummate the transactions contemplated by this
Agreement, including the transfer to Purchaser of the
Assets. Seller shall advise Purchaser of, and cause
to be delivered to Purchaser, all trade secrets and
proprietary information pertaining to the Business;
and
i. UCC-3 termination statement(s) relating to UCC-1
financing statement(s) described in paragraph e of
Article 7.
At the closing, Purchaser shall execute and/or deliver to
Seller:
a. Certificate of Incumbency of Purchaser;
b. Certificate of Good Standing of Purchaser;
c. Purchaser shall assume Seller's obligations under the
Leases, in accordance with Exhibit E hereto;
d. an opinion of Purchaser's counsel, Gould & Wilkie,
dated as of the Closing Date substantially in the
form of Exhibit I hereto;
e. A Certificate of Insurance evidencing occurrence or
claims based insurance to cover any and all exposure
for alleged acts of negligence by Purchaser and/or
Purchaser's employees occurring after the Closing, in
amount consistent with Purchaser's other physical
therapy practices; and
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f. A copy of Purchaser's most recent annual report.
6. Fees and Expenses. Except as expressly provided herein,
neither party shall be obligated to pay or perform any obligations or
liabilities of the other including without limitation obligations or liabilities
with respect to products sold by Seller, obligations or liabilities of Seller to
its creditors or any legal, accounting, brokerage or finder's fees or any taxes
or other expenses of the other party in connection with this Agreement or the
consummation of the transactions contemplated hereby.
7. Representations And Warranties of Seller. Seller
represents and warrants to Purchaser as follows:
a. Except as set forth on Exhibit J, the execution and
delivery by Seller of this Agreement and all
corollary documents mentioned and incorporated
herein, and the consummation of the transactions
contemplated herein, do not and will not conflict
with or result in any material breach of any
condition or provision of, or constitute a material
default under, or result in the creation or
imposition of any lien, charge or encumbrance upon
any of the Assets by reason of the provisions of any
contract, lien, lease, agreement, instrument or
judgment to which Seller is a party, or which is or
purports to be binding upon Seller or which affects
or purports to affect any of the Assets. No further
action or approval is required in order to constitute
this Agreement the valid, binding and enforceable
obligation of Seller;
b. Except as set forth in Article 3 or on Exhibit J, no
action, approval, consent or authorization, including
without limitation any action, approval, consent or
authorization of any landlord, mortgagee,
governmental or quasi-governmental agency,
commission, board, bureau or instrumentality, is
necessary for Seller to constitute this Agreement the
valid, binding and enforceable obligation of Seller
or to consummate the transactions contemplated
hereby, except as may be set forth herein;
c. Seller is the owner of and has good and marketable
title to the Assets, free of all liens, claims and
encumbrances, except as may be set forth herein;
d. To the best of Seller's knowledge, there are no
violations of any law or governmental rule or
regulation pending or threatened against Seller or
the Assets, and, to the best of Seller's knowledge,
Seller has complied with all laws and governmental
rules and regulations applicable to the Business and
the Assets;
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e. There are no judgments, liens (except any UCC-1
financing statement(s) filed against Seller's
equipment and/or receivables in connection with the
note(s) held by EBA), suits, actions or proceedings
pending or, to the best of Seller's knowledge,
threatened against Seller or the Assets, except as
set forth on Exhibit K attached hereto. Neither
Seller nor the Assets are a party to, subject to or
bound by any agreement or any judgment or decree of
any court, governmental body or arbitrator which
would conflict with or be breached by the execution,
delivery or performance of this Agreement, or which
could prevent the carrying out of the transactions
provided for in this Agreement, or which could
prevent the use by Purchaser of the Assets or
materially adversely affect the conduct of the
business by Purchaser;
f. Except as may be set forth herein or on the exhibits
annexed hereto, to the best of Seller's knowledge,
Seller has not entered into, and the Assets are not
subject to, any: (i) written contract or agreement
for the employment of any employee of the business;
(ii) contract with any labor union or guild; (iii)
pension, profit-sharing, retirement, bonus,
insurance, or similar plan with respect to any
employee of the business, except as set forth in
Exhibit L attached hereto; or (iv) similar contract
or agreement affecting or relating to the business or
the Assets;
g. To the best of Seller's knowledge, the Assets are in
reasonable working order and in compliance with all
applicable laws, rules and regulations, including the
Uniform Commercial Code and customary trade standards
of merchantability and no notice to creditors is
required pursuant to the Uniform Commercial Code in
connection with the sale of the Assets;
h. With respect to the Assets, Seller has filed all
federal, state, local and foreign tax returns
required to be filed by Seller prior to the date
hereof. Each such return is true, complete and
correct in all material respects. Seller has duly
paid or made adequate provisions for the payment of
all taxes, assessments and charges of any
governmental authority required to be paid by Seller
in connection with the Business. There are no tax
liens upon the Business and/or the Assets (other than
taxes not yet due and payable). No government is now
asserting, or to Seller's knowledge threatening to
assert, any deficiency or assessment for additional
taxes or any interest, penalties or fines with
respect to the Assets and/ or the Business;
i. Seller shall maintain at its own cost and expense
medical malpractice/errors and omissions insurance
coverage for at least four (4) years following the
Closing Date for claims which may be asserted against
Seller which arise out of the Business prior
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to Closing (a certificate of insurance evidencing
such policy is attached hereto as Exhibit M);
j. No other person or entity has any right, title or
interest in or to the Assets;
k. Seller has heretofore furnished Purchaser with
statements of income for the Business for the 12
months and 9 months ending, respectively, December
31, 1994 and September 30, 1995. Such income
statements fairly reflect, in all material respects,
the results of operations of the Business for the
periods indicated. Since September 30, 1995 (the
"Income Statement Date"), there has been no material
adverse change in the assets of the Business or
liabilities of the Business. Seller shall not be
deemed hereby to warrant the condition of the
physical therapy industry or economy as a whole or
the level of competition therein from and after the
Closing Date;
l. The Seller in the conduct of the Business maintains
insurance policies covering the assets of the
Business and the various occurrences which may arise
in connection with the operation of the Business
(including malpractice insurance if applicable). Such
policies are in full force and effect and all
premiums due thereon prior to or on the date of the
Closing have been paid. The Seller has complied in
all respects with the provisions of such policies;
m. The books and records of the Business are in all
material respects complete and correct, have been
maintained in accordance with good business practices
and accurately reflect the basis for the financial
position and results of operations of the Business
set forth in the financial statements. All of such
books and records, including true and complete copies
of all written contracts, have been made available
for inspection by the Purchaser and its
representatives;
n. As a material inducement to Purchaser's entering into
this Agreement, Seller represents and warrants to
Purchaser that the Business has averaged
approximately 1000 billable patient treatments per
week for the 1995 calendar year;
o. Seller has written managed care contracts currently
in effect with the companies listed in Exhibit N; and
p. In connection with the issuance and delivery of the
Securities, Seller represents and warrants to
Purchaser as follows:
(i) Seller has had an opportunity to ask questions
of and receive answers from duly designated
representatives of Purchaser, and has
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been afforded an opportunity to examine such
documents and other information which Seller or
his representative, if any, have requested
concerning the business and affairs of
Purchaser.
(ii) Seller acknowledges that he or it has such
knowledge and experience in financial and
business matters to make an informed investment
decision based upon the information furnished to
Seller and such additional information as Seller
may have requested and received from Purchaser
and the independent inquiries and investigations
undertaken by Seller. Seller represents he is an
"accredited investor" as defined in Regulation D
promulgated under the Securities Act of 1933, as
amended (the "Act") and that Seller can bear the
economic risk of loss of his or its entire
investment.
(iii) Seller is purchasing the Securities for his or
its own account for investment and not with a
view toward any resale or distribution thereof
in violation of the Act. Seller hereby consents
to the imposition of a legend on each
certificate representing the Securities, reading
substantially as follows:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, NO TRANSFER OF THE
SHARES MAY BE EFFECTED WITHOUT AN OPINION OF
COUNSEL TO THE CORPORATION STATING THAT THE
TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE
ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR
THAT THE TRANSFER OF THE SHARES IS COVERED BY AN
EFFECTIVE REGISTRATION STATEMENT WITH RESPECT TO
THE SHARES."
(iv) Seller is aware that the Securities are deemed
"restricted securities" as that term is defined
in Rule 144 (the "Rule") of the General Rules
and Regulations under that Act, and accordingly,
the Securities are not freely tradeable on the
open market.
8. Employees of Seller and the Business. Seller and Brett
Richman, P.T., P.C. shall execute and deliver at Closing the Employment
Agreement attached hereto as Exhibit G. Under no circumstance shall said
Employment Agreement be modified, amended or terminated without the prior
written consent of Purchaser.
As to all other employees of Seller, Purchaser agrees to
employ each of Seller's employees listed in Exhibit O hereto for thirty (30)
days after the Closing Date at the same salary that Seller has been paying such
employees. Purchaser shall have no obligation to pay any bonuses or additional
compensation to such employees nor shall Purchaser have any obligations or
liability with respect to the pension or profit sharing plan described in
Exhibit L hereto. Notwithstanding the foregoing or anything to the contrary
contained herein, Purchaser shall have the right at anytime, including within
said thirty (30) day period, to immediately terminate any employee listed in
Exhibit O for cause.
Commencing with the Closing Date, all employees listed in
Exhibit O shall be entitled to the standard number of vacation and sick days and
to the medical benefits as are described in Purchaser's employment manual, a
copy of which has been delivered to Seller.
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In determining the number of vacation and sick days to be allotted for the
period from the Closing Date through the day preceding the first anniversary of
the Closing Date, such employee's employment with Purchaser shall be deemed to
have commenced upon the date such employee first commenced his or her employment
with Seller. In no event shall Purchaser be liable for any accrued or unpaid
vacation and/or sick days due such employees for any periods prior to the
Closing Date. In no way shall the foregoing be deemed to create any obligation
on the part of Purchaser to retain any employee listed in Exhibit O beyond the
thirty (30) day period described above.
9. Representations and Warranties of Purchaser. Purchaser
represents and warrants to Seller as follows:
a. Purchaser is a Delaware corporation authorized to
transact business in New York. Purchaser has full
power and authority to carry out and perform its
undertakings and obligations as provided herein. The
execution and delivery of this Agreement and all
corollary documents executed by Purchaser, mentioned
or incorporated herein, and the performance by
Purchaser of its obligations hereunder have been duly
authorized and no further action or approval is
required in order to constitute this Agreement as the
binding and enforceable obligation of the Purchaser.
The execution and delivery by Purchaser of this
Agreement, and all corollary documents executed by
Purchaser mentioned or incorporated herein, and the
consummation of the transactions contemplated herein,
have been duly authorized by all proper or requisite
proceedings and will not conflict with or breach any
provision of the corporate documents of Purchaser;
b. No action, approval, consent or authorization,
including without limitation any action, approval,
consent or authorization of any governmental or
quasi-governmental agency, commission, board, bureau
or instrumentality, is necessary for Purchaser to
constitute this Agreement the binding and enforceable
obligation of Purchaser or to consummate the
transactions contemplated hereby;
c. To the best of Purchaser's knowledge, the Purchaser's
consummation of the transactions contemplated herein
does not and will not violate any existing local,
state or federal law or regulation, and there are no
violations of any existing law or governmental rule
or regulation pending or threatened against
Purchaser, which would materially impair Purchaser's
ability to perform its obligations under this
Agreement;
d. The Purchaser's Annual Report on Form 10-K for the
year ended 1994, and the Quarterly Report on Form
10-Q for the quarter ended September 30, 1995, did
not, at the time they were filed, contain an untrue
statement of a material fact required to be stated
therein or necessary in order to make the statements
therein not misleading. The consolidated financial
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statements of Purchaser included in the above filings
were prepared in accordance with generally accepted
accounting principles consistently applied and fairly
present (i) the consolidated financial position of
Purchaser and its subsidiaries as of the respective
dates thereof, and (ii) the consolidated results of
operations and cash flows for the periods presented.
There has been no material adverse change in the
business, financial condition or results of
operations of the Purchaser since the date of such
Form 10-Q for the quarter ended September 30, 1995;
e. The shares of restricted stock to be delivered to
Seller pursuant to Section 2(c) hereof have been duly
authorized and, when delivered in accordance with the
terms of this Agreement, will be validly issued,
fully paid and non-assessable, free of pre- emptive
rights, and are free of all liens, charges, claims,
pledges and encumbrances or restrictions, rights or
interests of others of any kind other than by
applicable Federal and State securities law; and
f. To the best of Purchaser's knowledge, there are no
legal or arbitral proceedings or any proceedings
before any governmental authority or agency now
pending or threatened against the Purchaser or any of
its subsidiaries, which, if adversely determined,
would have a material adverse effect on the
consolidated financial condition, operations or
business of the Purchaser and its subsidiaries.
10. Conduct of the Business. Seller, until the Closing,
shall:
a. Conduct the Business in the normal, usual and regular
manner (in that regard, Seller agrees that it shall
not (i) sell, transfer, or otherwise dispose of, or
enter into any agreement to sell, transfer, or
otherwise dispose of, any of the Assets, (ii) incur,
create or become obligated with respect to any
liabilities, contracts or obligations outside the
ordinary course of its business, or (iii) become
obligated under any agreement to purchase or supply
goods or services other than agreements that are not
material and are entered into in the ordinary course
of its business);
b. Use its best efforts to preserve the Business and the
Goodwill of the customers and suppliers of the
Business and others having relations with Seller; and
c. Give Purchaser and its duly designated
representatives reasonable access during normal
business hours to Seller's premises and the books and
records of the Business, and furnish to Purchaser
such data and information pertaining to Seller's
Business as Purchaser from time to time reasonably
may request. The obligation of Seller to furnish to
Purchaser such data and information pertaining to
Seller's Business as Purchaser
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from time to time reasonably may request shall
survive Closing.
11. Conditions to Closing. The obligations of Purchaser to
close hereunder are subject, at the option of Purchaser, to the following
conditions:
a. All of the terms, covenants and conditions to be
complied with or performed by Seller under this
Agreement on or before the Closing shall have been
complied with or performed in all material respects.
b. All representations or warranties of Seller herein
are true in all material respects as of the Closing
Date.
c. On the Closing Date, there shall be no liens or
encumbrances against the Assets, except as may be
provided for herein or set forth on Exhibit J hereto.
d. The issuance and delivery of the Securities has been
in all respects approved by Purchaser's Board of
Directors. In the event the issuance and delivery of
the Securities is not approved by Purchaser's Board
of Directors, Purchaser shall, in lieu thereof,
increase the cash portion of the Purchase Price
payable on the Closing Date by $500,000.00.
e. The execution and/or delivery of the following
documents by Seller and/or Brett Richman, P.T., P.C.,
which shall be in form and substance reasonably
satisfactory to the attorneys of Purchaser and
Seller:
i. Management and License Agreement;
ii. Stock Transfer Option;
iii. Escrow Agreement;
iv. Stock Power; and
v. Stock Certificate(s) of all outstanding shares
in Brett Richman, P.T., P.C.
The obligations of Seller to close hereunder are subject, at
the option of Seller, to the following conditions:
a. All of the terms, covenants and conditions to be
complied with or performed by Purchaser under this
Agreement on or before the Closing, including but not
limited to the delivery of the Certificate of
Insurance required pursuant to paragraph f of Article
5, shall have been complied with or performed in all
material respects.
b. All representations or warranties of Purchaser herein
are true in all material respects as of the Closing
Date.
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c. The formation at Purchaser's sole cost and expense of
Brett Richman, P.T., P.C and the execution and/or
delivery of the following documents by Purchaser,
which shall be in form and substance reasonably
satisfactory to the attorneys of Purchaser and
Seller:
i. Management and License Agreement;
ii. Stock Transfer Option; and
iii. Escrow Agreement.
12. Indemnification. Each party hereto shall indemnify and
hold the other parties harmless from and against all liability, claim, loss,
damage or expense, including reasonable attorneys' fees, incurred or required to
be paid by such other parties by reason of any breach or failure of observance
or performance of any representation, warranty or covenant or other provision of
this Agreement by such party. Neither party shall have any liability to the
other party for any indemnified claims until the aggregate amount of indemnified
claims exceed $25,000, and then only to the extent such amount exceeds $25,000.
Notwithstanding anything contained herein, the maximum aggregate liability of
Seller in connection with the claims for indemnification under this Agreement
shall not exceed the Purchase Price.
Seller and Purchaser each agree to give prompt written
notice to the other of any claim against the party giving notice which might
give rise to a claim by it against the other party hereto based upon the
indemnity agreement contained herein, stating the nature and basis of the claim
and, to the extent then known, the actual or estimated amount thereof, but the
failure to give such notice shall not affect the rights of the indemnified party
hereunder, except (i) to the extent the indemnifying party shall have suffered
actual damage by reason of such failure, or (ii) if such notice is not given
within 90 days from the date such claim first became known to the party giving
notice, in which event any right of indemnification with respect to such claim
shall be deemed to have lapsed and expired. In the event any action, suit or
proceeding is brought against a party with respect to which another party hereto
may have liability under the indemnity agreement contained herein, the
indemnifying party shall have the right, at its sole cost and expense, to defend
such action, with counsel of its own choosing which shall be reasonably
satisfactory to the indemnified party, in the name and on behalf of the
indemnified party and in connection with any such action, suit or proceeding the
parties hereto agree to render to each other such assistance as may reasonably
be required in order to insure the proper and adequate defense of any such
action, suit or proceeding. The indemnified party shall be kept fully informed
with respect to any such action, suit or proceeding and shall have a right to
participate therein at its own expense, it being understood and agreed that so
long as the indemnifying party has assumed the defense of such action, suit or
proceeding and has paid or is paying the costs and expenses of such defense, the
indemnified party shall bear its own counsel fees and expenses with respect
thereto. Neither party hereto shall make any settlement of any claim which might
give rise to liability to the other party hereto under the indemnity contained
herein or which would adversely affect the operation of the Business, without
the written consent of such other party, which consent such other party
covenants shall not be unreasonably withheld.
13. Risk Of Loss. The risk of loss to the tangible Assets of
the Business sold hereunder, until the Closing, is assumed and shall be borne by
Seller. If the amount of any loss or damage exceeds One Hundred Thousand and
00/100 Dollars ($100,000.00), Purchaser shall have the right to cancel this
Agreement by written notice to Seller. If Purchaser nevertheless elects to close
title, the purchase price shall be reduced by the amount
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of any such loss or damage. If such loss or damage is less than One Hundred
Thousand and 00/100 Dollars ($100,000.00), title shall close and the purchase
price shall be reduced by the amount of the loss or damage. Seller shall have no
further liability or obligation with respect to such loss or damage.
14. Covenant Not To Compete. Seller shall deliver to
Purchaser at Closing an agreement, in the form attached hereto as Exhibit G.
15. Brokerage. The parties hereto represent and warrant to
each other that they have not dealt with any broker or finder in connection with
this Agreement or the transactions contemplated hereby, and no broker or any
other person is entitled to receive any brokerage commission, finder's fee or
similar compensation in connection with this Agreement or the transactions
contemplated hereby. Each party hereto shall indemnify and hold the other
parties harmless from and against all liability, claim, loss, damage or expense
including reasonable attorneys' fees, incurred or required to be paid by such
other parties by reason of any breach or failure of observance of this Article
15.
16. Notices. All notices, demands and other communications
required or permitted to be given hereunder shall be in writing and shall be
deemed to have been properly given if delivered by certified mail, return
receipt requested, with postage prepaid, to Seller or Purchaser, as the case may
be, at their addresses first above written, or at such other addresses as they
may designate by notice given hereunder. Notices shall be deemed effective on
the date received or refused by the addressee. Copies of all such notices,
demands and other communications simultaneously shall be given in the aforesaid
manner to Seller's attorneys, Schulte Roth & Zabel, Attention: Steven Chudnow,
Esq. at 900 Third Avenue, New York, New York 10022, and to Purchaser's
attorneys, Gould & Wilkie, Attention: Andrew W. Bank, Esq. at One Chase
Manhattan Plaza, New York, New York 10005. The respective attorneys for the
parties hereby are authorized to give any notice required or permitted hereunder
and to agree to adjournments of the Closing.
17. Survival. The representations, warranties and covenants
contained herein or in any document, instrument, certificate, exhibit or
schedule furnished in connection herewith shall survive the delivery of the Bill
of Sale and shall continue in full force and effect after the Closing for a
period of eighteen (18) months, except to the extent waived in writing.
18. Further Assurances. In connection with the transactions
contemplated by this Agreement, the parties agree to execute and deliver such
further instruments, and to take such further actions, as may be reasonably
necessary or proper to effectuate and carry out the transactions contemplated in
this Agreement.
19. Changes Must Be In Writing. No delay or omission by either
Seller or Purchaser in exercising any right shall operate as a waiver of such
right or any other right. This Agreement may not be altered, amended, changed,
modified, waived or terminated in any respect or particular, unless the same
shall be in writing signed by the party to be bound. No waiver by any party of
any breach hereunder shall be deemed a waiver of any other or subsequent breach.
20. Captions and Exhibits. The captions in this Agreement are
for convenience only and are not to be considered in construing this Agreement.
The Exhibits annexed to this Agreement are an integral part of this Agreement,
and where there is any reference to this Agreement it shall be deemed to include
said Exhibits.
21. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
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<PAGE>
<PAGE>
22. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, successors and assigns.
23. Counterparts. This Agreement may be signed in
counterparts, each of which shall be deemed an original and all of which shall
constitute one and the same instrument.
24. Partial Invalidity. If any provision of this Agreement
or the application thereof to any person or circumstances, shall, to any extent,
be invalid or unenforceable, the remainder of this Agreement, or the application
of such term or provision to persons or circumstances other than those as to
which it is held invalid or unenforceable, shall not be affected thereby, and
each term and provision of this Agreement shall be valid and be enforced to the
fullest extent permitted by law.
25. Publicity. Seller acknowledges that Purchaser is a
publicly traded company subject to federal and state securities laws. The
parties agree to keep the terms of the transaction described herein strictly
confidential and shall not disclose such information to any third parties
whatsoever, other than to legal counsel, accountants, or other financial
advisors or as may be required by law, without in each case securing the prior
written consent of Purchaser.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
- - --------------------------------- -----------------------------------
Witness BRETT RICHMAN
ATTEST: PROFESSIONAL SPORTS CARE
MANAGEMENT, INC.
By: By:
---------------------------- --------------------------------
PATRICK J. WACK, JR. RUSSELL F. WARREN, JR.
Secretary President
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<PAGE>
<PAGE>
STATE OF NEW YORK )
)SS.:
COUNTY OF NEW YORK)
On the 12th day of December, 1995, before me personally came
RUSSELL F. WARREN, JR. to me known, who, being by me duly sworn did depose and
say that he resides at 215 John Street, Greenwich, Connecticut that he is the
President of PROFESSIONAL SPORTS CARE MANAGEMENT, INC., the corporation
described in and which executed the above instrument and that he signed his name
thereto by order of the board of directors of said corporation.
-----------------------------------
STATE OF NEW YORK )
)SS.:
COUNTY OF NEW YORK)
Be it remembered that on this 12th day of December, 1995,
before me, the subscriber, a notary public authorized to take acknowledgments
and proof in said County and State, personally appeared BRETT RICHMAN, who I am
satisfied is the individual named in and who executed the within Agreement of
Sale, and he acknowledged that he signed, sealed and delivered said Agreement of
Sale as his act and deed for the uses and purposes therein expressed.
------------------------------------
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<PAGE>
AGREEMENT OF SALE
AGREEMENT OF SALE, dated as of December 29, 1995 (hereinafter,
the "Agreement"), by and among MINUTEMEN, INC., a Connecticut corporation,
having an address at 600 Riverside Avenue, Westport, Connecticut 06880
(hereinafter referred to as the "Seller"), DARON SHEPARD, KENNETH SHEPARD, JON
SHEPARD AND FRED SHEPARD, (collectively the sole shareholders of Seller and
hereinafter referred to as the "Shareholders"), and PROFESSIONAL SPORTS CARE
MANAGEMENT, INC., a Delaware corporation, having an address at 550 Mamaroneck
Avenue, Harrison, New York 10528 ("Purchaser").
WITNESSETH:
WHEREAS, Purchaser desires to acquire, and Seller desires to
sell an undivided fifty-one percent (51%) interest as tenant-in-common in the
assets hereinafter specified of the business known as PRO FITNESS (the
"Business") a division of MINUTEMEN, INC., upon the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the covenants and
agreements hereafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which hereby are acknowledged, the parties hereto
agree as follows:
1. Agreement to Sell. Seller agrees to sell, transfer and
deliver to Purchaser, and Purchaser agrees to purchase, upon the terms and
conditions hereinafter set forth, an undivided fifty-one percent (51%) interest
as tenant-in-common in the assets (other than cash, accounts receivable and any
award which Seller may be entitled to in connection with its suit against Devrek
and Summex) of the Business (the "Assets"), including without limitation the
following:
a. the books and records;
b. the inventory of merchandise, parts and
supplies of the Business; and the equipment
described in Exhibit A hereto and all similar
equipment acquired or owned by the Business
(the "Equipment"). All of the Equipment shall
be in its "as is" condition as of the date of
this Agreement;
c. all rights, including but not limited to,
rights under any contract, (including, but not
limited to, all corporate fitness contracts),
agreements, leases, permits and licenses
described in Exhibit B hereto which Seller is a
party exclusively in connection with the
Business; and
d. the goodwill of the Business, including but not
limited to, the tradename Pro Fitness (the
"Goodwill").
<PAGE>
<PAGE>
2. Purchase Price. A. The purchase price to be paid by
Purchaser for the Assets is One Million Five Hundred Seventy-Five Thousand and
00/100 Dollars ($1,575,000.00), payable as follows:
a. One Million Two Hundred Seventy-Five Thousand
and 00/100 Dollars ($1,275,000.00) at the
Closing by wire transfer of immediately
available federal funds; and
b. Three Hundred Thousand and 00/100 Dollars
($300,000.00) by the execution and delivery at
the Closing of a Promissory Note by Purchaser
to Daron Shepard in said amount substantially
in the form of Exhibit C hereto (the
"Promissory Note").
B. The purchase price is comprised of the following
components:
Equipment: $ 51,145.00
Business and Goodwill: $968,855.00
Non-Compete Covenant of Daron Shepard: $300,000.00
Non-Compete Covenant of Kenneth Shepard: $127,500.00
Non-Compete Covenant of Jon Shepard: $127,500.00
The parties agree to use the foregoing allocation, which was
the result of arm's length negotiations, only for accounting and financial
purposes.
3. The Closing. The "Closing" means the settlement of the
obligations of Seller and Purchaser to each other under this Agreement,
including the payment of the purchase price to Seller as provided in Article 2
hereof and the delivery of the closing documents provided for in Article 5
hereof. The closing shall be accomplished by an escrow arrangement on a mutually
convenient date which is no later than January 9, 1996 (the "Closing Date").
4. Closing Documents. At the closing, Seller shall execute and
deliver or cause to be executed and delivered to Purchaser:
a. Certified copy of Certificate of Dissolution of
Pro Fitness, Inc.;
b. a Bill of Sale evidencing that title to the
assets of Pro Fitness, Inc. has been
transferred to Seller;
c. an Assignment and Assumption Agreement
evidencing that Seller has assumed all of the
rights and obligations under those contracts
(including, but not limited to, all corporate
fitness contracts), agreements, leases, permits
and licenses described in Exhibit B;
d. a Bill of Sale substantially in the form of
Exhibit D hereto;
e. certified copies of resolutions duly adopted by
the Board of Directors and Shareholders of
Seller authorizing the sale of the Assets, the
execution and delivery of the Covenant Not To
Compete and the performance by Seller of its
obligations hereunder;
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<PAGE>
<PAGE>
f. an opinion of Seller's counsel, Wofsey Rosen
Kweskin & Kuriansky, dated as of the Closing
Date, in form and substance satisfactory to
Purchaser's counsel, stating in the opinion of
Seller's counsel that: (i) Pro Fitness, Inc.
has duly executed and delivered to Seller a
Bill of Sale evidencing that title to all of
the assets of Pro Fitness, Inc. has been
transferred to Seller; (ii) Pro Fitness, Inc.
and Seller have duly executed and delivered an
Assignment and Assumption Agreement evidencing
that Pro Fitness, Inc. has assigned and Seller
has assumed all of the rights and obligations
under those contracts (including, but not
limited to, all corporate fitness contracts),
agreements, leases, permits and licenses
described in Exhibit B; (iii) Seller has full
power and authority to enter into this
Agreement and the Covenant Not To Compete and
perform its obligations hereunder; (iv) the
execution and delivery of this Agreement and
the performance by Seller of its obligations
hereunder have been duly authorized and no
further action or approval is required in order
to constitute this Agreement as the valid and
binding obligation of Seller, and further that
this Agreement is the valid and binding
obligation of Seller, enforceable in accordance
with its terms, except as enforceability may be
limited by bankruptcy, moratorium, insolvency
or other laws affecting creditor's rights
generally and that the execution and delivery
of the Covenant Not To Compete has been duly
authorized and no further action or approval is
required for the Covenant Not To Compete to be
duly authorized and delivered; (v) the
execution and delivery of this Agreement and
the Covenant Not To Compete and the performance
by Seller of its obligations hereunder do not
and will not violate any applicable existing
laws, rules or regulations of the State of
Connecticut; and (vi) except as may be set
forth in this Agreement, such counsel is not
representing Seller in nor has knowledge of any
suit, action or proceeding against Seller
which, if adversely determined, would prohibit
the consummation of the transactions
contemplated by this Agreement;
g. Certificate of Incumbency for Seller;
h. Certificate of Good Standing for Seller;
i. Covenant Not To Compete executed by the Seller
and the Shareholders, in the form attached
hereto as Exhibit E;
j. such other instruments in form and substance
reasonably satisfactory to Purchaser's
attorneys as may be necessary
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<PAGE>
<PAGE>
or proper to transfer to Purchaser good and
marketable title to the Assets and to otherwise
carry out the intentions of the parties to this
Agreement;
k. Evidence that Seller's insurance policies,
copies of which are attached hereto as Exhibit
F, are in full force and effect on the Closing
Date; and
l. Seller shall do all further acts and things as
may be necessary, or reasonably requested by
Purchaser, to consummate the transactions
contemplated by this Agreement. Seller shall
advise Purchaser of, all trade secrets and
proprietary information pertaining to the
Business.
At the closing, Purchaser shall execute and/or deliver to
Seller:
a. the funds required pursuant to Article 2(A)(a)
hereof;
b. the Promissory Note;
c. Sixty Thousand and 00/100 Dollars ($60,000.00)
by wire transfer of immediately available
federal funds as payment of the first (1st)
installment payment due under the Promissory
Note;
d. Certificate of Incumbency of Purchaser; and
e. Certificate of Good Standing of Purchaser; and
f. an opinion of Purchaser's counsel, Gould &
Wilkie, dated as of the Closing Date in the
form of Exhibit G hereto.
5. Fees and Expenses. Except as expressly provided herein,
neither party shall be obligated to pay or perform any obligations or
liabilities of the other party including without limitation any legal,
accounting, brokerage or finder's fees or any taxes or other expenses in
connection with this Agreement or the consummation of the transactions
contemplated hereby. Notwithstanding the foregoing, Purchaser shall share
equally with Seller the reasonable cost of an audit of the Business required by
Purchaser in connection with the transactions contemplated pursuant to this
Agreement. Such audit shall include the delivery to Purchaser of certified
financial statements of the Business relating to the fiscal years 1994 and 1995.
Seller shall be solely responsible for any costs and/or
obligations associated with the litigation involving Devrek, Summex and its
principles.
In the event that a Closing shall not occur due to one party's
breach of this Agreement, then the breaching party shall pay, as the sole remedy
in connection with such a breach, the reasonable costs and expenses incurred by
the non-breaching party in connection with this Agreement.
6. Representations And Warranties of Seller. Seller represents
and warrants to Purchaser as follows:
a. Seller has full power and authority to own its
properties and to conduct its business as now carried on, and to
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carry out and perform its undertakings and
obligations as provided herein. The execution
and delivery by Seller of this Agreement, all
corollary documents mentioned and incorporated
herein the Operating Agreement of Pro Fitness,
LLC (the "Operating Agreement") and the
consummation of the transactions contemplated
herein, have been duly authorized, and do not
and will not conflict with or result in any
breach of any condition or provision of, or
constitute a default under, or result in the
creation or imposition of any lien, charge or
encumbrance upon any of the assets of the
Business by reason of the provisions of any
contract, lien, lease, agreement, instrument or
judgment to which Seller is a party, or which
is or purports to be binding upon Seller or
which affects or purports to affect any of the
assets of the Business. To the best of Seller's
knowledge, no further action or approval is
required in order to constitute this Agreement
and the Operating Agreement, the valid, binding
and enforceable obligations of Seller;
b. No action, approval, consent or authorization,
including without limitation any action,
approval, consent or authorization of any
landlord (except in connection with the lease
relating to the premises located at 5 High
Ridge Park, Stamford, Connecticut), mortgagee,
governmental or quasi- governmental agency,
commission, board, bureau or instrumentality,
is necessary for Seller to constitute this
Agreement and the Operating Agreement the
valid, binding and enforceable obligations of
Seller or to consummate the transactions
contemplated hereby, except as may be set forth
herein;
c. Seller is the owner of and has good and
marketable title to the assets of the Business,
free of all liens, claims and encumbrances,
except as may be set forth herein;
d. Seller has assumed all of the rights and
obligations under those contracts (including,
but not limited to, all corporate fitness
contracts), agreements, leases, permits and
licenses described in Exhibit B;
e. To the best of Seller's knowledge, there are no
violations of any law or governmental rule or
regulation pending or threatened against Seller
or the assets of the Business, and Seller has
complied with all laws and governmental rules
and regulations applicable to the Business and
the assets of the Business;
f. There are no judgments, liens, suits, actions
or proceedings pending or, to the best of
Seller's knowledge, threatened against Seller
or the assets of the Business (other than the
suit against Devrek and Summex and a potential
counterclaim in such matter). Neither
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Seller nor the assets of the Business are a
party to, subject to or bound by any agreement
or any judgment or decree of any court,
governmental body or arbitrator which would
conflict with or be breached by the execution,
delivery or performance of this Agreement or
the Operating Agreement, or which could prevent
the carrying out of the transactions provided
for in this Agreement or the Operating
Agreement, or which could prevent the use by
Purchaser of the assets of the Business or
adversely affect the conduct of the Business by
Purchaser;
g. Except as may be set forth herein, Seller has
not entered into, and the assets of the
Business are not subject to, any: (i) written
contract or agreement for the employment of any
employee of the Business; (ii) contract with
any labor union or guild; (iii) pension,
profit-sharing, retirement, bonus, insurance,
or similar plan with respect to any employee of
the Business, except as set forth in Exhibit H
attached hereto; or (iv) similar contract or
agreement affecting or relating to the Business
or the assets of the Business;
h. To the best of Seller's knowledge, the assets
of the Business are in working order and in
compliance with all applicable laws, rules and
regulations, including the Uniform Commercial
Code and customary trade standards of
merchantability and no notice to creditors is
required pursuant to the Uniform Commercial
Code in connection with the sale of the Assets;
i. To the best of Seller's knowledge, with respect
to the assets of the Business, Seller has filed
each tax return, including without limitation
all income, excise, property, gain, sales,
franchise and license tax returns, required to
be filed by Seller prior to the date hereof. To
the best of Seller's knowledge, each such
return is true, complete and correct, and
Seller has paid all taxes, assessments and
charges of any governmental authority required
to be paid by it and has created reserves or
made provision for all taxes accrued, but not
yet payable. No government is now asserting, or
to Seller's knowledge threatening to assert,
any deficiency or assessment for additional
taxes or any interest, penalties or fines with
respect to Seller;
j. The Shareholders are the only holders of all
issued and outstanding stock of Seller;
k. Seller has heretofore furnished Purchaser with
balance sheets for the Business as of December
31 in each of the years 1993 and 1994 and as of
September 30, 1995 and the related statements
of income for the 12 months and 9 months,
respectively, then ended. The balance sheet of
the Business as of September 30, 1995 is
hereinafter referred to as the Balance Sheet.
To the best
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of Seller's knowledge, such balance sheets
fairly present the financial condition of the
Business at the respective dates thereof and
reflect all material claims against and all
debts and liabilities of the Business and to
the best of Seller's knowledge such income
statements fairly reflect the results of
operations of the Business for the periods
indicated. Since September 30, 1995 (the
"Balance Sheet Date"), there has been no
material adverse change in the assets of the
Business or liabilities or condition of the
Business. Attached hereto as Exhibit I is a
copy of the Balance Sheet and the income
statement for the 9 months ending September 30,
1995;
l. To the best of Seller's knowledge, the Seller
in the conduct of the Business maintains
insurance policies covering the assets of the
Business and the various occurrences which may
arise in connection with the operation of the
Business (including malpractice insurance if
applicable). Such policies are in full force
and effect and all premiums due thereon prior
to or on the date of the Closing have been
paid. The Seller has complied in all respects
with the provisions of such policies;
m. To the best of Seller's knowledge, the books
and records of the Business are in all material
respects complete and correct, have been
maintained in accordance with good business
practices and accurately reflect the basis for
the financial position and results of
operations of the Business set forth in the
Financial Statements. All of such books and
records, including true and complete copies of
all written contracts, have been made available
for inspection by the Purchaser and its
representatives; and
n. As a material inducement to Purchaser's
entering into this Agreement, Seller represents
and warrants to Purchaser that the corporate
fitness contracts set forth on Exhibit J
attached hereto are the only corporate fitness
contracts in which Seller has been a party,
which were not renewed by the parties upon the
expiration of the term of such contract.
Further, Seller shall notify the parties to all
corporate fitness contracts of the proposed
assignment of such contracts to Pro Fitness,
LLC and shall use its best efforts so that all
such contracts shall be assigned to Pro
Fitness, LLC by the Closing Date.
7. Representations and Warranties of Purchaser. Purchaser
represents and warrants to Seller as follows:
a. Purchaser is a Delaware corporation authorized
to transact business in Connecticut. Purchaser
has full power and authority to carry out and
perform its undertakings and obligations as
provided herein. The execution and delivery of
this Agreement, all corollary documents
executed by Purchaser, mentioned or
incorporated herein, the Operating Agreement
and the performance by Purchaser of its
obligations hereunder have been duly authorized
and no further action or approval
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<PAGE>
is required in order to constitute this
Agreement and the Operating Agreement as the
binding and enforceable obligations of the
Purchaser. The execution and delivery by
Purchaser of this Agreement, all corollary
documents executed by Purchaser mentioned or
incorporated herein, the Operating Agreement
and the consummation of the transactions
contemplated herein, have been duly authorized
by all proper or requisite proceedings and will
not conflict with or breach any provision of
the corporate documents of Purchaser;
b. No action, approval, consent or authorization,
including without limitation any action,
approval, consent or authorization of any
governmental or quasi-governmental agency,
commission, board, bureau or instrumentality,
is necessary for Purchaser to constitute this
Agreement and the Operating Agreement the
binding and enforceable obligation of Purchaser
or to consummate the transactions contemplated
hereby;
c. To the best of Purchaser's knowledge, the
Purchaser's consummation of the transactions
contemplated herein does not and will not
violate any existing local, state or federal
law or regulation, and there are no violations
of any existing law or governmental rule or
regulation pending or threatened against
Purchaser, which would materially impair
Purchaser's ability to perform its obligations
under this Agreement or the Operating
Agreement; and
d. Purchaser is not subject to or bound by any
agreement or any judgment or decree of any
court, governmental body or arbitrator which
would conflict with or be breached by the
execution, delivery or performance of this
Agreement or the Operating Agreement, or which
could prevent the carrying out of the
transactions provided for in this Agreement or
the Operating Agreement.
8. Conduct of the Business. Seller, until the Closing,
shall:
a. Conduct the Business in the normal, usual and
regular manner (in that regard, Seller agrees
that it shall not (i) sell, transfer, or
otherwise dispose of, or enter into any
agreement to sell, transfer, or otherwise
dispose of, any of the assets of the Business,
(ii) incur, create or become obligated with
respect to any liabilities, contracts or
obligations outside the ordinary course of its
business, or (iii) become obligated under any
agreement to purchase or supply goods or
services other than agreements that are entered
into in the ordinary course of its business);
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<PAGE>
b. Use its best efforts to preserve the Business
and the Goodwill of the customers and suppliers
of the Business and others having relations
with Seller; and
c. Give Purchaser and its duly designated
representatives reasonable access during normal
business hours to Seller's premises and the
books and records of the Business, and furnish
to Purchaser such data and information
pertaining to Seller's Business as Purchaser
from time to time reasonably may request.
The parties agree that Seller may pay 1995 year end bonuses to all
employees of Seller. The total amount of such year end bonuses shall be in
accordance with the practices of the Business in prior years (i.e.,
approximately $75,000.00).
9. Conditions to Closing. The obligations of Purchaser to
close hereunder are subject, at the option of Purchaser, to the following
conditions:
a. All of the terms, covenants and conditions to
be complied with or performed by Seller under
this Agreement on or before the Closing shall
have been complied with or performed in all
material respects.
b. All representations or warranties of Seller
herein are true in all material respects as of
the Closing Date.
c. On the Closing Date, there shall be no liens or
encumbrances against the assets of the
Business, except as may be provided for herein.
d. The terms of this Agreement and the transaction
described herein have been in all respects
approved by Purchaser's Board of Directors.
e. The simultaneous formation of Pro Fitness, LLC
by the parties hereto and the execution and
delivery of the following documents which shall
be in form and substance reasonably
satisfactory to the attorneys of Purchaser and
Seller:
i. certificate of formation;
ii. operating agreement;
iii. assignment by Seller of its forty-nine
percent (49%) interest as tenant-in-common
in all existing contracts, agreements,
leases, permits and licenses (including
but not limited to the corporate fitness
contracts) described in Exhibit B hereto;
iv. assumption by Pro Fitness, LLC of the
obligations under all contracts,
agreements, leases, permits and licenses
(including but not limited to the
corporate fitness contracts) described in
Exhibit B hereto;
v. promissory notes;
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<PAGE>
vi. employment agreement between Pro Fitness,
LLC and Daron Shepard; and
vii. any and all other documents which may be
reasonably necessary in connection with
the formation of Pro Fitness, LLC.
f. The simultaneous contribution by Seller of its
forty-nine percent (49%) interest as
tenant-in-common in the tangible assets (other
than cash, accounts receivable and any award
which Seller may be entitled to in connection
with its suit against Devrek and Summex) and
the tradename of the Business to Pro Fitness,
LLC in exchange for its forty-nine percent
(49%) interest in Pro Fitness, LLC.
The obligations of Seller to close hereunder are subject, at
the option of Seller, to the following conditions:
a. All of the terms, covenants and conditions to
be complied with or performed by Purchaser
under this Agreement on or before the Closing
shall have been complied with or performed in
all material respects.
b. All representations or warranties of Purchaser
herein are true in all material respects as of
the Closing Date.
c. The terms of this Agreement and the transaction
described herein have been in all respects
approved by Seller's Board of Directors.
d. The simultaneous formation of Pro Fitness, LLC
by the parties hereto and the execution and
delivery of the following documents which shall
be in form and substance reasonably
satisfactory to the attorneys of Purchaser and
Seller:
i. certificate of formation;
ii. operating agreement;
iii. assumption by Pro Fitness, LLC of the
obligations under all contracts,
agreements, leases, permits and licenses
(including but not limited to the
corporate fitness contracts) described in
Exhibit B hereto. Shareholders hereby
consent to said assumption by Pro Fitness,
LLC;
iv. assignment by Purchaser of its fifty-one
(51%) interest as tenant-in-common in all
existing contracts, agreements, leases,
permits and licenses (including but not
limited to the corporate fitness
contracts) described in Exhibit B hereto;
v. promissory notes;
vi. employment agreement between Pro Fitness,
LLC and Daron Shepard; and
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<PAGE>
vii. any and all other documents which may be
reasonably necessary in connection with
the formation of Pro Fitness, LLC.
e. The simultaneous contribution by Purchaser of
its fifty-one percent (51%) interest as
tenant-in-common in the tangible assets (other
than cash, accounts receivable and any award
which Seller may be entitled to in connection
with its suit against Devrek and Summex) and
the tradename of the Business in exchange for
its fifty-one percent (51%) interest in Pro
Fitness, LLC.
f. The execution by Purchaser of an agreement not
to compete
with Pro Fitness, LLC.
10. Indemnification. Each party hereto shall indemnify and
hold the other parties harmless from and against all liability, claim, loss,
damage or expense, including reasonable attorneys' fees, incurred or required to
be paid by such other parties by reason of any breach or failure of observance
or performance of any representation, warranty or covenant or other provision of
this Agreement by such party.
11. Covenant Not To Compete. Seller and Shareholders shall
deliver to Purchaser at Closing a Covenant Not To Compete, in the form of the
agreement attached hereto as Exhibit E.
12. Brokerage. The parties hereto represent and warrant to
each other that they have not dealt with any broker or finder in connection with
this Agreement or the transactions contemplated hereby, and no broker or any
other person is entitled to receive any brokerage commission, finder's fee or
similar compensation in connection with this Agreement or the transactions
contemplated hereby. Each party hereto shall indemnify and hold the other
parties harmless from and against all liability, claim, loss, damage or expense
including reasonable attorneys' fees, incurred or required to be paid by such
other parties by reason of any breach or failure of observance of this Article
12.
13. The Shareholders. The Shareholders hereby represent and
warrant that to the best of their knowledge, all of the representations and
warranties of Seller set forth herein are true in all material respects. The
Shareholders represent and warrant that they are the only shareholders of
Seller, and that they have full power and authority to carry out and perform
their undertakings and obligations as provided herein. The Shareholders agree as
aforesaid to induce Purchaser to enter into this Agreement.
14. Arbitration. Any dispute or controversy arising among the
parties hereto regarding any term, covenant or condition of this Agreement or
the breach thereof shall, upon written demand of the party initiating the
complaint, be submitted to and determined by arbitration before the American
Arbitration Association ("Association"), in Connecticut, by a panel of three (3)
arbitrators, in accordance with the rules of the Association then in effect. Any
award rendered shall be made by means of a written opinion explaining the
arbitrators' reasons for the award. The arbitrators may not amend or vary any
provision of this Agreement. Judgment upon the award rendered by the arbitrators
may be entered in any court of competent jurisdiction, which court shall have
the power to review such award for compliance with this Agreement. If the party
initiating the complaint chooses not to submit a dispute or controversy to
arbitration as provided herein, the parties hereto agree that arbitration is not
required and that any action or proceeding brought with respect to any dispute
or controversy arising under this Agreement, shall be maintained solely and
exclusively in the courts of the State of Connecticut.
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<PAGE>
15. Notices. All notices, demands and other communications
required or permitted to be given hereunder shall be in writing and shall be
deemed to have been properly given if delivered by certified mail, return
receipt requested, with postage prepaid, to Seller or Purchaser, as the case may
be, at their addresses first above written, or at such other addresses as they
may designate by notice given hereunder. Notices shall be deemed effective on
the date received or refused by the addressee. Copies of all such notices,
demands and other communications simultaneously shall be given in the aforesaid
manner to Seller's attorneys, Wofsey Rosen Kweskin & Kuriansky, Attention:
Marshall Goldberg, Esq. at 600 Summer Street, Stamford, Connecticut 06901-1490,
and to Purchaser's attorneys, Gould & Wilkie, Attention: Andrew W. Bank, Esq. at
One Chase Manhattan Plaza, New York, New York 10005. The respective attorneys
for the parties hereto are authorized to give any notice required or permitted
hereunder and to agree to adjournments of the Closing.
16. Survival. The representations, warranties and covenants
contained herein or in any document, instrument, certificate, exhibit or
schedule furnished in connection herewith shall survive for a period of one (1)
year from the Closing Date, except to the extent waived in writing.
17. Further Assurances. In connection with the transactions
contemplated by this Agreement, the parties agree to execute and deliver such
further instruments, and to take such further actions, as may be reasonably
necessary or proper to effectuate and carry out the transactions contemplated in
this Agreement.
18. Changes Must Be In Writing. No delay or omission by either
Seller or Purchaser in exercising any right shall operate as a waiver of such
right or any other right. This Agreement may not be altered, amended, changed,
modified, waived or terminated in any respect or particular, unless the same
shall be in writing signed by the party to be bound. No waiver by any party of
any breach hereunder shall be deemed a waiver of any other or subsequent breach.
19. Captions and Exhibits. The captions in this Agreement are
for convenience only and are not to be considered in construing this Agreement.
The Exhibits annexed to this Agreement are an integral part of this Agreement,
and where there is any reference to this Agreement it shall be deemed to include
said Exhibits.
20. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Connecticut.
21. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, successors and assigns.
22. Counterparts. This Agreement may be signed in
counterparts, each of which shall be deemed an original and all of which shall
constitute one and the same instrument.
23. Partial Invalidity. If any provision of this Agreement or
the application thereof to any person or circumstances, shall, to any extent, be
invalid or unenforceable, the remainder of this Agreement, or the application of
such term or provision to persons or circumstances other than those as to which
it is held invalid or unenforceable, shall not be affected thereby, and each
term and provision of this Agreement shall be valid and be enforced to the
fullest extent permitted by law.
24. Publicity. Seller and Shareholder acknowledge that
Purchaser is a publicly traded company subject to federal and state securities
laws. The parties agree to
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<PAGE>
keep the terms of the transaction described herein strictly confidential and
shall not disclose such information to any third parties whatsoever other than
their officers, directors, shareholders, employees, family members and
professional advisors (regardless of whether such advisors have received
compensation for their professional advice) without in each case securing the
prior written consent of Purchaser.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
MINUTEMEN, INC.
ATTEST:
By:__________________________ By:________________________________
Name: Daron Shepard Name: Ken Shepard
Secretary Title: President
- - -------------------------------- ----------------------------------
Witness DARON SHEPARD
- - -------------------------------- ----------------------------------
Witness KENNETH SHEPARD
- - -------------------------------- ----------------------------------
Witness JON SHEPARD
- - -------------------------------- ----------------------------------
Witness FRED SHEPARD
ATTEST: PROFESSIONAL SPORTS CARE
MANAGEMENT, INC.
By:_____________________________ By:________________________________
PATRICK J. WACK, JR. RUSSELL F. WARREN, JR.
Secretary President
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<PAGE>
STATE OF )
)SS.:
COUNTY OF )
On the day of December, 1995, before me personally came
to me known, who, being by me duly sworn did depose and
say that he/she resides at he/she is the
of MINUTEMEN, INC., the corporation described in and which
executed the above instrument and that he/she signed his/her name thereto by
order of the board of directors of said corporation.
-----------------------------------
STATE OF )
)SS.:
COUNTY OF )
On the day of December, 1995, before me personally came
to me known, who, being by me duly sworn did depose and say
that he resides at he is the of
PROFESSIONAL SPORTS CARE MANAGEMENT, INC., the corporation described in and
which executed the above instrument and that he signed his name thereto by
order of the board of directors of said corporation.
-----------------------------------
STATE OF )
)SS.:
COUNTY OF )
Be it remembered that on this day of December, 1995,
before me, the subscriber, a notary public
authorized to take acknowledgments and proof in said County and State,
personally appeared DARON SHEPARD, who I am satisfied is the individual named
in and who executed the within Agreement of Sale, and he acknowledged that he
signed, sealed and delivered said Agreement of Sale as his act and deed for the
uses and purposes therein expressed.
---------------------------------------
STATE OF )
)SS.:
COUNTY OF )
Be it remembered that on this day of December, 1995,
before me, the subscriber, a notary public
authorized to take acknowledgments and proof in said County and State,
personally appeared KENNETH SHEPARD, who I am satisfied is the individual named
in and who executed the within Agreement of Sale, and he acknowledged that he
signed, sealed and delivered said Agreement of Sale as his act and deed for the
uses and purposes therein expressed.
---------------------------------------
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<PAGE>
STATE OF )
)SS.:
COUNTY OF )
Be it remembered that on this day of December, 1995,
before me, the subscriber, a notary public
authorized to take acknowledgments and proof in said County and State,
personally appeared JON SHEPARD, who I am satisfied is the individual named in
and who executed the within Agreement of Sale, and he acknowledged that he
signed, sealed and delivered said Agreement of Sale as his act and deed for the
uses and purposes therein expressed.
-----------------------------------
STATE OF )
)SS.:
COUNTY OF )
Be it remembered that on this day of December, 1995,
before me, the subscriber, a notary public
authorized to take acknowledgments and proof in said County and State,
personally appeared FRED SHEPARD, who I am satisfied is the individual named in
and who executed the within Agreement of Sale, and he acknowledged that he
signed, sealed and delivered said Agreement of Sale as his act and deed for the
uses and purposes therein expressed.
-----------------------------------
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AGREEMENT OF SALE
AGREEMENT OF SALE, dated as of February 7, 1996 (hereinafter,
the "Agreement"), by and among NEUROSURGERY ASSOCIATES OF NORTHWEST CONNECTICUT,
a Connecticut corporation, having an address at 500 Chase Parkway, Waterbury,
Connecticut 06708 (hereinafter referred to as the "Seller"), JAMES E. FINN,
M.D., MICHAEL E. KARNASIEWICZ, M.D., JAROB N. MUSHAWEH, M.D., and STEPHEN A.
TORREY, M.D., (the sole shareholders of Seller and hereinafter collectively
referred to as the "Shareholders") and PROFESSIONAL SPORTS CARE MANAGEMENT,
INC., a Delaware corporation, having an address at 550 Mamaroneck Avenue,
Harrison, New York 10528 ("Purchaser").
WITNESSETH:
WHEREAS, Purchaser desires to acquire, and Seller desires to
sell, the assets hereinafter specified of the business known as SPINAL
REHABILITATION AND P.E.A.C., upon the terms and conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of the covenants and
agreements hereafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which hereby are acknowledged, the parties hereto
agree as follows:
1. Agreement to Sell. Seller agrees to sell, transfer and
deliver to Purchaser, and Purchaser agrees to purchase, upon the terms and
conditions hereinafter set forth, all of the assets described below (other than
cash, accounts receivable, securities and cash equivalents) of the physical
therapy practice operated by Seller under the name SPINAL REHABILITATION AND
P.E.A.C. (the "Assets"), including without limitation the following:
a. the Seller's physical therapy business, and the
medical books and records thereof (the "Business").
Purchaser acknowledges that Seller shall not be
required to deliver individual patient medical
records to Purchaser unless and until such patient
authorizes the release of such records to Purchaser;
b. the inventory of merchandise, parts and supplies of
the Business and all similar items acquired or owned
by the business on or before the closing date (as
defined below); and the equipment and furniture
described in Exhibit A hereto and all similar
equipment and/or furniture acquired or owned by the
Business on or before the closing date (the
"Equipment and Furniture"). All of the Equipment and
Furniture shall be in its "as is" condition as of the
date of this Agreement;
c. the lease described in Article 3 hereof (the
"Lease"); and
d. the goodwill of the Business (the "Goodwill").
2. Purchase Price. A. The purchase price to be paid by
Purchaser for the Assets is One Million Eight Hundred Seventy-Five Thousand and
00/100 Dollars ($1,875,000.00), payable as follows:
a One Million and 00/100 Dollars ($1,000,000.00) at the
Closing by wire transfer of immediately available
federal funds; and
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<PAGE>
b. Eight Hundred Seventy-Five Thousand and 00/100
Dollars ($875,000.00) by the execution and delivery
at the Closing of a Promissory Note by Purchaser to
Seller in said amount, substantially in the form of
Exhibit B hereto.
B. The purchase price is comprised of the following
components:
Equipment: $ 150,000.00
Business and Goodwill: $1,350,000.00
Non-Compete Covenant of Seller: $ 375,000.00
The parties agree to use the foregoing allocation, which was
the result of arm's length negotiations, only for tax, accounting and financial
purposes.
3. Lease. Seller shall lease or caused to be leased to
Purchaser unit 1A, unit 1B and unit 2C of the Scovill building located at 500
Chase Parkway, Waterbury, Connecticut (the "Premises"), pursuant to the terms
and substantially in the form of the Lease attached hereto as Exhibit C. Said
Lease shall be executed and delivered by the parties thereto at the Closing.
4. The Closing. The "Closing" means the settlement of the
obligations of Seller and Purchaser to each other under this Agreement,
including the payment of the purchase price to Seller as provided in Article 2
hereof and the delivery of the closing documents provided for in Article 5
hereof. The closing shall be held at the offices of Gould & Wilkie, One Chase
Manhattan Plaza, New York, New York 10005 on a mutually convenient date which is
no later than February 16, 1996 (the "Closing Date") or the closing may be
accomplished by an escrow arrangement.
5. Closing Documents. At the closing, Seller shall execute and
deliver or cause to be executed and delivered to Purchaser:
a. the Lease substantially in the form of Exhibit C
hereto;
b. a Bill of Sale substantially in the form of Exhibit D
hereto;
c. certified copies of resolutions duly adopted by the
Board of Directors and Shareholders of Seller
authorizing the sale of the Assets, the execution of
the Covenant Not To Compete and the performance by
Seller of its obligations hereunder;
d. an opinion of Seller's counsel, Wiggin & Dana dated
as of the Closing Date, in form and substance
satisfactory to Purchaser's counsel, stating in the
opinion of Seller's counsel that: (i) Seller has full
power and authority to enter into this Agreement and
the Covenant Not To Compete and to perform its
obligations hereunder; (ii) the execution and
delivery of this Agreement and the Covenant Not To
Compete and the performance by Seller
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<PAGE>
<PAGE>
of its obligations hereunder have been duly
authorized and no further action or approval is
required in order to constitute this Agreement as the
valid and binding obligations of Seller, enforceable
in accordance with their terms, except as
enforceability may be limited by bankruptcy,
moratorium, insolvency or other laws affecting
creditor's rights generally; (iii) the execution and
delivery of this Agreement and the Covenant Not To
Compete and the performance by Seller of its
obligations hereunder do not and will not violate any
applicable existing laws, rules or regulations of the
State of Connecticut; and (iv) except as may be set
forth in this Agreement, such counsel is not
representing Seller in nor has knowledge of any suit,
action or proceeding against Seller which, if
adversely determined, would prohibit the consummation
of the transactions contemplated by this Agreement;
e. Certificate of Incumbency for Seller;
f. Certificate of Good Standing for Seller;
g. Covenant Not To Compete executed by the Seller and
the Shareholders, in the form attached hereto as
Exhibit E;
h. such other instruments in form and substance
reasonably satisfactory to Purchaser's attorneys as
may be necessary or proper to transfer to Purchaser
good and marketable title to the Assets to be
transferred under this Agreement and to otherwise
carry out the intentions of the parties to this
Agreement;
i. such other instruments in form and substance
reasonably satisfactory to Purchaser's attorney
including, but not limited to, evidence of adequate
(in the opinion of Purchaser or Purchaser's attorney)
occurrence or claims based insurance or the purchase
of tail insurance to cover any and all exposure for
alleged acts of negligence occurring prior to the
Closing; and
j. Seller shall do all further acts and things as may be
necessary, or reasonably requested by Purchaser, to
consummate the transactions contemplated by this
Agreement, including the transfer to Purchaser of the
Assets. Seller shall advise Purchaser of, and cause
to be delivered to Purchaser, all trade secrets and
proprietary information pertaining to the Business.
At the closing, Purchaser shall execute and/or deliver to
Seller:
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<PAGE>
<PAGE>
a. the Promissory Note;
b. Certificate of Incumbency of Purchaser;
c. Certificate of Good Standing of Purchaser;
d. the Lease; and
e. an opinion of Purchaser's counsel, Gould & Wilkie,
dated as of the Closing Date in the form of Exhibit F
hereto.
6. Fees and Expenses. Except as expressly provided herein,
Purchaser shall not be obligated to pay or perform any obligations or
liabilities of Seller including without limitation obligations or liabilities
with respect to products sold by Seller, obligations or liabilities of Seller to
its creditors or any legal, accounting, brokerage or finder's fees or any taxes
or other expenses in connection with this Agreement or the consummation of the
transactions contemplated hereby. Notwithstanding the foregoing, Seller shall
pay one-half of the reasonable cost of any audit of the Business required by
Purchaser in connection with the transactions contemplated pursuant to this
Agreement, Seller's cost of which shall not exceed $5,000.00.
7. Representations And Warranties of Seller. Seller represents
and warrants to Purchaser as follows:
a. Seller has full power and authority to own its
properties and to conduct its business as now carried
on and to carry out and perform its undertakings and
obligations as provided herein. The execution and
delivery by Seller of this Agreement and all
corollary documents mentioned and incorporated
herein, and the consummation of the transactions
contemplated herein, do not and will not conflict
with or result in any breach of any condition or
provision of, or constitute a default under, or
result in the creation or imposition of any lien,
charge or encumbrance upon any of the Assets by
reason of the provisions of any contract, lien,
lease, agreement, instrument or judgment to which
Seller is a party, or which is or purports to be
binding upon Seller or which affects or purports to
affect any of the Assets. No further action or
approval is required in order to constitute this
Agreement the valid, binding and enforceable
obligation of Seller;
b. No action, approval, consent or authorization,
including without limitation any action, approval,
consent or authorization of any landlord, mortgagee,
governmental or quasi-governmental agency,
commission, board, bureau or instrumentality, is
necessary for Seller to constitute this Agreement the
valid, binding and enforceable obligation of Seller
or to consummate the transactions contemplated
hereby, except as may be set forth herein, it being
understood that Seller makes no representation or
warranty
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<PAGE>
<PAGE>
whatsoever as to any legal and/or regulatory
requirements that may exist with respect to
Purchaser's purchase of the Business and the Assets
and Purchaser's operation of the Business following
the Closing Date, all of which shall be Purchaser's
sole responsibility as more particularly described in
Article 9 below;
c. Seller is the owner of and has good and marketable
title to the Assets, free of all liens, claims and
encumbrances, except as may be set forth herein;
d. To the best of Seller's knowledge, there are no
violations of any law or governmental rule or
regulation pending or threatened against Seller or
the Assets, and Seller has complied with all laws and
governmental rules and regulations applicable to the
Business and the Assets;
e. There are no judgments, liens, suits, actions or
proceedings pending or, to the best of Seller's
knowledge, threatened against Seller with respect to
the Business or the Assets, except as set forth on
Exhibit G attached hereto. Neither Seller nor the
Assets are a party to, subject to or bound by any
agreement or any judgment or decree of any court,
governmental body or arbitrator which would conflict
with or be breached by the execution, delivery or
performance of this Agreement, or which could prevent
the carrying out of the transactions provided for in
this Agreement, or which could prevent the use by
Purchaser of the Assets or adversely affect the
conduct of the business by Purchaser;
f. Except as may be set forth in Exhibit H attached
hereto, Seller has not entered into with respect to
the Business, and the Assets are not subject to, any:
(i) written contract or agreement for the employment
of any employee of the business; (ii) contract with
any labor union or guild; (iii) pension,
profit-sharing, retirement, bonus, insurance, or
similar plan with respect to any employee of the
business; or (iv) similar contract or agreement
affecting or relating to the business or the Assets;
g. The Assets are in working order, normal wear and tear
excepted, and in compliance with all applicable laws,
rules and regulations, including the Uniform
Commercial Code and customary trade standards of
merchantability with respect to the inventory of
merchandise and no notice to creditors is required
pursuant to the Uniform Commercial Code in connection
with the sale of the Assets;
h. With respect to the Assets, Seller has filed each tax
return, including without limitation all income,
excise,
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<PAGE>
property, gain, sales, and license tax returns,
required to be filed by Seller prior to the date
hereof. Each such return is true, complete and
correct, and Seller has paid all taxes, assessments
and charges of any governmental authority required to
be paid by it and has created reserves or made
provision for all taxes accrued, but not yet payable.
No government is now asserting, or to Seller's
knowledge threatening to assert, any deficiency or
assessment for additional taxes or any interest,
penalties or fines with respect to Seller;
i. Seller shall maintain at its own cost and expense
medical malpractice/errors and omissions insurance
coverage for at least four (4) years following the
Closing Date for any and all claims of any kind
whatsoever which may be asserted against Seller which
arise out of the Business prior to Closing; and
j. No other person or entity has any right, title or
interest in or to the Assets.
k. Seller has heretofore furnished Purchaser with
balance sheets for the Business as of June 30 in each
of the years 1993, 1994 and 1995 and as of December
31, 1995 and the related statements of income for the
12 months and 6 months, respectively, then ended. The
balance sheet of the Business as of December 31, 1995
is hereinafter referred to as the Balance Sheet. Such
balance sheets fairly present the financial condition
of the Business at the respective dates thereof and
reflect all material claims against and all debts and
liabilities of the Business and such income
statements fairly reflect the results of operations
of the Business for the periods indicated. Since
December 31, 1995 (the "Balance Sheet Date"), there
has been no material adverse change in the assets of
the Business or liabilities or condition of the
Business;
l. The Seller in the conduct of the Business maintains
insurance policies covering the assets of the
Business and the various occurrences which may arise
in connection with the operation of the Business
(including malpractice insurance if applicable). Such
policies are in full force and effect and all
premiums due thereon prior to or on the date of the
Closing have been paid. The Seller has complied in
all respects with the provisions of such policies.
Such insurance is of comparable amounts and coverage
as that which companies engaging in similar
businesses maintain in accordance with good business
practice;
m. The books and records of the Business are in all
material respects complete and correct, have been
maintained in accordance with good business practices
and accurately reflect the basis for the financial
position and results of operations of
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<PAGE>
the Business set forth in the financial statements.
All of such books and records, including true and
complete copies of all written contracts, have been
made available for inspection by the Purchaser and
its representatives;
n. As a material inducement to Purchaser's entering into
this Agreement, Seller represents and warrants to
Purchaser that the Business has averaged
approximately 275 billable patient treatments per
week for the 1995 calendar year;
o. The Business has managed care contracts currently in
effect with the companies listed in Exhibit I; and
p. The Shareholders are the only holders of all issued
and outstanding stock of Seller.
8. Employees of Seller and the Business. Purchaser agrees to
employ each of Seller's employees listed in Exhibit J hereto for sixty (60) days
after the Closing Date at the same salary that Seller has been paying such
employees. Purchaser shall have no obligation to pay any bonuses or additional
compensation to such employees nor shall Purchaser have any obligations or
liability with respect to the pension or profit sharing plan described in
Exhibit H hereto. Notwithstanding the foregoing or anything to the contrary
contained herein, Purchaser shall have the right at anytime, including within
said sixty (60) day period, to immediately terminate any employee listed in
Exhibit J for cause.
Commencing with the Closing Date, all employees listed in
Exhibit J shall be entitled to the standard number of vacation and sick days and
to the medical benefits as are described in Purchaser's employment manual, a
copy of which has been delivered to Seller. In determining the number of
vacation and sick days to be allotted for the period from the Closing Date
through the day preceding the first anniversary of the Closing Date, such
employee's employment with Purchaser shall be deemed to have commenced upon the
date such employee first commenced his or her employment with Seller. In no
event shall Purchaser be liable for any accrued or unpaid vacation and/or sick
days due such employees for any periods prior to the Closing Date. In no way
shall the foregoing be deemed to create any obligation on the part of Purchaser
to retain any employee listed in Exhibit J beyond the sixty (60) day period
described above.
9. Representations and Warranties of Purchaser. Purchaser
represents and warrants to Seller as follows:
a. Purchaser is a Delaware corporation authorized to
transact business in Connecticut. Purchaser has full
power and authority to carry out and perform its
undertakings and obligations as provided herein. The
execution and delivery of this Agreement and all
corollary documents executed by Purchaser, mentioned
or incorporated herein, and the performance by
Purchaser of its obligations hereunder have been duly
authorized and no further action or approval is
required in order to constitute this Agreement as the
binding and enforceable obligation of the Purchaser.
The execution and delivery by Purchaser of this
Agreement, and all corollary documents executed
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<PAGE>
by Purchaser mentioned or incorporated herein, and
the consummation of the transactions contemplated
herein, have been duly authorized by all proper or
requisite proceedings and will not conflict with or
breach any provision of the corporate documents of
Purchaser; and
b. No action, approval, consent or authorization,
including without limitation any action, approval,
consent or authorization of any governmental or
quasi-governmental agency, commission, board, bureau
or instrumentality, is necessary for Purchaser to
constitute this Agreement the binding and enforceable
obligation of Purchaser or to consummate the
transactions contemplated hereby. Without limiting
the generality of the preceding sentence, Purchaser
represents and covenants that it shall be solely
responsible for complying with any legal and/or
regulatory requirements that may exist with respect
to Purchaser's purchase of the Business and the
Assets and Purchaser's operation of the Business
following the Closing Date; and
c. To the best of Purchaser's knowledge, the Purchaser's
consummation of the transactions contemplated herein
does not and will not violate any existing local,
state or federal law or regulation, and there are no
violations of any existing law or governmental rule
or regulation pending or threatened against
Purchaser, which would materially impair Purchaser's
ability to perform its obligations under this
Agreement.
10. Conduct of the Business. Seller, until the Closing, shall:
a. Conduct the Business in the normal, usual and regular
manner (in that regard, Seller agrees that it shall
not (i) sell, transfer, or otherwise dispose of, or
enter into any agreement to sell, transfer, or
otherwise dispose of, any of the Assets, (ii) incur,
create or become obligated with respect to any
liabilities, contracts or obligations relating to the
Business outside the ordinary course of its business,
or (iii) become obligated under any agreement to
purchase or supply goods or services other than
agreements that are not material and are entered into
in the ordinary course of its business);
b. Preserve the Business and the Goodwill of the
customers and suppliers of the Business and others
having relations with the Business; and
c. Give Purchaser and its duly designated
representatives reasonable access during normal
business hours to Seller's premises and the books and
records of the Business, and furnish to Purchaser
such data and information pertaining to Seller's
Business as Purchaser
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<PAGE>
from time to time reasonably may request. The
obligation of Seller to furnish to Purchaser such
data and information pertaining to Seller's Business
as Purchaser from time to time reasonably may request
shall survive Closing. In connection with Seller's
furnishing to Purchaser such data and information,
Purchaser shall be responsible for the payment of a
one-time "tape conversion" charge. Seller shall be
responsible for all other incidental costs associated
with providing such data and information to
Purchaser.
11. Conditions to Closing. The obligations of Purchaser to
close hereunder are subject, at the option of Purchaser, to the following
conditions:
a. All of the terms, covenants and conditions to be
complied with or performed by Seller under this
Agreement on or before the Closing shall have been
complied with or performed in all material respects.
b. All representations or warranties of Seller herein
are true in all material respects as of the Closing
Date and Purchaser shall have completed its due
diligence investigation.
c. On the Closing Date, there shall be no liens or
encumbrances against the Assets, except as may be
provided for herein.
d. The terms of this Agreement and the transaction
described herein have been in all respects approved
by Purchaser's Board of Directors.
The obligations of Seller to close hereunder are subject, at
the option of Seller, to the following conditions:
a. All of the terms, covenants and conditions to be
complied with or performed by Purchaser under this
Agreement on or before the Closing shall have been
complied with or performed in all material respects.
b. All representations or warranties of Purchaser herein
are true in all material respects as of the Closing
Date.
12. Indemnification. Each party hereto shall indemnify and
hold the other parties harmless from and against all liability, claim, loss,
damage or expense, including reasonable attorneys' fees, incurred or required to
be paid by such other parties by reason of any breach or failure of observance
or performance of any representation, warranty or covenant or other provision of
this Agreement by such party.
13. Risk Of Loss. The risk of loss to the Assets of the
Business sold hereunder, until the Closing, is assumed and shall be borne by
Seller. If the amount of any loss or damage exceeds Fifty Thousand and 00/100
Dollars ($50,000.00), Purchaser shall have the right to cancel this Agreement by
written notice to Seller. If Purchaser nevertheless
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<PAGE>
elects to close title, the purchase price shall be reduced by the amount of any
such loss or damage. If such loss or damage is less than Fifty Thousand and
00/100 Dollars ($50,000.00), title shall close and the purchase price shall be
reduced by the amount of the loss or damage. Seller shall have no further
liability or obligation with respect to such loss or damage.
14. Covenant Not To Compete. Seller and the Shareholders shall
deliver to Purchaser at Closing an agreement, in the form attached hereto as
Exhibit E.
15. Brokerage. The parties hereto represent and warrant to
each other that they have not dealt with any broker or finder in connection with
this Agreement or the transactions contemplated hereby, and no broker or any
other person is entitled to receive any brokerage commission, finder's fee or
similar compensation in connection with this Agreement or the transactions
contemplated hereby. Each party hereto shall indemnify and hold the other
parties harmless from and against all liability, claim, loss, damage or expense
including reasonable attorneys' fees, incurred or required to be paid by such
other parties by reason of any breach or failure of observance of this Article
15.
16. The Shareholders. Shareholders hereby confirm all of the
representations and warranties of Seller set forth herein, and agree to
indemnify and hold Purchaser harmless from and against any misrepresentation or
breach of any warranty by Seller, or any breach or failure by Seller to comply
with any term, covenant or condition of this Agreement as fully as if
Shareholders were the Seller herein. Shareholders represent and warrant that
they are the only shareholders of Seller, and that they have full power and
authority to carry out and perform their undertakings and obligations as
provided; herein. Shareholders agree as aforesaid to induce Purchaser to enter
into this Agreement.
17. Arbitration. Any dispute or controversy arising among the
parties hereto regarding any term, covenant or condition of this Agreement or
the breach thereof shall, upon written demand of any party hereto, be submitted
to and determined by arbitration before the American Arbitration Association
("Association"), in Connecticut, by a panel of three (3) arbitrators, in
accordance with the rules of the Association then in effect. Any award rendered
shall be made by means of a written opinion explaining the arbitrators' reasons
for the award. The arbitrators may not amend or vary any provision of this
Agreement. Judgment upon the award rendered by the arbitrators may be entered in
any court of competent jurisdiction, which court shall have the power to review
such award for compliance with this Agreement.
18. Notices. All notices, demands and other communications
required or permitted to be given hereunder shall be in writing and shall be
deemed to have been properly given if delivered by certified mail, return
receipt requested, with postage prepaid, to Seller or Purchaser, as the case may
be, at their addresses first above written, or at such other addresses as they
may designate by notice given hereunder. Notices shall be deemed effective on
the date received or refused by the addressee. Copies of all such notices,
demands and other communications simultaneously shall be given in the aforesaid
manner to Seller's attorneys, Wiggin & Dana, Attention: Norm Fleming, Esq. at 1
Century Tower, New Haven, Connecticut 06508-1832, and to Purchaser's attorneys,
Gould & Wilkie, Attention: Andrew W. Bank, Esq. at One Chase Manhattan Plaza,
New York, New York 10005. The respective attorneys for the parties hereby are
authorized to give any notice required or permitted hereunder and to agree to
adjournments of the Closing.
19. Liquidated Damages. In the event Seller defaults hereunder
and fails to consummate the transaction due to Seller selling, conveying or
transferring the Assets to another purchaser, Seller agrees to pay to Purchaser
the sum of Twenty-Five Thousand and 00/100 Dollars ($25,000.00) as and for
liquidated damages, plus Seller shall reimburse
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<PAGE>
Purchaser for all of its expenses incurred in connection with the transaction
contemplated by this Agreement. The parties have agreed to this liquidated
damages amount due to the recognized difficulty in determining the exact and
specific degree of the losses and damages incurred by Purchaser as a result of
said default. This provision shall remain in effect through April 30, 1996.
20. Survival. The representations, warranties and covenants
contained herein or in any document, instrument, certificate, exhibit or
schedule furnished in connection herewith shall survive the delivery of the Bill
of Sale and shall continue in full force and effect after the Closing, except to
the extent waived in writing.
21. Further Assurances. In connection with the transactions
contemplated by this Agreement, the parties agree to execute and deliver such
further instruments, and to take such further actions, as may be reasonably
necessary or proper to effectuate and carry out the transactions contemplated in
this Agreement.
22. Changes Must Be In Writing. No delay or omission by either
Seller or Purchaser in exercising any right shall operate as a waiver of such
right or any other right. This Agreement may not be altered, amended, changed,
modified, waived or terminated in any respect or particular, unless the same
shall be in writing signed by the party to be bound. No waiver by any party of
any breach hereunder shall be deemed a waiver of any other or subsequent breach.
23. Captions and Exhibits. The captions in this Agreement are
for convenience only and are not to be considered in construing this Agreement.
The Exhibits annexed to this Agreement are an integral part of this Agreement,
and where there is any reference to this Agreement it shall be deemed to include
said Exhibits.
24. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Connecticut.
25. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, successors and assigns.
26. Counterparts. This Agreement may be signed in
counterparts, each of which shall be deemed an original and all of which shall
constitute one and the same instrument.
27. Partial Invalidity. If any provision of this Agreement or
the application thereof to any person or circumstances, shall, to any extent, be
invalid or unenforceable, the remainder of this Agreement, or the application of
such term or provision to persons or circumstances other than those as to which
it is held invalid or unenforceable, shall not be affected thereby, and each
term and provision of this Agreement shall be valid and be enforced to the
fullest extent permitted by law.
28. Publicity. Seller acknowledges that Purchaser is a
publicly traded company subject to federal and state securities laws. The
parties agree to keep the terms of the transaction described herein strictly
confidential and shall not disclose such information to any third parties
whatsoever, other than to legal counsel, accountants, or other financial
advisors or as may be required by law, without in each case securing the prior
written consent of Purchaser.
29. Access to Files. Seller shall have the right, during
normal business hours, to have reasonable post-closing access to billing and
treatment records to facilitate the
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<PAGE>
collection of its receivables. Seller agrees to preserve the confidentiality of
any information contained in such records. After the Closing, Purchaser agrees
to cooperate with Seller for the purpose of determining which receivables due
Seller may have actually been received by Purchaser, and agrees to hold such
receivables in trust for Seller, and further agrees, without delay, to turn over
such receivables to Seller upon its written request. If Purchaser becomes aware
that it has received Seller's receivables, it shall promptly remit same to
Seller and shall not wait for Seller to request same.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
ATTEST: NEUROSURGERY ASSOCIATES OF
NORTHWEST CONNECTICUT
By: By:
----------------------------- ----------------------------------
Name: James E. Finn, M.D.
Title: President
- - ------------------------------ ---------------------------------
Witness James E. Finn, M.D.
- - ------------------------------ ---------------------------------
Witness Michael E. Karnasiewicz, M.D.
- - ------------------------------ ---------------------------------
Witness Jarob N. Mushaweh, M.D.
- - ------------------------------ ---------------------------------
Witness Stephen A. Torrey, M.D.
ATTEST: PROFESSIONAL SPORTS CARE
MANAGEMENT, INC.
By: By:
----------------------------- ---------------------------------
PATRICK J. WACK, JR. RUSSELL F. WARREN, JR.
Secretary President
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<PAGE>
STATE OF )
)SS.:
COUNTY OF )
On the day of February, 1996, before me personally came
to me known, who, being by me duly sworn did depose and say
that he resides at he is the of
NEUROSURGERY ASSOCIATES OF NORTHWEST CONNECTICUT, the corporation described in
and which executed the above instrument and that he signed his name thereto by
order of the board of directors of said corporation.
-----------------------------------
STATE OF )
)SS.:
COUNTY OF )
On the day of February, 1996, before me personally came
to me known, who, being by me duly sworn did depose and say
that he resides at he is the of
PROFESSIONAL SPORTS CARE MANAGEMENT, INC., the corporation described in and
which executed the above instrument and that he signed his name thereto by
order of the board of directors of said corporation.
-----------------------------------
STATE OF )
)SS.:
COUNTY OF )
Be it remembered that on this day of February, 1996, before
me, the subscriber, a notary public authorized to take acknowledgments and proof
in said County and State, personally appeared JAMES A. FINN, M.D., who I am
satisfied is the individual named in and who executed the within Agreement of
Sale, and he acknowledged that he signed, sealed and delivered said Agreement of
Sale as his act and deed for the uses and purposes therein expressed.
------------------------------------
STATE OF )
)SS.:
COUNTY OF )
Be it remembered that on this day of February, 1996, before
me, the subscriber, a notary public authorized to take acknowledgments and proof
in said County and State, personally appeared MICHAEL E. KARNASIEWICZ, M.D., who
I am satisfied is the individual named in and who executed the within Agreement
of Sale, and he acknowledged that he signed, sealed and delivered said Agreement
of Sale as his act and deed for the uses and purposes therein expressed.
------------------------------------
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<PAGE>
<PAGE>
STATE OF )
)SS.:
COUNTY OF )
Be it remembered that on this day of February, 1996, before
me, the subscriber, a notary public authorized to take acknowledgments and proof
in said County and State, personally appeared JAROB N. MUSHAWEH, M.D., who I am
satisfied is the individual named in and who executed the within Agreement of
Sale, and he acknowledged that he signed, sealed and delivered said Agreement of
Sale as his act and deed for the uses and purposes therein expressed.
------------------------------------
STATE OF )
)SS.:
COUNTY OF )
Be it remembered that on this day of February, 1996, before
me, the subscriber, a notary public authorized to take acknowledgments and proof
in said County and State, personally appeared STEPHEN A. TORREY, M.D., who I am
satisfied is the individual named in and who executed the within Agreement of
Sale, and he acknowledged that he signed, sealed and delivered said Agreement of
Sale as his act and deed for the uses and purposes therein expressed.
------------------------------------
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of February 9, 1996 (hereinafter,
the "Agreement"), between PROFESSIONAL SPORTS CARE MANAGEMENT, INC., a Delaware
corporation, having an address at 550 Mamaroneck Avenue, Harrison, New York
10528 ("Purchaser") and FRANK PAVLISKO, with offices at 160 Hanover Avenue,
Morristown, New Jersey 07962 ("Seller").
WITNESSETH:
WHEREAS, Seller owns all of the issued and outstanding shares (the
"Shares") of the capital stock of MORRISTOWN SPORTS MEDICINE CENTER, INC., a New
Jersey corporation having a principal office at 160 East Hanover Avenue,
Morristown, New Jersey 07962-1449 (hereinafter referred to as "Morristown"); and
WHEREAS, Morristown provides physical and occupational therapy and
rehabilitation services (the "Business"); and
WHEREAS, Purchaser desires to acquire, and Seller desires to sell free
and clear of all liens, claims, charges or encumbrances of any nature whatsoever
(except as specifically provided for herein), all of Seller's Shares in
Morristown, upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the covenants and agreements
hereafter set forth, and other good and valuable consideration, the receipt and
sufficiency of which hereby are acknowledged, the parties hereto agree as
follows:
1. Purchase and Sale of Shares. Seller agrees to sell, transfer and
deliver to Purchaser, and Purchaser agrees to purchase, upon the terms and
conditions hereinafter set forth, the Shares. All capitalized terms not defined
within the text of this Agreement are set forth on Schedule 1 annexed hereto.
2. Purchase Price. The purchase price to be paid by Purchaser for the
Shares is Three Million Ten Thousand One Hundred Fifty Nine and 06/100 Dollars
($3,010,159.06) (subject to changes due to (i) the market price of the
Securities pursuant to paragraph c of Article 2 and (ii) payments made by Seller
towards the Equipment Leases, as said term is defined below), payable as
follows:
a. One Million Two Hundred Fifty Thousand and 00/100 Dollars
($1,250,000.00) at the Closing by wire transfer of
immediately available federal funds;
b. Seven Hundred Eighty-Nine Thousand and 00/100 Dollars
($789,000.00) by the execution and delivery at the closing
of a Promissory Note by Purchaser to Seller in said amount,
substantially in the form of Schedule 2(b) hereto;
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c. Approximately Two Hundred Fifty Thousand and 00/100 Dollars
($250,000.00) by the issuance and delivery to Seller at the
closing of 33,333 restricted shares of common stock of
Professional Sports Care Management, Inc. (the
"Securities"). The actual value of Securities shall be
determined by the market price of the Securities on the
Closing Date (as said term is defined below);
d. Approximately Thirty Thousand and 00/100 Dollars
($30,000.00) by the assumption of debt consisting of
Morristown's future obligations under the equipment leases
described in Schedule 2(d) hereto (the "Equipment Leases");
and
e. Six Hundred Ninety-One Thousand One Hundred Fifty Nine and
06/100 Dollars ($691,159.06) at the Closing by wire transfer
of immediately available federal funds. Said amount shall be
applied to pay off the total obligations due in connection
with the notes described in Schedule 2(e) hereto (the
"Existing Debt").
3. The Closing. The "Closing" means the settlement of the obligations
of Seller and Purchaser to each other under this Agreement, including the
payment of the purchase price to Seller as provided in Article 2 hereof and the
delivery of the closing documents provided for in Article 4 hereof. The closing
shall be held at the offices of Gould & Wilkie, One Chase Manhattan Plaza, New
York, New York 10005 on a mutually convenient date which is no later than
February 9, 1996 (the "Closing Date") or the closing may be accomplished by an
escrow arrangement.
Prior to the Closing, Seller shall obtain any necessary payoff
letters, wiring instructions and such other instruments as may be necessary in
connection with Purchaser's pay off of the Existing Debt.
4. Closing Documents. At the closing, Seller shall execute and deliver
or cause to be executed and delivered to Purchaser:
a. Waivers and Consents. All waivers and consents necessary
for the consummation of the transactions contemplated by this
Agreement.
b. Documents of Transfer. Stock certificates representing
all of the issued and outstanding shares of capital stock of
Morristown duly endorsed in or accompanied by stock powers duly
endorsed in proper form for transfers.
c. Seller's Certificate. Seller's certificate of that as of
the Closing Date:
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(i) all terms conditions and covenants of this Agreement
have been complied with, performed or observed by Seller in
all material respects;
(ii) all of the representations and warranties made by
Seller in this Agreement are correct and complete in all
material respects;
(iii) all of the Schedules prepared by Seller or Morristown
and made part of this Agreement are current, correct and
complete in all material respects;
(iv) there has not been instituted any suit or proceeding or
claim asserted by any third party to restrain or invalidate
this transaction or to seek damages from or to impose
obligations upon either Purchaser, Morristown, Seller or the
Business by reason of this transaction which, in Purchaser's
good faith judgment, would involve expense or lapse of time
that would be materially adverse to Purchaser's interests or
would materially adversely affect Purchaser's ownership of
Morristown or operation of the Business;
(v) Purchaser has received all consents, waivers,
assignments and other certificates, notices, assurances and
other instruments and documents, as are reasonably required
for the purpose of carrying out the transactions
contemplated by this Agreement;
(vi) There has not been suffered (i) any Material Adverse
Change relating to the Business, or (ii) any damage or
destruction, casualty or loss, however arising and whether
or not covered by insurance, which either alone or in the
aggregate has a Material Adverse Effect;
(vii) Seller has afforded the officers, employees,
attorneys, agents, accountants and other representatives of
Purchaser access to Morristown's properties, books and
records, and has permitted Purchaser to make extracts from
and copies of such books and records, and has furnished them
with such additional financial and operating data and other
information as to its financial condition, results of
operations, business, properties, assets, liabilities, or
future prospects as Purchaser and its representatives have
reasonably requested;
(viii) there has not been any action taken or any statute
enacted by any governmental authority which would render the
parties unable to consummate the transactions contemplated
herein or make the transactions contemplated herein illegal
or prohibit, restrict or
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<PAGE>
substantially delay the consummation of the transactions
contemplated herein;
(ix) Morristown has not declared nor paid any dividends or
other distributions of cash or property to Seller,
subsequent to January 31, 1996, other than in the ordinary
course of business.
d. Employment Agreement. Executed Employment Agreement
between Purchaser and Seller substantially in the form of
Schedule 4(d).
e. Resignations. The resignations of the existing members of
Morristown's Board of Directors and Officers.
f. Opinion of Seller's Counsel. An opinion, dated the
Closing Date and addressed to Purchaser, of Connell, Foley &
Geiser, counsel to Seller and Morristown, to the effect that:
(i) Morristown is a corporation duly organized, valid and
existing and in good standing under the laws of the State of
New Jersey. Morristown has all requisite corporate power to
carry on its business as it is now being conducted.
(ii) The Stock Purchase Agreement and the Covenant Not To
Compete referred to in paragraph g below (both such
agreements being hereinafter sometimes jointly referred to
as the "Operative Agreements") have been duly and validly
executed and delivered by the Seller and each of the
Operative Agreements is a valid and binding obligation of
the Seller enforceable in accordance with its terms, subject
to bankruptcy, reorganization, moratorium, insolvency and
other laws of general applicability relating to or affecting
creditors' rights generally and the principles of equity.
(iii) Except as set forth in the Stock Purchase Agreement
and on the exhibits and schedules thereto, the execution and
delivery of the Operative Agreements and the consummation of
the transactions contemplated thereby, under the conditions
therein provided, will not (A) violate any provision of the
Certificate of Incorporation or By-Laws of Morristown, or
(B) to the best of its knowledge, after due inquiry, result
in a violation or breach of, or constitute (with or without
due notice or lapse of time or both) a default under any
agreements, indentures or instruments to which Seller or
Morristown are a party or by which any of their respective
properties are bound.
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<PAGE>
(iv) Morristown's authorized and outstanding capitalization
is as represented by the Seller in the Stock Purchase
Agreement and each of the issued and outstanding Shares
being sold to Purchaser pursuant to the Stock Purchase
Agreement by the Seller is duly and validly authorized,
issued, and fully paid and non-assessable with no personal
liability attaching to the ownership thereof and is issued
of record to the Seller. To the best of such counsel's
knowledge, there are not outstanding options, subscriptions,
warrants, rights (including preemptive rights), calls,
commitments, conversion rights, plans or other agreements of
any character providing for the purchase or issuance of any
authorized but unissued securities of Morristown. The
delivery of the Shares by the Seller to Purchaser pursuant
to the Stock Purchase Agreement will transfer to Purchaser
good and marketable title thereto, free and clear of all
adverse claims, other than claims arising out of actions of
Purchaser.
(v) To the best of such counsel's knowledge there is neither
any litigation, proceeding, labor dispute, arbitral action
or government investigation pending or, so far as known to
such counsel, threatened against, relating to or affecting
(A) the Business, (B) any employee plan or any fiduciary or
administrator thereof, nor (C) the transactions contemplated
by this Agreement which, if adversely determined could, in
any one case or in the aggregate, have a material adverse
affect on the Business. To the best of counsel's knowledge
there are no decrees, injunctions or orders of any court or
governmental department or agency outstanding against Seller
with respect to the Assets or the Business.
(vi) To the best of such counsel's knowledge, Seller is not
engaged in, or a party to, or threatened with, any suit,
action or legal, administrative, arbitration or other
proceeding or governmental investigation which, if adversely
determined, would adversely affect or impede the purchase of
the Shares by Purchaser pursuant to the Stock Purchase
Agreement or otherwise affect the validity of the title of
Purchaser to such Shares on or after the Closing.
g. Covenant Not To Compete executed by the Seller, in the
form attached hereto as Schedule 4(g);
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<PAGE>
h. the original notes (marked "paid in full", signed and
dated by the respective payee thereunder) together with UCC-3
termination statement(s) relating to the Existing Debt; and
i. such other instruments in form and substance reasonably
satisfactory to Purchaser's attorney including, but not limited
to, evidence of adequate (in the opinion of Purchaser or
Purchaser's attorney) occurrence or claims based insurance or the
purchase of tail insurance to cover any and all exposure for
alleged acts of negligence occurring prior to the Closing.
At the closing, Purchaser shall execute and deliver or cause
to be executed an delivered to Seller:
a. Certificate of Incumbency of Purchaser;
b. Certificate of Good Standing of Purchaser;
c. a certificate of an officer of Purchaser that as of the
Closing Date:
(i) all of the terms, conditions and covenants of this
Agreement have been complied with, performed or observed by
Purchaser;
(ii) all of the representations and warranties made by
Purchaser in this Agreement are correct and complete in all
material respects;
(iii) there has not been instituted any suit or proceeding
or claims asserted by any third party to restrain or
invalidate this transaction or to seek damages from or to
impose obligations upon either Seller or Purchaser by reason
of this transaction which, in the good faith judgment of
Purchaser would involve expense or lapse of time that would
be materially adverse to its interests;
(iv) Seller has received from Purchaser all instruments and
documents as are reasonably required for the purpose of
carrying out the transactions contemplated by this
Agreement.
d. an Employment Agreement between Purchaser and Seller
substantially in the form of Schedule 4(d) hereto.
e. an opinion of Purchaser's counsel, Gould & Wilkie, dated
as of the Closing Date in the form of Schedule 4(e) hereto.
f. the Securities.
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<PAGE>
g. the Promissory Note in the form of Schedule 2(b) hereto.
h. a Certificate of Insurance evidencing occurrence or
claims based insurance to cover any and all exposure for alleged
acts of negligence occurring after the Closing.
i. the Guaranty.
5. Fees and Expenses. Except as expressly provided herein, Purchaser
shall not be obligated to pay or perform any obligations or liabilities of
Seller including without limitation obligations or liabilities with respect to
products sold by Seller, obligations or liabilities of Seller to its creditors
or any legal, accounting, brokerage or finder's fees or any taxes or other
expenses in connection with this Agreement or the consummation of the
transactions contemplated hereby. Notwithstanding the foregoing, Seller shall
pay the reasonable cost of any audit of the Business required by Purchaser in
connection with the transactions contemplated pursuant to this Agreement,
Seller's cost of which shall not exceed $5,000.00
6. Representations And Warranties of Seller. Seller represents and
warrants to Purchaser as follows:
6.1 Organization and Capitalization.
(a) Morristown is a corporation duly organized, validly existing
and in good standing under the laws of the State of New Jersey.
Morristown has not been notified by any Governmental Authority as to
the absence of any licensing, qualification or other authority
necessary to conduct business in any jurisdiction. Morristown has all
requisite corporate power and authority to own, operate and lease its
properties and to carry on the Business as it is now being conducted.
(b) Seller has delivered to Purchaser copies of Morristown's: (i)
Certificate of Incorporation and all amendments thereto as certified
by the Secretary of State of New Jersey and (ii) By-Laws, as amended
to date, as certified by Morristown's Secretary, and the same are
true, complete and correct copies of Morristown's Certificate of
Incorporation and By-Laws, as amended, and currently in effect. Such
Certificate of Incorporation and By-Laws are in full force and effect
and Morristown is not in violation of any of the provisions thereof.
(c) Seller is the true and lawful owner of 100% of the issued and
outstanding Shares of the capital stock of Morristown. All of the
issued and outstanding Shares have been validly issued, and are fully
paid and non-assessable. Morristown has no shares outstanding or
obligations to issue shares, except as set forth herein. Seller has
the necessary power and authority to sell the Shares free and clear of
all claims, liens,
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security interests, pledges, options, encumbrances and other
restrictions of any nature whatsoever. There are no outstanding
subscriptions, options, warrants or other rights entitling any third
party to acquire any Shares from Morristown or from the Seller.
Delivery to Purchaser at the Closing of certificates representing the
Shares will transfer to Purchaser legal and valid title to such
Shares, free and clear of all Liens, exclusive of any Liens created by
Purchaser.
6.2 Enforceability.
(a) This Agreement has been duly and validly executed and
delivered by Seller and constitutes the legal, valid and binding
obligation of Seller, enforceable against Seller in accordance with
its terms, except to the extent enforceability may be limited by
bankruptcy, insolvency, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and principles of equity.
(b) To the best of Seller's knowledge, the execution, delivery
and performance by Seller of this Agreement and all other instruments,
agreements, certificates and documents contemplated hereby does not
and will not (i) violate any Law applicable to Morristown, Seller or
to the Shares or otherwise violate or conflict with, or result in a
breach of, or constitute a default (or an event which, with or without
notice or lapse of time or both, would constitute a default) under, or
permit cancellation of, or result in the creation of any Lien upon any
of the Shares or the Assets under any of the terms, conditions or
provisions of any material Contract to which Seller or Morristown is a
party, or by which Seller's or Morristown's properties or assets are
bound, or pursuant to any license, permit or certificate issued by an
Governmental Authority; (ii) permit the acceleration of the maturity
of any material indebtedness of, or indebtedness secured by any
property of, Morristown; or (iii) violate or conflict with any
provision of Morristown's Certificate of Incorporation or By-Laws.
6.3 Titles to Properties; Absence of Liens and Encumbrances.
(a) Schedule 6.3(a) sets forth a correct and complete list of all
of the fixed assets, personal property, equipment, improvements, and
other operating and related facilities, including, but not limited to,
all furniture, furnishings, fixtures, office and other equipment,
vehicles, machinery, supplies, parts, office and data processing
equipment, telephones, telephone systems and equipment, generators,
receivers, computer hardware and software, test and electronic
equipment, and all other equipment of any type or nature whatsoever
owned by Morristown and used in the Business. All of said personal
property is in good condition and repair (ordinary wear and tear
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excepted which is not such as to Materially Adversely Affect the
operation of the Business), and suitable for the uses for which
intended. All of such personal property is operated in conformity with
all applicable laws, ordinances, regulations, orders and other
requirements relating thereto, adopted or currently in effect, except
such thereof, which do not alone or in the aggregate have a Material
Adverse Effect on the Business. All of such properties are owned free
and clear by Morristown except for the Liens and Equipment Leases
described on Schedule 2(d), which Liens or Equipment Leases do not
have a Material Adverse Effect on or interfere with the current use of
such properties or otherwise impair the operation of the Business by
Morristown.
(b) Schedule 6.3(b) contains an accurate and complete description
of all real properties owned or leased by Morristown in connection
with the operation of the Business. Seller has delivered to Purchaser
complete and correct copies of all instruments showing such interests
in said real property and all leases with respect to the leased
facilities described on Schedule 6.3(b). All such leases are valid and
enforceable in accordance with their terms; are in full force and
effect and have not been modified or amended; no default exists under
any such lease; and no event has occurred which with the giving of
notice or passage of time, or both, would constitute such a default.
Except as shown on Schedule 6.3(b), all fixtures, equipment, and other
items essential to the current operation of the Business, other than
the leased properties are owned by Morristown free and clear of all
Liens. The use of such real property conforms in all material respects
to all applicable health, fire, safety, environmental, zoning and
building laws and ordinances.
6.4 Contracts.
Schedule 6.4 sets forth a full and complete list of all
Morristown's rights in sales agreements, franchises, license
agreements, lease agreements, maintenance agreements, procurement
agreements, consultant agreements and employee agreements by which
Morristown is bound or which relates in any way to the operation or
conduct of the Business (hereinafter collectively referred to as
"Contracts") (except for Contracts which have been fully performed or
by their terms are terminable without penalty or other liability to
Morristown upon Morristown's notice of 30 days or less), including
without limitation, the following:
(i) each contract of employment of any officer, employee or
consultant or with any labor union or association;
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(ii) each bonus, pension, profit-sharing, retirement, deferred
compensation, incentive or supplementary compensation, percentage
compensation, termination or severance pay, hospitalization,
insurance or other plan providing employee benefits;
(iii) each contract in or pursuant to which any person who is an
officer, director, stockholder or employee of Morristown, or a
member of the family of any of the foregoing, has a direct or
indirect interest;
(iv) each contract relating to the borrowing or lending of money
or the guarantee of any obligations for borrowed money or
otherwise, excluding endorsements made for purposes of collection
in the ordinary course of business;
(v) each contract in excess of $5,000 for the supply by
Morristown of goods or services;
(vi) each contract for capital expenditures or the purchase by
Morristown of materials, supplies, equipment or services (other
than in the ordinary course of business);
(vii) each license or royalty agreement;
(viii) each supplier, distributor, dealer, broker, reseller,
installer, manufacturer's representative, sales agency, sales
representative, franchise, promotional or advertising contract;
(ix) each contract with any Governmental Authority;
(x) each option to purchase any of Morristown's assets,
properties or rights (other than in the ordinary course of
business);
(xi) any other contract involving payments of more than $5,000,
individually or in the aggregate;
(xii) each contract containing covenants not to compete in any
business or geographical area or not to use or disclose any
informational in Morristown's possession; and
(xiii) any contract not made in the ordinary course of business.
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Seller has made available to Purchaser true and correct copies of
each of the Contracts and a written description of each material
oral arrangement so listed. To the best of Seller's knowledge,
each of the Contracts is valid and in full force and effect and
is enforceable in accordance with its terms and will be valid and
in full force and effect and enforceable following the
consummation of the transactions contemplated hereby. The
Contracts constitute all of the material contracts used in the
conduct of Morristown's business as heretofore conducted. Except
as indicated on Schedule 6.4, Seller is not aware of any
threatened repudiation, cancellation or outstanding disputes
under any of the Contracts, and there have been on extensions,
moratoriums, deferments or the like with respect to any of the
Contracts.
6.5 No Defaults or Violations.
(a) Morristown has not breached any provisions of, nor is it
in default under the terms of, any material Contract to which it
is a party or by which it or any of its Assets is bound or under
which it has any rights and, to the best of Seller's knowledge,
no other party to any such Contract is in default thereunder in
any material respect;
(b) To the best of Seller's knowledge, Morristown is not in
violation or in default of with respect to any Law applicable to
the Business, except to the extent any such violation or default
would neither result in a payment obligation nor have a Material
Adverse Effect; and
(c) To the best of Seller's knowledge, Morristown has
complied in all material respects with all Laws material to the
conduct of the Business, except where the failure to comply would
not have a Material Adverse Effect. Morristown is not engaged in
any unfair practices, and has and currently is conducting its
business in full compliance with all Laws relating to employment
practices. Morristown has not received and is not aware of any
written notice of any violations of any Law, including, but not
limited to, those relating to fire, safety, pricing, sales or
installation of products or services, marketing practices,
political contributions or improper payments, health, sanitation,
environmental, occupational safety and health, labor and
employment, employment practices and benefits, terms and
conditions of employment and wages and hours, immigration, energy
and similar laws, orders, rules, regulations and ordinances.
6.6 Financial Statements.
Seller has heretofore furnished Purchaser with balance
sheets for the Business as of December 31 in each of the years
1993 and 1994 and as of September 30, 1995 and the related
statements of income for the 12 months and 9 months,
respectively, then ended. The balance sheet of the Business as
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of September 30, 1995 is hereinafter referred to as the Balance
Sheet. Such Financial Statements have been prepared in accordance
with generally accepted accounting principles, consistently
applied, throughout the periods indicated. Such balance sheets
fairly present the financial condition of the Business in
accordance with such principles, consistently applied, at the
respective dates thereof and reflect all material claims against
and all debts and liabilities of the Business and such income
statements fairly reflect the results of operations of the
Business in accordance with such principles, consistently
applied, for the periods indicated. Since September 30, 1995 (the
"Balance Sheet Date"), there has been no material adverse change
in the assets of the Business or liabilities or condition of the
Business;
6.7 Licenses, etc.
To the best of Seller's knowledge, Morristown holds all
licenses, certificates, permits, approvals, franchises, rights
and other authorizations of or from any Governmental Authority,
which are currently necessary for the operations of the Business.
To the best of Seller's knowledge, Morristown has ownership of
and full right and authority under all such licenses,
certificates, permits, approvals, franchises, rights and other
authorizations.
6.8 Employee Benefit Plans.
Except as set forth in Schedule 6.8, Morristown does not
maintain or sponsor, nor is it required to make contributions to,
any pension, profit-sharing, savings, bonus, incentive or
deferred compensation, severance pay, medical, life insurance,
welfare or other employee benefit plan. All pension,
profit-sharing, savings, bonus, incentive or deferred
compensation, severance pay, medical, life insurance, welfare or
other employee benefit plans within the meaning of Section 3(3)
of the Employee Retirement Income Security Act of 1974, as
amended (hereinafter referred to as "ERISA"), in which the
employees of Morristown participate (such plans and related
trusts, insurance an annuity contracts, funding media and related
agreements and arrangements, other than any "multiemployer plan"
(within the meaning of Section 3(37) of ERISA), being hereinafter
referred to as the "Benefit Plans" and any such multiemployer
plans being hereinafter referred to as the "Multiemployer Plans")
comply in all material respects with all requirements of ERISA,
the Internal Revenue Code (the "Code"), the Department of Labor
and the Internal Revenue Service, and with all other applicable
laws, and Morristown has not taken or failed to take any action
with respect to either the Benefit Plans or the Multiemployer
Plans which might create any liability on the part of Morristown
or the Purchaser. Each "fiduciary" (within the meaning of Section
3(21)(A) of ERISA) as to each Benefit Plan and as to each
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Multiemployer Plan has complied in all material respects with the
requirements of ERISA and all other applicable laws in respect of
each such Plan. Morristown has furnished to the Purchaser copies
of all Benefit Plans and Multiemployer Plans and all financial
statements, actuarial reports and annual reports and returns
filed with the Internal Revenue Service with respect to such
Benefit Plans and Multiemployer Plans for a period of three years
prior to the date hereof. Such financial statements, actuarial
reports and annual reports and returns are true and correct in
all material respects, and none of the actuarial assumptions
underlying such documents have changed since the respective dates
thereof. In addition:
(i) Each Benefit Plan has received a favorable
determination letter from the Internal Revenue Service
as to its qualification under Section 401(a) of the
Code, except with respect to those Benefit Plans which
are not eligible for an application for such a letter;
(ii) No Benefit Plan which is a "defined benefit plan"
(within the meaning of Section 3(35) of ERISA)
(hereinafter referred to as the "Defined Benefit
Plans") or Multiemployer Plan has incurred an
"accumulated funding deficiency" (within the meaning of
Section 412(a) of the Code), whether or not waived;
(iii)No "reportable event" (within the meaning of Section
4043 of ERISA) has occurred with respect to any Defined
Benefit Plan or any Multiemployer Plan;
(iv) Morristown has not withdrawn as a contributing sponsor
(partially or totally within the meaning of ERISA) from
any Benefit Plan or any Multiemployer Plan; and neither
the execution and delivery of this Agreement nor the
consummation of the transactions contemplated herein
will result in the withdrawal (partially or totally
within the meaning of ERISA) from any Benefit Plan or
Multiemployer Plan, or in any withdrawal or other
liability of any nature to Morristown or the Purchaser
under any Benefit Plan or Multiemployer Plan;
(v) No "prohibited transaction" (within the meaning of
Section 406 of ERISA or Section 4975(c) of the Code)
has occurred with respect to any Benefit Plan or
Multiemployer Plan;
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(vi) The excess of the aggregate present value of accrued
benefits over the aggregate value of the assets of any
Defined Benefit Plan (computed both on a termination
basis and on an ongoing basis) is not more than $-0-,
and the aggregate withdrawal liability of Morristown
with respect to any Multiemployer Plan assuming the
withdrawal of Morristown from said Multiemployer Plan,
is not more than $-0-;
(vii)No provision of any Benefit Plan or of any agreement,
and no act or omission of Morristown, in any way
limits, impairs, modifies or otherwise affects the
right of Morristown or the Purchaser unilaterally to
amend or terminate any Benefit Plan after the Closing,
subject to the requirements of applicable law;
(viii) There are no contributions which are or hereafter
will be required to be made to trusts in connection
with any Benefit Plan that would constitute a "defined
contribution plan" (within the meaning of Section 3(34)
of ERISA).
(ix) Other than claims in the ordinary course for benefits
with respect to the Benefit Plans or the Multiemployer
Plans, there are no actions, suits or claims (including
claims for income taxes, interest, penalties, fines or
excise taxes with respect thereto) pending with respect
to any Benefit Plan or any Multiemployer Plan, or any
circumstances which might give rise to any such action,
suit or claim (including claims for income taxes,
interest, penalties, fines or excise taxes with respect
thereto);
(x) All reports, returns and similar documents with respect
to the Benefit Plans required to be filed with any
governmental agency have been so filed;
(xi) Morristown has not incurred any liability to the
Pension Benefit Guaranty Corporation (except for
required premium payments). No notice of termination
has been filed by the plan administrator (pursuant to
Section 4041 of ERISA) or issued by the Pension Benefit
Guaranty Corporation (pursuant to Section 4042 of
ERISA) with respect to any Benefit Plan subject to
ERISA. There has been no termination
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of any Defined Benefit Plan or any related trust by
Morristown;
(xii)No Benefit Plan which is a Defined Benefit Plan
subject to Title IV of ERISA has applied for or
received a waiver of the minimum funding standards
imposed by Section 412 of the Code;
(xiii) Morristown does not have any obligation to provide
health or other welfare benefits to former, retired or
terminated employees, except as specifically required
under Section 4980B of the Code. Morristown has
substantially complied with the notice and continuation
requirements of Section 4980B of the Code and the
regulations thereunder; and
(xiv)No Benefit Plan or Multiemployer Plan contains any
provisions which would prevent the transactions
contemplated by this Agreement, including the requiring
of any consent thereto.
Seller, at his sole cost and expense, hereby agrees that he
will cause Morristown to (i) take all steps necessary to
terminate the Morristown Sports Medicine Center, Inc. Profit
Sharing Plan (the "Profit Sharing Plan") as of a date prior or
the Closing, including but not limited to, the filing of an
Application for Determination Upon Termination for the Profit
Sharing Plan, and all required forms with the Internal Revenue
Service ("IRS") and Department of Labor ("DOL"), (ii) deliver all
notices to the IRS, DOL, Pension Benefit Guaranty Corporation and
any other governmental agency required to be delivered to
employees and to the trustees of the Profit Sharing Plan, (iii)
continue to file with the IRS, DOL, Pension Benefit Guaranty
Corporation and any other governmental agency any and all
information reports, including annual reports, required with
respect to the Profit Sharing Plan until the completion of the
termination of the Profit Sharing Plan , (iv) fully vest all
employees in their account balances in the Profit Sharing Plan
and (v) otherwise comply with all requirements relating to such
termination.
As soon as practicable following the receipt of a favorable
determination letter from the IRS with respect to the termination
of the Profit Sharing Plan , Seller shall cause the trustees of
the Profit Sharing Plan to distribute the account balances in the
Profit Sharing Plan of the employees who are participants in the
Profit Sharing Plan in accordance with the terms of the plan
documents and any and all applicable laws, rules and regulations.
Seller agrees that any contributions now due or that may
become due to the Profit Sharing Plan shall be the sole
responsibility of Seller and shall be immediately paid or caused
to be paid when due, by Seller. Seller agrees that all costs of
terminating the Profit Sharing Plan and post closing
administration, including the cost of filing all notices,
amendments, returns, reports and determination letter requests
shall be borne by Seller. Seller shall use best
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efforts to cause the current trustees of the Profit Sharing Plan
to remain as trustees of the Profit Sharing Plan through
completion of the termination process.
6.9 Litigation.
Except as set forth in Schedule 6.9, there are no actions, suits,
arbitration proceedings or, to the best of Seller's knowledge,
labor disputes, or other litigation, legal or administrative
proceedings pending or, to the best of knowledge of Seller, after
due inquiry, threatened against or affecting Morristown, its
business or operations or any of its officers, directors,
employees or its Stockholder in their capacity as such, or any of
the properties or businesses thereof, or the Business, or
relating to the transactions contemplated by this Agreement.
Morristown is not directly named in any order, judgment, decree,
stipulation, or consent of or with any arbitrator or Governmental
Authority and is not obligated to pay any fines.
6.10 Taxes.
(a) Morristown is taxed as a "S" Corporation for Federal
Income Tax purposes. Morristown has duly and timely (including
extensions) filed or will file on a timely basis all Tax Returns
which it has been required or will be required to file, and has
paid or provided for all Taxes due or claimed to be due by any
taxing authority. All such Tax Returns are true, complete and
correct in all material respects. Morristown is not delinquent in
the payment of any Taxes, and there are no outstanding
deficiencies with respect to any Taxes except for those being
contested in good faith and by appropriate proceedings.
Morristown has not executed or filed with any taxing authority
any Agreement which is still in effect including any Agreement
extending the period for assessment or collection of any Taxes
for which Seller may become liable. Morristown is not a party to
any pending action or proceeding by any Governmental Authority
for assessment or collection of Taxes for which Seller may be
liable, and no claim for assessment or collection of Taxes for
which Morristown may be liable has been asserted or threatened
against it. There are no tax liens on any of the assets of
Morristown. There are no tax examinations or audits in progress
involving Morristown or the Business.
(b) The charges, accruals and reserves in respect of Taxes
reflected in the books and records, and the charges, accruals and
reserves in respect of Taxes shown in the Financial Statements,
will be sufficient for payment of all Taxes of Morristown for all
periods or portions of periods ending on or before the Closing
Date, whether known or unknown, and whether attributable to
Morristown or to any entity with respect
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to which Morristown has filed a consolidated or combined
return.
The Purchase Price shall be allocated as set forth in
Schedule 6.10 hereto. The parties hereto agree that the
allocation of the Purchase Price is intended to comply with the
allocation method required by Section 338 of the Internal Revenue
Code of 1986, as amended (the "Code"). The parties shall
cooperate to comply with all substantive and procedural
requirements of Section 338 of the Code and any regulations
thereunder, and the allocation shall be adjusted if, and to the
extent, necessary to comply with the requirements of Section 338
of the Code. Neither Purchaser nor Seller will take, nor permit
any affiliated person to take, for federal, state or local income
tax purposes, any position inconsistent with the allocation set
forth in Schedule 6.10 hereto, or, if applicable, such adjusted
allocation. Purchaser and Seller agree that it and he shall
attach to their respective tax returns for the tax year in which
the Closing shall occur an information statement on Form 8594,
which shall be completed in accordance with allocations set forth
in Schedule 6.10 hereto.
Purchaser and Seller shall make an election under Section
338(h) (10) of the Code (and any comparable election under state
or local tax law) with respect to the acquisition of Morristown
by Purchaser. Purchaser and Seller shall cooperate fully with
each other in the making of such election. In particular, and not
by way of limitation, in order to effect such election, on or
prior to the date of the Closing, Purchaser and Seller shall
jointly execute necessary copies of Internal Revenue Service Form
8023 and all attachments required to be filed therewith pursuant
to applicable Treasury regulations.
6.11 No Other Agreement.
Except contracts for the sale of inventory in the ordinary
course of business, Morristown has no Contract with respect to a
sale or other disposition of its assets (or any portion thereof).
6.12 Insurance.
Schedule 6.12 contains an accurate and complete list of all
policies of fire, theft, liability, workers' compensation,
health, automobile, title, casualty and other forms of insurance
including directors' and officers' liability insurance policies
owned or held by Morristown or under which it or its properties
are insured, and Morristown has heretofore made available for
inspection by Purchaser a true and complete copy of all such
policies. All such policies are in full force and effect, are
valid and outstanding, all premiums with respect thereto covering
all periods up to and including the date hereof have been paid,
and no written notice of cancellation, termination or deficiency
of any nature has been received with respect to any such policy.
In the reasonable judgment of Seller, such policies are
sufficient in amount and coverage to adequately insure the
business risks, the assets and the Business of Morristown against
loss or damage in
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the manner customary and prudent for companies engaged in similar
business in similar areas. Said policies shall be in force at the
Closing. Neither the Seller nor Morristown have any knowledge of
any proposed increase of the insurance ratings with respect to
its properties or knows of any conditions or circumstances
applicable to the Business which they might reasonably be
expected to know would result in such increase, except for those
conditions generally applicable to the industry in which
Morristown is engaged in business.
6.13 Accounts Receivable; Accounts Payable.
All of Morristown's accounts receivable and all other claims
and/or notes receivable and the aging thereof are listed on
Schedule 6.13 and arose from valid sales and bona fide
transactions in the ordinary course of business, and, to the best
of the Seller's knowledge, represent and will represent valid and
binding obligations of the account debtor to which such
receivables relate, and, to the best of Seller's knowledge, there
exist no material disputes with regard to such accounts
receivable; they are not subject to any setoff or counterclaim,
and are not contingent upon the fulfillment of any contract or
condition whatsoever.
The accounts and notes payable and accrued expenses
reflected in Financial Statements, and the accounts and notes
payable and accrued expenses incurred by Morristown subsequent to
the Balance Sheet Date, are in all respects valid claims that
arose in the ordinary course of business. Since the date of this
Agreement, the accounts and notes payable and accrued expenses of
Morristown have been maintained on a basis consistent with past
practices.
All of the accounts payable of Morristown are listed on
Schedule 6.13. Purchaser agrees to be responsible for the payment
of all of the accounts payable listed on Schedule 6.13. Seller
hereby agrees to be responsible for the payment of any and all
accounts payable accruing prior to the Closing Date which are not
listed on Schedule 6.13 hereof.
6.14 Labor Matters; Personnel.
Morristown is not a party to any collective bargaining
agreement with any labor organization. No consent, action or
approval of any labor organization is required to be obtained by
Morristown in connection with the performance by Seller of the
terms of this Agreement and the consummation of the transactions
contemplated hereby. As of the date hereof there is not pending
or, to the best of Seller's knowledge, threatened any labor
dispute between Morristown and any labor organization or any
strike or work stoppage involving the employees of Morristown
generally which would have a Material Adverse Effect. To the best
of Seller's knowledge, there are no charges of unfair labor
practices pending or threatened before any
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Governmental Authority, nor are there pending any labor
negotiations or union organization efforts involving the
employees of Morristown.
6.15 Absence of Certain Changes or Events.
Since the date of this Agreement through the Closing Date,
Morristown has conducted its business only in the ordinary course
and has not, with regard to the Business:
(a) suffered any event or condition of any character, which,
individually or in the aggregate, has had a Material Adverse
Effect;
(b) suffered any adverse change in the financial condition
or in the operations, business, properties or assets of
Morristown or suffered any damage, destruction or loss to
Morristown's properties or assets, whether or not covered by
insurance, which has had a Material Adverse Effect;
(c) incurred, or paid, discharged or satisfied, any material
obligations or liabilities (absolute, accrued, contingent or
otherwise) or entered into any material transactions, except in
the ordinary course of business consistent with past practice;
(d) suffered any material default under, or suffered any
event which with notice or lapse of time or both would constitute
a material default under, any material Contract to which Seller
is a party or by which it or any of the Assets is bound:
(e) made any material capital expenditure or commitment for
a material capital expenditure for additions to property, plant,
equipment or intangible capital assets or otherwise except in the
ordinary course of business;
(f) terminated (excluding a termination in accordance with
its terms) or amended, or suffered a termination or amendment of,
any material Contract;
(g) entered into any transaction with Seller or a relative
thereof;
(h) incurred any material indebtedness for borrowed money
(except by endorsement for collection or for deposit of
negotiable instruments received in the ordinary and regular
course of business); or
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(i) entered into any material Contract or arrangement,
whether or not legally binding, except in the ordinary course of
business.
6.16 Consents.
No notice to, filing with, authorization of, exemption by,
or consent, waiver or approval of, any Person or Governmental
Authority is required by Seller to consummate the transactions
contemplated by this Agreement.
6.17 Books and Records.
All books and records maintained by Morristown which relate
to or concern the operation of the Business, including, but not
limited to, all of Morristown's files of correspondence, lists
and records concerning Morristown's patients, including billing
histories, and all of Morristown's books, records and documents,
including books of original entry, have been maintained in
accordance with good business and accounting practices.
6.18 Third-Party Interests.
Seller, nor any director or, to the best of Seller's
knowledge, any officer or employee of Morristown, nor any entity
in which any of the foregoing has any interest, has any interest
in any of the assets or properties now being used in the Business
as heretofore conducted.
6.19 Bank Accounts, Cash and Securities.
Schedule 6.19 is a correct and complete list of: (i) each
bank account and safe deposit box maintained by Morristown and
the names of all persons authorized to deal with such accounts
and safe deposit boxes; (ii) all of Morristown's cash, cash
equivalents, security deposits and marketable securities on hand
as of Closing Date; and (iii) all of Morristown's prepaid
expenses and loans receivable.
6.20 Powers of Attorney.
No person has any power of attorney to act on behalf of
Morristown in connection with any of Morristown's properties or
business affairs.
6.21 Related Party Transactions; Stockholder Indebtedness.
Schedule 6.21 sets forth the amount and other essential
terms of indebtedness or other obligations, liabilities or
commitments (contingent or otherwise) of Morristown to or from
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any past or present officer, director, consultant, employee,
stockholder or any person related to, controlling, controlled by
or in the common control with any of the foregoing (other than
for usual services performed within the past month the payment
for which is not yet due), and all transactions between such
persons and Morristown. Except as set forth on Schedule 6.21, as
of the date hereof, there is no indebtedness outstanding from
Seller to Morristown and there is no guarantee by Morristown of
the indebtedness of Seller to any other person or entity.
6.22 Accuracy of Schedules.
All of the Schedules prepared by Morristown and made part of
this Agreement are current, correct and complete in all material
respects at and as of the date set forth on each of such
Schedules, which shall be current, correct and complete in all
material respects at and as of the Closing Date.
6.23 Full Disclosure.
To the best of Seller's knowledge, no representation,
warranty or covenant made by Seller herein, and no schedule or
exhibit required by this Agreement or delivered by it pursuant to
this Agreement, contains any untrue statement of a material fact,
or, taken as a whole, omits to state a material fact necessary to
make the statements contained in this Agreement or the matters
disclosed in such document, certificate, schedule or exhibit, in
the light of the circumstances under which such statements or
disclosures were made, not untrue or materially misleading.
6.24 Patient Treatments.
As a material inducement to Purchaser's entering into this
Agreement, Seller represents and warrants to Purchaser that the
Business has averaged approximately 350 billable patient
treatments per week for the 1995 calendar year.
6.25 Managed Care Contracts.
Morristown has managed care contracts currently in effect
with the companies listed in Schedule 6.25. To the best of
Seller's knowledge, Seller has not overcharged any providers
(i.e., insurance companies, HMO's, etc.) for services provided by
Morristown prior to the Closing Date. In the event Morristown has
overcharged said providers or to have received any overpayment
for services rendered prior to the Closing Date, Seller shall be
solely responsible for the reimbursement of all sums required in
connection therewith. In addition, Seller shall indemnify and
hold Purchaser harmless from and against and in respect of any
loss, liability , claim, damage, deficiency, reasonable cost or
expense actually incurred by Purchaser arising
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out of such overcharge or overpayment in accordance with
Article 11 hereto.
6.26 Securities.
In connection with the issuance and delivery of the
Securities, Seller represents and warrants to Purchaser as
follows:
(a) Seller has had an opportunity to ask questions of
and receive answers from duly designated representatives of
Purchaser, and has been afforded an opportunity to examine such
documents and other information which Seller or his
representative, if any, have requested concerning the business
and affairs of Purchaser.
(b) Seller acknowledges that he or it has such
knowledge and experience in financial and business matters to
make an informed investment decision based upon the information
furnished to Seller and such additional information as Seller may
have requested and received from Purchaser and the independent
inquiries and investigations undertaken by Seller. Seller
represents he is an "accredited investor" as defined in
Regulation D promulgated under the Securities Act of 1933, as
amended (the "Act") and that Seller can bear the economic risk of
loss of his or its entire investment.
(c) Seller is purchasing the Securities for his or its
own account for investment and not with a view toward any resale
or distribution thereof in violation of the Act. Seller hereby
consents to the imposition of a legend on each certificate
representing the Securities, reading substantially as follows:
"THESE SECURITIES HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, NO TRANSFER
OF THE SHARES MAY BE EFFECTED WITHOUT AN
OPINION OF COUNSEL TO THE CORPORATION STATING
THAT THE TRANSFER IS EXEMPT FROM REGISTRATION
UNDER THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS OR THAT THE TRANSFER OF THE
SHARES IS COVERED BY AN EFFECTIVE
REGISTRATION STATEMENT WITH RESPECT TO THE
SHARES."
(d) Seller is aware that the Securities are deemed
"restricted securities" as that term is defined in Rule 144 (the
"Rule") of the General Rules and Regulations under that Act, and
accordingly, the Securities are not freely tradeable on the open
market.
7. Employees of Seller and the Business. Purchaser and Seller shall
execute and deliver at Closing the Employment Agreement attached hereto as
Schedule 4(d).
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As to all other employees of Morristown, Purchaser agrees to employ
each of Morristown's employees listed in Schedule 7 hereto for ninety (90) days
after the Closing Date at the same salary that Morristown has been paying such
employees. Purchaser shall have no obligation to pay any bonuses or additional
compensation to such employees nor shall Purchaser have any obligations or
liability with respect to the employee benefit plans described in Schedule 6.8
hereto. Notwithstanding the foregoing or anything to the contrary contained
herein, Purchaser shall have the right at anytime, including within said ninety
(90) day period, to immediately terminate any employee listed in Schedule 7 for
cause.
Commencing with the Closing Date, all employees listed in Schedule 7
shall be entitled to the standard number of vacation and sick days and to the
medical benefits as are described in Purchaser's employment manual, a copy of
which has been delivered to Seller. In determining the number of vacation and
sick days to be allotted for the period from the Closing Date through the day
preceding the first anniversary of the Closing Date and in determining the
eligibility of the employees listed in Schedule 7 for participation in
Purchaser's employee benefit plans, such employee's employment with Purchaser
shall be deemed to have commenced upon the date such employee first commenced
his or her employment with Morristown. In no event shall Purchaser be liable for
any accrued or unpaid vacation and/or sick days due such employees for any
periods prior to the Closing Date. In no way shall the foregoing be deemed to
create any obligation on the part of Purchaser to retain any employee listed in
Schedule 7 beyond the ninety (90) day period described above.
8. Representations and Warranties of Purchaser. Purchaser represents
and warrants to Seller as follows:
8.1 Due Incorporation, Etc.
Purchaser is a Delaware corporation authorized to transact
business in New Jersey. Purchaser has full power and authority to
carry out and perform its undertakings and obligations as
provided herein. The execution and delivery of this Agreement and
all corollary documents executed by Purchaser, mentioned or
incorporated herein, and the performance by Purchaser of its
obligations hereunder have been duly authorized and no further
action or approval is required in order to constitute this
Agreement as the binding and enforceable obligation of the
Purchaser. The execution and delivery by Purchaser of this
Agreement, and all corollary documents executed by Purchaser
mentioned or incorporated herein, and the consummation of the
transactions contemplated herein, have been duly authorized by
all proper or requisite proceedings and will not conflict with or
breach any provision of the corporate documents of Purchaser.
8.2 Enforceability.
(a) No action, approval, consent or authorization, including
without limitation any action, approval, consent or authorization
of any governmental or quasi-governmental agency, commission,
board, bureau or instrumentality, is necessary for Purchaser to
constitute this Agreement the binding and
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<PAGE>
enforceable obligation of Purchaser or to consummate the
transactions contemplated hereby; and
(b) To the best of Purchaser's knowledge, the Purchaser's
consummation of the transactions contemplated herein does not and
will not violate any existing local, state or federal law or
regulation, and there are no violations of any existing law or
governmental rule or regulation pending or threatened against
Purchaser, which would materially impair Purchaser's ability to
perform its obligations under this Agreement.
8.3 Full Disclosure.
No representation, warranty or covenant made by Purchaser
herein, and no document, certificate, schedule or exhibit given
or delivered or to be given or delivered by it pursuant to this
Agreement, contains any untrue statement of a material fact, or,
taken as a whole, omits to state a material fact necessary to
make the statements contained in this Agreement or the matters
disclosed in such document, certificate, schedule or exhibit, in
the light of the circumstances under which such statements or
disclosures were made, not untrue or materially misleading.
8.4 Financial Reports.
The Purchaser's Annual Report on Form 10-K for the year
ended 1994, and the Quarterly Report on Form 10-Q for the quarter
ended September 30, 1995, did not, at the time they were filed,
contain an untrue statement of a material fact required to be
stated therein or necessary in order to make the statements
therein not misleading. The consolidated financial statements of
Purchaser included in the above filings were prepared in
accordance with generally accepted accounting principles
consistently applied and fairly present (i) the consolidated
financial position of Purchaser and its subsidiaries as of the
respective dates thereof, and (ii) the consolidated results of
operations and cash flows for the periods presented. There has
been no material adverse change in the business, financial
condition or results of operations of the Purchaser since the
date of such Form 10-Q for the quarter ended September 30, 1995.
8.5 Securities.
The shares of restricted stock to be delivered to Seller
pursuant to Section 2(c) hereof have been duly authorized and,
when delivered in accordance with the terms of this Agreement,
will be validly issued, fully paid and non-assessable, free of
pre- emptive rights, and are free of all liens, charges, claims,
pledges and encumbrances or restrictions, rights or interests of
others of
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<PAGE>
any kind other than by applicable Federal and State
securities law.
8.6 Litigation.
To the best of Purchaser's knowledge, there are no legal or
arbitral proceedings or any proceedings before any governmental
authority or agency now pending or threatened against the
Purchaser or any of its subsidiaries, which, if adversely
determined, would have a material adverse effect on the
consolidated financial condition, operations or business of the
Purchaser and its subsidiaries.
8.7 Leases/Subleases.
Purchaser agrees to guarantee the performance of Morristown
under the real property leases/subleases described in Schedule
6.3(b) hereto, pursuant to the form of guaranty attached hereto
as Schedule 8.7 (the "Guaranty").
9. Conduct of the Business. Seller, until the Closing,
shall:
(a) Conduct the Business in the normal, usual and regular
manner (in that regard, Seller agrees that it shall not (i) sell,
transfer, or otherwise dispose of, or enter into any agreement to
sell, transfer, or otherwise dispose of, any of the Assets, (ii)
incur, create or become obligated with respect to any
liabilities, contracts or obligations outside the ordinary course
of its business, or (iii) become obligated under any agreement to
purchase or supply goods or services other than agreements that
are not material and are entered into in the ordinary course of
its business).
(b) Preserve the Business and the goodwill of the customers
and suppliers of the Business and others having relations with
Morristown.
(c) Give Purchaser and its duly designated representatives
reasonable access during normal business hours to Morristown's
offices and the books and records of the Business, and furnish to
Purchaser such data and information pertaining to Morristown's
Business as Purchaser from time to time reasonably may request.
10. Conditions to Closing. The obligations of Purchaser to close
hereunder are subject, at the option of Purchaser, to the following conditions:
(a) All of the terms, covenants and conditions to be complied
with or performed by Seller under this Agreement on or before the
Closing shall have been complied with or performed in all material
respects.
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<PAGE>
(b) All representations or warranties of Seller herein are true
in all material respects as of the Closing Date and Purchaser shall
have completed its due diligence investigation.
(c) On the Closing Date, there shall be no Liens, except as may
be provided for herein.
(d) The terms of this Agreement and the transaction described
herein have been in all respects approved by Purchaser's Board of
Directors.
The obligations of Seller to close hereunder are subject, at
the option of Seller, to the following conditions:
(a) All of the terms, covenants and conditions to be complied
with or performed by Purchaser under this Agreement on or before the
Closing shall have been complied with or performed in all material
respects.
(b) All representations or warranties of Purchaser herein are
true in all material respects as of the Closing Date.
11. Indemnification.
11.1 In addition to all other obligations of Seller provided for
in this Agreement and subject to the provisions of Section 11.4,
Seller hereby covenants and agrees to indemnify and to hold Purchaser
harmless from and against and in respect of any loss, liability,
claim, damage, deficiency, reasonable cost or expense, actually
incurred by Purchaser from or arising out of:
(a) Any damage or deficiency incurred or sustained by
Purchaser resulting from any misrepresentation, breach of
representation or warranty, or non-fulfillment of any agreement or
covenant on the part of Seller under this Agreement including but not
limited to the Financial Statements, or from any misrepresentation in
or omission from any exhibit, schedule or other instrument required to
be furnished to Purchaser under this Agreement.
(b) Any damage or deficiency incurred or sustained by
Purchaser arising out of the operation or termination of any of
Morristown's employee benefit plans.
(c) Any damage or deficiency incurred or sustained by
Purchaser and/or Morristown as a result of any defaults under or
claims pursuant to that certain equipment lease by and between
Macrolease International Corporation and Morristown dated January 20,
1993.
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<PAGE>
(d) All reasonable costs and expenses (including reasonable
attorneys' fees) incurred by Purchaser in connection with any action,
suit, proceeding, demand, assessment or judgment incident to any of
the matters Purchaser is indemnified against by Seller in this
Agreement.
11.2 (a) Without in any way limiting the scope of the indemnity
hereunder and without precluding Purchaser from exercising any other
right, power or remedy hereunder or at law or equity consistent with
the provisions of this Article, if Seller at any time, or from time to
time, becomes Obligated to Pay (as such term is defined below) any
amount to Purchaser pursuant to the terms of this Agreement (including
without limitation, by reason of any indemnification of Purchaser
pursuant to Section 11.1, or arising under any other Agreement
delivered in connection herewith) Purchaser shall be entitled,
following forty five (45) days notice to Seller and Seller's failure
to make payment within said forty-five (45) day period, to offset all
or any portion of amounts which Purchaser is entitled to receive from
Seller against payments of the Purchase Price in the order in which
such payments are due.
(b) For purposes of this Section 11.2, the term "Obligated
To Pay" shall mean an obligation arising from a claim (i) that is not
contested or in dispute, (ii) that has been resolved by written
agreement, (iii) as to which a final, nonappealable determination has
been rendered by binding arbitration or by a court of competent
jurisdiction, or (iv) for Seller's failure to either deliver to
Purchaser accounts receivable payments or make accounts payable
payments of any accounts payable accruing prior to the Closing which
were not included in Schedule 6.13 hereof.
11.3 Subject to the provisions of Section 11.4, Purchaser agrees
to indemnify and to hold Seller harmless from and against and in
respect of any loss, liability, claim, damage, deficiency, reasonable
cost or expense incurred by Seller from or arising out of:
(a) Any and all damages, costs, claims and expenses arising
by reason of Purchaser's failure to perform and discharge its
obligations under this Agreement or arising by reason of Purchaser's
operation of the Business after the Closing Date.
(b) Any damage or deficiency incurred or sustained by
resulting from any misrepresentation, breach of representation or
warranty, or non-fulfillment of any Agreement or covenant on the part
of Purchaser under this Agreement.
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<PAGE>
(c) All reasonable costs and expenses (including reasonable
attorneys' fees) incurred by Seller in connection with any action,
suit, proceeding, demand, assessment or judgment incident to any of
the matters Seller is indemnified against by Purchaser in this
Agreement.
11.4 Seller and Purchaser each agree to give prompt written
notice to the other of any claim against the party giving notice which
might give rise to a claim by it against the other party hereto based
upon the indemnity agreement contained in Section 11.1 and 11.3
hereof, stating the nature and basis of the claim and, to the extent
then known, the actual or estimated amount thereof, but the failure to
give such notice shall not affect the rights of the indemnified party
hereunder, except (i) to the extent the indemnifying party shall have
suffered actual damage by reason of such failure, or (ii) if such
notice is not given within 90 days from the date such claim first
became known to the party giving notice, in which event any right of
indemnification with respect to such claim shall be deemed to have
lapsed and expired. In the event any action, suit or proceeding is
brought against a party with respect to which another party hereto may
have liability under the indemnity agreement contained in Section 11.1
or 11.3 hereof, the indemnifying party shall have the right, at its
sole cost and expense, to defend such action, with counsel of its own
choosing which shall be reasonably satisfactory to the indemnified
party, in the name and on behalf of the indemnified party and in
connection with any such action, suit or proceeding the parties hereto
agree to render to each other such assistance as may reasonably be
required in order to insure the proper and adequate defense of any
such action, suit or proceeding. The indemnified party shall be kept
fully informed with respect to any such action, suit or proceeding and
shall have a right to participate therein at its own expense, it being
understood and agreed that so long as the indemnifying party has
assumed the defense of such action, suit or proceeding and has paid or
is paying the costs and expenses of such defense, the indemnified
party shall bear its own counsel fees and expenses with respect
thereto. Neither party hereto shall make any settlement of any claim
which might give rise to liability to the other party hereto under the
indemnity contained in Section 11.1 or 11.3 hereof or which would
adversely affect the operation of the Business, without the written
consent of such other party, which consent such other party covenants
shall not be unreasonably withheld.
12. Covenant Not To Compete. Seller shall deliver to Purchaser at
Closing an agreement, in the form attached hereto as Schedule 4(g).
13. Brokerage. The parties hereto represent and warrant to each other
that they have not dealt with any broker or finder in connection with this
Agreement or the transactions contemplated hereby, and no broker or any other
person is entitled to receive any
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<PAGE>
brokerage commission, finder's fee or similar compensation in connection with
this Agreement or the transactions contemplated hereby. Each party hereto shall
indemnify and hold the other parties harmless from and against all liability,
claim, loss, damage or expense including reasonable attorneys' fees, incurred or
required to be paid by such other parties by reason of any breach or failure of
observance of this Article 13.
14. Notices. All notices, demands and other communications required or
permitted to be given hereunder shall be in writing and shall be deemed to have
been properly given if delivered by certified mail, return receipt requested,
with postage prepaid, to Seller or Purchaser, as the case may be, at their
addresses first above written, or at such other addresses as they may designate
by notice given hereunder. Notices shall be deemed effective on the date
received or refused by the addressee. Copies of all such notices, demands and
other communications simultaneously shall be given in the aforesaid manner to
Seller's attorneys, Connell, Foley & Geiser, Attention: Michael McBride, Esq. at
85 Livingston Avenue, Roseland, New Jersey 07068, and to Purchaser's attorneys,
Gould & Wilkie, Attention: Andrew W. Bank, Esq. at One Chase Manhattan Plaza,
New York, New York 10005. The respective attorneys for the parties hereby are
authorized to give any notice required or permitted hereunder and to agree to
adjournments of the Closing.
15. Liquidated Damages. In the event Seller defaults hereunder and
fails to consummate the transaction as described herein, Seller agrees to
promptly pay to Purchaser the sum of Fifty Thousand and 00/100 Dollars
($50,000.00) as and for liquidated damages. The parties have agreed to this
liquidated damages amount due to the recognized difficulty in determining the
exact and specific degree of the losses and damages incurred by Purchaser as a
result of said default. Notwithstanding the foregoing, if Seller's default
relates to or results in Seller selling, conveying or transferring the Business
to another purchaser, then the parties agree that the liquidated damages amount
shall be the greater of: (i) Fifty Thousand and 00/100 Dollars ($50,000.00) or
(ii) the difference between the purchase price set forth in Article 2 hereof and
the price paid by such third party purchaser.
16. Survival. The representations, warranties and covenants contained
herein or in any document, instrument, certificate, exhibit or schedule
furnished in connection herewith shall survive and shall continue in full force
and effect for a period of eighteen (18) months after the Closing, except to the
extent waived in writing.
17. Further Assurances. In connection with the transactions
contemplated by this Agreement, the parties agree to execute and deliver such
further instruments, and to take such further actions, as may be reasonably
necessary or proper to effectuate and carry out the transactions contemplated in
this Agreement.
18. Changes Must Be In Writing. No delay or omission by either Seller
or Purchaser in exercising any right shall operate as a waiver of such right or
any other right. This Agreement may not be altered, amended, changed, modified,
waived or terminated in any respect or particular, unless the same shall be in
writing signed by the party to be bound. No waiver by any party of any breach
hereunder shall be deemed a waiver of any other or subsequent breach.
19. Captions and Exhibits. The captions in this Agreement are for
convenience only and are not to be considered in construing this Agreement. The
Schedules annexed to this Agreement are an integral part of this Agreement, and
where there is any reference to this Agreement it shall be deemed to include
said Schedules.
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<PAGE>
20. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New Jersey.
21. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, executors,
administrators, successors and assigns.
22. Counterparts. This Agreement may be signed in counterparts, each
of which shall be deemed an original and all of which shall constitute one and
the same instrument.
23. Partial Invalidity. If any provision of this Agreement or the
application thereof to any person or circumstances, shall, to any extent, be
invalid or unenforceable, the remainder of this Agreement, or the application of
such term or provision to persons or circumstances other than those as to which
it is held invalid or unenforceable, shall not be affected thereby, and each
term and provision of this Agreement shall be valid and be enforced to the
fullest extent permitted by law.
25. Publicity. Seller acknowledges that Purchaser is a publicly traded
company subject to federal and state securities laws. The parties agree to keep
the terms of the transaction described herein strictly confidential and shall
not disclose such information to any third parties whatsoever, other than to
legal counsel, accountants or other financial advisors or as may be required by
Law or Governmental Authorities, without in each case securing the prior written
consent of Purchaser.
26. Right of First Refusal. Seller owns a physical therapy practice in
Mendham, New Jersey (the "Mendham Practice"). Purchaser shall have the on-going
right of first refusal to purchase the Mendham Practice. If at any time, Seller
receives an offer from a third party to purchase the Mendham Practice, Seller
shall notify Purchaser thereof. Upon receipt of said notice, if Purchaser then
desires to purchase the Mendham Practice, then within thirty (30) days after
receipt of said notice from Seller, Purchaser shall offer to purchase the
Mendham Practice (by notice thereof to Seller) upon all of the same terms and
conditions as were contained in the above described third party offer. If
Purchaser duly notifies Seller as set forth above, then Seller and Purchaser
shall promptly and in good faith enter into an agreement providing for the
purchase and sale of the Mendham Practice in accordance with Purchaser's offer.
In addition, if Purchaser exercises its right of first refusal to purchase the
Mendham Practice, then all income generated by Seller in connection with his
association with Warner Lambert shall be assigned to Morristown commencing with
the closing date of the transfer of the Mendham Practice.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
- - --------------------------------- -----------------------------------
Witness FRANK PAVLISKO
ATTEST: PROFESSIONAL SPORTS CARE
MANAGEMENT, INC.
By:_____________________________ By:________________________________
ANDREW W. BANK RUSSELL F. WARREN, JR.
Assistant Secretary President
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<PAGE>
<PAGE>
STATE OF )
)SS.:
COUNTY OF )
On the day of February, 1996, before me personally came
to me known, who, being by me duly sworn did depose and
say that he resides at he is the
of PROFESSIONAL SPORTS CARE MANAGEMENT, INC., the corporation described in
and which executed the above instrument and that he signed his name thereto
by order of the board of directors of said corporation.
-----------------------------------
STATE OF )
)SS.:
COUNTY OF )
Be it remembered that on this day of February, 1996, before me,
the subscriber, a notary public authorized to take acknowledgments and proof in
said County and State, personally appeared FRANK PAVLISKO, who I am satisfied is
the individual named in and who executed the within Agreement of Sale, and he
acknowledged that he signed, sealed and delivered said Agreement of Sale as his
act and deed for the uses and purposes therein expressed.
------------------------------------
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of February 14, 1996
(hereinafter, the "Agreement"), between PROFESSIONAL SPORTS CARE MANAGEMENT,
INC., a Delaware corporation, having an address at 550 Mamaroneck Avenue,
Harrison, New York 10528 ("Purchaser"), MANUEL BANZON, M.D., doing business
at 4247 Route 9 North, Freehold, New Jersey 07728, RANDALL KRAKAUER, M.D.,
doing business at 4247 Route 9 North, Freehold, New Jersey 07728 and CARY
SKOLNICK, M.D., doing business at 4247 Route 9 North, Freehold, New Jersey
07728 (hereinafter collectively referred to as the "Sellers").
WITNESSETH:
WHEREAS, Sellers' own all of the issued and outstanding shares
(the "Shares") of the capital stock of INSTITUTE OF REHABILITATION, INC., a
New Jersey corporation having a principal office at 4253 Route 9 North,
Building 4, Freehold, New Jersey 07728 (hereinafter referred to as "Rehab")
as set forth in Schedule 6.1(e) annexed hereto and made a part hereof; and
WHEREAS, Rehab is engaged in the business of providing physical
and occupational therapy and rehabilitation services (the "Business"); and
WHEREAS, Purchaser desires to acquire, and Sellers desire to sell
free and clear of all liens, claims, charges or encumbrances of any nature
whatsoever (except as specifically provided for herein), all of Sellers'
Shares in Rehab, upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the covenants and agreements
hereafter set forth, and other good and valuable consideration, the receipt
and sufficiency of which hereby are acknowledged, the parties hereto agree as
follows:
1. Purchase and Sale of Shares. Sellers agree to sell,
transfer and deliver to Purchaser, and Purchaser agrees to purchase, upon the
terms and conditions hereinafter set forth, the Shares. All capitalized
terms not defined within the text of this Agreement are set forth on Schedule
1 annexed hereto.
2. Purchase Price. The purchase price to be paid by Purchaser
for the Shares is One Million One Hundred Thousand and 00/100 Dollars
($1,100,000.00), payable as follows:
a. One Hundred Thousand and 00/100 Dollars ($100,000.00)
(the "Downpayment") upon execution of this Agreement
by wire transfer of immediately available federal
funds to the attorney trust account of Fredrick
Niemann, Esq. ("Escrow Agent"). Upon Closing,
<PAGE>
Escrow Agent shall wire transfer the Downpayment to
an account to be specified by Sellers. In the event
Purchaser defaults hereunder and fails to consummate
the transaction as described herein, the Downpayment
shall be promptly paid by Escrow Agent to Sellers as
and for liquidated damages. In the event the Closing
is not consummated for any other reason, the
Downpayment shall be promptly refunded by the Escrow
Agent to Purchaser. The Escrow Agent is acting as a
stakeholder only and in the absence of bad faith
shall not be liable for any action or inaction.
b. One Million and 00/100 Dollars
($1,000,000.00) at the Closing by
wire transfer of immediately
available federal funds.
3. The Closing. The "Closing" means the settlement of the
obligations of Sellers and Purchaser to each other under this Agreement,
including the payment of the purchase price to Sellers as provided in Article
2 hereof and the delivery of the closing documents provided for in Article 4
hereof. The closing shall be held at the offices of Gould & Wilkie, One
Chase Manhattan Plaza, New York, New York 10005 on a mutually convenient date
which is no later than March 1, 1996 (the "Closing Date") or the closing may
be accomplished by an escrow arrangement. Delivery of the Shares shall be
made by each of the Sellers to Purchaser at the Closing by delivering one or
more certificates in negotiable form representing the Shares, each such
certificate to be accompanied by any requisite documentary or stock transfer
taxes.
4. Closing Documents. At the closing, Sellers shall execute
and
deliver or cause to be executed and delivered to Purchaser:
a. Waivers and Consents. All waivers and
consents necessary for the consummation of the
transactions contemplated by this Agreement.
b. Documents of Transfer. Stock
certificates representing all of the issued and
outstanding shares of capital stock of Rehab duly
endorsed in or accompanied by stock powers duly
endorsed in proper form for transfers.
c. Sellers's Certificate. Sellers'
certificate of that as of the Closing Date:
(i) all of the representations and
warranties made by Sellers in this
Agreement are correct and complete in all
material respects;
(ii) all of the Schedules prepared by Sellers
or Rehab and made part of this Agreement are
current, correct and complete in all material
respects;
(iii) there has not been instituted any suit or proceeding
or claim asserted by any third party to restrain or
invalidate this transaction or to seek damages from or to
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impose obligations upon either Purchaser, Rehab, Sellers or
the Business by reason of this transaction which, in
Purchaser's good faith judgment, would involve expense or
lapse of time that would be materially adverse to
Purchaser's interests or would materially adversely affect
Purchaser's ownership of Rehab or operation of the Business;
(iv) Purchaser has received all consents,
waivers, assignments and other certificates,
notices, assurances and other instruments and
documents, as are reasonably required for the
purpose of carrying out the transactions
contemplated by this Agreement;
(v) There has not been suffered (i) any
Material Adverse Change relating to the
Business, or (ii) any damage or destruction,
casualty or loss, however arising and whether
or not covered by insurance, which either alone
or in the aggregate has a Material Adverse
Effect;
(vi) Sellers have afforded the officers,
employees, attorneys, agents, accountants and
other representatives of Purchaser access to
Rehab's properties, books and records, and has
permitted Purchaser to make extracts from and
copies of such books and records, and has
furnished them with such additional financial
and operating data and other information as to
its financial condition, results of operations,
business, properties, assets, liabilities, or
future prospects as Purchaser and its
representatives have reasonably requested
pursuant to that certain checklist attached
hereto as Schedule 4(c)(vi);
(vii) to the best of Sellers' present
knowledge and information there has not been
any action taken or any statute enacted by any
governmental authority which would render the
parties unable to consummate the transactions
contemplated herein or make the transactions
contemplated herein illegal or prohibit,
restrict or substantially delay the
consummation of the transactions contemplated
herein;
(viii) Rehab has not declared nor paid any
dividends or other distributions of cash or
property to Sellers, subsequent to the Closing
Date.
d. Resignations. The resignations of the
existing members of Rehab's Board of Directors and
Officers.
e. Opinion of Sellers' Counsel. An opinion,
dated the Closing Date and addressed to Purchaser, of
Fredrick Niemann, Esq. counsel to Sellers and Rehab,
to the effect that:
(i) Rehab is a corporation duly
organized, valid and existing and in good
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standing under the laws of the State of
New Jersey. Rehab has all requisite
corporate power to carry on its business
as it is now being conducted.
(ii) The Stock Purchase Agreement and the
Covenant Not To Compete referred to in
paragraph f below (both such agreements being
hereinafter sometimes jointly referred to as
the "Operative Agreements") have been duly and
validly executed and delivered by the Sellers
and each of the Operative Agreements is a valid
and binding obligation of the Sellers
enforceable in accordance with its terms,
subject to bankruptcy, reorganization,
moratorium, insolvency and other laws of
general applicability relating to or affecting
creditors' rights generally and the principles
of equity.
(iii) Except as set forth in the Stock
Purchase Agreement and on the exhibits
and schedules thereto, the execution and
delivery of the Operative Agreements and
the consummation of the transactions
contemplated thereby, under the
conditions therein provided, will not (A)
violate any provision of the Certificate
of Incorporation or By-Laws of Rehab, or
(B) to the best of its knowledge, after
due inquiry with the President of Rehab,
result in a violation or breach of, or
constitute (with or without due notice or
lapse of time or both) a default under
any agreements, indentures or instruments
to which Sellers or Rehab are a party or
by which any of their respective
properties are bound.
(iv) Rehab's authorized and outstanding
capitalization is as represented by the
Sellers in the Stock Purchase Agreement
and each of the issued and outstanding
Shares being sold to Purchaser pursuant
to the Stock Purchase Agreement by the
Sellers is duly and validly authorized,
issued, and fully paid and non-
assessable with no personal liability
attaching to the ownership thereof and is
issued of record to the shareholders
named in Schedule 6.1(c) to the Stock
Purchase Agreement in the amount set
forth opposite their respective names in
such Schedule. To the best of such
counsel's knowledge, there are not
outstanding options, subscriptions,
warrants, rights (including preemptive
rights), calls, commitments, conversion
rights, plans or other agreements of any
character providing for the purchase or
issuance of any authorized but unissued
securities of Rehab. The delivery of the
Shares by the Sellers to Purchaser
-4-<PAGE>
pursuant to the Stock Purchase Agreement
will transfer to Purchaser good and
marketable title thereto, free and clear
of all adverse claims, other than claims
arising out of actions of Purchaser.
(v) To the best of such counsel's
knowledge there is neither any
litigation, proceeding, labor dispute,
arbitral action or government
investigation pending or, so far as known
to such counsel, threatened against,
relating to or affecting (A) the
Business, (B) any employee plan or any
fiduciary or administrator thereof, nor
(C) the transactions contemplated by this
Agreement which, if adversely determined
could, in any one case or in the
aggregate, have a material adverse affect
on the Business. To the best of
counsel's knowledge there are no decrees,
injunctions or orders of any court or
governmental department or agency
outstanding against Sellers with respect
to the Assets or the Business.
(vi) To the best of such counsel's
knowledge, none of the Sellers are
engaged in, or a party to, or threatened
with, any suit, action or legal,
administrative, arbitration or other
proceeding or governmental investigation
which, if adversely determined, would
adversely affect or impede the purchase
of the Shares by Purchaser pursuant to
the Stock Purchase Agreement or otherwise
affect the validity of the title of
Purchaser to such Shares on or after the
Closing.
f. Covenant Not To Compete executed by the
Sellers, in the form attached hereto as Schedule 4(f).
At the closing, Purchaser shall execute and deliver or
cause to be executed and delivered to Sellers:
a. Certificate of Incumbency of Purchaser;
b. Certificate of Good Standing of Purchaser;
c. a certificate of an officer of Purchaser that as of
the Closing Date:
(i) all of the representations and
warranties made by Purchaser in this
Agreement are correct and complete in all
material respects;
(ii) there has not been instituted any suit
or proceeding or claims asserted by any third
party to restrain or invalidate this
transaction or to seek damages from or to
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<PAGE>
impose obligations upon either Sellers or
Purchaser by reason of this transaction which,
in the good faith judgment of Purchaser would
involve expense or lapse of time that would be
materially adverse to its interests;
(iii) Sellers have received from Purchaser all
instruments and documents as are reasonably
required for the purpose of carrying out the
transactions contemplated by this Agreement as
set forth in Schedule 4(c)(vi) attached hereto.
d. an opinion of Purchaser's counsel, Gould
& Wilkie, dated as of the Closing Date in the form of
Schedule 4(d) hereto.
5. Fees and Expenses. Except as expressly provided herein,
Purchaser shall not be obligated to pay or perform any obligations or
liabilities of Sellers including without limitation obligations or
liabilities with respect to products sold by Sellers, obligations or
liabilities of Sellers to its creditors or any legal, accounting, brokerage
or finder's fees or any taxes or other expenses in connection with this
Agreement or the consummation of the transactions contemplated hereby. All
transfer, documentary, sales, use, stamp, registration, value added and other
such taxes and fees (including any penalties and interest) incurred in
connection with this Agreement shall be borne and paid by each of the Sellers
when due, and each of the Sellers will, at his own expense, file all
necessary tax returns and other documentation with respect to all such taxes
and fees, and, if required by applicable law, the Purchaser will join in the
execution of any such tax returns and other documentation. Notwithstanding
the foregoing, Sellers shall pay the reasonable cost of any audit of the
Business required by Purchaser in connection with the transactions
contemplated pursuant to this Agreement.
6. Representations And Warranties of Sellers. Sellers
represent
and warrant to Purchaser as follows:
6.1 Organization and Capitalization.
(a) Rehab is a corporation duly organized,
validly existing and in good standing under the laws
of the State of New Jersey. Rehab has not been
notified by any Governmental Authority as to the
absence of any licensing, qualification or other
authority necessary to conduct business in any
jurisdiction. Rehab has all requisite corporate
power and authority to own, operate and lease its
properties and to carry on the Business as it is now
being conducted.
(b) Sellers has delivered to Purchaser
copies of Rehab's: (i) Certificate of Incorporation
and all amendments thereto as certified by the
Secretary of State of New Jersey and (ii) By-Laws, as
amended to date, as certified by Rehab's Secretary,
and the same are true, complete and correct copies of
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<PAGE>
Rehab's Certificate of Incorporation and By-Laws, as
amended, and currently in effect. Such Certificate
of Incorporation and By-Laws are in full force and
effect and Rehab is not in violation of any of the
provisions thereof.
(c) The authorized capital stock of Rehab is
as set forth on Schedule 6.1(c). Rehab does not have
any treasury shares. Sellers are, in the aggregate,
the true and lawful owners of 100% of the issued and
outstanding Shares of the capital stock of Rehab.
All of the issued and outstanding Shares have been
validly issued, and are fully paid and
non-assessable. Rehab has no shares outstanding or
obligations to issue shares, except as set forth in
Schedule 6.1(c). Each of the Sellers have the
necessary power and authority to sell the Shares free
and clear of all claims, liens, security interests,
pledges, options, encumbrances and other restrictions
of any nature whatsoever. There are no outstanding
subscriptions, options, warrants or other rights
entitling any third party to acquire any Shares from
Rehab or from the Sellers. Delivery to Purchaser at
the Closing of certificates representing the Shares,
pursuant to Article 3 of this Agreement, will
transfer to Purchaser legal and valid title to such
Shares, free and clear of all Liens, exclusive of any
Liens created by Purchaser.
6.2 Enforceability.
(a) This Agreement has been duly and validly
executed and delivered by Sellers and constitutes the
legal, valid and binding obligation of Sellers,
enforceable against Sellers in accordance with its
terms, except to the extent enforceability may be
limited by bankruptcy, insolvency, moratorium or
other similar laws affecting the enforcement of
creditors' rights generally and principles of equity.
(b) To the best of Sellers' knowledge, the
execution, delivery and performance by Sellers of
this Agreement and all other instruments, agreements,
certificates and documents contemplated hereby does
not and will not (i) violate any Law applicable to
Rehab, Sellers or to the Shares or otherwise violate
or conflict with, or result in a breach of, or
constitute a default (or an event which, with or
without notice or lapse of time or both, would
constitute a default) under, or permit cancellation
of, or result in the creation of any Lien upon any of
the Shares or the Assets under any of the terms,
conditions or provisions of any material Contract to
which Sellers or Rehab is a party, or by which
Sellers' or Rehab's properties or assets are bound,
or pursuant to any license, permit or certificate
issued by an Governmental Authority; (ii) permit the
acceleration of the maturity of any material
indebtedness of, or indebtedness secured by any
property of, Rehab; or (iii) violate or conflict with
any provision of Rehab's Certificate of Incorporation
or By-Laws.
6.3 Titles to Properties; Absence of Liens and
Encumbrances.
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(a) Schedule 6.3(a) sets forth a correct and
complete list of all of the fixed assets, personal
property, equipment, improvements, and other
operating and related facilities, including, but not
limited to, all furniture, furnishings, fixtures,
office and other equipment, vehicles, machinery,
supplies, parts, office and data processing
equipment, telephones, telephone systems and
equipment, generators, receivers, computer hardware
and software, test and electronic equipment, and all
other equipment of any type or nature whatsoever
owned by Rehab and used in the Business. All of said
personal property is in working condition (ordinary
wear and tear excepted which is not such as to
Materially Adversely Affect the operation of the
Business), for the uses and purposes for which
intended. Sellers presently have no personal
knowledge of any defect or malfunctioning of any
personal property. In the event said personal
property is not in working condition on the Closing
Date, Sellers' shall give Purchaser a credit at
Closing of up to $5,000.00 towards the cost of
repairing same. All of such personal property is
operated in conformity with all applicable laws,
ordinances, regulations, orders and other
requirements relating thereto, adopted or currently
in effect, except such thereof, which do not alone or
in the aggregate have a Material Adverse Effect on
the Business. All of such properties are owned free
and clear by Rehab except for the Liens and equipment
leases described on Schedule 6.3(a), which Liens or
equipment leases do not have a Material Adverse
Effect on or interfere with the current use of such
properties or otherwise impair the operation of the
Business by Rehab.
(b) Schedule 6.3(b) contains an accurate and
complete description of all real properties owned or
leased by Rehab in connection with the operation of
the Business. Sellers have delivered to Purchaser
complete and correct copies of all instruments
showing such interests in said real property and all
leases with respect to the leased facilities
described on Schedule 6.3(b). All such leases are
valid and enforceable in accordance with their terms;
are in full force and effect and have not been
modified or amended; no default exists under any such
lease; and no event has occurred which with the
giving of notice or passage of time, or both, would
constitute such a default. Except as shown on
Schedule 6.3(b), all fixtures, equipment, and other
items essential to the current operation of the
Business, other than the leased properties are owned
by Rehab free and clear of all Liens. The use of
such real property conforms in all material respects
to all applicable health, fire, safety,
environmental, zoning and building laws and
ordinances.
6.4 Contracts.
Schedule 6.4 sets forth a full and complete
list of all Rehab's rights in sales agreements,
franchises, license agreements, lease agreements,
-8-<PAGE>
maintenance agreements, procurement agreements,
consultant agreements and employee agreements by
which Rehab is bound or which relates in any way to
the operation or conduct of the Business (hereinafter
collectively referred to as "Contracts") (except for
Contracts which have been fully performed or by their
terms are terminable without penalty or other
liability to Rehab upon Rehab's notice of 30 days or
less), including without limitation, the following:
(i) each contract of employment of any
officer, employee or consultant or with
any labor union or association;
(ii) each bonus, pension,
profit-sharing, retirement, deferred
compensation, incentive or supplementary
compensation, percentage compensation,
termination or severance pay,
hospitalization, insurance or other plan
providing employee benefits;
(iii) each contract in or pursuant to
which any person who is an officer,
director, stockholder or employee of
Rehab, or a member of the family of any
of the foregoing, has a direct or
indirect interest;
(iv) each contract relating to the
borrowing or lending of money or the
guarantee of any obligations for borrowed
money or otherwise, excluding
endorsements made for purposes of
collection in the ordinary course of
business;
(v) each contract in excess of $5,000
for the supply by Rehab of goods or
services;
(vi) each contract for capital
expenditures or the purchase by Rehab of
materials, supplies, equipment or
services (other than in the ordinary
course of business);
(vii) each license or royalty agreement;
(viii) each supplier, distributor,
dealer, broker, reseller, installer,
manufacturer's representative, sales
agency, sales representative, franchise,
promotional or advertising contract;
(ix) each contract with any
Governmental Authority;
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<PAGE>
(x) each option to purchase any of
Rehab's assets, properties or rights
(other than in the ordinary course of
business);
(xi) any other contract involving
payments of more than $5,000,
individually or in the aggregate;
(xii) each contract containing covenants
not to compete in any business or
geographical area or not to use or
disclose any informational in Rehab's
possession; and
(xiii) any contract not made in the
ordinary course of business.
Sellers have made available to Purchaser true and correct copies
of each of the Contracts and a written description of each
material oral arrangement so listed. To the best of Sellers'
knowledge, each of the Contracts is valid and in full force and
effect and is enforceable in accordance with its terms and will
be valid and in full force and effect and enforceable following
the consummation of the transactions contemplated hereby. The
Contracts constitute all of the material contracts used in the
conduct of Rehab's business as heretofore conducted. Except as
indicated on Schedule 6.4, Sellers are not aware of any
threatener repudiation, cancellation or outstanding disputes
under any of the Contracts, and there have been on extensions,
moratoriums, deferments or the like with respect to any of the
Contracts.
6.5 No Defaults or Violations.
(a) Rehab has not breached any provisions of,
nor is it in default under the terms of, any material
Contract to which it is a party or by which it or any
of its Assets is bound or under which it has any
rights and, to the best of Sellers' knowledge, no
other party to any such Contract is in default
thereunder in any material respect;
(b) To the best of Sellers' knowledge, Rehab
is not in violation or in default of with respect to
any Law applicable to the Business, except to the
extent any such violation or default would neither
result in a payment obligation nor have a Material
Adverse Effect; and
(c) To the best of Sellers' knowledge, Rehab
is in compliance in all material respects with all
Laws material to the conduct of the Business, except
where the failure to comply would not have a Material
Adverse Effect. Rehab is not engaged in any unfair
practices, and has and currently is conducting its
business in full compliance with all Laws relating to
employment practices. Rehab has not received and is
not aware of any written notice of any violations of
any Law, including, but not limited to, those
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<PAGE>
relating to fire, safety, pricing, sales or
installation of products or services, marketing
practices, political contributions or improper
payments, health, sanitation, environmental,
occupational safety and health, labor and employment,
employment practices and benefits, terms and
conditions of employment and wages and hours,
immigration, energy and similar laws, orders, rules,
regulations and ordinances.
6.6 Financial Statements.
Sellers have heretofore furnished Purchaser
with balance sheets for the Business as of
December 31 in each of the years 1993 and 1994 and as
of September 30, 1995 and the related statements of
income for the 12 months and 9 months, respectively,
then ended. The balance sheet of the Business as of
September 30, 1995 is hereinafter referred to as the
Balance Sheet. Such Financial Statements have been
prepared in accordance with generally accepted
accounting principles, consistently applied,
throughout the periods indicated. Such balance
sheets fairly present the financial condition of the
Business in accordance with such principles,
consistently applied, at the respective dates thereof
and reflect all material claims against and all debts
and liabilities of the Business and such income
statements fairly reflect the results of operations
of the Business in accordance with such principles,
consistently applied, for the periods indicated.
Since September 30, 1995 (the "Balance Sheet Date"),
there has been (i) no material adverse change in the
assets of the Business or liabilities or condition of
the Business, financial or otherwise, or in the
results of the operations of the Business or (ii) no
actual or threatened disputes pertaining to the
Business with any major accounts or referral sources
of Rehab or actual or threatened loss of business
from any of the major accounts or referral sources of
Rehab.
6.7 Licenses, etc.
To the best of Sellers' knowledge, Rehab holds
all licenses, certificates, permits, approvals,
franchises, rights and other authorizations of or
from any Governmental Authority, which are currently
necessary for the operations of the Business. To the
best of Sellers' knowledge, Rehab has ownership of
and full right and authority under all such licenses,
certificates, permits, approvals, franchises, rights
and other authorizations.
6.8 ERISA.
Except as set forth in Schedule 6.8,
Rehab does not maintain or sponsor, nor is it
required to make contributions to, any pension,
profit-sharing, savings, bonus, incentive or deferred
compensation, severance pay, medical, life insurance,
welfare or other employee benefit plan. All pension,
profit-sharing, savings, bonus, incentive or
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deferred compensation, severance pay, medical, life
insurance, welfare or other employee benefit plans
within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended
(hereinafter referred to as "ERISA"), in which the
employees of Rehab participate (such plans and
related trusts, insurance an annuity contracts,
funding media and related agreements and
arrangements, other than any "multiemployer plan"
(within the meaning of Section 3(37) of ERISA), being
hereinafter referred to as the "Benefit Plans" and
any such multiemployer plans being hereinafter
referred to as the "Multiemployer Plans") comply in
all material respects with all requirements of ERISA,
the Internal Revenue Code (the "Code"), the
Department of Labor and the Internal Revenue Service,
and with all other applicable laws, and Rehab has not
taken or failed to take any action with respect to
either the Benefit Plans or the Multiemployer Plans
which might create any liability on the part of Rehab
or the Purchaser. Each "fiduciary" (within the
meaning of Section 3(21)(A) of ERISA) as to each
Benefit Plan and as to each Multiemployer Plan has
complied in all material respects with the
requirements of ERISA and all other applicable laws
in respect of each such Plan. Rehab has furnished to
the Purchaser copies of all Benefit Plans and
Multiemployer Plans and all financial statements,
actuarial reports and annual reports and returns
filed with the Internal Revenue Service with respect
to such Benefit Plans and Multiemployer Plans for a
period of three years prior to the date hereof. Such
financial statements, actuarial reports and annual
reports and returns are true and correct in all
material respects, and none of the actuarial
assumptions underlying such documents have changed
since the respective dates thereof. In addition:
(i) Each Benefit Plan has received a favorable
determination letter from the Internal Revenue
Service as to its qualification under Section
401(a) of the Code, except with respect to
those Benefit Plans which are not eligible for
an application for such a letter;
(ii) No Benefit Plan which is a "defined benefit
plan" (within the meaning of Section 3(35) of
ERISA) (hereinafter referred to as the "Defined
Benefit Plans") or Multiemployer Plan has
incurred an "accumulated funding deficiency"
(within the meaning of Section 412(a) of the
Code), whether or not waived;
(iii) No "reportable event" (within the meaning of
Section 4043 of ERISA) has occurred with
respect to any Defined Benefit Plan or any
Multiemployer Plan;
(iv) Rehab has not withdrawn as a contributing
sponsor (partially or totally within the
meaning of ERISA) from any Benefit Plan or any
Multiemployer Plan; and neither the execution
and delivery of this Agreement nor the
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<PAGE>
consummation of the transactions contemplated
herein will result in the withdrawal (partially
or totally within the meaning of ERISA) from
any Benefit Plan or Multiemployer Plan, or in
any withdrawal or other liability of any nature
to Rehab or the Purchaser under any Benefit
Plan or Multiemployer Plan;
(v) No "prohibited transaction" (within the meaning
of Section 406 of ERISA or Section 4975(c) of
the Code) has occurred with respect to any
Benefit Plan or Multiemployer Plan;
(vi) The excess of the aggregate present value of
accrued benefits over the aggregate value of
the assets of any Defined Benefit Plan
(computed both on a termination basis and on an
ongoing basis) is not more than $-0-, and the
aggregate withdrawal liability of Rehab with
respect to any Multiemployer Plan assuming the
withdrawal of Rehab from said Multiemployer
Plan, is not more than $- 0-;
(vii) No provision of any Benefit Plan or of any
agreement, and no act or omission of Rehab, in
any way limits, impairs, modifies or otherwise
affects the right of Rehab or the Purchaser
unilaterally to amend or terminate any Benefit
Plan after the Closing, subject to the
requirements of applicable law;
(viii)There are no contributions which are or
hereafter will be required to be made to trusts
in connection with any Benefit Plan that would
constitute a "defined contribution plan"
(within the meaning of Section 3(34) of ERISA).
(ix) Other than claims in the ordinary course for
benefits with respect to the Benefit Plans or
the Multiemployer Plans, there are no actions,
suits or claims (including claims for income
taxes, interest, penalties, fines or excise
taxes with respect thereto) pending with
respect to any Benefit Plan or any
Multiemployer Plan, or any circumstances which
might give rise to any such action, suit or
claim (including claims for income taxes,
interest, penalties, fines or excise taxes with
respect thereto);
(x) All reports, returns and similar documents with
respect to the Benefit Plans required to be
filed with any governmental agency have been so
filed;
(xi) Rehab has not incurred any liability to the
Pension Benefit Guaranty Corporation (except
for required premium payments). No notice of
termination has been filed by the plan
administrator (pursuant to Section 4041 of
ERISA) or issued by the Pension Benefit
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<PAGE>
Guaranty Corporation (pursuant to Section 4042
of ERISA) with respect to any Benefit Plan
subject to ERISA. There has been no
termination of any Defined Benefit Plan or any
related trust by Rehab;
(xii) No Benefit Plan which is a Defined Benefit Plan
subject to Title IV of ERISA has applied for or
received a waiver of the minimum funding
standards imposed by Section 412 of the Code;
(xiii)Rehab does not have any obligation to provide
health or other welfare benefits to former,
retired or terminated employees, except as
specifically required under Section 4980B of
the Code. Rehab has substantially complied
with the notice and continuation requirements
of Section 4980B of the Code and the
regulations thereunder; and
(xiv) No Benefit Plan or Multiemployer Plan contains
any provisions which would prevent the
transactions contemplated by this Agreement,
including the requiring of any consent thereto.
Sellers, at their sole cost and expense, hereby agree that
they will cause Rehab to (i) take all steps necessary to
terminate the Institute for Rehabilitation and Therapy Profit
Sharing Plan and Trust (the "Profit Sharing Plan") and the
Institute for Rehabilitation and Therapy Pension Plan and Trust
(the "Pension Plan") as of a date prior or the Closing, including
but not limited to, the filing of an Application for
Determination Upon Termination for each of the Profit Sharing
Plan and the Pension Plan, and all required forms with the
Internal Revenue Service ("IRS") and Department of Labor ("DOL"),
(ii) deliver all notices to the IRS, DOL, Pension Benefit
Guaranty Corporation and any other governmental agency required
to be delivered to employees and to the trustees of the Profit
Sharing Plan or the Pension Plan, (iii) continue to file with the
IRS, DOL, Pension Benefit Guaranty Corporation and any other
governmental agency any and all information reports, including
annual reports, required with respect to the Profit Sharing Plan
or the Pension Plan until the completion of the termination of
the Profit Sharing Plan and the Pension Plan, (iv) fully vest all
employees in their account balances in the Profit Sharing Plan
and the Pension Plan and (v) otherwise comply with all
requirements relating to such termination.
As soon as practicable following the receipt of a favorable
determination letter from the IRS with respect to the termination
of the Profit Sharing Plan and the Pension Plan, Sellers shall
cause the trustees of the Profit Sharing Plan and the Pension
Plan to distribute the account balances in each of the Profit
Sharing Plan and the Pension Plan of the employees who are
participants in the Profit Sharing Plan or the Pension Plan in
accordance with the terms of the plan documents and any and all
applicable laws, rules and regulations.
Sellers agree that any contributions now due or that may
become due to the Profit Sharing Plan or the Pension Plan shall
be the sole responsibility of Sellers and shall be immediately
paid or caused to be paid when due, by Sellers. Sellers agree
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<PAGE>
that all costs of terminating the Profit Sharing Plan and the
Pension Plan and post closing administration, including the cost
of filing all notices, amendments, returns, reports and
determination letter requests shall be borne by Sellers. Sellers
shall use best efforts to cause the current trustees of the
Profit Sharing Plan and the Pension Plan shall remain as trustees
of the Profit Sharing Plan and the Pension Plan through
completion of the termination process.
6.9 Litigation.
Except as set forth in Schedule 6.9, there are
no actions, suits, arbitration proceedings or, to the
best of Sellers' knowledge, labor disputes, or other
litigation, legal or administrative proceedings
pending or, to the best of knowledge of Sellers,
after due inquiry, threatened against or affecting
Rehab, its business or operations or any of its
officers, directors, employees or its Stockholders in
their capacity as such, or any of the properties or
businesses thereof, or the Business, or relating to
the transactions contemplated by this Agreement.
Rehab is not directly named in any order, judgment,
decree, stipulation, or consent of or with any
arbitrator or Governmental Authority and is not
obligated to pay any fines.
Notwithstanding anything to the contrary
contained herein, Sellers shall remain responsible
for the defense and the payment of any judgment or
settlement in connection with the pending litigation
matters listed in Schedule 6.9 hereof, including the
payment of all costs and expenses incurred in
connection therewith. Furthermore, Sellers agree to
indemnify and hold Purchaser and Rehab harmless from
and against any damage or deficiency incurred or
sustained by Purchaser and/or Rehab arising out of
those pending litigation matters listed in Schedule
6.9 hereof.
6.10 Taxes.
(a) Rehab is taxed as a "S" Corporation for
Federal Income Tax purposes. Rehab has duly and
timely (including extensions) filed or will file on a
timely basis all Tax Returns which it has been
required or will be required to file, and has paid or
provided for all Taxes due or claimed to be due by
any taxing authority. All such Tax Returns are true,
complete and correct in all material respects. Rehab
is not delinquent in the payment of any Taxes, and
there are no outstanding deficiencies with respect to
any Taxes except for those being contested in good
faith and by appropriate proceedings. Rehab has not
executed or filed with any taxing authority any
Agreement which is still in effect including any
Agreement extending the period for assessment or
collection of any Taxes for which Sellers may become
liable. Rehab is not a party to any pending action
or proceeding by any Governmental Authority for
assessment or collection of Taxes for which Sellers
may be liable, and no claim for assessment or
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collection of Taxes for which Rehab may be liable has
been asserted or threatened against it. There are no
tax liens on any of the assets of Rehab. There are
no tax examinations or audits in progress involving
Rehab or the Business.
(b) The charges, accruals and reserves in
respect of Taxes reflected in the books and records,
and the charges, accruals and reserves in respect of
Taxes shown in the Financial Statements, will be
sufficient for payment of all Taxes of Rehab for all
periods or portions of periods ending on or before
the Closing Date, whether known or unknown, and
whether attributable to Rehab or to any entity with
respect to which Rehab has filed a consolidated or
combined return.
(c) Each of the Sellers, jointly and severally, at his
own expense shall be responsible for preparing and filing any and
all Tax Returns of Rehab required to be filed by Rehab in respect
of any and all periods up to and including the date of the
Closing to the extent not a5lready filed, whether or not required
to be filed on or before the date of the Closing, and shall pay
all Taxes due and payable by Rehab for all periods up to and
including the date of the Closing to the extent not already
paid. Each of the Sellers shall review all such Tax Returns with
the Purchaser prior to filing and shall submit such proof of
payment of the Taxes due as the Purchaser shall reasonably
request.
The Purchase Price shall be allocated as set forth in
Schedule 6.10 hereto. The parties hereto agree that the
allocation of the Purchase Price is intended to comply with the
allocation method required by Section 338 of the Internal Revenue
Code of 1986, as amended (the "Code"). The parties shall
cooperate to comply with all substantive and procedural
requirements of Section 338 of the Code and any regulations
thereunder, and the allocation shall be adjusted if, and to the
extent, necessary to comply with the requirements of Section 338
of the Code. Neither Purchaser nor any of the Sellers will take,
nor permit any affiliated person to take, for federal, state or
local income tax purposes, any position inconsistent with the
allocation set forth in Schedule 6.10 hereto, or, if applicable,
such adjusted allocation. Purchaser and each of the Sellers
agrees that it and he shall attach to their respective tax
returns for the tax year in which the Closing shall occur an
information statement on Form 8594, which shall be completed in
accordance with allocations set forth in Schedule 6.10 hereto.
Purchaser and each of the Sellers shall make an election
under Section 338(h) (10) of the Code (and any comparable
election under state or local tax law) with respect to the
acquisition of Rehab by Purchaser. Purchaser and each of the
Sellers shall cooperate fully with each other in the making of
such election. In particular, and not by way of limitation, in
order to effect such election, on or prior to the date of the
Closing, Purchaser and each of the Sellers shall jointly execute
necessary copies of Internal Revenue Service Form 8023 and all
attachments required to be filed therewith pursuant to applicable
Treasury regulations.
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<PAGE>
The parties hereto hereby agree that in the event the
Sellers' tax liability in connection with this transaction
increases as a result of the parties election under Section
338(h)(10) of the Code, Purchaser shall reimburse Sellers for
one-half of the amount of the increase in said taxes over the
amount of taxes Sellers would have otherwise had to pay had the
parties not made such election ("Purchaser's Share"). Purchaser
agrees to pay to Sellers Purchaser's Share within thirty (30)
days following presentment to Purchaser of a notice showing the
increased tax liability.
6.11 No Other Agreement.
Except contracts for the sale of inventory in
the ordinary course of business, Rehab has no
Contract with respect to a sale or other disposition
of its assets (or any portion thereof).
6.12 Insurance.
Schedule 6.12 contains an accurate and complete
list of all policies of fire, theft, liability,
workers' compensation, health, automobile, title,
casualty and other forms of insurance including
directors' and officers' liability insurance policies
owned or held by Rehab or under which it or its
properties are insured, and Rehab has heretofore made
available for inspection by Purchaser a true and
complete copy of all such policies. All such
policies are in full force and effect, are valid and
outstanding, all premiums with respect thereto
covering all periods up to and including the date
hereof have been paid, and no written notice of
cancellation, termination or deficiency of any nature
has been received with respect to any such policy.
Said policies shall be in force at the Closing.
Neither the Sellers nor Rehab have any knowledge of
any proposed increase of the insurance ratings with
respect to its properties or knows of any conditions
or circumstances applicable to the Business which
they might reasonably be expected to know would
result in such increase, except for those conditions
generally applicable to the industry in which Rehab
is engaged in business.
6.13 Accounts Receivable; Accounts Payable.
All of Rehab's accounts receivable and all
other claims and/or notes receivable and the aging
thereof are listed on Schedule 6.13 and arose from
valid sales and bona fide transactions in the
ordinary course of business, and, to the best of the
Sellers' knowledge, represent and will represent
valid and binding obligations of the account debtor
to which such zreceivables relate, and, to the best
of Sellers' knowledge, there exist no material
disputes with regard to such accounts receivable;
they are not subject to any setoff or counterclaim,
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<PAGE>
and are not contingent upon the fulfillment of any contract or
condition whatsoever.
The accounts and notes payable and accrued expenses
reflected in Financial Statements, and the accounts and notes
payable and accrued expenses incurred by Rehab subsequent to the
Balance Sheet Date, are in all respects valid claims that arose
in the ordinary course of business. Since the date of this
Agreement, the accounts and notes payable and accrued expenses of
Rehab have been maintained on a basis consistent with past
practices. The accounts payable and accrued expenses of Rehab on
the date of the Closing shall not exceed $0.
Sellers represent that all bills, expenses and obligations
due and payable by Rehab as of the Closing Date shall be paid in
full at or prior to the Closing Date. Sellers further represent
that should any bills, expenses and/or obligations of Rehab
accruing prior to the Closing Date not be paid in full at or
prior to the Closing Date, Sellers shall pay same upon
presentation of invoices for such expenses to Sellers. In the
event Sellers do not pay said bills, expenses and/or obligations
as required herein, Sellers shall in addition pay all fees and
expenses incurred by Purchaser in collecting such reimbursable
expenses, including reasonable attorneys fees.
6.14 Labor Matters; Personnel.
Rehab is not a party to any collective
bargaining agreement with any labor organization. No
consent, action or approval of any labor organization
is required to be obtained by Rehab in connection
with the performance by Sellers of the terms of this
Agreement and the consummation of the transactions
contemplated hereby. As of the date hereof there is
not pending or, to the best of Sellers' knowledge,
threatened any labor dispute between Rehab and any
labor organization or any strike or work stoppage
involving the employees of Rehab generally which
would have a Material Adverse Effect or any
resignations or threatened resignations of physical
therapists or notice that any physical therapists,
other professionals or other employees of Rehab
intend to take leaves of absence, with or without
pay. To the best of Sellers' knowledge, there are no
charges of unfair labor practices pending or
threatened before any Governmental Authority, nor are
there pending any labor negotiations or union
organization efforts involving the employees of Rehab.
6.15 Absence of Certain Changes or Events.
Since the date of this Agreement through the
Closing Date, Rehab has conducted its business only
in the ordinary course and has not, with regard to
the Business:
(a) suffered any event or condition of any
character, which, individually or in the aggregate,
has had a Material Adverse Effect;
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<PAGE>
(b) suffered any adverse change in the
financial condition or in the operations, business,
properties or assets of Rehab or suffered any damage,
destruction or loss to Rehab's properties or assets,
whether or not covered by insurance, which has had a
Material Adverse Effect;
(c) incurred, or paid, discharged or
satisfied, any material obligations or liabilities
(absolute, accrued, contingent or otherwise) or
entered into any material transactions, except in the
ordinary course of business consistent with past
practice;
(d) suffered any material default under, or
suffered any event which with notice or lapse of time
or both would constitute a material default under,
any material Contract to which Sellers are a party or
by which it or any of the Assets is bound:
(e) made any material capital expenditure or
commitment for a material capital expenditure for
additions to property, plant, equipment or intangible
capital assets or otherwise except in the ordinary
course of business;
(f) terminated (excluding a termination in
accordance with its terms) or amended, or suffered a
termination or amendment of, any material Contract;
(g) entered into any transaction with a
Seller or a relative thereof;
(h) incurred any material indebtedness for
borrowed money (except by endorsement for collection
or for deposit of negotiable instruments received in
the ordinary and regular course of business); or
(i) entered into any material Contract or
arrangement, whether or not legally binding, except
in the ordinary course of business.
6.16 Consents.
No notice to, filing with, authorization of,
exemption by, or consent, waiver or approval of, any
Person or Governmental Authority is required by
Sellers to consummate the transactions contemplated
by this Agreement.
6.17 Books and Records.
All books and records maintained by Rehab which
relate to or concern the operation of the Business,
including, but not limited to, all of Rehab's files
of correspondence, lists and records concerning
Rehab's patients, including billing histories, and
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all of Rehab's books, records and documents,
including books of original entry, have been
maintained in accordance with good business and
accounting practices.
6.18 Third-Party Interests.
None of the Sellers, nor any director or, to
the best of Sellers' knowledge, any officer or
employee of Rehab, nor any entity in which any of the
foregoing has any interest, has any interest in any
of the assets or properties now being used in the
Business as heretofore conducted.
6.19 Bank Accounts, Cash and Securities.
Schedule 6.19 is a correct and complete list
of: (i) each bank account and safe deposit box
maintained by Rehab and the names of all persons
authorized to deal with such accounts and safe
deposit boxes; (ii) all of Rehab's cash, cash
equivalents, security deposits and marketable
securities on hand as of Closing Date; and (iii) all
of Rehab's prepaid expenses and loans receivable.
6.20 Powers of Attorney.
No person has any power of attorney to act on
behalf of Rehab in connection with any of Rehab's
properties or business affairs.
6.21 Related Party Transactions; Stockholder
Indebtedness.
Schedule 6.21 sets forth the amount and other
essential terms of indebtedness or other obligations,
liabilities or commitments (contingent or otherwise)
of Rehab to or from any past or present officer,
director, consultant, employee, stockholder or any
person related to, controlling, controlled by or in
the common control with any of the foregoing (other
than for usual services performed within the past
month the payment for which is not yet due), and all
transactions between such persons and Rehab. Except
as set forth on Schedule 6.21, as of the date hereof,
there is no indebtedness outstanding from any of the
Sellers to Rehab and there is no guarantee by Rehab
of the indebtedness of any of the Sellers to any
other person or entity.
6.22 Accuracy of Schedules.
All of the Schedules prepared by Rehab and made
part of this Agreement are current, correct and
complete in all material respects at and as of the
date set forth on each of such Schedules, which shall
be current, correct and complete in all material
respects at and as of the Closing Date.
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6.23 Full Disclosure.
To the best of Sellers' knowledge, no
representation, warranty or covenant made by Sellers
herein, and no schedule or exhibit required by this
Agreement or delivered by it pursuant to this
Agreement, contains any untrue statement of a
material fact, or, taken as a whole, omits to state a
material fact necessary to make the statements
contained in this Agreement or the matters disclosed
in such document, certificate, schedule or exhibit,
in the light of the circumstances under which such
statements or disclosures were made, not untrue or
materially misleading.
6.24 Patient Treatments.
As a material inducement to Purchaser's
entering into this Agreement, Sellers represent and
warrant to Purchaser that the Business has had annual
patient treatments of 9805 in 1993, 9765 in 1994 and
7780 in 1995.
6.25 Managed Care Contracts; Medicare and Medicaid.
Rehab has managed care contracts currently in
effect with the companies listed in Schedule 6.25.
Net revenues from Medicare and Medicaid represented
0% of the net revenues of the Business during
calendar years 1993 and 1994 and during the first
nine months of 1995.
To the best of Sellers' knowledge, Sellers have not
overcharged any providers (i.e., insurance companies, HMO's,
etc.) for services provided by Rehab prior to the Closing Date.
In the event Rehab is deemed to have overcharged said providers
or to have received any overpayment for services rendered prior
to the Closing Date, Sellers shall be solely responsible for the
reimbursement of all sums required in connection therewith. In
addition, Sellers shall indemnify and hold Purchaser harmless
from and against and in respect of any loss, liability , claim,
damage, deficiency, reasonable cost or expense actually incurred
by Purchaser arising out of such overcharge or overpayment in
accordance with Article 11 hereto.
6.26 Environmental.
Rehab has duly complied with, and the real estate subject
to the leases listed on Schedule 6.3(b) and improvements thereon
and all other real estate owned or leased by Rehab and the
improvements thereon (all such owned or leased real estate being
hereinafter referred to collectively as the "Premises") are in
compliance with, the provisions of all federal, state and local
environmental, health and safety laws, codes and ordinances and
all rules and regulations promulgated thereunder.
(b) Rehab has been issued, and will
maintain until the date of the Closing, all required
federal, state and local permits, licenses,
certificates and approvals relating to (i) air
emissions, (ii) discharges to surface water or ground
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<PAGE>
water, (iii) noise emissions, (iv) solid or liquid
waste disposal, (v) the use, generation, storage,
transportation or disposal of toxic or hazardous
substances or wastes (intended hereby and hereafter
to include any and all such materials listed in any
federal, state or local law, code or ordinance and
all rules and regulations promulgated thereunder, as
hazardous or potentially hazardous), or (vi) other
environmental, health and safety matters.
(c) Rehab has not received any notice of, and
neither Rehab nor any of the Stockholders knows of any facts
which might constitute violations of, any federal, state or local
environmental, health or safety laws, codes or ordinances, and
any rules or regulations promulgated thereunder, which relate to
the use, ownership or occupancy of any of the Premises or of any
premises formerly owned, leased or occupied by Rehab. Rehab is
not in violation of any rights-of-way or restrictions affecting
any of the Premises or any rights appurtenant thereto.
6.27 Use of Names.
All names under which Rehab currently conducts the Business
are listed in Schedule 6.27. There are no other persons or
businesses conducting businesses similar to those of the Company
in the State of New Jersey having the right to use or using the
names set forth in Schedule 6.27 or any variants of such names;
and no person or business has ever attempted to restrain Rehab or
any of the Stockholders from using such names or any variant
thereof.
6.28 Computer Software. Rehab has the right to use all
computer software, including all property rights constituting
part of that computer software, used in connection with Rehab's
business operations (the "Computer Software"). A list of all
written licenses pertaining to the Computer Software is set forth
in Schedule 6.28 (the "Licenses"). Rehab has no knowledge that
any of the Licenses may not be valid or enforceable by Rehab or
that the use of the Computer Software or any of the Licenses may
infringe upon or conflict with the rights of any third party.
Rehab has not granted any licenses to use the Computer Software
or any sub-licenses with respect to any of the Licenses.
7. Employees of Sellers and the Business. Purchaser agrees to
employ each of Rehab's employees listed in Schedule 7 hereto for thirty (30)
days after the Closing Date at the same salary that Rehab has been paying
such employees. The salary of each such employee is set forth on Schedule 7
hereto. Purchaser shall have no obligation to pay any bonuses or additional
compensation to such employees nor shall Purchaser have any obligations or
liability with respect to the employee benefit plans described in Schedule
6.8 hereto. Notwithstanding the foregoing or anything to the contrary
contained herein, Purchaser shall have the right at anytime, including within
said thirty (30) day period, to immediately terminate any employee listed in
Schedule 7 for cause.
Commencing with the Closing Date, all employees listed in
Schedule 7 shall be entitled to the standard number of vacation and sick days
and to the medical benefits as are described in Purchaser's employment
manual, a copy of which has been delivered to Sellers. In determining the
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<PAGE>
number of vacation and sick days to be allotted for the period from the
Closing Date through the day preceding the first anniversary of the Closing
Date and in determining the eligibility of the employees listed in Schedule 7
for participation in Purchaser's employee benefit plans, such employee's
employment with Purchaser shall be deemed to have commenced upon the date
such employee first commenced his or her employment with Rehab. In no event
shall Purchaser be liable for any accrued or unpaid vacation and/or sick days
due such employees for any periods prior to the Closing Date. In no way
shall the foregoing be deemed to create any obligation on the part of
Purchaser to retain any employee listed in Schedule 7 beyond the thirty (30)
day period described above.
8. Representations and Warranties of Purchaser. Purchaser
represents and warrants to Sellers as follows:
8.1 Due Incorporation, Etc.
Purchaser is a Delaware corporation authorized
to transact business in New Jersey. Purchaser has
full power and authority to carry out and perform its
undertakings and obligations as provided herein. The
execution and delivery of this Agreement and all
corollary documents executed by Purchaser, mentioned
or incorporated herein, and the performance by
Purchaser of its obligations hereunder have been duly
authorized and no further action or approval is
required in order to constitute this Agreement as the
binding and enforceable obligation of the Purchaser.
The execution and delivery by Purchaser of this
Agreement, and all corollary documents executed by
Purchaser mentioned or incorporated herein, and the
consummation of the transactions contemplated herein,
have been duly authorized by all proper or requisite
proceedings and will not conflict with or breach any
provision of the corporate documents of Purchaser.
8.2 Enforceability.
(a) No action, approval, consent or
authorization, including without limitation any
action, approval, consent or authorization of any
governmental or quasi-governmental agency,
commission, board, bureau or instrumentality, is
necessary for Purchaser to constitute this Agreement
the binding and enforceable obligation of Purchaser
or to consummate the transactions contemplated
hereby; and
(b) To the best of Purchaser's knowledge,
the Purchaser's consummation of the transactions
contemplated herein does not and will not violate any
existing local, state or federal law or regulation,
and there are no violations of any existing law or
governmental rule or regulation pending or threatened
against Purchaser, which would materially impair
Purchaser's ability to perform its obligations under
this Agreement.
8.3 Full Disclosure.
No representation, warranty or covenant made by
Purchaser herein, and no document, certificate,
schedule or exhibit given or delivered or to be given
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<PAGE>
or delivered by it pursuant to this Agreement,
contains any untrue statement of a material fact, or,
taken as a whole, omits to state a material fact
necessary to make the statements contained in this
Agreement or the matters disclosed in such document,
certificate, schedule or exhibit, in the light of the
circumstances under which such statements or
disclosures were made, not untrue or materially
misleading.
9. Conduct of the Business. Sellers, until the Closing, shall:
(a) Conduct the Business in the normal,
usual and regular manner (in that regard, Sellers
agrees that it shall not (i) sell, transfer, or
otherwise dispose of, or enter into any agreement to
sell, transfer, or otherwise dispose of, any of the
Assets, (ii) incur, create or become obligated with
respect to any liabilities, contracts or obligations
outside the ordinary course of its business, (iii)
make loans or advances or grant pay raises, bonuses
or awards, directly or indirectly, to any management
personnel, employee, director or shareholder of
Rehab, (iv) declare or pay any dividend or make any
other distribution in respect of its capital stock,
other than in cash, or directly or indirectly,
purchase, redeem or otherwise acquire or dispose of
any shares of its capital stock or (v) become
obligated under any agreement to purchase or supply
goods or services other than agreements that are not
material and are entered into in the ordinary course
of its business).
(b) Preserve the Business and the goodwill of
the customers and suppliers of the Business and
others having relations with Rehab.
(c) Give Purchaser and its duly designated
representatives reasonable access during normal
business hours to Rehab's offices and the books and
records of the Business, and furnish to Purchaser
such data and information pertaining to Rehab's
Business as Purchaser from time to time reasonably
may request.
10. Conditions to Closing. The obligations of Purchaser to
close hereunder are subject, at the option of Purchaser, to the following
conditions:
(a) All of the terms, covenants and
conditions to be complied with or performed by
Sellers under this Agreement on or before the Closing
shall have been complied with or performed in all
material respects.
(b) All representations or warranties of
Sellers herein are true in all material respects as
of the Closing Date.
(c) On the Closing Date, there shall be no
Liens, except as may be provided for herein.
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<PAGE>
(d) The Stockholders and Rehab shall have
entered into a lease, substantially in the form of
Schedule 10 hereto.
The obligations of Sellers to close hereunder are subject, at the
option of Sellers, to the following conditions:
(a) All of the terms, covenants and
conditions to be complied with or performed by
Purchaser under this Agreement on or before the
Closing shall have been complied with or performed in
all material respects.
(b) All representations or warranties of
Purchaser herein are true in all material respects as
of the Closing Date.
11. Indemnification.
11.1 In addition to all other obligations of
Sellers provided for in this Agreement and subject to
the provisions of Section 11.3, Sellers hereby
covenants and agrees to indemnify and to hold
Purchaser harmless from and against and in respect of
any loss, liability, claim, damage, deficiency,
reasonable cost or expense, actually incurred by
Purchaser from or arising out of:
(a) Any damage or deficiency
incurred or sustained by Purchaser resulting from any
misrepresentation, breach of representation or
warranty, or non- fulfillment of any agreement or
covenant on the part of Sellers under this Agreement
including but not limited to the Financial
Statements, or from any misrepresentation in or
omission from any exhibit, schedule or other
instrument required to be furnished to Purchaser
under this Agreement.
(b) Any damage or deficiency
incurred or sustained by Purchaser arising out of the
operation or termination of any Rehab's employee
benefit plans.
(c) All reasonable costs and
expenses (including reasonable attorneys' fees)
incurred by Purchaser in connection with any action,
suit, proceeding, demand, assessment or judgment
incident to any of the matters Purchaser is
indemnified against by Sellers in this Agreement.
11.2 Subject to the provisions of Section
11.3, Purchaser agrees to indemnify and to hold
Sellers harmless from and against and in respect of
any loss, liability, claim, damage, deficiency,
reasonable cost or expense incurred by Sellers from
or arising out of:
(a) Any and all damages,
costs, claims and expenses arising by reason of
Purchaser's failure to perform and discharge its
obligations under this Agreement or arising by reason
of Purchaser's operation of the Business after the
Closing Date.
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(b) Any damage or deficiency
incurred or sustained by resulting from any
misrepresentation, breach of representation or
warranty, or non-fulfillment of any Agreement or
covenant on the part of Purchaser under this
Agreement.
(c) All reasonable costs and
expenses (including reasonable attorneys' fees)
incurred by Sellers in connection with any action,
suit, proceeding, demand, assessment or judgment
incident to any of the matters Sellers are
indemnified against by Purchaser in this Agreement.
11.3 Sellers and Purchaser each agree to give
prompt written notice to the other of any claim
against the party giving notice which might give rise
to a claim by it against the other party hereto based
upon the indemnity agreement contained in Section
11.1 and 11.2 hereof, stating the nature and basis of
the claim and, to the extent then known, the actual
or estimated amount thereof, but the failure to give
such notice shall not affect the rights of the
indemnified party hereunder, except (i) to the extent
the indemnifying party shall have suffered actual
damage by reason of such failure, or (ii) if such
notice is not given within 90 days from the date such
claim first became known to the party giving notice,
in which event any right of indemnification with
respect to such claim shall be deemed to have lapsed
and expired. In the event any action, suit or
proceeding is brought against a party with respect to
which another party hereto may have liability under
the indemnity agreement contained in Section 11.1 or
11.2 hereof, the indemnifying party shall have the
right, at its sole cost and expense, to defend such
action, with counsel of its own choosing which shall
be reasonably satisfactory to the indemnified party,
in the name and on behalf of the indemnified party
and in connection with any such action, suit or
proceeding the parties hereto agree to render to each
other such assistance as may reasonably be required
in order to insure the proper and adequate defense of
any such action, suit or proceeding. The indemnified
party shall be kept fully informed with respect to
any such action, suit or proceeding and shall have a
right to participate therein at its own expense, it
being understood and agreed that so long as the
indemnifying party has assumed the defense of such
action, suit or proceeding and has paid or is paying
the costs and expenses of such defense, the
indemnified party shall bear its own counsel fees and
expenses with respect thereto. Neither party hereto
shall make any settlement of any claim which might
give rise to liability to the other party hereto
under the indemnity contained in Section 11.1 or 11.2
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<PAGE>
hereof or which would adversely affect the operation
of the Business, without the written consent of such
other party, which consent such other party covenants
shall not be unreasonably withheld.
11.4 Neither party shall have any liability to the other
party for any indemnified claims under Article 11 until the
aggregate amount of indemnified claims exceed $10,000, and then
only to the extent such amount exceeds $10,000. Notwithstanding
the foregoing, the $10,000 exclusion shall not apply to those
circumstances where either of the parties is specifically
obligated to make payment of certain costs and expenses as
provided herein.
12. Covenant Not To Compete. Sellers shall deliver to
Purchaser at Closing an agreement, in the form attached hereto as
Schedule 4(f).
13. Brokerage. The parties hereto represent and warrant to each
other that they have not dealt with any broker or finder in connection with
this Agreement or the transactions contemplated hereby, and no broker or any
other person is entitled to receive any brokerage commission, finder's fee or
similar compensation in connection with this Agreement or the transactions
contemplated hereby. Each party hereto shall indemnify and hold the other
parties harmless from and against all liability, claim, loss, damage or
expense including reasonable attorneys' fees, incurred or required to be paid
by such other parties by reason of any breach or failure of observance of
this Article 13.
14. Arbitration. Any dispute or controversy arising among the
parties hereto regarding any term, covenant or condition of this Agreement or
the breach thereof shall, upon written demand of any party hereto, be
submitted to and determined by arbitration before the American Arbitration
Association ("Association"), in New Jersey, by a panel of three (3)
arbitrators, in accordance with the rules of the Association then in effect.
Any award rendered shall be made by means of a written opinion explaining the
arbitrators' reasons for the award. The arbitrators may not amend or vary any
provision of this Agreement. Judgment upon the award rendered by the
arbitrators may be entered in any court of competent jurisdiction, which
court shall have the power to review such award for compliance with this
Agreement.
15. Notices. All notices, demands and other communications
required or permitted to be given hereunder shall be in writing and shall be
deemed to have been properly given if delivered by certified mail, return
receipt requested, with postage prepaid, to Sellers or Purchaser, as the case
may be, at their addresses first above written, or at such other addresses as
they may designate by notice given hereunder. Notices shall be deemed
effective on the date received or refused by the addressee. Copies of all
such notices, demands and other communications simultaneously shall be given
in the aforesaid manner to Sellers' attorney, Fredrick Neimann, Esq. at 63
West Main Street, Freehold, New Jersey 07728, and to Purchaser's attorneys,
Gould & Wilkie, Attention: Andrew W. Bank, Esq. at One Chase Manhattan Plaza,
New York, New York 10005. The respective attorneys for the parties hereby are
authorized to give any notice required or permitted hereunder and to agree to
adjournments of the Closing.
16. Liquidated Damages. In the event Sellers default hereunder
and fail to consummate the transaction as described herein, Sellers agree to
promptly pay to Purchaser the sum of One Hundred Thousand and 00/100 Dollars
($100,000.00) as and for liquidated damages. The parties have agreed to this
liquidated damages amount due to the recognized difficulty in determining the
exact and specific degree of the losses and damages incurred by Purchaser as
a result of said default.
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<PAGE>
17. Survival. The representations, warranties and covenants
contained herein or in any document, instrument, certificate, exhibit or
schedule furnished in connection herewith shall survive and shall continue in
full force and effect for a period of one (1) year after the Closing, except
to the extent waived in writing.
18. Further Assurances. In connection with the transactions
contemplated by this Agreement, the parties agree to execute and deliver such
further instruments, and to take such further actions, as may be reasonably
necessary or proper to effectuate and carry out the transactions contemplated
in this Agreement.
19. Changes Must Be In Writing. No delay or omission by
either Sellers or Purchaser in exercising any right shall operate as a waiver
of such right or any other right. This Agreement may not be altered,
amended, changed, modified, waived or terminated in any respect or
particular, unless the same shall be in writing signed by the party to be
bound. No waiver by any party of any breach hereunder shall be deemed a
waiver of any other or subsequent breach.
20. Captions and Exhibits. The captions in this Agreement are
for convenience only and are not to be considered in construing this
Agreement. The Schedules annexed to this Agreement are an integral part of
this Agreement, and where there is any reference to this Agreement it shall
be deemed to include said Schedules.
21. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New Jersey.
22. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, successors and assigns. The parties hereto
acknowledge and agree that Purchaser may designate a direct or indirect
wholly-owned subsidiary of Purchaser to acquire the Shares, provided
Purchaser's payment obligations hereunder shall not be affected by such
designation by Purchaser.
23. Counterparts. This Agreement may be signed in
counterparts, each of which shall be deemed an original and all of which
shall constitute one and the same instrument.
24. Partial Invalidity. If any provision of this Agreement or
the application thereof to any person or circumstances, shall, to any extent,
be invalid or unenforceable, the remainder of this Agreement, or the
application of such term or provision to persons or circumstances other than
those as to which it is held invalid or unenforceable, shall not be affected
thereby, and each term and provision of this Agreement shall be valid and be
enforced to the fullest extent permitted by law.
25. Publicity. Sellers acknowledge that Purchaser is a publicly
traded company subject to federal and state securities laws. The parties
agree to keep the terms of the transaction described herein strictly
confidential and shall not disclose such information to any third parties
whatsoever, other than to legal counsel, accountants or other financial
advisors or as may be required by Law or Governmental Authorities, without in
each case securing the prior written consent of Purchaser.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first above written.
_________________________________ ___________________________________
Witness MANUEL BANZON, M.D.
_________________________________ ___________________________________
Witness RANDALL KRAKAUER, M.D.
_________________________________ __________________________________
Witness CARY SKOLNICK, M.D.
ATTEST: PROFESSIONAL SPORTS CARE
MANAGEMENT, INC.
By:_____________________________ By:________________________________
PATRICK J. WACK, JR. RUSSELL F. WARREN, JR.
Secretary President
The Downpayment has been received
by the undersigned on this __ day
of February 1996, and by execution
hereof, the undersigned hereby
covenants and agrees to be bound
by the terms of Article 2 hereof.
_________________________________
Fredrick Niemann, Esq.
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<PAGE>
STATE OF )
)SS.:
COUNTY OF )
On the day of February, 1996, before me personally
came to me known, who, being by me duly sworn did depose
and say that he resides at he is
the of PROFESSIONAL SPORTS CARE MANAGEMENT, INC., the
corporation described in and which executed the above instrument and that he
signed his name thereto by order of the board of directors of said
corporation.
___________________________________
STATE OF )
)SS.:
COUNTY OF )
Be it remembered that on this day of February, 1996, before me,
the subscriber, a notary public authorized to take acknowledgments and proof
in said County and State, personally appeared MANUEL BANZON, M.D., who I am
satisfied is the individual named in and who executed the within Agreement of
Sale, and he acknowledged that he signed, sealed and delivered said Agreement
of Sale as his act and deed for the uses and purposes therein expressed.
____________________________________
STATE OF )
)SS.:
COUNTY OF )
Be it remembered that on this day of February, 1996, before me,
the subscriber, a notary public authorized to take acknowledgments and proof
in said County and State, personally appeared RANDALL KRAKAUER, M.D., who I
am satisfied is the individual named in and who executed the within Agreement
of Sale, and he acknowledged that he signed, sealed and delivered said
Agreement of Sale as his act and deed for the uses and purposes therein
expressed.
____________________________________
STATE OF )
)SS.:
COUNTY OF )
Be it remembered that on this day of February, 1996, before me,
the subscriber, a notary public authorized to take acknowledgments and proof
in said County and State, personally appeared CARY SKOLNICK, M.D., who I am
satisfied is the individual named in and who executed the within Agreement of
Sale, and he acknowledged that he signed, sealed and delivered said Agreement
of Sale as his act and deed for the uses and purposes therein expressed.
____________________________________
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AGREEMENT OF SALE
AGREEMENT OF SALE, dated as of April 22, 1996 (hereinafter,
the "Agreement"), by and among BUSINESS HEALTHCARE, a professional corporation
formed pursuant to the laws of the State of Connecticut, having an address at 83
Wooster Heights Road, Danbury, Connecticut 06810 (hereinafter referred to as the
"Seller"), NATHANIEL SELLECK, M.D., (the sole shareholder of Seller and
hereinafter referred to as the "Shareholder") and PROFESSIONAL WORK CARE, L.L.C.
a New York limited liability company, having an address at 550 Mamaroneck
Avenue, Harrison, New York 10528 ("Purchaser").
WITNESSETH:
WHEREAS, Purchaser desires to acquire, and Seller desires to
sell, all of the assets hereinafter specified of Seller upon the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the covenants and
agreements hereafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which hereby are acknowledged, the parties hereto
agree as follows:
1. Agreement to Sell. Seller agrees to sell, transfer and
deliver to Purchaser, and Purchaser agrees to purchase, upon the terms and
conditions hereinafter set forth, all of the assets (other than cash,
securities, cash equivalents and the medical records and patient lists of the
occupational medical business, which medical records and patient lists shall be
placed in the custody of a licensed physician of Purchaser's choosing) of the
occupational medical practice operated by Seller (the "Assets"), including
without limitation the following:
a. the Seller's occupational medical business (the
"Business");
b. the inventory of merchandise, parts and supplies
of the Business and all similar items acquired or
owned by the business on or before the closing
date (as defined below); and the equipment and
furniture described in Exhibit A hereto and all
similar equipment and/or furniture acquired or
owned by the business on or before the closing
date (the "Equipment and Furniture"). All of the
Equipment and Furniture shall be in its "as is"
condition as of the date of this Agreement;
c. all accounts receivable of the Business;
d. Seller's rights under the lease described in
Exhibit B hereto (the "Lease"); and
e. the goodwill of the Business, which shall be
placed in the custodianship of a licensed
physician of Purchaser's choosing (the
"Goodwill").
<PAGE>
2. Purchase Price. A. The purchase price to be paid by
Purchaser for the Assets is Four Hundred Forty Five Thousand and 00/100 Dollars
($445,000.00), payable as follows:
a Two Hundred Thousand and 00/100 Dollars
($200,000.00) at the Closing by wire transfer of
immediately available federal funds; and
b. Two Hundred Forty Five Thousand and 00/100 Dollars
($245,000.00) by the execution and delivery at the
Closing of a Promissory Note by Purchaser to
Seller in said amount, substantially in the form
of Exhibit C hereto.
B. The purchase price is comprised of the following
components:
Accounts Receivable: $ 45,000.00
Equipment and Furniture: $ 60,000.00
Business and Goodwill: $310,000.00
Non-Compete Covenant of Seller: $ 30,000.00
The parties agree to use the foregoing allocation, which was
the result of arm's length negotiations, for accounting, tax and financial
purposes.
3. Lease. Seller shall arrange for the assignment to Purchaser
of its interest in the lease, described in Exhibit B, for premises in the
building located at 83 Wooster Heights Road, Danbury, Connecticut and obtain the
necessary consent from lessor to such assignment, pursuant to the terms and
substantially in the form of the Assignment and Assumption Agreement attached
hereto as Exhibit D.
4. The Closing. The "Closing" means the settlement of the
obligations of Seller and Purchaser to each other under this Agreement,
including the payment of the purchase price to Seller as provided in Article 2
hereof and the delivery of the closing documents provided for in Article 5
hereof. The closing shall be accomplished by an escrow arrangement on a mutually
convenient date which is no later than April 22, 1996 (the "Closing Date").
5. Closing Documents. At the closing, Seller shall execute and
deliver or cause to be executed and delivered to Purchaser:
a. an assignment of the rights of Seller under the
Lease and the lessor's consent to such assignment,
substantially in the form of the Assignment and
Assumption Agreement set forth as Exhibit D
hereto;
b. a Bill of Sale substantially in the form of
Exhibit E hereto;
c. an Employment Agreement between Shareholder and
Professional Work Care Danbury, P.C.,
substantially in the form of Exhibit F hereto;
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<PAGE>
<PAGE>
d. an Employment Agreement between Emily Selleck and
Professional Work Care Danbury, P.C.,
substantially in the form of Exhibit G hereto;
e. certified copies of resolutions duly adopted by
the Board of Directors and Shareholder of Seller
authorizing the sale of the Assets, the execution
of the Covenant Not To Compete and the performance
by Seller of its obligations hereunder;
f. an opinion of Seller's counsel, Chipman, Mazzucco,
Land & Pennarola, LLC dated as of the Closing
Date, in form and substance satisfactory to
Purchaser's counsel, stating in the opinion of
Seller's counsel that: (i) Seller has full power
and authority to enter into this Agreement and the
Covenant Not To Compete and to perform its
obligations hereunder; (ii) the execution and
delivery of this Agreement and the Covenant Not To
Compete and the performance by Seller of its
obligations hereunder have been duly authorized
and no further action or approval is required in
order to constitute this Agreement as the valid
and binding obligations of Seller, enforceable in
accordance with their terms, except as
enforceability may be limited by bankruptcy,
moratorium, insolvency or other laws affecting
creditor's rights generally; (iii) the execution
and delivery of this Agreement and the Covenant
Not To Compete and the performance by Seller of
its obligations hereunder do not and will not
violate any applicable existing laws, rules or
regulations of the State of Connecticut; and (iv)
except as may be set forth in this Agreement, such
counsel is not representing Seller in nor has
knowledge of any suit, action or proceeding
against Seller which, if adversely determined,
would prohibit the consummation of the
transactions contemplated by this Agreement;
g. Certificate of Incumbency for Seller;
h. Certificate of Good Standing for Seller;
i. Covenant Not To Compete executed by the Seller and
the Shareholder, in the form attached hereto as
Exhibit H;
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<PAGE>
<PAGE>
j. such other instruments in form and substance
reasonably satisfactory to Purchaser's attorneys
as may be necessary or proper to transfer to
Purchaser good and marketable title to the Assets
to be transferred under this Agreement and to
otherwise carry out the intentions of the parties
to this Agreement;
k. Seller shall do all further acts and things as may
be necessary, or reasonably requested by
Purchaser, to consummate the transactions
contemplated by this Agreement, including the
transfer to Purchaser of the Assets. Seller shall
advise Purchaser of, and cause to be delivered to
Purchaser, all trade secrets and proprietary
information pertaining to the Business.
At the closing, Purchaser shall execute and/or deliver to
Seller:
a. the Promissory Note;
b. Certificate of Incumbency of Purchaser;
c. Certificate of Good Standing of Purchaser;
d. Purchaser shall assume Seller's obligations under
the Lease, in accordance with Exhibit D hereto;
e. an opinion of Purchaser's counsel, Gould & Wilkie,
dated as of the Closing Date in the form of
Exhibit I hereto;
f. evidence that Professional Work Care Danbury, P.C.
has obtained claims based insurance to cover
Shareholder against any and all exposure for all
claims made subsequent to the Closing based upon
alleged acts of negligence, such coverage shall be
comparable to Shareholder's existing coverage;
g. certified copy of resolutions duly adopted by the
managers of Purchaser authorizing the purchase of
the Assets, the execution of the Promissory Note,
and the performance by Purchaser of its
obligations hereunder;
h. evidence that Purchaser has qualified to do
business in Connecticut; and
i. reimbursement of the security deposit under the
Lease.
6. Fees and Expenses. Except as expressly provided herein,
Purchaser shall not be obligated to pay or perform any obligations or
liabilities of Seller including without limitation obligations or liabilities
with respect to products sold by Seller, obligations or liabilities of Seller to
its creditors or any legal, accounting, brokerage or finder's fees or any taxes
or other expenses in connection with this Agreement or the consummation of the
transactions contemplated hereby.
- 4 -
<PAGE>
<PAGE>
7. Representations And Warranties of Seller. Seller
represents and warrants to Purchaser as follows:
a. Seller has full power and authority to own its
properties and to conduct its business as now
carried on and to carry out and perform its
undertakings and obligations as provided herein.
The execution and delivery by Seller of this
Agreement and all corollary documents mentioned
and incorporated herein, and the consummation of
the transactions contemplated herein, do not and
will not conflict with or result in any breach of
any condition or provision of, or constitute a
default under, or result in the creation or
imposition of any lien, charge or encumbrance upon
any of the Assets by reason of the provisions of
any contract, lien, lease, agreement, instrument
or judgment to which Seller is a party, or which
is or purports to be binding upon Seller or which
affects or purports to affect any of the Assets.
No further action or approval is required in order
to constitute this Agreement the valid, binding
and enforceable obligation of Seller;
b. No action, approval, consent or authorization,
including without limitation any action, approval,
consent or authorization of any landlord,
mortgagee, governmental or quasi-governmental
agency, commission, board, bureau or
instrumentality, is necessary for Seller to
constitute this Agreement the valid, binding and
enforceable obligation of Seller or to consummate
the transactions contemplated hereby, except as
may be set forth herein (including, but not
limited to the consent of the lessor under the
Lease);
c. Seller is the owner of and has good and marketable
title to the Assets, free of all liens, claims and
encumbrances, except as may be set forth herein;
d. To the best of Seller's knowledge, there are no
violations of any law or governmental rule or
regulation pending or threatened against Seller or
the Assets, and Seller has complied with all laws
and governmental rules and regulations applicable
to the Business and the Assets;
e. There are no judgments, liens, suits, actions or
proceedings pending or, to the best of Seller's
knowledge, threatened against Seller or the
Assets, except as set forth on Exhibit J attached
hereto. Neither Seller nor the Assets are a party
to, subject to or bound by any agreement or any
judgment or decree of any court, governmental body
or arbitrator which would conflict with or be
breached by the execution, delivery or performance
of this Agreement, or which could prevent the
carrying out of the transactions provided for in
this
- 5 -
<PAGE>
<PAGE>
Agreement, or which could prevent the use by
Purchaser of the Assets or adversely affect
the conduct of the business by Purchaser;
f. Except as may be set forth herein, Seller has not
entered into, and the Assets are not subject to,
any: (i) written contract or agreement for the
employment of any employee of the business; (ii)
contract with any labor union or guild; (iii)
pension, profit-sharing, retirement, bonus,
insurance, or similar plan with respect to any
employee of the business, except as set forth in
Exhibit K attached hereto; or (iv) similar
contract or agreement affecting or relating to the
business or the Assets;
g. The Equipment and Furniture are in working order
and in compliance with all applicable laws, rules
and regulations, and no notice to creditors is
required pursuant to the Uniform Commercial Code
in connection with the sale of the Assets;
h. With respect to the Assets, Seller has filed each
tax return, including without limitation all
income, excise, property, gain, sales, and license
tax returns, required to be filed by Seller prior
to the date hereof. Each such return is true,
complete and correct in all material respects, and
Seller has paid all taxes, assessments and charges
of any governmental authority required to be paid
by it and has created reserves or made provision
for all taxes accrued, but not yet payable. No
government is now asserting, or to Seller's
knowledge threatening to assert, any deficiency or
assessment for additional taxes or any interest,
penalties or fines with respect to Seller;
i. No other person or entity has any right, title or
interest in or to the Assets.
j. Attached hereto as Exhibit L are balance sheets
for the Business as of December 31 in each of the
years 1993, 1994 and 1995 and the related
statements of income for the 12 months,
respectively, then ended. The balance sheet of the
Business as of December 31, 1995 is hereinafter
referred to as the Balance Sheet. Such balance
sheets fairly present the financial condition of
the Business at the respective dates thereof and
reflect all material claims against and all debts
and liabilities of the Business and such income
statements fairly reflect the results of
operations of the Business for the periods
indicated. Since December 31, 1995 (the "Balance
Sheet Date"), there has been no material adverse
change in the assets of the Business or
liabilities or condition of the Business;
- 6 -
<PAGE>
<PAGE>
k. The Seller in the conduct of the Business
maintains insurance policies covering the assets
of the Business and the various occurrences which
may arise in connection with the operation of the
Business (including malpractice insurance if
applicable). Such policies are in full force and
effect and all premiums due thereon prior to or on
the date of the Closing have been paid. The Seller
has complied in all respects with the provisions
of such policies. Such insurance is of comparable
amounts and coverage as that which companies
engaging in similar businesses maintain in
accordance with good business practice;
l. The books and records of the Business are in all
material respects complete and correct, have been
maintained in accordance with good business
practices and accurately reflect the basis for the
financial position and results of operations of
the Business set forth in the financial
statements. All of such books and records,
including true and complete copies of all written
contracts, have been made available for inspection
by the Purchaser and its representatives;
m. As a material inducement to Purchaser's entering
into this Agreement, Seller represents and
warrants to Purchaser that the Business has
pre-tax normalized consolidated net income of at
least $30,000.00 for the fiscal year ending 1995;
n. Seller has managed care contracts currently in
effect with the companies listed in Exhibit M; and
o. The Shareholder is the only holder of all issued
and outstanding stock of Seller.
8. Employees of Seller and the Business. Shareholder and
Professional Work Care Danbury, P.C. and Emily Selleck and Professional Work
Care Danbury, P.C. shall execute and deliver at Closing the Employment
Agreements attached hereto as Exhibit F and G, respectively. Under no
circumstance shall either Employment Agreement be modified, amended or
terminated without the prior written consent of Purchaser.
As to all other employees of Seller, Purchaser agrees to
employ each of Seller's employees listed in Exhibit N hereto for thirty (30)
days after the Closing Date at the same salary that Seller has been paying such
employees. Purchaser shall have no obligation to pay any bonuses or additional
compensation to such employees nor shall Purchaser have any obligations or
liability with respect to the pension or profit sharing plan described in
Exhibit K hereto. Notwithstanding the foregoing or anything to the contrary
contained herein, Purchaser shall have the right at anytime, including within
said thirty (30) day period, to immediately terminate any employee listed in
Exhibit N for cause.
Commencing with the Closing Date, all employees listed in
Exhibit N shall be entitled to the standard number of vacation and sick days and
to the medical benefits as are described in Purchaser's employment manual, a
copy of which has been delivered to Seller. In determining the number of
vacation and sick days to be allotted for the period from the Closing Date
through the day preceding the first anniversary of the Closing Date, such
employee's employment with Purchaser shall be deemed to have commenced upon the
date such employee first commenced his or her employment with Seller. In no
event shall Purchaser be liable for any accrued or unpaid vacation and/or sick
days due such employees
- 7 -
<PAGE>
<PAGE>
for any periods prior to the Closing Date. In no way shall the foregoing be
deemed to create any obligation on the part of Purchaser to retain any employee
listed in Exhibit N beyond the thirty (30) day period described above.
9. Representations and Warranties of Purchaser. Purchaser
represents and warrants to Seller as follows:
a. Purchaser is a New York limited liability company
authorized to transact business in Connecticut.
Purchaser is managed by two (2) managers, Hunter
Giroux and Patrick J. Wack, Jr. The sole members
of Purchaser are Hunter Giroux and Professional
Sports Care Management, Inc. Purchaser has full
power and authority to carry out and perform its
undertakings and obligations as provided herein.
The execution and delivery of this Agreement and
all corollary documents executed by Purchaser,
mentioned or incorporated herein, and the
performance by Purchaser of its obligations
hereunder have been duly authorized and no further
action or approval is required in order to
constitute this Agreement as the binding and
enforceable obligation of the Purchaser. The
execution and delivery by Purchaser of this
Agreement, and all corollary documents executed by
Purchaser mentioned or incorporated herein, and
the consummation of the transactions contemplated
herein, have been duly authorized by all proper or
requisite proceedings and will not conflict with
or breach any provision of the operating agreement
of Purchaser; and
b. No action, approval, consent or authorization,
including without limitation any action, approval,
consent or authorization of any governmental or
quasi-governmental agency, commission, board,
bureau or instrumentality, is necessary for
Purchaser to constitute this Agreement the binding
and enforceable obligation of Purchaser or to
consummate the transactions contemplated hereby;
and
c. To the best of Purchaser's knowledge, the
Purchaser's consummation of the transactions
contemplated herein does not and will not violate
any existing local, state or federal law or
regulation, and there are no violations of any
existing law or governmental rule or regulation
pending or threatened against Purchaser, which
would materially impair Purchaser's ability to
perform its obligations under this Agreement.
10. Conduct of the Business. Seller, until the Closing, shall:
a. Conduct the Business in the normal, usual and
regular manner (in that regard, Seller agrees that
it shall not (i) sell, transfer, or otherwise
dispose
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<PAGE>
<PAGE>
of, or enter into any agreement to sell, transfer,
or otherwise dispose of, any of the Assets, except
in the ordinary course of business, (ii) incur,
create or become obligated with respect to any
liabilities, contracts or obligations outside the
ordinary course of its business, or (iii) become
obligated under any agreement to purchase or
supply goods or services other than agreements
that are not material and are entered into in the
ordinary course of its business);
b. Preserve the Business and the Goodwill of the
customers and suppliers of the Business and others
having relations with Seller; and
c. Give Purchaser and its duly designated
representatives reasonable access during normal
business hours to Seller's premises and the books
and records of the Business, and furnish to
Purchaser such data and information pertaining to
Seller's Business as Purchaser from time to time
reasonably may request. The obligation of Seller
to furnish to Purchaser such data and information
pertaining to Seller's Business as Purchaser from
time to time reasonably may request shall survive
Closing.
11. Conditions to Closing. The obligations of Purchaser
to close hereunder are subject, at the option of Purchaser, to the following
conditions:
a. All of the terms, covenants and conditions to be
complied with or performed by Seller under this
Agreement on or before the Closing shall have been
complied with or performed in all material
respects.
b. All representations or warranties of Seller herein
are true in all material respects as of the
Closing Date and Purchaser shall have completed
its due diligence investigation.
c. On the Closing Date, there shall be no liens or
encumbrances against the Assets, except as may be
provided for herein.
d. The terms of this Agreement and the transaction
described herein have been in all respects
approved by Purchaser's Managers.
e. The execution and/or delivery of the following
documents by Seller and/or Professional Work Care
Danbury, P.C., which shall be substantially in the
form of Exhibit O attached hereto.
i. Management and License Agreement;
ii. Stock Transfer Option;
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<PAGE>
<PAGE>
iii. Escrow Agreement;
iv. Stock Power;
v. Stock Certificate(s) of all outstanding
shares in Professional Work Care Danbury,
P.C.; and
vi. all other documentation necessary to organize
Professional Work Care Danbury, P.C.
The obligations of Seller to close hereunder are subject, at
the option of Seller, to the following conditions:
a. All of the terms, covenants and conditions to be
complied with or performed by Purchaser under this
Agreement on or before the Closing shall have been
complied with or performed in all material
respects.
b. All representations or warranties of Purchaser
herein are true in all material respects as of the
Closing Date.
c. The formation at Purchaser's sole cost and expense
of Professional Work Care Danbury, P.C. and the
execution and/or delivery of the following
documents by Purchaser, which shall be
substantially in the form of Exhibit O attached
hereto:
i. Management and License Agreement;
ii. Stock Transfer Option;
iii. Escrow Agreement;
iv. true and complete copy of Certificate of
Incorporation of Professional Work Care
Danbury, P.C.; and
v. all documentation necessary to organize
Professional Work Care Danbury, P.C.
12. Indemnification. Each party hereto shall indemnify and
hold the other parties harmless from and against all liability, claim, loss,
damage or expense, including reasonable attorneys' fees, incurred or required to
be paid by such other parties by reason of any breach or failure of observance
or performance of any representation, warranty or covenant or other provision of
this Agreement by such party.
13. [Intentionally Deleted]
14. Covenant Not To Compete. Seller and the Shareholder
shall deliver to Purchaser at Closing an agreement, in the form attached hereto
as Exhibit H.
15. Brokerage. The parties hereto represent and warrant to
each other that they have not dealt with any broker or finder in connection with
this Agreement or the transactions contemplated hereby, and no broker or any
other person is entitled to receive
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<PAGE>
<PAGE>
any brokerage commission, finder's fee or similar compensation in connection
with this Agreement or the transactions contemplated hereby. Each party hereto
shall indemnify and hold the other parties harmless from and against all
liability, claim, loss, damage or expense including reasonable attorneys' fees,
incurred or required to be paid by such other parties by reason of any breach or
failure of observance of this Article 15.
16. The Shareholder. Shareholder hereby confirms all of the
representations and warranties of Seller set forth herein, and agrees to
indemnify and hold Purchaser harmless from and against any misrepresentation or
breach of any warranty by Seller, or any breach or failure by Seller to comply
with any term, covenant or condition of this Agreement as fully as if
Shareholder was the Seller herein. Shareholder represents and warrants that he
is the only shareholder of Seller, and that he has full power and authority to
carry out and perform his undertakings and obligations as provided herein.
Shareholder agrees as aforesaid to induce Purchaser to enter into this
Agreement.
17. Arbitration. Any dispute or controversy arising among the
parties hereto regarding any term, covenant or condition of this Agreement or
the breach thereof shall, upon written demand of any party hereto, be submitted
to and determined by arbitration before the American Arbitration Association
("Association"), in Connecticut, by a panel of three (3) arbitrators, in
accordance with the rules of the Association then in effect. Any award rendered
shall be made by means of a written opinion explaining the arbitrators' reasons
for the award. The arbitrators may not amend or vary any provision of this
Agreement. Judgment upon the award rendered by the arbitrators may be entered in
any court of competent jurisdiction, which court shall have the power to review
such award for compliance with this Agreement.
18. Notices. All notices, demands and other communications
required or permitted to be given hereunder shall be in writing and shall be
deemed to have been properly given if delivered by certified mail, return
receipt requested, with postage prepaid, to Seller or Purchaser, as the case may
be, at their addresses first above written, or at such other addresses as they
may designate by notice given hereunder. Notices shall be deemed effective on
the date received or refused by the addressee. Copies of all such notices,
demands and other communications simultaneously shall be given in the aforesaid
manner to Seller's attorneys, Chipman, Mazzucco, Land & Pennarola, LLC,
Attention: David Chipman, Esq., at 30 Main Street, Danbury, Connecticut 06810,
and to Purchaser's attorneys, Gould & Wilkie, Attention: Andrew W. Bank, Esq. at
One Chase Manhattan Plaza, New York, New York 10005. The respective attorneys
for the parties hereby are authorized to give any notice required or permitted
hereunder and to agree to adjournments of the Closing.
19. [Intentionally Deleted]
20. Survival. The representations, warranties and covenants
contained herein or in any document, instrument, certificate, exhibit or
schedule furnished in connection herewith shall survive the delivery of the Bill
of Sale and shall continue in full force and effect after the Closing, except to
the extent waived in writing.
21. Further Assurances. In connection with the transactions
contemplated by this Agreement, the parties agree to execute and deliver such
further instruments, and to take such further actions, as may be reasonably
necessary or proper to effectuate and carry out the transactions contemplated in
this Agreement.
22. Changes Must Be In Writing. No delay or omission by
either Seller or Purchaser in exercising any right shall operate as a waiver of
such right or any other
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<PAGE>
<PAGE>
right. This Agreement may not be altered, amended, changed, modified, waived or
terminated in any respect or particular, unless the same shall be in writing
signed by the party to be bound. No waiver by any party of any breach hereunder
shall be deemed a waiver of any other or subsequent breach.
23. Captions and Exhibits. The captions in this Agreement are
for convenience only and are not to be considered in construing this Agreement.
The Exhibits annexed to this Agreement are an integral part of this Agreement,
and where there is any reference to this Agreement it shall be deemed to include
said Exhibits.
24. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Connecticut.
25. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, successors and assigns.
26. Counterparts. This Agreement may be signed in
counterparts, each of which shall be deemed an original and all of which shall
constitute one and the same instrument.
27. Partial Invalidity. If any provision of this Agreement or
the application thereof to any person or circumstances, shall, to any extent, be
invalid or unenforceable, the remainder of this Agreement, or the application of
such term or provision to persons or circumstances other than those as to which
it is held invalid or unenforceable, shall not be affected thereby, and each
term and provision of this Agreement shall be valid and be enforced to the
fullest extent permitted by law.
28. Publicity. The parties agree to keep the terms of the
transaction described herein strictly confidential and shall not disclose such
information to any third parties whatsoever, other than to legal counsel,
accountants, or other financial advisors or as may be required by law, without
in each case securing the prior written consent of the other parties.
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<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
ATTEST: BUSINESS HEALTHCARE,
a professional corporation
By:___________________________ By:__________________________________
Name: Emily Selleck Name: Nathaniel Selleck, M.D.
Title: Secretary Title: President
- - ------------------------------ ----------------------------------
Witness Nathaniel Selleck, M.D.
ATTEST: PROFESSIONAL WORK CARE, L.L.C.
______________________________ By:_________________________________
Witness Name: Hunter Giroux
Manager
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<PAGE>
<PAGE>
STATE OF )
)SS.:
COUNTY OF )
On the day of April, 1996, before me personally came
to me known, who, being by me duly sworn did depose
and say that he resides at he is the
of BUSINESS HEALTHCARE, a professional corporation the professional
corporation described in and which executed the above instrument and that he
signed his name thereto by order of the board of directors of said
corporation.
-----------------------------------
STATE OF )
)SS.:
COUNTY OF )
On the day of April, 1996, before me personally came
to me known, who, being by me duly sworn did depose
and say that he resides at he is a Manager
of PROFESSIONAL WORK CARE, L.L.C., a New York limited liability company and
that he has authority to sign the foregoing instrument, and acknowledged that
he executed the same as the act and deed of said limited liability company.
-----------------------------------
STATE OF )
)SS.:
COUNTY OF )
Be it remembered that on this day of April, 1996, before me,
the subscriber, a notary public authorized to take acknowledgments and proof in
said County and State, personally appeared NATHANIEL SELLECK, M.D., who I am
satisfied is the individual named in and who executed the within Agreement of
Sale, and he acknowledged that he signed, sealed and delivered said Agreement of
Sale as his act and deed for the uses and purposes therein expressed.
------------------------------------
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PROMISSORY NOTE
$300,000.00 January 1, 1996
FOR VALUE RECEIVED, PROFESSIONAL SPORTS CARE MANAGEMENT, INC.,
a Delaware corporation, having an address at 550 Mamaroneck Avenue, Harrison,
New York 10528 ("Maker"), hereby covenants and promises to pay to DARON SHEPARD,
having an address at 5 High Ridge Park, Stamford, Connecticut 06906 (hereinafter
referred to as the "Payee"), or order, at the Payee's address first above
written or at such other address as Payee may designate in writing, Three
Hundred Thousand and 00/100 Dollars ($300,000.00), lawful money of the United
States of America.
Principal under this Note shall be due and payable in five (5)
annual installments of Sixty Thousand and 00/100 Dollars ($60,000.00) each.
Payment of the first (1st) installment payment shall be made on January 10,
1996, the Closing Date, as said term is defined in that certain Agreement of
Sale, dated December 29, 1995, entered into by Maker, Payee and Shareholders
(the "Agreement of Sale") and the remaining four (4) payments being made
annually on the anniversary of the Closing Date. No interest shall be due or
payable in connection with the principal covered by this Note except as provided
in Section I. below.
Each installment payment shall be made by Maker by the
delivery of one (1) check in the amount of the installment due payable to the
Payee.
In the event that certain Employment Agreement dated the date
hereof between Payee and Pro Fitness, LLC is terminated in accordance with the
terms contained therein, Maker shall from and after such date automatically be
released from any and all obligations under this Note, and this Note shall be
deemed null and void and of no further force and effect.
I. Default.
Maker agrees that upon an Event of Default, as defined herein,
the entire indebtedness due under this Note shall, at the option of the Payee,
accelerate and become immediately due and payable without demand or notice of
any kind. Notwithstanding anything to the contrary contained herein, Maker
further agrees that the unpaid balance hereof shall bear interest at a fixed per
annum rate of the lesser of thirteen percent (13%) or the highest lawful rate
permitted under applicable law together with any attorney's fees reasonably
incurred by Payee as a result of such default.
For purposes of this Note, an Event of Default shall mean:
A. The failure by Maker to pay any installment of
principal due under this Note within twenty (20)
days after notice from the Payee that such
installment has not been paid as of the date
provided for herein;
B. The filing of an application by Maker for a consent
to the appointment of a receiver, trustee or
liquidator of itself or of all of its assets; or the
filing by Maker of a voluntary petition in
bankruptcy or the filing of a
<PAGE>
pleading in any court of record admitting in writing
its inability to pay its debts as they may become
due; or the making by Maker of a general assignment
for the benefit of creditors; or the filing by Maker
of an answer admitting the material allegations of or
consenting to or defaulting in answering a petition
filed against it in any bankruptcy proceeding; or
C. There shall be commenced against the Maker or any of
its subsidiaries any case, proceeding or other action
of a nature referred to in clause B. of this Section
I., which (a) results in the final entry of an order
for relief or any such adjudication or appointment,
or (b) remains unstayed, undismissed, undischarged or
unbonded for a period of ninety (90) days.
II. Notices.
Any notice, request or other communication required or
permitted to be given under any of the provisions of this Note shall be in
writing and shall be deemed given on the date the same is sent by certified or
registered mail, return receipt requested, postage prepaid and addressed to the
party for which intended at its address first set forth above.
III. Subordination.
Anything in this Note to the contrary notwithstanding, the
Payee by its acceptance of this Note, for itself, its successors and assigns,
covenants and agrees, and each holder of this Note by his acceptance thereof,
whether upon original issue or upon transfer, assignment or exchange, likewise
covenants and agrees, expressly for the benefit of the present and future
holders of Senior Indebtedness, that the right of payment of principal of and
interest, if any, on this Note is hereby expressly subordinated and made subject
to the prior payment in full of all Senior Indebtedness and to all other rights
of any Institutional Lender under or in respect of any Senior Indebtedness.
"Senior Indebtedness" shall mean the principal of and premium,
if any, and the interest on all indebtedness of Maker arising out of any loans
made by any Institutional Lender to Maker or made to others and guaranteed,
directly or indirectly, by Maker, now existing or hereafter incurred, and all
renewals, replacements, consolidations, amendments and extensions thereof and to
all advances made or to be made thereunder and to the interest thereon.
"Institutional Lender" shall mean a bank, a savings and loan
association, a regulated insurance company, a trust company, a pension trust, a
pension or welfare fund, a college or university or any similar lending
institution.
Notwithstanding anything to the contrary contained herein,
Maker agrees that upon an Event of Default any and all amounts due and owing
Payee under this Note shall be deducted from the allocation of Pro Fitness,
LLC's earnings before interest and taxes ("EBIT") due Maker (as provided in that
certain Operating Agreement of Pro Fitness, LLC dated the date hereof) and shall
be assigned to Payee.
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<PAGE>
IV. Miscellaneous.
A. Prepayment. Maker shall have the right to prepay the
indebtedness evidenced by this Note, in whole or in part, without penalty, upon
ten (10) days prior written notice to Payee.
B. Course of Dealing. No delay or omission by Payee in
exercising any right hereunder, nor failure by Payee to insist upon the strict
performance of any terms herein, shall operate as a waiver of such right, any
other right hereunder, or any terms herein. No waiver of any right shall be
effective unless in writing and signed by Payee, nor shall a waiver on one
occasion be constituted as a bar to, or waiver of, any such right on any future
occasion.
C. Amendments. This Note may be amended or varied only by a
document, in writing, of even or subsequent date hereof, executed by Maker and
Payee.
D. Governing Law. This Note shall be governed by and construed
in accordance with the laws of the State of Connecticut.
E. Successors and Assigns, Survival. This Note shall be
binding upon the Maker and its successors, and shall inure to the benefit of
Payee and their heirs, executors, administrators, successors and assigns.
F. Severability. The invalidity or unenforceability of any
provision of this Note shall not effect the validity or enforceability of any
other provision.
G. Headings. The descriptive headings in this Note are for
convenience of reference only, and shall not be deemed to affect the meaning or
construction of any of the provisions hereof.
H. Capitalized Terms. All capitalized terms not defined herein
have the same meaning as such terms have when used in the Agreement of Sale.
I. Waivers. Maker hereby waives diligence, demand, presentment
for payment, notice of nonpayment, protest and notice of protest, except as
otherwise expressly provided herein.
IN WITNESS WHEREOF, Maker has executed this Note on the date
first above written.
PROFESSIONAL SPORTS CARE
MANAGEMENT, INC.
ATTEST:
- - ------------------------------ ---------------------------------
PATRICK J. WACK, JR. RUSSELL F. WARREN, JR.
Secretary President
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OPERATING AGREEMENT
OF
PRO FITNESS, L.L.C.
A New York Limited Liability Company
DATED: January __, 1996
<PAGE>
<PAGE>
OPERATING AGREEMENT
OF
PRO FITNESS, L.L.C.
A New York Limited Liability Company
OPERATING AGREEMENT, adopted as of January 1, 1996, by the
members of PRO FITNESS, L.L.C., a New York limited liability company (the
"Company"), each of whom has indicated acceptance hereof by executing this
Agreement (the "Members").
In accordance with Section 417 of the New York Limited
Liability Company Law (the "LLCL"), the Members hereby adopt this Operating
Agreement in order to set forth their agreement with respect to the business of
the Company, the conduct of its affairs, and the rights, powers, preferences,
limitations or responsibilities of the Company's Members, Managers, employees or
agents.
The Members agree as follows:
I. MEMBERS
1. Classes of Members. A. There shall be two classes of Members of the
Company, to be known as Class A Members and Class B Members.
B. Each Member's interest in the Company shall be signified by
the issuance to such Member of Units of interest in the Company ("Units"). The
per-Unit price at the time of any issuance of Units shall be the Fair Market
Value, as determined by the Managers at the time of such issuance.
C. i. Whenever this Agreement refers to the Fair Market Value
of Units, the term "Fair Market Value" shall mean the fair market value of the
Company as a going concern, as determined in good faith and in a timely fashion
by the Managers, who shall in making such determination consider all relevant
factors including, but not limited to, the most recent arm's length transaction,
if any, involving any interests in the Company. The Fair Market Value of a Unit
shall be the Fair Market Value of the Company divided by the total number of
Units held by Members, except that the Managers may make a reasonable adjustment
for the value of voting rights, which are vested in Class A Units and not in
Class B Units. Any Member affected by such valuation (the "Challenging Person")
may, as the sole and exclusive means of challenging such valuation, obtain at
its own expense a valuation from an independent, unaffiliated business
evaluation expert (the "Evaluation Expert"); provided, however, that the
selection of the Evaluation Expert shall be subject to the approval of the
holders of 75% of the Units held by the Class A Members, which approval shall
not be withheld or delayed unreasonably. If such second valuation is not less
than 90% nor more than 110% of the first valuation, the Fair Market Value shall
be the average of the two valuations. In any other case, the Managers and the
Evaluation Expert shall select a second, mutually acceptable business evaluation
expert, who shall perform a third valuation, the cost of which shall be equally
shared by the Company and the Challenging Person, and the Fair Market Value
shall be the average of the three valuations.
ii. Notwithstanding anything in this Agreement to
the contrary, the Company shall not be prohibited from consummating any
transaction notwithstanding the fact
<PAGE>
<PAGE>
that the determination of Fair Market Value remains in dispute. If at the
conclusion of the determination of Fair Market Value in accordance with the
foregoing paragraph, the Fair Market Value of Units is greater by 10% or more
than the Unit price upon which such transaction was consummated (the "Unit Price
Difference"), the Challenging Person (but no other person) will receive from the
Company additional cash, Class A Units or Class B Units, as reasonably
determined by the Managers sufficient to satisfy the Unit Price Difference. If
the challenge to Fair Market Value shall be made in connection with a
liquidating sale pursuant to which the Company will receive cash proceeds which
will be distributed to Members, the Company shall place in escrow pending the
final determination of Fair Market Value an amount in cash estimated by the
Managers to be sufficient to satisfy the Unit Price Difference.
D. The Class A Members shall be vested with exclusive and
unrestricted voting rights. At every meeting of the Members, each Class A Member
shall be entitled to one vote for every Unit held by such Member. The Class B
Members shall have no voting rights except as otherwise set forth herein. Class
A Units and Class B Units shall, in all other respects, represent the same
interest in the Company.
2. Class A Members.
A. Professional Sports Care Management, Inc., a Delaware
corporation ("PSCM") and Minutemen, Inc., a Connecticut corporation
("Minutemen"), shall constitute the initial Class A Members of the Company (the
"Founding Members"). The Founding Members' initial interests in the Company, in
the aggregate of 100,000 Class A Units (the "Founding Interests"), are set forth
in Schedule A attached hereto.
B. Up to 50,000 additional Class A Units may be granted from
time to time by the Managers. Additional Class A Members and their interests in
the Company shall be established by the Managers, as set forth in this Agreement
and shall be indicated by amendments to Schedule A. The Company shall make no
Issuance (as defined in Section I(2)(C), below) unless the consideration
received by the Company for such Issuance is the Fair Market Value of the Units
or other interests of the Company so issued.
C. The Managers may, in their discretion, issue additional
Class A Units to existing Class A Members and/or to persons who are not Members.
However, if any additional Class A Units are to be offered, then the Company
shall not issue any such Units unless the Managers notify all Class A Members in
writing at least thirty (30) days prior to the date of the proposed issuance
thereof (the "Issuance") of the terms of the proposed Issuance (the "Issuance
Notice") and grant to all Class A Members the right (the "Preemptive Right"),
subject to the limitations set forth below, to subscribe for and, upon
consummation of an Issuance, purchase additional Units in the Company, as the
case may be, to be so issued at the same price and on the same terms as
reflected in the Issuance Notice, such that any Class A Members who exercise
such Preemptive Right will own the same economic interest (on a percentage
basis) in the Company as held by each of them prior to the Issuance. The
Preemptive Right shall be exercisable by a Class A Member for a period of
fifteen (15) days after receipt of the Issuance Notice from the Managers by
written notification to the Managers. The failure by a Class A Member to
exercise its Preemptive Right within the time period set forth above shall be
deemed a waiver by such Class A Member of its Preemptive Right. Anything stated
in this paragraph to the contrary notwithstanding, no Member, other than the
Founding Members, shall have Preemptive Rights with respect to the issuance of
any Units pursuant to an Incentive Unit Plan or other like benefit program duly
adopted by the Managers.
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<PAGE>
D. Except as a result of one or both Founding Members' failure
to exercise their respective Preemptive Rights or withdrawal from the Company,
there shall be no change to any Founding Member's interest relative to the
interests of the other Founding Member.
3. Class B Members. A. Class B Members and their respective interests in
the Company shall be established by the Managers, as set forth in this
Agreement, and shall be indicated by amendments to Schedule A. The foregoing
notwithstanding, at no time shall the aggregate number of Class B Units issued
be greater than 30% of the aggregate number of issued Class A Units. The Company
shall make no Issuance unless the consideration received by the Company for such
Issuance is the Fair Market Value of the Units or other interests of the Company
so issued.
B. The Managers by unanimous vote may, in their discretion,
issue additional Class B Units to existing Members and/or to persons who are not
Members. However, if any Class B Units are to be offered to any Class A Member,
then the Company shall make no issuance unless the Managers provide an Issuance
Notice to all Class A Members in writing at least thirty (30) days prior to the
date of the proposed Issuance and grant to all Class A Members Preemptive
Rights, subject to the limitations set forth below, to subscribe for and, upon
consummation of an Issuance, purchase Class B Units in the Company, as the case
may be, to be so issued at the same price and on the same terms as reflected in
the Issuance Notice, such that any Class A Members who exercise such Preemptive
Right will own the same economic interest (on a percentage basis) in the Company
as held by each of them prior to the Issuance. The Preemptive Right shall be
exercisable by a Member for a period of fifteen (15) days after receipt of the
Issuance Notice from the Managers by written notification to the Managers. The
failure by a Member to exercise its Preemptive Right within the time period set
forth above shall be deemed a waiver by such Member of its Preemptive Right.
4. New Members. Before any Units or other interests are granted to any new
Member, such Member shall first become a party to this Agreement and thereby
agree to be subject to all of the terms and conditions set forth herein.
5. Time of Meetings. There shall be at least one meeting of the Class A
Members each year, which shall be scheduled by the Managers. Additional meetings
of the Class A Members shall be called by the Managers on the request of Class A
Members whose membership interest is, in the aggregate, not less than [49]% of
the total Class A membership interest. Class B Members shall be entitled to
attend any meeting of the Class A Members, but shall have no right to
participate or vote at any meeting except as provided in Section (I)8.
6. Notice of Meetings. Written notice of any meeting of the Members shall
be given, personally or by mail, to each Member not less than seven (7) days
prior to the meeting, except as otherwise required by the LLCL. Such notice
shall state the place, date and hour of the meeting. Unless otherwise agreed to
by the Managers, all meetings shall take place at the location of the Company's
principal offices.
7. Voting. At all meetings of Members the holders of 100% of the Units
entitled to vote, present in person or represented by proxy, shall constitute a
quorum for the transaction of business, except as otherwise provided by the
Articles of Organization or this Agreement. At all meetings, each Class A Member
may vote, in person or by proxy. An affirmative vote of 75% of the Units voted
in person or by proxy shall decide any question brought before such meeting,
unless the question or action is one upon which a greater vote is required by
express provision of law, the Articles of Organization or this Agreement.
Wherever this Agreement
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<PAGE>
provides that a decision of the Company requires the approval of the Members,
such decision shall require the approval of the holders of at least 75% of the
Class A Units. Other than with respect to the rights initially granted to the
Managers and the Class A Members set forth in this Agreement (as such rights may
be amended from time to time) the adoption of any matter which materially and
adversely affects in a disproportionate manner the rights, obligations or
economic interests of the Class B Members, taken as a whole, shall require the
approval of the holders of at least 75% of the Class B Units voting in person or
by proxy.
8. Proxies. Members who are unable to attend a meeting may appear and vote
by proxy; provided, however, that a proxy shall only be valid if it is in
writing and has been duly executed by the Member. No proxy shall be valid unless
on the face of such proxy it specifically names the individual who shall be
authorized to act on such Member's behalf, which individual must be either a
Manager or another Member of the Company. No Member may hold, or act in any
capacity pursuant to, the proxy of more than one Member at any meeting, except
that the Managers of the Company shall not be restricted from voting multiple
proxies duly delivered to the Company. All proxies granted in violation of this
Section shall be void.
9. Annual Report. Within ninety (90) days following the end of each fiscal
year of the Company, the Members shall be provided with an annual report
containing financial statements (which need not be audited) consisting of a
balance sheet as of the last day of the two preceding fiscal years, a statement
of operations for the two preceding fiscal years and a statement of cash flows
for the two preceding fiscal years.
II. MANAGERS
1. General. A. Except where otherwise required by law, the Articles of
Organization or this Agreement, the business and affairs of the Company shall be
managed by the Managers. The initial Managers of the Company shall be Daron
Shepard, Kenneth Shepard, Russell F. Warren, Jr. and Patrick J. Wack, Jr. each
of whom shall serve until his resignation or until removed in accordance with
this Agreement. Any act or decision of the Company made or to be made by the
Managers, requires the affirmative vote of 75% of the Managers.
B. The number of Managers may be changed with the approval of
the holders of at least [75]% of the Class A Units. If the number of Managers is
increased, the Managers then serving shall, within thirty (30) days after the
increasing of the number of the Managers, select one natural person, who may but
need not be a Member, to fill each opening.
C. Managers may be removed, with or without cause, by the
unanimous vote of the Managers (exclusive of the Manager in question). The
removal of a Manager who is also a Member shall not affect the Manager's rights
as a Member and shall not constitute a withdrawal of a Member.
D. If Daron Shepard or Kenneth Shepard shall resign or be
removed as a Manager, then Minutemen shall have the sole authority to fill such
vacancy. If Russell F. Warren, Jr. or Patrick J. Wack, Jr. shall resign or be
removed as a Manager, then PSCM shall have the sole authority to fill such
vacancy. Within thirty (30) days after the removal or resignation of a Manager,
one natural person, who may but need not be a Member, shall be selected to fill
such vacancy.
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<PAGE>
2. Authority. The Managers hereby delegate all powers of the Manager,
delegable under applicable law to the Executive Director except for those items
expressly reserved to the Managers by the Articles of Organization or this
Agreement. The Members, Managers and Executive Director agree that it is the
policy of the Company to continue the operating plan and approach of the
Company's predecessor, Pro Fitness, Inc. Any alteration or redirection of such
policies and practices shall require approval of the Company's Managers or
Members, as appropriate. The Managers shall be responsible and have sole
authority for the following aspects of the management and direction of the
Company:
A. Supervising the capital structure of the Company and
negotiating, approving and binding the Company to financing arrangements with
third parties, including capital assessments and debt (in excess of $25,000.00)
and equity financings (whether within or outside of the ordinary course of
business).
B. Establishing financial and investment policies and
maintaining the records of the Company relating to its formation and operation.
C. Delegating to any Founding Members such responsibilities
and authority as may, in the judgment of the Managers, be appropriate.
D. Admission of additional Members into the Company, and
establishing the terms and conditions applicable thereto.
E. Expenditures or obligations incurred by the Company in
excess of Twenty Five Thousand and 00/100 Dollars ($25,000.00) per expenditure
or obligation other than with respect to corporate fitness contracts and
employment agreements.
F. Mergers or reorganization by the Company.
G. The sale, transfer, assignment or other disposition of all
or substantially all the assets of the Company.
Any decision by the Managers with respect to the foregoing
shall require the affirmative vote of 75% of the Managers.
3. Procedures. The Managers may adopt such rules, regulations
and procedures for the conduct of their business as the Managers, from time to
time, deem appropriate.
4. Executive Director. Daron Shepard is hereby appointed as
the Executive Director of the Company in accordance with the terms and
conditions of that certain Employment Agreement between Mr. Shepard and the
Company, dated the date hereof, which is attached hereto as Exhibit A, and he is
hereby granted the authority to oversee the day-to-day administration and
management of the Company. The Executive Director shall have the sole authority
to perform the following non-exclusive duties:
A. The hiring and firing of employees, including the
determination of compensation and employment bonuses.
B. Negotiating, approving and executing contracts, agreements
and all other documents as may be required in the ordinary course of business of
the Company, including, but not limited to corporate fitness contracts. In
addition, the Executive Director may incur on
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<PAGE>
behalf of the Company and within the ordinary course of business, obligations
and capital expenditures which do not exceed Twenty-Five Thousand and 00/100
Dollars ($25,000.00) in the aggregate in any fiscal year.
C. Maintaining the books of account and other financial
records of the Company.
D. To determine the amount of working capital required for the
Company and require the Founding Members to supply such additional capital
pursuant to Section III(5)(iii).
E. To make expenditures which are in the ordinary course of
the Company's business and do not exceed the sum of Twenty-Five Thousand and
00/100 Dollars ($25,000.00).
F. To execute on behalf of the Company all documents and
instruments which require the consent of and have been approved by the Managers
and/or the Members as the case may be.
G. Maintain bank accounts in the name of the Company. Such
Bank accounts shall require two (2) signatures for the withdrawal of funds or
the issuance of a check in excess of Twenty-Five Thousand and 00/100 Dollars
($25,000.00). One signatory shall be the Executive Director or a designee of
Minutemen and the second signatory shall be Russell F. Warren, Jr. or Patrick J.
Wack, Jr. or a designee of PSCM. For withdrawals or the issuance of checks in
any lesser amounts or for the transfer of funds from one Company account to
another Company account, the Executive Director or its designee shall be the
sole signatory with respect to such accounts, unless the Managers shall
determine otherwise.
H. Unless specifically entrusted to the Managers or Members,
the Executive Director is empowered to carry on the business and affairs of the
Company, and shall have the sole authority and power to legally bind the Company
with third parties provided the Executive Director is acting within the scope of
his duties and authority as set forth in this Agreement or pursuant to such
authority as may be granted to him by the Members or Managers.
Daron Shepard shall continue to serve as Executive Director
until the expiration or earlier termination of said Employment Agreement, as
said Employment Agreement may be extended and/or renewed. If Daron Shepard shall
resign or is removed as Executive Director or upon the termination of his
Employment Agreement, a temporary Executive Director shall be selected by
Minutemen. The temporary Executive Director shall serve as the Executive
Director for a period of sixty (60) days. If during said sixty (60) day period,
the Managers are unable to agree upon the appointment of a replacement Executive
Director by the affirmative vote of 75% of the Mangers, the temporary Executive
Director shall continue to serve as Executive Director until such time as 75% of
the Managers are able to agree upon a replacement Executive Director. However,
the temporary Executive Director shall not serve in such capacity for a period
to exceed one (1) year (including the initial sixty (60) day period). If after
one (1) year, 75% of the Managers are not able to agree upon a replacement
Executive Director, PSCM shall select a new temporary Executive Director who
shall serve in such capacity for a one (1) year term, unless during such time,
75% of the Managers are able to agree upon a replacement Executive Director. The
party who shall be responsible for the selection of a temporary Executive
Director shall have the sole authority to replace such temporary Executive
Director. However, a new temporary Executive Director selected by said party
shall not serve in such capacity beyond the expiration of the initial one (1)
year term unless agreed to by the affirmative vote of 75% of the Managers. The
foregoing alternating selection process shall continue until
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<PAGE>
such time as 75% of the Managers are able to agree upon a replacement Executive
Director. The temporary Executive Director shall be subject to the same terms
and conditions of employment as set forth in the Employment Agreement between
Mr. Shepard and the Company. The terms and conditions of employment for the
replacement Executive Director shall be determined by the affirmative vote of
75% of the Managers. At no time shall any Executive Director take any actions
which shall serve solely to adversely affect EBIT (as defined in Section IV
below).
5. Outside Business Interests and Activities. The Managers
(including the Executive Director) and the Members shall be permitted to engage
in other business interests and activities in addition to those relating to the
Company. Neither the Company, the Managers, nor any Member shall have any right
by virtue of this Operating Agreement, to share or participate in such other
investments or activities of any Manager and/or Member, or to the income or
proceeds derived therefrom. Neither the Managers nor any Members shall incur any
liability to the Company or the Members as a result of engaging in any other
business or venture, except to the extent the Company participates in such other
business or venture.
III. CAPITAL
1. Founding Members. Each Founding Member has made a capital
contribution, in-kind, to the Company and has received therefor Units of
interest in the Company, in the amount set forth on Schedule A.
2. Additional Members. Each additional Member shall be
required to make a capital contribution to the Company and receive therefor
Units of interest in the Company, in cash or in kind and in amounts to be
determined by the Managers and, if required, agreed to by such additional
Members prior to his admittance into the Company.
3. In-kind Capital Contributions. Members who, with the
consent of the Managers, make in-kind capital contributions, shall be solely and
personally responsible for any tax liability that may be imposed upon them with
respect to the sale of the contributed asset by the Company.
4. Additional Capital Contributions. The Managers may request
Members to make additional capital contributions to the Company. Such a call
shall be made in writing (the "Call") to all Members, or may be limited to all
Members of a single class of membership. The Call shall give such information as
the Managers deem necessary and appropriate, and shall advise the Members of the
time, which shall be not less than fifteen (15) days, in which they must
indicate their willingness to participate in the Call. All Members who
participate in the Call shall be permitted to do so in the ratio that such
Member's Units bear to the aggregate Units of all Members participating in the
Call, and the total Units issued as a result of the Call shall be distributed in
like ratio. Members who do not participate in any Call shall have their
interests in the Company diluted accordingly, but no Member shall be required to
make an involuntary additional capital contribution.
5. Loans. (i) Each of the Founding Members shall make a loan
to the Company in the amount of One Hundred Twenty-Five Thousand and 00/100
Dollars ($125,000.00), for an aggregate of Two Hundred Fifty Thousand and 00/100
Dollars ($250,000.00). Such loans are to be evidenced by promissory notes
substantially in the form attached hereto as Exhibit B.
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Annual payments of principal may be made to the Founding Members at the election
of the Managers.
(ii) Upon request made by the Managers, Members may loan money
to the Company, upon such terms and conditions as the Member and the Managers
may agree.
(iii) If the Executive Director determines that additional
working capital is necessary to operate the business of the Company, then upon
the request of the Executive Director, the Founding Members shall loan to the
Company such additional amount of working capital in accordance with the ratio
that each founding Member's Units bears to the aggregate units of the Founding
Members. The terms and conditions of such loans shall be determined by the
Executive Director subject to the approval of 75% of the Managers which approval
shall not be unreasonably withheld.
6. Capital Accounts. The Company will maintain a capital
account for each Member. The Company will (a) increase the capital account of a
Member by (i) any capital contribution, whether in cash or in kind, by the
Member, and (ii) any allocation of profit to the Member, and (b) decrease the
capital account of the Member by (i) any allocation of loss to the Member and
(ii) any distribution, whether in cash or in kind, to the Member.
7. Interest. Members are not entitled to the payment of
interest on their capital accounts.
8. Company Assets. All Company assets will be in the name of
the Company, and no member shall have any rights in any Company assets.
IV. PROFITS, LOSSES AND DISTRIBUTIONS
1. Distributions. A. The Company shall allocate to the Members
in the ratio of each Member's interest in the Company, the Company's earnings
before interest and taxes ("EBIT"). The calculation of EBIT for each year shall
be such year's revenues less such year's direct operating expenses and such
year's sales, general and administrative expenses. In the event there is a
dispute as to the calculation of EBIT, the Managers shall select an independent
certified public accountant to make such calculation for the time period in
dispute.
B. The Executive Director shall determine the amount of
working capital required to operate the Company for one (1) month and said
amount shall be retained by the Company as a reserve. All available funds in
excess of the reserve amount shall be distributed by the Company to the Members,
in accordance with the ratio of each Member's interest in the Company on or
before March 10 of each year. In the event that the distribution to a Member
does not equal such Member's allocation of EBIT, the difference between such
Member's distribution and respective EBIT allocation shall be added to such
Member's capital account. Thereafter, each Member's distribution shall be in the
ratio of each Member's capital account balance at the time of such distribution.
Notwithstanding anything to the contrary contained herein, for
the fiscal years ending December 31, 1996, December 31, 1997 and December 31,
1998, if EBIT is Five Hundred Thousand and 00/100 Dollars ($500,000.00) or less,
PSCM shall be allocated the first Two Hundred Fifty-Five Thousand and 00/100
Dollars ($255,000.00) of EBIT and Minutemen shall be allocated an amount equal
to EBIT minus Two Hundred Fifty-Five Thousand and 00/100
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Dollars ($255,000.00). Accordingly, cash distributions for such periods shall be
made to each Member in accordance with such Member's proportionate share of
EBIT. For example, if EBIT is Four Hundred Twenty-Five Thousand and 00/100
Dollars ($425,000.00), PSCM shall receive 60% (i.e., $255,000/$425,000.) of any
cash distribution and Minutemen shall receive 40% (i.e., $170,000/$425,000) of
any cash distribution.
Additional examples of the EBIT distribution process are set
forth on Schedule B hereto.
C. In addition to distributions required pursuant to Section
IV(1)(A), the Company may make distributions to the Members having positive
capital account balances. Such distributions may be made from time to time as
determined by the Managers, in the ratio of each Member's capital account
balance at the time of distribution.
D. Except as provided elsewhere herein, no Member is entitled
to any distribution in return of a capital contribution. If the Managers so
determine, however, the Company may make a distribution to a Member, at any
time, in return of a capital contribution.
E. Upon the occurrence of an event of Default under that
certain Promissory Note dated the date hereof between PSCM as Maker and Daron
Shepard as Payee, any and all amounts due and owing Daron Shepard under said
Note shall be deducted from funds of the Company and such deductions shall
reduce EBIT distributions otherwise due to PSCM on a dollar for dollar basis.
2. Profits. The Company will allocate profits for a fiscal
year, or any portion thereof, among the Members in the ratio of each Member's
interest in the Company. Notwithstanding the foregoing, for the fiscal years
ending December 31, 1996, December 31, 1997 and December 31, 1998, profits shall
be allocated in accordance with EBIT allocations as set forth in Section
IV(1)(B).
3. Losses. The Company will allocate losses for a fiscal year,
or any portion thereof, among the Members in the ratio of each Member's interest
in the Company.
4. Dissolution. The Company will allocate profits and losses
among the Members upon dissolution of the Company and liquidation of its assets,
in the ratio of each Member's interest in the Company.
V. TRANSFER AND WITHDRAWAL
1. Transfer. A. Except as expressly provided herein, Members
may not sell, transfer, assign, pledge, or otherwise dispose or encumber their
interests in the Company, or any rights as a Member thereof.
B. The foregoing subsection (A) to the contrary
notwithstanding, Members shall be permitted to convey their interests in the
Company and their rights thereunder, including such Member's interest in its
capital account, only upon the consent of, and subject to the terms and
conditions established by, a majority in interest of the non-transferring
Members, which consent may not be withheld or delayed unreasonably.
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C. Any Member who desires so to convey its interest shall give
written notice (the "Conveyance Notice") thereof to the Managers, which notice
shall fully identify the proposed transferee(s), and set forth the terms and
conditions of the proposed conveyance. As quickly as practicable but in no event
longer than thirty (30) days, the Managers shall exercise one of the following
options:
i. grant the Company's consent to the proposed conveyance
after obtaining the consent of a majority in interest of the non-transferring
Members;
ii. request additional information about the proposed
transferee(s) and/or the terms and conditions of the proposed conveyance, in
which case a final exercise of one of the remaining options may be deferred
until thirty (30) days after such additional information is received;
iii. cause the Company to exercise a right of first refusal,
which is hereby granted (the "Right of First Refusal"), to purchase such offered
Units. Such Right of First Refusal shall give the Company the right to purchase
such Units at the price set forth in the Conveyance Notice (the "Company
Price"). The closing of such transaction shall occur within a reasonable time
established by the Managers, and subject to the delivery of such customary
documentation as may be required by the attorneys for the Company. By agreement
of the Managers, payment of the Company Price may be made by an unsecured
promissory note of the Company, payable with interest at the Chase Manhattan
Bank, N.A. (or its successor) Prime Rate plus [2]%, pursuant to a
self-amortizing repayment schedule that shall not exceed five (5) years. The
Managers shall have the authority to establish additional procedures for the
closing, which shall be binding on all parties; or
iv. deny consent to the proposed conveyance. In the event that
the Company denies consent to the proposed conveyance, the Member shall have the
right to offer the Units within thirty (30) days to the other Members, at the
Company Price, provided that the Offer is made to every Member holding Units of
the same Class as the Units being offered. Any Members desiring to purchase such
Units (the "Purchasing Members") shall notify the selling Member within fifteen
(15) days. Each Purchasing Member shall have the right to purchase the number of
offered Units that is equal to the total number of Offered Units times a
fraction (i) the numerator of which is the number of Units held before the
conveyance by such Purchasing Member, and (ii) the denominator of which is the
number of Units held before the conveyance by all Purchasing Members. The
closing of such transaction shall occur within a reasonable time established by
the Managers and subject to the delivery of such customary documentation as may
be required by the attorneys for the Company. The Managers shall have the
authority to establish additional procedures for the closing, which shall be
binding on all parties.
D. Upon receipt of a Conveyance Notice, a majority in interest
of the non-transferring Members shall not, without due cause, withhold consent
to any Member's requests to convey their ownership interest in their Units and
their rights to receive distributions and allocations of profits and losses
thereunder, provided that no such conveyance shall transfer any Member's right
to vote or otherwise participate in the affairs of the Company, if such
conveyance shall be as follows:
i. in the case of either Members who are natural persons or
trusts, to, from and among persons, entities or trusts (x) within each Member's
Family Group; (y) created by or at the direction of a Member; or (z) for the
benefit of a Member or a person in the Member's Family Group. "Family Group"
shall mean a Member's spouse and descendants (whether
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natural or adopted) and any trust, partnership or corporation or similar entity
created by or at the direction of a Member for the benefit of either the Member
or the Member's spouse and/or descendants.
ii. in the case of a corporate or other non-individual Member,
transfers made by reason of a merger, consolidation, combination, sale of
assets, reorganization, dissolution or liquidation involving a Member in which
the entity or entities having voting control over such Member continue to have
voting control over the surviving entity in such merger, consolidation,
combination, sale of assets or reorganization, except any such requirement of
voting control shall not be applicable in the case of dissolutions or
liquidations in which transfers are made to the individual Members who were
holders of equity in the dissolved or liquidated entity.
E. For purposes of this Section, in the case of a corporate or
other non-individual Member, a merger, consolidation, combination, sale of
assets, reorganization, dissolution or liquidation ("Change of Control
Transaction") involving a Member, in which the person or persons, or entity or
entities having ultimate control over such Member prior to such Change in
Control Transaction do not continue to control such Member after such Change in
Control Transaction, shall constitute a transfer within the meaning of Section
V(1)(A) hereof and shall require any successor in interest to give effect and
adhere to all the procedures, rights and obligations set forth in this Article,
including without limitation the provisions of Sections V(1)(C)(iii-iv), with
respect to transfers and conveyances to third parties not otherwise exempt.
F. In order for any conveyance of interests in the Company to
be effective and for any person to be recognized by the Company as a Member and
to be issued Units or other interest in the Company, any transferee shall first
execute and become a party to this Agreement and thereby become subject to all
of the terms and conditions set forth herein. Notwithstanding anything to the
contrary contained herein, a merger, consolidation, sale of all or substantially
all of the assets or a majority or more of the issued and outstanding stock of
PSCM shall not be deemed a Change of Control Transaction.
2. Withdrawal. A. Notwithstanding that the Company has denied
a Member consent to convey its interest in the Company after such Member has
presented the Managers with a Conveyance Notice in accordance with this Section,
a Member may withdraw from the Company. However, any such withdrawal or series
of withdrawals which involve more than 25% of the then outstanding Class A Units
shall require the prior written consent of the Managers, which consent may be
denied by the Managers for any reasonable grounds including, but not limited to,
(i) the financial impact of such withdrawal upon the Company, and (ii) the
inability of the Managers to receive assurances that the Founding Members would
continue the Company after such Member's withdrawal, as provided in this
Agreement. Within one hundred eighty (180) days after any withdrawal thus
approved by the Managers, the Company shall make a distribution to the Member
equal to the positive balance of its capital account, if any, as adjusted
through the date of withdrawal, with a set-off for any amounts whatsoever owed
by the Member to the Company. In the discretion of the Managers, such payment
may be made by an unsecured promissory note of the Company, payable with
interest at the Chase Manhattan Bank, N.A. (or its successor) Prime Rate plus 2%
pursuant to a self-amortizing schedule that shall not exceed five (5) years.
B. Anything in the foregoing paragraph to the contrary
notwithstanding, no Member may withdraw from the Company after the Company has
announced its intent to liquidate, except with consent of the Managers in their
sole discretion.
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3. Tax Considerations. Any capital gains, income, transfer,
gift or other taxes imposed upon any transferor or transferee as a result of any
conveyance of any interest in the Company shall be exclusively the
responsibility of the person upon whom such tax is imposed. The Company shall
have no responsibility therefor whatsoever. In the event that any tax, expense
(including legal and accounting fees) or cost is incurred by or imposed upon the
Company as a result of any conveyance of an interest in the Company, except as a
result of the Company's issuing or purchasing any interest in the Company, the
Member conveying such interest shall indemnify, or cause the transferee to
indemnify, the Company for such tax, expense or cost.
VI. MERGERS AND CONSOLIDATION
1. The Company may enter into a merger or consolidation, in
accordance with Article X of the LLCL, pursuant to an agreement of merger or
consolidation (the "Plan") that has been adopted by the Company under the
procedures set forth in Paragraph (2) of this Article VI.
2. The Company may adopt a Plan only if:
A. the Plan is approved by at least 75% of the Managers;
B. after approval by the Managers, the Plan is submitted to
the Class A Members, who shall be the only members entitled to vote thereon, for
approval in accordance with Section 1002(c) of the LLCL; and
C. the Class A Members vote at least 75% of their Units in
favor of the Plan.
VII. LIQUIDATION
1. Upon dissolution of the Company, the assets of the Company
shall be liquidated by the Managers (or a Liquidating Trustee appointed by the
Managers, which may be a Member) as promptly as possible, but in an orderly and
businesslike manner so as not to involve undue sacrifice, and the proceeds
thereof will be applied and distributed in the following priority, unless
otherwise required by applicable law:
A. to pay all creditors of the Company other than Members, in
the order of priority provided by law;
B. to pay all creditors of the Company that are Members; and
C. after the payment of all debts, liabilities and obligations
of the Company, to increase the Members' capital accounts in accordance with
this Agreement and to distribute to the Members their respective positive
capital accounts' balances, if any.
2. Within one hundred eighty (180) days after completion of
final distributions, the Managers or Liquidating Trustee shall cause to be
prepared by a firm of certified public accountants a statement setting forth the
assets and liabilities of the Company as at the date of dissolution, which
statement shall be furnished to all of the Members.
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3. The Liquidating Trustee, if engaged, shall be entitled to
receive reasonable compensation.
Notwithstanding the foregoing, in the event that either
Founding Member wishes to dissolve the Company, a reasonable effort must first
be made to sell the interest of the Founding Member wishing to dissolve the
Company to the other Member, or sell the Company to a third party. After such
efforts have been made, and upon ninety (90) days written notice to the other
Founding Member, either Founding Member may cause the Company to be dissolved.
Unless the Managers, by an affirmative vote of 75%, agree to the contrary any
such dissolution shall be a dissolution in kind. That is, the Executive Director
shall cause to be distributed to the Members, each Member's pro rata share of
the assets of the Company including without limitation the Company's good will,
corporate fitness contracts, tradename and equipment.
In the event of any such dissolution the Company shall make
proper and legal provision to:
A. Pay all creditors of the Company other than Members, in the
order of priority provided by law; and
B. To pay all creditors of the Company that are Members.
In the event of a liquidation, Minutemen and PSCM shall, to
the extent necessary for the continuance of the separate parts of the Company's
business, contribute to the Company those assets (other than cash, accounts
receivable and any award which Pro Fitness may be entitled to in connection with
its suit against Devrek and Summex) of Minutemen's division known as Pro Fitness
which were not contributed to the Company.
VIII. DURATION
l. Unless the Company shall have been sooner dissolved in
accordance with the provisions of the LLCL, the Company shall dissolve on the
earlier of:
A. the one hundred eightieth (180th) day following the
bankruptcy, death, dissolution, expulsion, incapacity or withdrawal of any Class
A Member, unless at least 51% of the capital interests and 51% of the interests
in profits of the surviving Class A Members are sooner voted in favor of the
continuation of the Company; or
B. December 31, 2035.
IX. INDEMNITY
Every person (and the heirs, executors and administrators of
such person) who is or was a Member, Manager or Executive Director of the
Company shall be indemnified by the Company against all judgments, payments in
settlement (whether or not approved by court), fines, penalties and other
reasonable costs and expenses (including fees and disbursements of counsel)
imposed upon or incurred by such person in connection with or resulting from any
action, suit, proceeding, investigation or claim, whether civil, criminal,
administrative, legislative or other (including any criminal action, suit or
proceeding in which such person enters
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a plea of guilty or nolo contendere or its equivalent), or any appeal relating
thereto which is brought or threatened by any other person, governmental
authority or instrumentality (herein called a "third-party action") and in which
such person is made a party or is otherwise involved by reason of his being or
having been such Member, Manager or Executive Director or by reason of any
action or omission, or alleged action or omission, by such person in his
capacity as such Member, Manager or Executive Director if either (a) such person
is wholly successful, on the merits or otherwise, in defending such third-party
action or (b) in the judgment of a court of competent jurisdiction or, in the
absence of such determination, in the judgment of the Managers of the Company,
such person acted in good faith and in what he reasonably believed to be the
best interest of the Company and, in addition, in any criminal action, had no
reasonable cause to believe that his conduct was unlawful. In case such person
is successful, on the merits or otherwise, in defending part of such action, or,
in the judgment of such a court or the Managers, has met the applicable standard
of conduct specified in the preceding sentence with respect to part of such
action, he shall be indemnified by the Company against the judgments, settlement
payments, fines, penalties and other costs and expenses attributable to such
part of such action.
The foregoing rights of indemnification shall be in addition
to any rights to which any such Member, Manager or Executive Director may
otherwise be entitled.
In any case in which, in the judgment of the Managers, any
such Member, Manager or Executive Director will be entitled to indemnification
under the foregoing provisions of this Article, such amounts as they deem
necessary to cover the reasonable costs and expenses incurred by such person in
connection with the action, suit, proceeding, investigation or claim prior to
final disposition thereof shall be advanced to such person upon receipt of an
undertaking by or on behalf of such person to repay such amounts if it is
ultimately determined that he is not so entitled to indemnification.
PSCM shall indemnify and hold Minutemen harmless from all
costs, expenses, losses, injuries or impositions including without limitation
additional taxes, reasonable accountants' or attorneys' fees occasioned from the
exclusion of a merger, consolidation, sale of all or substantially all of the
assets or a majority or more of the issued and outstanding stock of PSCM from a
Change in Control Transaction.
X. ARBITRATION
1. Arbitration of Disputes. The parties acknowledge that the
expeditious and equitable settlement of disputes arising under this Agreement is
to their mutual advantage. To that end, the parties agree to use their best
efforts to resolve all differences of opinion and to settle all disputes through
joint cooperation and consultation. Any dispute relating to a breach or alleged
breach arising out of this Agreement (or any other agreement to the extent
incorporated herein by reference) that the parties are unable to settle within
sixty (60) days, as set forth in the preceding sentence, shall be resolved by
final and binding arbitration before a single arbitrator selected and serving
under the Commercial Arbitration Rules of the American Arbitration Association.
The arbitration shall be held in the location in which the Company's principal
offices are located at the time of the dispute, unless another location is
mutually agreed upon by the parties to such arbitration. Such arbitration shall
be the exclusive remedy hereunder. The decision of the arbitrator may, but need
not, be entered as a judgment in accordance with the provisions of the laws of
the state in which the Company's principal offices are located at the time of
the dispute. If this arbitration provision is for any reason held to be invalid
or otherwise inapplicable to any dispute, the parties hereto agree that any
action or
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proceeding brought with respect to any dispute arising under this Agreement, or
to interpret or clarify any rights or obligations arising hereunder, shall be
maintained solely and exclusively in the courts of the state in which the
Company's principal offices are located at the time of the dispute.
2. Determination of Fair Market Value. Anything set forth in
the foregoing paragraph notwithstanding, the Members agree that the exclusive
procedure for resolving disputes over the determination of Fair Market Value
shall be as set forth in Section I(1)(C) of this Agreement. All Members and the
Company shall be bound by the determination of Fair Market Value made in
accordance therewith. Accordingly, the Members agree that no arbitration, or
action or proceeding in any court or other tribunal, shall be brought with
respect to any dispute over the determination of Fair Market Value.
XI. MISCELLANEOUS
1. License of Name. Simultaneously with the execution of this
Agreement, the Company shall grant to AFS, Inc. an affiliate of Minutemen, the
right and license to use the name "Pro Fitness" in connection with the retail
sale of fitness and fitness related equipment pursuant to the terms and
provisions of the License Agreement attached hereto as Exhibit C.
2. Contracts, Agreements and Licenses. Simultaneously with the
execution of this Agreement, Minutemen and PSCM shall transfer and assign to the
Company their rights under all existing contracts, agreements, leases, permits
and licenses in connection with the operation of the health enhancement and
fitness business known as Pro Fitness ("PF"), including, but not limited to, all
contracts related to all corporate fitness services or activities of PF, and the
Company shall assume all of the covenants, duties, liabilities and obligations
thereunder pursuant to the terms and provisions of the Assignment and Assumption
Agreement attached hereto as Exhibit D.
XII. AMENDMENTS
This Agreement may be amended only by both the affirmative
vote of the holders of 75% of the Class A Units (or such higher percentage as
may be required for such amendment pursuant to Section 402(e) of the LLCL) and
the affirmative vote of at least 75% of the Class A Units held by the Founding
Members. By entering their signatures in the spaces indicated below, each Member
of the Company hereby consents to the adoption of this Agreement as and for the
Operating Agreement of Pro Fitness, L.L.C.
PROFESSIONAL SPORTS CARE MINUTEMEN, INC.
MANAGEMENT, INC.
By: By:
---------------------------------- --------------------------------
Name: Name:
Title: Title:
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SCHEDULE A
Members of the Company
Date of Original Schedule A: January ___, 1996
Date of Latest Revision: N/A
Capital
Class A Members Units Contribution
Founding Members
Professional Sports Care 51,000 An undivided 51% interest
Management, Inc. as tenant in common in
the tradename and the
tangible assets (other
than cash, accounts
receivable and any award
which Pro Fitness may be
entitled to in connection
with its suit against
Devrek and Summex) of the
business known as Pro
Fitness
Minutemen, Inc. 49,000 An undivided 49%
interest as tenant in
common in the tradename
and the tangible assets
(other than cash, accounts
receivable and any award
which Pro Fitness may be
entitled to in connection
with its suit against
Devrek and Summex) of the
business known as Pro
Fitness
Totals 100,000
PROMISSORY NOTE
January __, 1996
$125,000.00
FOR VALUE RECEIVED PRO FITNESS, L.L.C., a New York limited
liability company, having an address at 5 High Ridge Park, Stamford, Connecticut
06906 ("Maker"), hereby covenants and promises to pay to PROFESSIONAL SPORTS
CARE MANAGEMENT, INC., a Delaware corporation, having an address at 550
Mamaroneck Avenue, Harrison, New York 10528 ("Payee"), or order, at Payee's
address first above written or at such other address as Payee may designate in
writing, ONE HUNDRED TWENTY FIVE THOUSAND DOLLARS ($125,000.00), lawful money of
the United States of America together with interest on the unpaid principal
balance at the lowest applicable federal interest rate as defined in ss.1274 of
the Internal Revenue Code.
Maker covenants and agrees with Payee as follows:
1. Accrued interest under this Note shall be due and payable
on January 1, of each year commencing January 1, 1997.
2. In the event any payment due hereunder shall not be paid on
the date when due, such payment shall bear interest at the lesser of [twenty
percent] per annum or the highest lawful rate permitted under applicable law,
from the date when such payment was due until paid. In addition, Maker shall pay
a late payment premium of [five (5%)] percent of any principal or interest
payment made more than [ten (10)] days after the due date thereof, which premium
shall be paid with such late payment. This paragraph shall not be deemed to
extend or otherwise modify or amend the date when such payments are due
hereunder. The obligations of Maker under this Note are subject to the
limitation that payments of interest shall not be required to the extent that
the charging of or the receipt of any such payment by Payee would be contrary to
the provisions of law applicable to Payee limiting the maximum rate of interest
which may be charged or collected by Payee.
3. The holder of this Note may declare the entire unpaid
amount of principal and interest under this Note to be immediately due and
payable if Maker fails to pay any installment of principal or interest due under
this Note within ten (10) days after notice from the holder of this Note that
such installment has not been paid as of the date when due.
4. Maker, and all guarantors, endorsers and sureties of this
Note, hereby waive presentment for payment, demand, protest, notice of protest,
notice of nonpayment, and notice of dishonor of this Note. Maker and all
guarantors, endorsers and sureties consent that the holder of this Note at any
time may extend the time of payment of all or any part of the indebtedness
secured hereby, or may grant any other indulgences.
5. If not sooner paid, the entire amount of principal and
interest under this Note shall be due and payable upon the dissolution or sale
of Maker or upon the sale of Payee's ownership interest in Maker to Minutemen,
Inc.
6. Any notice or demand required or permitted to be made or
given hereunder shall be deemed sufficiently given or made if given by personal
service or by certified or registered mail, return receipt
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requested, addressed, if to Maker, at Maker's address first above written, or if
to Payee, at Payee's address first above written. Either party may change
address by like notice to the other party.
7. This Note may not be changed or terminated orally, but only
by an agreement in writing signed by the party against whom enforcement of any
change, modification, termination, waiver, or discharge is sought. This Note
shall be construed and enforced in accordance with the laws of Connecticut.
IN WITNESS WHEREOF Maker has executed this Note on
the date first above written.
ATTEST: PRO FITNESS, L.L.C.
By: By:
------------------------------- -------------------------------
Manager Executive Director
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PROMISSORY NOTE
January __, 1996
$125,000.00
FOR VALUE RECEIVED PRO FITNESS, L.L.C., a New York limited
liability company, having an address at 5 High Ridge Park, Stamford, Connecticut
06906 ("Maker"), hereby covenants and promises to pay to MINUTEMEN, INC., a
Connecticut corporation, having an address at 600 Riverside Avenue, Westport,
Connecticut 06880 ("Payee"), or order, at Payee's address first above written or
at such other address as Payee may designate in writing, ONE HUNDRED TWENTY FIVE
THOUSAND DOLLARS ($125,000.00), lawful money of the United States of America
together with interest on the unpaid principal balance at the lowest applicable
federal interest rate as defined in ss.1274 of the Internal Revenue Code.
Maker covenants and agrees with Payee as follows:
1. Accrued interest under this Note shall be due and payable
on January 1, of each year commencing January 1, 1997.
2. In the event any payment due hereunder shall not be paid on
the date when due, such payment shall bear interest at the lesser of [twenty
percent] per annum or the highest lawful rate permitted under applicable law,
from the date when such payment was due until paid. In addition, Maker shall pay
a late payment premium of [five (5%)] percent of any principal or interest
payment made more than [ten (10)] days after the due date thereof, which premium
shall be paid with such late payment. This paragraph shall not be deemed to
extend or otherwise modify or amend the date when such payments are due
hereunder. The obligations of Maker under this Note are subject to the
limitation that payments of interest shall not be required to the extent that
the charging of or the receipt of any such payment by Payee would be contrary to
the provisions of law applicable to Payee limiting the maximum rate of interest
which may be charged or collected by Payee.
3. The holder of this Note may declare the entire unpaid
amount of principal and interest under this Note to be immediately due and
payable if Maker fails to pay any installment of principal or interest due under
this Note within ten (10) days after notice from the holder of this Note that
such installment has not been paid as of the date when due.
4. Maker, and all guarantors, endorsers and sureties of this
Note, hereby waive presentment for payment, demand, protest, notice of protest,
notice of nonpayment, and notice of dishonor of this Note. Maker and all
guarantors, endorsers and sureties consent that the holder of this Note at any
time may extend the time of payment of all or any part of the indebtedness
secured hereby, or may grant any other indulgences.
5. If not sooner paid, the entire amount of principal and
interest under this Note shall be due and payable upon the dissolution or sale
of Maker or upon the sale of Payee's ownership interest in Maker to Professional
Sports Care Management, Inc.
6. Any notice or demand required or permitted to be made
or given hereunder shall be deemed sufficiently given or made if given by
personal service or by certified or registered mail, return receipt requested,
addressed, if to Maker, at Maker's address first above written, or if
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to Payee, at Payee's address first above written. Either party may change
address by like notice to the other party.
7. This Note may not be changed or terminated orally, but only
by an agreement in writing signed by the party against whom enforcement of any
change, modification, termination, waiver, or discharge is sought. This Note
shall be construed and enforced in accordance with the laws of Connecticut.
IN WITNESS WHEREOF Maker has executed this Note on
the date first above written.
ATTEST: PRO FITNESS, L.L.C.
By: By:
------------------------------- ---------------------------------
Manager Executive Director
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PROMISSORY NOTE
$450,000.00 January 11, 1996
FOR VALUE RECEIVED, PROFESSIONAL SPORTS CARE MANAGEMENT, INC.,
a Delaware corporation, having an address at 550 Mamaroneck Avenue, Harrison,
New York 10528 ("Maker"), hereby covenants and promises to pay to BRETT RICHMAN,
P.T., having an address at 5402 Avenue N, Brooklyn, New York 11234 (hereinafter
referred to as the "Payee"), or order, at the Payee's business address first
above written or at such other address as Payee may designate in writing, Four
Hundred Fifty Thousand and 00/100 Dollars ($450,000.00), lawful money of the
United States of America, with interest thereon at the rate of six percent (6%)
per annum.
Principal and accrued interest under this Note shall be due
and payable in one (1) installment of Four Hundred Fifty Thousand and 00/100
Dollars ($450,000.00) of principal, plus accrued interest on the unpaid balance,
on January 11, 1997.
In the event that certain Employment Agreement dated the date
hereof between Brett Richman, P.T., P.C. and Payee is terminated in accordance
with the terms contained therein for other than the death or disability (i.e., a
physical or mental condition of such severity and probable prolonged duration as
to cause Payee to be unable to continue his duties under the Employment
Agreement) of Payee, then as of such date the amount of outstanding principal
due under this Note shall be reduced by an amount equal to the product obtained
by multiplying $273.97 by the number of days remaining from the date of such
termination to January 11, 1997.
I. Default.
Maker agrees that upon an Event of Default, as defined herein,
the entire indebtedness due under this Note shall, at the option of the Payee,
accelerate and become immediately due and payable without demand or notice of
any kind. Notwithstanding anything to the contrary contained herein, Maker
further agrees that the unpaid balance hereof shall bear interest at a fixed per
annum rate of the lesser of thirteen percent (13%) or the highest lawful rate
permitted under applicable law.
For purposes of this Note, an Event of Default shall mean:
A. The failure by Maker to pay any installment of
principal due under this Note within ten (10) days
after notice from the Payee that such installment has
not been paid as of the date provided for herein;
B. The filing of an application by Maker for a consent
to the appointment of a receiver, trustee or
liquidator of itself or of all of its assets; or the
filing by Maker of a voluntary petition in bankruptcy
or the filing of a pleading in any court of record
admitting in writing its inability to pay its debts
as they may become due; or the making by Maker of a
general assignment for the benefit of creditors; or
the filing by Maker of an answer admitting the
material allegations of or consenting to or
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defaulting in answering a petition filed against it
in any bankruptcy proceeding; or
C. There shall be commenced against the Maker or any of
its subsidiaries any case, proceeding or other action
of a nature referred to in clause B. of this Section
I., which (a) results in the final entry of an order
for relief or any such adjudication or appointment,
or (b) remains unstayed, undismissed, undischarged or
unbonded for a period of sixty (60) days.
II. Notices.
Any notice, request or other communication required or
permitted to be given under any of the provisions of this Note shall be in
writing and shall be deemed given on the date the same is sent by certified or
registered mail, return receipt requested, postage prepaid and addressed to the
party for which intended at its address first set forth above.
III. Subordination.
Anything in this Note to the contrary notwithstanding, the
Payee by its acceptance of this Note, for itself, its successors and assigns,
covenants and agrees, and each holder of this Note by his acceptance thereof,
whether upon original issue or upon transfer, assignment or exchange, likewise
covenants and agrees, expressly for the benefit of the present and future
holders of Senior Indebtedness, that the right of payment of principal of and
interest, if any, on this Note is hereby expressly subordinated and made subject
to the prior payment in full of all Senior Indebtedness and to all other rights
of any Institutional Lender under or in respect of any Senior Indebtedness.
"Senior Indebtedness" shall mean the principal of and premium,
if any, and the interest on all indebtedness of Maker arising out of any loans
made by any Institutional Lender to Maker or made to others and guaranteed,
directly or indirectly, by Maker, now existing or hereafter incurred, and all
renewals, replacements, consolidations, amendments and extensions thereof and to
all advances made or to be made thereunder and to the interest thereon.
"Institutional Lender" shall mean a bank, a savings and loan
association, a regulated insurance company, a trust company, a pension trust, a
pension or welfare fund, a college or university or any similar lending
institution.
Maker shall not, directly or indirectly, incur, guarantee,
create, or suffer to exist any indebtedness which is contractually subordinate
or junior in the right of payment (to any extent) to any Senior Indebtedness
unless (i) such indebtedness is pari passu in right of payment to this Note and
(ii) such indebtedness is contractually subordinated to Senior Indebtedness to
the same extent and on substantially the same terms as this Note is subordinated
to Senior Indebtedness.
IV. Miscellaneous.
A. Prepayment. Maker shall have the right to prepay the
indebtedness evidenced by this Note, in whole or in part, without penalty, upon
ten (10) days prior written notice to Payee.
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B. Course of Dealing. No delay or omission by Payee in
exercising any right hereunder, nor failure by Payee to insist upon the strict
performance of any terms herein, shall operate as a waiver of such right, any
other right hereunder, or any terms herein. No waiver of any right shall be
effective unless in writing and signed by Payee, nor shall a waiver on one
occasion be constituted as a bar to, or waiver of, any such right on any future
occasion.
C. Amendments. This Note may be amended or varied only by a
document, in writing, of even or subsequent date hereof, executed by Maker and
Payee.
D. Governing Law. This Note shall be governed by and
construed in accordance with the laws of the State of New York.
E. Successors and Assigns, Survival. This Note shall be
binding upon the Maker and its successors, and shall inure to the benefit of
Payee and their heirs, executors, administrators, successors and assigns. Payee
shall have the right to assign this Note without Maker's consent.
F. Severability. The invalidity or unenforceability of any
provision of this Note shall not effect the validity or enforceability of any
other provision.
G. Headings. The descriptive headings in this Note are for
convenience of reference only, and shall not be deemed to affect the meaning or
construction of any of the provisions hereof.
H. Capitalized Terms. All capitalized terms not defined
herein have the same meaning as such terms have when used in the Agreement of
Sale.
I. Waivers. Maker hereby waives diligence, demand,
presentment for payment, notice of nonpayment, protest and notice of protest,
except as otherwise expressly provided herein.
IN WITNESS WHEREOF, Maker has executed this Note on the date
first above written.
PROFESSIONAL SPORTS CARE
MANAGEMENT, INC.
ATTEST:
- - ------------------------------ ---------------------------------
PATRICK J. WACK, JR. RUSSELL F. WARREN, JR.
Secretary President
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OPERATING AGREEMENT
OF
PROFESSIONAL WORK CARE, L.L.C.
A New York Limited Liability Company
DATED: February 12, 1996
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OPERATING AGREEMENT
OF
PROFESSIONAL WORK CARE, L.L.C.
A New York Limited Liability Company
OPERATING AGREEMENT, adopted as of February 12, 1996, by the
members of PROFESSIONAL WORK CARE, L.L.C., a New York limited liability company
(the "Company"), each of whom has indicated acceptance hereof by executing this
Agreement (the "Members").
In accordance with Section 417 of the New York Limited
Liability Company Law (the "LLCL"), the Members hereby adopt this Operating
Agreement in order to set forth their agreement with respect to the business of
the Company, the conduct of its affairs, and the rights, powers, preferences,
limitations or responsibilities of the Company's Members, Managers, employees or
agents.
The Members agree as follows:
I. MEMBERS
1. Classes of Members. A. There shall be two classes of
Members of the Company, to be known as Class A Members and Class B Members.
B. Each Member's interest in the Company shall be
signified by the issuance to such Member of Units of interest in the Company
("Units"). The per-Unit price at the time of any issuance of Units shall be the
Fair Market Value, as determined by the Managers at the time of such issuance.
C. (i) Whenever this Agreement refers to the Fair
Market Value of Units, the term "Fair Market Value" shall mean the fair market
value of the Company as a going concern, as determined in good faith and in a
timely fashion by the Managers, who shall in making such determination consider
all relevant factors including, but not limited to, the most recent arm's length
transaction, if any, involving any interests in the Company. The Fair Market
Value of a Unit shall be the Fair Market Value of the Company divided by the
total number of Units held by Members, except that the Managers may make a
reasonable adjustment for the value of voting rights, which are vested in Class
A Units and not in Class B Units. Any Member affected by such valuation (the
"Challenging Person") may, as the sole and exclusive means of challenging such
valuation, obtain at its own expense a valuation from an independent,
unaffiliated business evaluation expert (the "Evaluation Expert"); provided,
however, that the selection of the Evaluation Expert shall be subject to the
approval of the holders of 51% of the Units held by the Class A Members
(excluding for this purpose the Challenging Person), which approval shall not be
withheld or delayed unreasonably. If such second valuation is not less than 90%
nor more than 110% of the first valuation, the Fair Market Value shall be the
average of the two valuations. In any other case, the Managers and the
Evaluation Expert shall select a second, mutually acceptable business evaluation
expert, who shall perform a third valuation, the cost of which
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shall be equally shared by the Company and the Challenging Person, and the Fair
Market Value shall be the average of the three valuations.
(ii) Notwithstanding anything in this Agreement
to the contrary, the Company shall not be prohibited from consummating any
transaction notwithstanding the fact that the determination of Fair Market Value
remains in dispute. If at the conclusion of the determination of Fair Market
Value in accordance with the foregoing paragraph, the Fair Market Value of Units
is greater by 10% or more than the Unit price upon which such transaction was
consummated (the "Unit Price Difference"), the Challenging Person (but no other
person) will receive from the Company additional cash, Class A Units or Class B
Units, as reasonably determined by the Managers sufficient to satisfy the Unit
Price Difference. If the challenge to Fair Market Value shall be made in
connection with a liquidating sale pursuant to which the Company will receive
cash proceeds which will be distributed to Members, the Company shall place in
escrow pending the final determination of Fair Market Value an amount in cash
estimated by the Managers to be sufficient to satisfy the Unit Price Difference.
D. The Class A Members shall be vested with
exclusive and unrestricted voting rights. At every meeting of the Members, each
Class A Member shall be entitled to one vote for every Unit held by such Member.
The Class B Members shall have no voting rights except as otherwise set forth
herein. Class A Units and Class B Units shall, in all other respects, represent
the same interest in the Company.
2. Class A Members. A. Professional Sports Care Management,
Inc., a Delaware corporation ("PSCM") and Hunter Giroux ("HG"), shall constitute
the initial Class A Members of the Company (the "Founding Members"). The
Founding Members' initial interests in the Company, in the aggregate of 140,000
Class A Units (the "Founding Interests"), are set forth in Schedule A attached
hereto.
B. Subject to Paragraphs E and G below, up to
1,500,000 additional Class A Units may be granted from time to time by the
Managers. Said 1,500,000 additional Class A Units shall be inclusive of the
Class A Units described in Paragraphs E and G below. Additional Class A Members
and their interests in the Company shall be established by the Managers, as set
forth in this Agreement and shall be indicated by amendments to Schedule A.
Except as provided in Paragraphs E and G below, the Company shall make no
Issuance (as defined in Section I(2)(C), below) unless the consideration
received by the Company for such Issuance is the Fair Market Value of the Units
or other interests of the Company so issued.
C. The Managers may, in their discretion, issue
additional Class A Units to existing Class A Members and/or to persons who are
not Members. However, if any additional Class A Units are to be offered, then
the Company shall not issue any such Units unless the Managers notify all Class
A Members in writing at least thirty (30) days prior to the date of the proposed
issuance thereof (the "Issuance") of the terms of the proposed Issuance (the
"Issuance Notice") and grant to all Class A Members the right (the "Preemptive
Right"), subject to the limitations set forth below, to subscribe for and, upon
consummation of an Issuance, purchase additional Units in the Company, as the
case may be, to be so issued at the same price and on the same terms as
reflected in the Issuance Notice, such that any Class A Members who exercise
such Preemptive Right will own the same economic interest (on a percentage
basis) in the Company as held by each of them prior to the Issuance. The
Preemptive Right shall be exercisable by a Class A Member for a period of
fifteen (15) days after receipt of the Issuance Notice from the Managers by
written
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notification to the Managers. The failure by a Class A Member to exercise its
Preemptive Right within the time period set forth above shall be deemed a waiver
by such Class A Member of its Preemptive Right with respect to that particular
issuance. Anything stated in this paragraph to the contrary notwithstanding, no
Member shall have Preemptive Rights with respect to the issuance of any Units
pursuant to an Incentive Unit Plan or other like benefit program duly adopted by
the Managers.
D. Except as a result of one or both Founding
Members' failure to exercise their respective Preemptive Rights or withdrawal
from the Company or as a result of the issuance of Units pursuant to an
incentive plan to be adopted by the Company or as a result of an issuance
pursuant to paragraphs E, F and G below, there shall be no change to any
Founding Member's interest relative to the interests of the other Founding
Member.
E. Promptly following the commencement by the
Company of the provision of management services to an occupational medical
clinic, (i) HG shall purchase and the Company shall issue to HG, 70,000
additional Class A Units at a purchase price of Thirty Five Thousand and 00/100
Dollars ($35,000.00); and (ii) PSCM shall purchase and the Company shall issue
to PSCM, 20,000 additional Class A Units at a purchase price of Ten Thousand and
00/100 Dollars ($10,000.00). The closing of such transactions shall occur within
a reasonable time established by the Managers and subject to the delivery of
such customary documentation as may be required by the attorneys for the
Company.
F. Notwithstanding anything to the contrary
contained in paragraph A above or Schedule A hereto, the 130,000 Class A Units
representing HG's initial interest in the Company, as set forth on Schedule A,
shall vest during the following periods: (i) 70,000 Class A Units upon the
execution of this Agreement; (ii) 30,000 Class A Units following the first
anniversary of the execution of this Agreement; and (iii) 30,000 Class A Units
following the second anniversary of the execution of this Agreement.
Notwithstanding the foregoing, for voting and quorum purposes HG shall be deemed
to hold all Class A Units issued to HG regardless of when said interest vests.
G. Notwithstanding anything to the contrary
contained in paragraphs C or D hereof, the Company shall grant to (i) HG the
option to purchase an additional 100,000 Class A Units pursuant to the terms and
conditions of the Option Agreement attached hereto as Schedule B (the "HG
Option"); and (ii) PSCM the option to purchase an additional 425,000 Class A
Units pursuant to the terms and conditions of the Option Agreement attached
hereto as Schedule C (the "PSCM Option").
3. Class B Members. A. Class B Members and their respective
interests in the Company shall be established by the Managers, as set forth in
this Agreement, and shall be indicated by amendments to Schedule A. The
foregoing notwithstanding, at no time shall the aggregate number of Class B
Units issued be greater than 30% of the aggregate number of issued Class A
Units. The Company shall make no Issuance unless the consideration received by
the Company for such Issuance is the Fair Market Value of the Units or other
interests of the Company so issued.
B. The Managers by unanimous vote may, in their
discretion, issue additional Class B Units to existing Members and/or to persons
who are not Members. However, if any Class B Units are to be offered to any
Class A Member, then the Company shall make no issuance unless the Managers
provide an Issuance Notice to all Class A Members in writing at least thirty
(30) days prior to the date of the proposed Issuance and grant to all Class A
Members Preemptive Rights, subject to the limitations set forth below,
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to subscribe for and, upon consummation of an Issuance, purchase Class B Units
in the Company, as the case may be, to be so issued at the same price and on the
same terms as reflected in the Issuance Notice, such that any Class A Members
who exercise such Preemptive Right will own the same economic interest (on a
percentage basis) in the Company as held by each of them prior to the Issuance.
The Preemptive Right shall be exercisable by a Member for a period of fifteen
(15) days after receipt of the Issuance Notice from the Managers by written
notification to the Managers. The failure by a Member to exercise its Preemptive
Right within the time period set forth above shall be deemed a waiver by such
Member of its Preemptive Right.
4. Waiver of Preemptive Rights. If, within ninety (90) days
following an Issuance Notice, the Company issues any Units described therein at
a price that is less than 90% of the price set forth in the Issuance Notice, any
Member who failed to exercise its Preemptive Rights pursuant to such initial
Issuance Notice shall be entitled to receive a second Issuance Notice and to
exercise Preemptive Rights thereunder, at such lower price.
5. New Members. Before any Units or other interests are
granted to any new Member, such Member shall first become a party to this
Agreement and thereby agree to be subject to all of the terms and conditions set
forth herein.
6. Time of Meetings. There shall be at least one meeting of
the Class A Members each year, which shall be scheduled by the Managers.
Additional meetings of the Class A Members shall be called by either the
Executive Director or by the Managers on the request of Class A Members whose
membership interest is, in the aggregate, not less than 35% of the total Class A
membership interest. Class B Members shall be entitled to attend any meeting of
the Class A Members, but shall have no right to participate or vote at any
meeting except as provided in Section (I)8.
7. Notice of Meetings. Written notice of any meeting of the
Members shall be given, personally or by mail, to each Member not less than
seven (7) days prior to the meeting, except as otherwise required by the LLCL.
Such notice shall state the place, date and hour of the meeting.
8. Voting. At all meetings of Members the holders of a
majority of the Units entitled to vote, present in person or represented by
proxy, shall constitute a quorum for the transaction of business, except as
otherwise provided by statute, the Articles of Organization, or this Agreement.
At all meetings, each Class A Member may vote, in person or by proxy. A majority
of the Units voted in person or by proxy shall decide any question brought
before such meeting, unless the question or action is one upon which a different
vote is required by express provision of law, the Articles of Organization or
this Agreement. Other than with respect to the rights initially granted to the
Managers and the Class A Members set forth in this Agreement (as such rights may
be amended from time to time) the adoption of any matter which materially and
adversely affects in a disproportionate manner the rights, obligations or
economic interests of the Class B Members, taken as a whole, shall require the
approval of the holders of at least 75% of the Class B Units voting in person or
by proxy.
9. Proxies. Members who are unable to attend a meeting may
appear and vote by proxy; provided, however, that a proxy shall only be valid if
it is in writing and has been duly executed by the Member. No proxy shall be
valid unless on the face of such proxy it specifically names the individual who
shall be authorized to act on such Member's behalf, which individual must be
either a Manager or another Member of the Company. No Member
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may hold, or act in any capacity pursuant to, the proxy of more than one Member
at any meeting, except that the Managers of the Company shall not be restricted
from voting multiple proxies duly delivered to the Company. All proxies granted
in violation of this Section shall be void.
10. Annual Report. Within ninety (90) days following the end
of each fiscal year of the Company, the Members shall be provided with an annual
report containing financial statements (which need not be audited) consisting of
a balance sheet as of the last day of the two preceding fiscal years, a
statement of operations for the two preceding fiscal years and a statement of
cash flows for the two preceding fiscal years.
II. MANAGERS
1. General. A. Except where otherwise required by law, the
Articles of Organization or this Agreement, the business and affairs of the
Company shall be managed by the Managers. The initial Managers of the Company
shall be Patrick J. Wack, Jr. and Hunter Giroux each of whom shall serve until
his resignation or until removed in accordance with this Agreement.
B. The number of Managers may be changed with the
approval of the holders of all of the Class A Units.
C. Provided there are at least three (3) Managers,
Managers may be removed, with or without cause, by the unanimous vote of the
Managers (exclusive of the Manager in question).
D. The Managers then serving shall, within thirty
(30) days after the removal or resignation of any Manager or the increasing of
the number of the Managers, select one natural person, who may but need not be a
Member, to fill each vacancy.
E. If PSCM shall exercise the PSCM Option, the
Managers of the Company shall be Russell F. Warren, Jr., Patrick J. Wack, Jr.
and Hunter Giroux.
2. Authority. The Managers shall, except as otherwise
expressly provided by applicable law, the Articles of Organization or this
Agreement, have all of the authority permitted to be exercised by Managers under
the LLCL in furtherance thereof. Except as otherwise expressly provided in this
Agreement, the Managers and not the Members shall have the exclusive authority
to determine any of the issues described in LLCL Sections 402(c) and 402(d). The
authority of the Managers shall include, but not be limited to:
A. Negotiating, approving and executing contracts in
excess of $25,000.00 and incurring obligations on behalf of the Company in
excess of $25,000.00 within the ordinary course of business.
B. Supervising the capital structure of the Company
and negotiating, approving and binding the Company to operating and capital
financing arrangements, including capital assessments and debt and equity
financings (whether within or outside of the ordinary course of business).
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C. Establishing financial policies, determining
distributions, and maintaining the books of account and other records of the
Company.
D. Delegating to any Founding Members such
responsibilities and authority as may, in the judgment of the Managers, be
appropriate.
E. Recommending compensation to a Compensation
Committee. The Compensation Committee, which shall act by the majority vote of
its members, shall be appointed by the vote of the holders of 51% of the Class A
Units held by the Founding Members (excluding for the purposes of this vote,
Units held by the Executive Director) and shall be responsible for approving the
compensation packages of the executive officers of the Company.
F. Admission of additional Members into the Company,
and establishing the terms and conditions applicable thereto.
Any decision by the Managers with respect to the
foregoing shall require the affirmative vote of a majority of the Managers.
3. Procedures. The Managers may adopt such rules, regulations
and procedures for the conduct of their business as the Managers, from time to
time, deem appropriate.
4. Executive Director. Hunter Giroux is hereby appointed as
the Executive Director of the Company and shall serve for a term of four (4)
years or until his resignation or until removed in accordance with this
Agreement. The Executive Director is hereby granted the authority to: (a)
oversee the day-to-day administration and management of the Company; and (b)
engage employees, contractors or consultants in connection therewith. The
Executive Director may be removed, with cause, by the vote of at least 66 2/3%
of the Managers. "With cause" shall mean gross negligence in the performance of
the duties of the Executive Director or the unwillingness or inability to
perform the duties of the Executive Director.
If HG is removed as Executive Director, PSCM shall have the
right, at any time thereafter, to purchase HG's interest in the Company.
However, if HG shall resign as Executive Director, PSCM agrees to purchase HG's
interest in the Company within thirty (30) days of HG's resignation.
Notwithstanding anything to the contrary contained herein, the purchase price
for either acquisition shall be equal to the amount determined by the then
independent public accountant of the Company by valuing the Company at four (4)
times the Company's pre-tax income, as defined by generally accepted accounting
principles and in a manner consistent with other similar operations of PSCM,
from the immediately prior twelve (12) month period multiplied by HG's interest.
Said purchase price shall be paid in cash except that at the option of PSCM 50%
of the purchase price may be deferred by a self- amortizing two (2) year note at
the then lowest applicable federal interest rate as defined in Section 1274 of
the Internal Revenue Code. Such right to purchase in the case of HG's removal,
shall be exercised by PSCM by giving written notice of such exercise to HG. HG
shall execute and deliver to PSCM any and all documentation reasonably required
to accomplish either transfer as the case may be.
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III. CAPITAL
1. Founding Members. Each Founding Member has made a capital
contribution, in cash or in services, to the Company and has received therefor
Units of interest in the Company, in the amount set forth on Schedule A.
2. Additional Members. Each additional Member shall be
required to make a capital contribution to the Company and receive therefor
Units of interest in the Company, in cash or in kind and in unit amounts to be
determined by the Managers and, if required, agreed to by such additional
Members prior to his admittance into the Company.
3. In-kind Capital Contributions. Members who, with the
consent of the Managers, make in-kind capital contributions, shall be solely and
personally responsible for any tax liability that may be imposed upon them with
respect to the sale of the contributed asset by the Company.
4. Additional Capital Contributions. The Managers may request
Members to make additional capital contributions to the Company. Such a call
shall be made in writing (the "Call") to all Members, or may be limited to all
Members of a single class of membership. The Call shall give such information as
the Managers deem necessary and appropriate, and shall advise the Members of the
time, which shall be not less than fifteen (15) days, in which they must
indicate their willingness to participate in the Call. All Members who
participate in the Call shall be permitted to do so in the ratio that such
Member's Units bear to the aggregate Units of all Members participating in the
Call, and the total Units issued as a result of the Call shall be distributed in
like ratio. Members who do not participate in any Call shall have their
interests in the Company diluted accordingly, but no Member shall be required to
make an involuntary additional capital contribution.
In connection with the foregoing, upon request of the
Manager's to make additional capital contributions, PSCM shall contribute up to
an additional Two Hundred Ninety Thousand and 00/100 Dollars ($290,000.00) to
the Company.
5. Loans. (i) Subject to the approval of PSCM's Board of
Directors, PSCM shall make available to the Company a line of credit in an
amount not to exceed Five Hundred Thousand and 00/100 Dollars ($500,000.00). All
borrowings shall be evidenced by a promissory note substantially in the form
attached hereto as Schedule D. The amount of all such borrowings shall be repaid
by the Company within two (2) years of the creation of said line of credit with
interest on all outstanding borrowings payable monthly at a rate per annum equal
to the prime rate charged from time to time by Chemical Bank.
(ii) Upon request made by the Managers, Members may
loan money to the Company, upon such terms and conditions as the Member and the
Managers may agree.
6. Capital Accounts. The Company will maintain a capital
account for each Member. The Company will (a) increase the capital account of a
Member by (i) any capital contribution, whether in cash or in kind, by the
Member, and (ii) any allocation of profit to the Member, and (b) decrease the
capital account of the Member by (i) any allocation of loss to the Member and
(ii) any distribution, whether in cash or in kind, to the Member.
7. Interest. Members are not entitled to the payment of
interest on their capital accounts.
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8. Company Assets. All Company assets will be in the name of
the Company, and no member shall have any rights in any Company assets.
9. Buyout Option. PSCM shall have the right, at any time from
and after the second anniversary of the execution of this Agreement, to purchase
the interests of one or more of the Members of the Company, however, PSCM's
right to purchase the interests of HG shall be restricted as follows: (i) PSCM
shall only have the right to purchase the 130,000 Class A Units initially issued
to HG pursuant to paragraph 2F; (ii) PSCM shall have the right to purchase only
up to 70,000 Units of HG's initially issued Class A Units until the third
anniversary of the execution of his Agreement, thereafter, PSCM shall have the
right to purchase all 130,000 Class A Units initially issued to HG; and (iii) in
the event PSCM sells the interests of HG purchased by PSCM pursuant to this
paragraph within six (6) months of purchasing same, PSCM shall pay to HG the
difference between the purchase price paid by PSCM for HG's interest and the
selling price received by PSCM for the sale of said interest. Such right shall
be exercised by PSCM by giving written notice of such exercise to each Member.
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 amount determined by the then independent public accountant of the
Company by valuing the Company at four (4) times the Company's pre-tax income,
as defined by generally accepted accounting principles and in a manner
consistent with other similar operations of PSCM, from the immediately prior
twelve (12) month period multiplied by the interest to be transferred. Said
purchase price shall be paid in cash except that at the option of PSCM 50% of
the purchase price may be deferred by a self- amortizing two (2) year note at
the then lowest applicable federal interest rate as defined in Section 1274 of
the Internal Revenue Code. At the closing of any such acquisition, the Member(s)
transferring its interest shall execute and deliver to PSCM any and all
documentation reasonably required to accomplish such transfer. Under no
circumstance shall PSCM exercise the foregoing buyout rights unless PSCM has
first exercised the PSCM Option described in Section I(2)(F) above.
IV. PROFITS, LOSSES AND DISTRIBUTIONS
1. Distributions. A. To the full extent of available funds and
subject to the provisions of the LLCL, the Company shall, on or before March 31
of each year, make a distribution to the Members that, in the judgment of the
Managers, reasonably approximates the personal federal, state and local tax
liability of the Members resulting from their respective allocations of Company
profits.
B. In addition to distributions required pursuant to
Section IV(1)(A), the Company may make distributions to the Members having
positive capital account balances. Such distributions may be made from time to
time as determined by the Managers, in the ratio of each Member's capital
account balance at the time of distribution.
C. Except as provided elsewhere herein, no Member is
entitled to any distribution in return of a capital contribution. If the
Managers so determine, however, the Company may make a distribution to a Member,
at any time, in return of a capital contribution.
2. Profits. The Company will allocate profits for a fiscal
year, or any portion thereof, among the Members in the ratio of each Member's
Unit-Days, as defined below.
3. Losses. The Company will allocate losses for a fiscal year,
or any portion thereof, among the Members in the ratio of each Member's
Unit-Days, as defined below.
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4. Dissolution. The Company will allocate profits and losses
among the Members upon dissolution of the Company and liquidation of its assets,
in the ratio of each Member's Unit-Days, as defined below.
5. Unit-Days. For any allocation of profits or losses, each
Member's Unit-Days shall be the number of Units issued to such Member (as shown
on Schedule A, as amended from time to time), multiplied by the number of days
such Units were owned by such Member during the period to which any allocation
of profits or losses applies.
V. TRANSFER AND WITHDRAWAL
1. Transfer. A. Except as expressly provided herein, Members
may not sell, transfer, assign, pledge, or otherwise dispose or encumber their
interests in the Company, or any rights as a Member thereof.
B. The foregoing subsection (A) to the contrary
notwithstanding, Members shall be permitted to convey their interests in the
Company and their rights thereunder, including such Member's interest in its
capital account, only upon the consent of, and subject to the terms and
conditions established by, a majority in interest of the non-transferring
Members, which consent may not be withheld or delayed unreasonably.
C. Any Member who desires so to convey its interest
shall give written notice (the "Conveyance Notice") thereof to the Managers,
which notice shall fully identify the proposed transferee(s), and set forth the
terms and conditions of the proposed conveyance. As quickly as practicable but
in no event longer than thirty (30) days, the Managers shall in their reasonable
discretion exercise one of the following options:
(i) grant the Company's consent to the proposed
conveyance after obtaining the consent of a majority in interest of the
non-transferring Members;
(ii) request additional information about the
proposed transferee(s) and/or the terms and conditions of the proposed
conveyance, in which case a final exercise of one of the remaining options may
be deferred until thirty (30) days after such additional information is
received;
(iii) cause the Company to exercise a right of
first refusal, which is hereby granted (the "Right of First Refusal"), to
purchase such offered Units. Such Right of First Refusal shall give the Company
the right to purchase such Units at the price set forth in the Conveyance Notice
(the "Company Price"). The closing of such transaction shall occur within a
reasonable time established by the Managers, and subject to the delivery of such
customary documentation as may be required by the attorneys for the Company. In
the discretion of the Managers, payment of the Company Price may be made by an
unsecured promissory note of the Company, payable with interest at the Chemical
Bank Prime Rate, pursuant to a self-amortizing repayment schedule that shall not
exceed five (5) years. The Managers shall have the authority to establish
additional procedures for the closing, which shall be binding on all parties; or
(iv) deny consent to the proposed conveyance.
In the event that the Company denies consent to the proposed conveyance, the
Member shall have the right to offer the Units within thirty (30) days to the
other Members, at the Company Price, provided that the Offer is made to every
Member holding Units of the same Class as the Units being offered.
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Any Members desiring to purchase such Units (the "Purchasing Members") shall
notify the selling Member within fifteen (15) days. Each Purchasing Member shall
have the right to purchase the number of offered Units that is equal to the
total number of Offered Units times a fraction (i) the numerator of which is the
number of Units held before the conveyance by such Purchasing Member, and (ii)
the denominator of which is the number of Units held before the conveyance by
all Purchasing Members. The closing of such transaction shall occur within a
reasonable time established by the Managers and subject to the delivery of such
customary documentation as may be required by the attorneys for the Company. The
Managers shall have the authority to establish additional procedures for the
closing, which shall be binding on all parties.
D. Upon receipt of a Conveyance Notice, a majority
in interest of the non-transferring Members shall not, without due cause,
withhold consent to any Member's requests to convey their ownership interest in
their Units and their rights to receive distributions and allocations of profits
and losses thereunder, provided that no such conveyance shall transfer any
Member's right to vote or otherwise participate in the affairs of the Company,
if such conveyance shall be as follows:
(i) in the case of either Members who are
natural persons or trusts, to, from and among persons, entities or trusts (x)
within each Member's Family Group; (y) created by or at the direction of a
Member; or (z) for the benefit of a Member or a person in the Member's Family
Group. "Family Group" shall mean a Member's spouse and descendants (whether
natural or adopted) and any trust, partnership or corporation or similar entity
created by or at the direction of a Member for the benefit of either the Member
or the Member's spouse and/or descendants.
(ii) in the case of a corporate or other
non-individual Member, transfers made by reason of a merger, consolidation,
combination, sale of assets, reorganization, dissolution or liquidation
involving a Member in which the entity or entities having voting control over
such Member continue to have voting control over the surviving entity in such
merger, consolidation, combination, sale of assets or reorganization, except any
such requirement of voting control shall not be applicable in the case of
dissolutions or liquidations in which transfers are made to the individual
Members who were holders of equity in the dissolved or liquidated entity.
E. For purposes of this Section, in the case of a
corporate or other non-individual Member, a merger, consolidation, combination,
sale of assets, reorganization, dissolution or liquidation ("Change of Control
Transaction") involving a Member, in which the person or persons, or entity or
entities having ultimate control over such Member prior to such Change in
Control Transaction do not continue to control such Member after such Change in
Control Transaction, shall constitute a transfer within the meaning of Section
V(1)(A) hereof and shall require any successor in interest to give effect and
adhere to all the procedures, rights and obligations set forth in this Article,
including without limitation the provisions of Sections V(1)(C)(iii-iv), with
respect to transfers and conveyances to third parties not otherwise exempt.
F. In order for any conveyance of interests in the
Company to be effective and for any person to be recognized by the Company as a
Member and to be issued Units or other interest in the Company, any transferee
shall first execute and become a party to this Agreement and thereby become
subject to all of the terms and conditions set forth herein. Notwithstanding
anything to the contrary contained herein, a merger, consolidation, sale of all
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or substantially all of the assets or a majority or more of the issued and
outstanding stock of PSCM shall not be deemed a Change of Control Transaction.
2. Withdrawal. A. Notwithstanding that the Company has denied
a Member consent to convey its interest in the Company after such Member has
presented the Managers with a Conveyance Notice in accordance with this Section,
a Member may withdraw from the Company. However, any such withdrawal or series
of withdrawals shall require the prior written consent of the Managers, which
consent may be denied by the Managers for any reasonable grounds including, but
not limited to, (i) the financial impact of such withdrawal upon the Company,
and (ii) the inability of the Managers to receive assurances that the Founding
Members would continue the Company after such Member's withdrawal, as provided
in this Agreement. Within one hundred eighty (180) days after any withdrawal
thus approved by the Managers, the Company shall make a distribution to the
Member equal to the positive balance of its capital account, if any, as adjusted
through the date of withdrawal, with a set-off for any amounts whatsoever owed
by the Member to the Company. In the discretion of the Managers, such payment
may be made by an unsecured promissory note of the Company, payable with
interest at the Chemical Bank Prime Rate pursuant to a self-amortizing schedule
that shall not exceed five (5) years.
B. Anything in the foregoing paragraph to the
contrary notwithstanding, no Member may withdraw from the Company after the
Company has announced its intent to liquidate, except with consent of the
Managers in their sole discretion.
3. Tax Considerations. Any capital gains, income, transfer,
gift or other taxes imposed upon any transferor or transferee as a result of any
conveyance of any interest in the Company shall be exclusively the
responsibility of the person upon whom such tax is imposed. The Company shall
have no responsibility therefor whatsoever. In the event that any tax, expense
(including legal and accounting fees) or cost is incurred by or imposed upon the
Company as a result of any conveyance of an interest in the Company, except as a
result of the Company's issuing or purchasing any interest in the Company, the
Member conveying such interest shall indemnify, or cause the transferee to
indemnify, the Company for such tax, expense or cost.
VI. MERGERS AND CONSOLIDATION
1. The Company may enter into a merger or consolidation, in
accordance with Article X of the LLCL, pursuant to an agreement of merger or
consolidation (the "Plan") that has been adopted by the Company under the
procedures set forth in Paragraph (2) of this Article VI.
2. The Company may adopt a Plan only if:
A. the Plan is approved by at least 66 2/3% of the
Managers;
B. after approval by the Managers, the Plan is
submitted to the Class A Members, who shall be the only members entitled to vote
thereon, for approval in accordance with Section 1002(c) of the LLCL; and
C. the Class A Members vote at least 51% of their
Units in favor of the Plan.
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VII. LIQUIDATION
1. Upon dissolution of the Company, the assets of the Company
shall be liquidated by the Managers (or a Liquidating Trustee appointed by the
Managers, which may be a Member) as promptly as possible, but in an orderly and
businesslike manner so as not to involve undue sacrifice, and the proceeds
thereof will be applied and distributed in the following priority, unless
otherwise required by applicable law:
A. to pay all creditors of the Company other than
Members, in the order of priority provided by law;
B. to pay all creditors of the Company that are
Members; and
C. after the payment of all debts, liabilities and
obligations of the Company, to increase the Members' capital accounts in
accordance with this Agreement and to distribute to the Members their respective
positive capital accounts' balances, if any.
2. Within one hundred eighty (180) days after completion of
final distributions, the Managers or Liquidating Trustee shall cause to be
prepared by a firm of certified public accountants a statement setting forth the
assets and liabilities of the Company as at the date of dissolution, which
statement shall be furnished to all of the Members.
3. The Liquidating Trustee, if engaged, shall be
entitled to receive reasonable compensation.
VIII. DURATION
1. Unless the Company shall have been sooner dissolved in
accordance with the provisions of the LLCL, the Company shall dissolve on the
earlier of:
A. the one hundred eightieth (180th) day following
the bankruptcy, death, dissolution, expulsion, incapacity or withdrawal of any
Class A Member, unless at least 51% of the capital interests and 51% of the
interests in profits of the other Class A Members are sooner voted in favor of
the continuation of the Company; or
B. January 31, 2036.
IX. INDEMNITY
Every person (and the heirs, executors and administrators of
such person) who is or was a Member, Manager, employee or agent of the Company
or of any other company, including another company, partnership, joint venture,
trust or other enterprise, which such person serves or served as such at the
request of the Company, shall be indemnified by the Company against all
judgments, payments in settlement (whether or not approved by court), fines,
penalties and other reasonable costs and expenses (including fees and
disbursements of counsel) imposed upon or incurred by such person in connection
with or resulting from any action, suit, proceeding, investigation or claim,
whether civil, criminal, administrative, legislative or other (including any
criminal action, suit or proceeding in which such person enters a plea of guilty
or nolo contendere or its equivalent), or any appeal relating thereto which is
brought or threatened by any other person, governmental authority or
instrumentality (herein
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called a "third-party action") and in which such person is made a party or is
otherwise involved by reason of his being or having been such Member, Manager,
employee or agent or by reason of any action or omission, or alleged action or
omission, by such person in his capacity as such Member, Manager, employee or
agent unless a judgment or other final adjudication adverse to such person
establishes that his or her acts or omissions were in bad faith or involved
intentional misconduct or a knowing violation of law or that he or she
personally gained in fact a financial profit or other advantage to which he or
she was not legally entitled. Except as otherwise provided herein, each such
person shall be indemnified by the Company against the judgments, settlement
payments, fines, penalties and other costs and expenses attributable to such
part of such action.
The foregoing rights of indemnification shall be in addition
to any rights to which any such Member, Manager, employee or agent may otherwise
be entitled and shall be subject to the provisions of Sections 417 and 420 of
the LLCL.
In any case in which, in the judgment of the Managers, any
such Member, Manager or employee will be entitled to indemnification under the
foregoing provisions of this Article, such amounts as they deem necessary to
cover the reasonable costs and expenses incurred by such person in connection
with the action, suit, proceeding, investigation or claim prior to final
disposition thereof shall be advanced to such person upon receipt of an
undertaking by or on behalf of such person to repay such amounts if it is
ultimately determined that he is not so entitled to indemnification.
X. ARBITRATION
1. Arbitration of Disputes. The parties acknowledge that the
expeditious and equitable settlement of disputes arising under this Agreement is
to their mutual advantage. To that end, the parties agree to use their best
efforts to resolve all differences of opinion and to settle all disputes through
joint cooperation and consultation. Any dispute, alleged breach, interpretation,
challenge or disagreement whatsoever arising out of this Agreement (or any other
agreement to the extent incorporated herein by reference) that the parties are
unable to settle within sixty (60) days, as set forth in the preceding sentence,
shall be resolved by final and binding arbitration before a single arbitrator
selected and serving under the Commercial Arbitration Rules of the American
Arbitration Association. The arbitration shall be held in New York City, unless
another location is mutually agreed upon by the parties to such arbitration.
Such arbitration shall be the exclusive remedy hereunder. The decision of the
arbitrator may, but need not, be entered as a judgment in accordance with the
provisions of the laws of the State of New York. If this arbitration provision
is for any reason held to be invalid or otherwise inapplicable to any dispute,
the parties hereto agree that any action or proceeding brought with respect to
any dispute arising under this Agreement, or to interpret or clarify any rights
or obligations arising hereunder, shall be maintained solely and exclusively in
the Courts of the State of New York venued in New York County.
2. Determination of Fair Market Value. Anything set forth in
the foregoing paragraph notwithstanding, the Members agree that the exclusive
procedure for resolving disputes over the determination of Fair Market Value
shall be as set forth in Section I(1)(C) of this Agreement. All Members and the
Company shall be bound by the determination of Fair Market Value made in
accordance therewith. Accordingly, the Members agree that no arbitration, or
action or proceeding in any court or other tribunal, shall be brought with
respect to any dispute over the determination of Fair Market Value, however, the
Members agree that
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an interpretation of the process in which the Fair Market Value is determined
may be subject to arbitration.
XI. NON-COMPETITION
1. Except with the prior written consent of the Managers, in
their sole discretion, no Member shall, while a Member of the Company or for 12
months following termination of membership for any reason, be an officer,
director, agent, committee-member of, or have a direct or indirect 2% or greater
equity interest in, any business operating within a radius of five (5) miles of
(a) any Company facility, if such business engages in the management (whether
directly or as a contract vendor) of one or more health-care delivery systems
(e.g., health maintenance organizations, independent practice organizations,
preferred practice organizations, third-party administrators, or other like
organizations) that include occupational medical services of the nature to be
arranged by the Company or (b) any PSCM facility, if such business engages in
the management (whether directly or as a contract vendor) of one or more
health-care delivery systems that include physical and/or occupational therapy
and rehabilitation services; except that the foregoing restriction shall not
prohibit any business activity of PSCM, or any Members' activities in or with
respect to the current or prospective business of PSCM.
2. The Members intend that this Section be enforced to the
fullest extent permissible under applicable law and by injunctive or other
appropriate equitable relief. If any portion of this Section is found to be
unenforceable, the Members intend that the remaining provisions shall be fully
enforced upon their terms.
3. Each Member agrees that this Section is fair and
reasonable, and that this Section will not unfairly or unreasonably restrict
such Member's ability to earn a living or pursue his/her chosen career or
profession.
XII. MISCELLANEOUS
The Members hereby agree that the Company shall, to the extent
geographical limitations would not preclude same, contract exclusively with PSCM
and/or an affiliate of PSCM for the following services: (a) functional capacity
evaluations; (b) work assessment testing; (c) physical and occupational therapy
services; and (d) work conditioning.
XIII. AMENDMENTS
This Agreement may be amended only by both the affirmative
vote of the holders of 51% of the Class A Units (or such higher percentage as
may be required for such amendment pursuant to Section 402(e) of the LLCL) and
the affirmative vote of all of the Class A Units held by the Founding Members.
By entering their signatures in the spaces indicated below, each Member of the
Company hereby consents to the adoption of this Agreement as and for the
Operating Agreement of PROFESSIONAL WORK CARE, L.L.C.
PROFESSIONAL SPORTS CARE
MANAGEMENT, INC.
By:
- - -------------------------------- ----------------------------------
HUNTER GIROUX Russell F. Warren, Jr.
President
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SCHEDULE A
Members of the Company
Date of Original Schedule A: February 12, 1996
Date of Latest Revision: N/A
Capital
Class A Members Units Contribution
Founding Members
Professional Sports Care 10,000 $100.00
Management, Inc.
Hunter Giroux 130,000 Services rendered
to the Company
in connection
with the
formation and
operation of its
business.
Total 140,000
PROMISSORY NOTE
$789,000.00 February 9, 1996
FOR VALUE RECEIVED, PROFESSIONAL SPORTS CARE MANAGEMENT, INC., a
Delaware corporation, having an address at 550 Mamaroneck Avenue, Harrison, New
York 10528 ("Maker"), hereby covenants and promises to pay to FRANK PAVLISKO,
P.T., having an address at 160 Hanover Avenue, Morristown, New Jersey 07982
(hereinafter referred to as the "Payee"), or order, at the Payee's business
address first above written or at such other address as Payee may designate in
writing, Seven Hundred Eighty-Nine Thousand and 00/100 Dollars ($789,000.00),
lawful money of the United States of America, with interest thereon at the rate
of six percent (6%) per annum.
Principal and accrued interest under this Note shall be due and
payable in twenty (20) quarterly installments. Payment of the first (1st)
installment payment shall be made on April 1, 1996, and the remaining nineteen
(19) payments being made quarterly thereafter. Each installment payment shall be
made by Maker by the deliver of one (1) check in the amount of the installment
due payable to the Payee.
In the event that certain Employment Agreement dated the date hereof
between Maker and Payee is terminated in accordance with the terms contained in
paragraph 7(a) therein for other than the death or disability (i.e., a physical
or mental condition of such severity and probable prolonged duration as to cause
Payee to be unable to continue his duties under the Employment Agreement) of
Payee, Maker shall from and after such date automatically be released from any
and all obligations under this Note, and this Note shall be deemed null and void
and of no further force and effect.
I. Default.
Maker agrees that upon an Event of Default, as defined herein, the
entire indebtedness due under this Note shall, at the option of the Payee,
accelerate and become immediately due and payable without demand or notice of
any kind. Notwithstanding anything to the contrary contained herein, Maker
further agrees that the unpaid balance hereof shall bear interest at a fixed per
annum rate of the lesser of thirteen percent (13%) or the highest lawful rate
permitted under applicable law.
For purposes of this Note, an Event of Default shall mean:
A. The failure by Maker to pay any installment of principal due
under this Note within ten (10) days after notice from the Payee
that such installment has not been paid as of the date provided
for herein;
B. The filing of an application by Maker for a consent to the
appointment of a receiver, trustee or liquidator of itself or of
all of its assets; or the filing by Maker of a voluntary petition
in bankruptcy or the filing of a pleading in any court of record
admitting in writing its inability to pay its debts as they may
become due; or the making by Maker of a general assignment for
the benefit of creditors; or the filing by Maker of an answer
admitting the material allegations of or consenting to or
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defaulting in answering a petition filed against it in any
bankruptcy proceeding; or
C. There shall be commenced against the Maker or any of its
subsidiaries any case, proceeding or other action of a nature
referred to in clause B. of this Section I., which (a) results in
the final entry of an order for relief or any such adjudication
or appointment, or (b) remains unstayed, undismissed,
undischarged or unbonded for a period of ninety (90) days.
II. Notice.
Any notice, request or other communication required or permitted to be
given under any of the provisions of this Note shall be in writing and shall be
deemed given on the date the same is sent by certified or registered mail,
return receipt requested, postage prepaid and addressed to the party for which
intended at its address first set forth above.
III. Subordination.
Anything in this Note to the contrary notwithstanding, the Payee by
its acceptance of this Note, for itself, its successors and assigns, covenants
and agrees, and each holder of this Note by his acceptance thereof, whether upon
original issue or upon transfer, assignment or exchange, likewise covenants and
agrees, expressly for the benefit of the present and future holders of Senior
Indebtedness, that the right of payment of principal of and interest, if any, on
this Note is hereby expressly subordinated and made subject to the prior payment
in full of all Senior Indebtedness and to all other rights of any Institutional
Lender under or in respect of any Senior Indebtedness.
"Senior Indebtedness" shall mean the principal of and premium, if any,
and the interest on all indebtedness of Maker arising out of any loans made by
any Institutional Lender to Maker or made to others and guaranteed, directly or
indirectly, by Maker, now existing or hereafter incurred, and all renewals,
replacements, consolidations, amendments and extensions thereof and to all
advances made or to be made thereunder and to the interest thereon, all in the
ordinary course of business.
"Institutional Lender" shall mean a bank, a savings and loan
association, a regulated insurance company, a trust company, a pension trust, a
pension or welfare fund, a college or university or any similar lending
institution.
IV. Miscellaneous.
A. Prepayment. Maker shall have the right to prepay the indebtedness
evidenced by this Note, in whole or in part, without penalty, upon ten (10) days
prior written notice to Payee.
B. Course of Dealing. No delay or omission by Payee in exercising any
right hereunder, nor failure by Payee to insist upon the strict performance of
any terms herein, shall operate as a waiver of such right, any other right
hereunder, or any terms herein. No waiver of any right shall be effective unless
in writing and signed by Payee, nor shall a
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waiver on one occasion be constituted as a bar to, or waiver of, any
such right on any future occasion.
C. Amendments. This Note may be amended or varied only by a document,
in writing, of even or subsequent date hereof, executed by Maker and Payee.
D. Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of New Jersey.
E. Successors and Assigns, Survival. This Note shall be binding upon
the Maker and its successors and assigns, and shall inure to the benefit of and
be enforceable by Payee and their heirs, executors, administrators, successors
and assigns. In the event of a Change in Control, as said term is defined in the
Employment Agreement, Maker will require the successor to Maker to expressly
assume the obligations hereunder. If Payee should die while any amount would
still be payable to Payee hereunder, all such amounts shall be paid in
accordance with the terms of this Note to Payee's devisee, legatee or other
designee or, if there is no such designee, to Payee's estate.
F. Severability. The invalidity or unenforceability of any provision
of this Note shall not effect the validity or enforceability of any other
provision.
G. Headings. The descriptive headings in this Note are for convenience
of reference only, and shall not be deemed to affect the meaning or construction
of any of the provisions hereof.
H. Capitalized Terms. All capitalized terms not defined herein have
the same meaning as such terms have when used in the Stock Purchase Agreement
dated February 9, 1996, between Maker and Payee.
I. Waivers. Maker hereby waives diligence, demand, presentment for
payment, notice of nonpayment, protest and notice of protest, except as
otherwise expressly provided herein.
IN WITNESS WHEREOF, Maker has executed this Note on the date first
above written.
PROFESSIONAL SPORTS CARE
MANAGEMENT, INC.
ATTEST:
- - ------------------------------ ---------------------------------
ANDREW W. BANK RUSSELL F. WARREN, JR.
Assistant Secretary President
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PROMISSORY NOTE
$875,000.00 February 20, 1996
FOR VALUE RECEIVED, PROFESSIONAL SPORTS CARE MANAGEMENT, INC.,
a Delaware corporation, having an address at 550 Mamaroneck Avenue, Harrison,
New York 10528 ("Maker"), hereby covenants and promises to pay to NEUROSURGERY
ASSOCIATES OF NORTHWEST CONNECTICUT, a Connecticut corporation, having an
address at 500 Chase Parkway, Waterbury, Connecticut 06708 (hereinafter referred
to as the "Payee"), or order, at the Payee's business address first above
written or at such other address as Payee may designate in writing, Eight
Hundred Seventy- Five Thousand and 00/100 Dollars ($875,000.00), lawful money of
the United States of America, with interest thereon at the rate of six percent
(6%) per annum.
Principal and accrued interest under this Note shall be due
and payable in twenty (20) quarterly installments. Payment of the first (1st)
installment shall be made on April 1, 1996, and the remaining nineteen (19)
payments being made quarterly thereafter.
I. Default.
Maker agrees that upon an Event of Default, as defined herein,
the entire indebtedness due under this Note shall, at the option of the Payee,
accelerate and become immediately due and payable without demand or notice of
any kind. Notwithstanding anything to the contrary contained herein, Maker
further agrees that the unpaid balance hereof shall bear interest at a fixed per
annum rate of the lesser of thirteen percent (13%) or the highest lawful rate
permitted under applicable law.
For purposes of this Note, an Event of Default shall mean:
A. The failure by Maker to pay any installment of
principal due under this Note within ten (10) days
after notice from the Payee that such installment has
not been paid as of the date provided for herein;
B. The filing of an application by Maker for a consent
to the appointment of a receiver, trustee or
liquidator of itself or of all of its assets; or the
filing by Maker of a voluntary petition in bankruptcy
or the filing of a pleading in any court of record
admitting in writing its inability to pay its debts
as they may become due; or the making by Maker of a
general assignment for the benefit of creditors; or
the filing by Maker of an answer admitting the
material allegations of or consenting to or
defaulting in answering a petition filed against it
in any bankruptcy proceeding; or
C. There shall be commenced against the Maker or any of
its subsidiaries any case, proceeding or other action
of a nature referred to in clause B. of this Section
I., which (a) results in the final entry of an order
for relief or any such adjudication or appointment,
or (b) remains unstayed, undismissed, undischarged or
unbonded for a period of ninety (90) days.
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II. Notices.
Any notice, request or other communication required or
permitted to be given under any of the provisions of this Note shall be in
writing and shall be deemed given on the date the same is sent by certified or
registered mail, return receipt requested, postage prepaid and addressed to the
party for which intended at its address first set forth above.
III. Subordination.
Anything in this Note to the contrary notwithstanding, the
Payee by its acceptance of this Note, for itself, its successors and assigns,
covenants and agrees, and each holder of this Note by his acceptance thereof,
whether upon original issue or upon transfer, assignment or exchange, likewise
covenants and agrees, expressly for the benefit of the present and future
holders of Senior Indebtedness, that the right of payment of principal of and
interest, if any, on this Note is hereby expressly subordinated and made subject
to the prior payment in full of all Senior Indebtedness and to all other rights
of any Institutional Lender under or in respect of any Senior Indebtedness.
"Senior Indebtedness" shall mean the principal of and premium,
if any, and the interest on all indebtedness of Maker arising out of any loans
made by any Institutional Lender to Maker or made to others and guaranteed,
directly or indirectly, by Maker, now existing or hereafter incurred, and all
renewals, replacements, consolidations, amendments and extensions thereof and to
all advances made or to be made thereunder and to the interest thereon.
"Institutional Lender" shall mean a bank, a savings and loan
association, a regulated insurance company, a trust company, a pension trust, a
pension or welfare fund, a college or university or any similar lending
institution.
IV. Miscellaneous.
A. Prepayment. Maker shall have the right to prepay the
indebtedness evidenced by this Note, in whole or in part, without penalty, upon
ten (10) days prior written notice to Payee.
B. Course of Dealing. No delay or omission by Payee in
exercising any right hereunder, nor failure by Payee to insist upon the strict
performance of any terms herein, shall operate as a waiver of such right, any
other right hereunder, or any terms herein. No waiver of any right shall be
effective unless in writing and signed by Payee, nor shall a waiver on one
occasion be constituted as a bar to, or waiver of, any such right on any future
occasion.
C. Amendments. This Note may be amended or varied only by a
document, in writing, of even or subsequent date hereof, executed by Maker and
Payee.
D. Governing Law. This Note shall be governed by and construed
in accordance with the laws of the State of Connecticut.
E. Successors and Assigns, Survival. This Note shall be
binding upon the Maker and its successors, and shall inure to the benefit of
Payee and their heirs, executors, administrators, successors and assigns. Payee
shall have the right to assign this Note without Maker's consent.
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F. Severability. The invalidity or unenforceability of any
provision of this Note shall not effect the validity or enforceability of any
other provision.
G. Headings. The descriptive headings in this Note are for
convenience of reference only, and shall not be deemed to affect the meaning or
construction of any of the provisions hereof.
H. Capitalized Terms. All capitalized terms not defined herein
have the same meaning as such terms have when used in the Agreement of Sale.
I. Waivers. Maker hereby waives diligence, demand, presentment
for payment, notice of nonpayment, protest and notice of protest, except as
otherwise expressly provided herein.
IN WITNESS WHEREOF, Maker has executed this Note on the date
first above written.
PROFESSIONAL SPORTS CARE
MANAGEMENT, INC.
ATTEST:
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PATRICK J. WACK, JR. RUSSELL F. WARREN, JR.
Secretary President
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LIMITED PARTNERSHIP AGREEMENT
OF
PROFESSIONAL SPORTS CARE HUNTINGTON, L.P.
THIS AGREEMENT is made as of the 16th day of March, 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 JOE CAPOBIANCO with an address at 33 Walt
Whitman Road, Suite 118, Huntington, New York 11746 and GEORGE PAPADOPOULOS with
an address at 15 West 44th Street, 3rd Floor, New York, New York 10036 and ROB
PANARIELLO with an address at 333 Earle Ovington Boulevard, Uniondale, New York
11553 and GREG FRANCESCHINI with an address at 368 Lakehurst Road, Toms River,
New Jersey 08763 (hereinafter collectively referred as "Limited Partner"). The
General Partner and the Limited Partner are hereinafter sometimes collectively
referred to as the "Partner" or individually as a "Partner".
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 HUNTINGTON, 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 HUNTINGTON, L.P. (hereinafter referred to as the "Partnership"). The
principal office of the Partnership shall be maintained at 33 Walt Whitman Road,
Huntington, New York 11743. The mailing address shall be at 550 Mamaroneck
Avenue, Suite 308, 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
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.
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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
February 28, 2046, 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 Partner shall be JOE CAPOBIANCO, GEORGE
PAPADOPOULOS, ROB PANARIELLO and GREG FRANCESCHINI.
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 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.
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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 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
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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
value of such interest as of the date of removal of the General Partner which
value shall be determined pursuant to Section 3.1.3 by the then independent
public accountant of the Partnership in accordance with generally accepted
accounting principles. 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.
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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 Partner has made the following initial Capital Contribution to the
Partnership:
JOE CAPOBIANCO $20,500.00
GEORGE PAPADOPOULOS $20,000.00
ROB PANARIELLO $15,000.00
GREG FRANCESCHINI $ 4,500.00
3.1.2 JOE CAPOBIANCO, as the Limited Partner has a 27.33%
interest in the Partnership, GEORGE PAPADOPOULOS, as the Limited Partner has
26.67% interest in the Partnership, ROB PANARIELLO, as the Limited Partner has a
20% interest in the Partnership and GREG FRANCESCHINI, as a Limited Partner has
a 6% interest in the Partnership.
3.1.3 The General Partner shall have the right, at any time
from and after the first anniversary of the filing of the Certificate of Limited
Partnership, to purchase the interests of one or more of the Limited Partners in
the Partnership. Such right shall be exercised by the 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
amount determined by the then independent public accountant of the Partnership
by valuing the Partnership at four (4) times the earnings before interest and
taxes, as defined by generally accepted accounting principles and in a manner
consistent with other similar operations of the General Partner, from the
immediately prior twelve (12) month period
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multiplied by 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, 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
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 60 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.
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3.3.2 Primary Option to Purchase Within 60 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 70 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 granted and who exercises a Primary Option
may within ten days after the expiration of the 70 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."
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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 than 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 guardian or conservator of an
incompetent Partner), the Partnership or the remaining Partners, within 70 days
of the Partnership's receipt of actual notice of the transfer in the case of a
Primary Option and within 80 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
(Intentionally Omitted).
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 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
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3.3, the interest may be transferred within ten days after the expiration of the
80 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 80 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 shall be determined in the same manner or valuation of a General
Partner interest under Section 2.6(B) and a Limited Partner interest under
Section 3.1.3.
Section 3.8 Payment of Purchase Price
The payment of a purchase price for an interest hereunder,
other than pursuant to Section 3.1.3, 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 selfamortizing five (5) year note at the then lowest applicable
federal interest rate as defined in ss.1274 of the Internal Revenue Code. The
payment of a purchase price for an interest under Section 3.1.3 shall be paid in
cash upon the date of such transfer.
Section 3.9 Transfer to Immediate Family Members
Notwithstanding any other provision of this Agreement the
Limited Partner may transfer his interest in the limited partnership
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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 $15,000.00 initial Capital Contribution to the
Partnership.
4.1.2 The General Partner has a 20% interest in the
Partnership.
4.1.3 The General Partner shall make a loan to the
Partnership of up to One Hundred Fifty Thousand Dollars ($150,000.00) upon the
execution of this Agreement. The amount of such loan shall be repaid by the
Partnership upon the demand of the General Partner with interest to be charged
at the rate of seven (7%) percent per annum. The form of Promissory Note to be
executed by the Partnership in connection with said loan is attached hereto as
Exhibit A.
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
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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
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
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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;
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
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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
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
his Partnership interest to additional 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
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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 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
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Partners or a designated representative thereof sending a notice to that effect
to all Partners 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 3.6.
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.
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
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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 B below, shall be allocated 80% 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 20%
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),
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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 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
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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, 80% 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 20% 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.
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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 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 - 80%
(2) To the General Partner - 20%
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 Partners so entitled.
The fair market value of such assets shall be determined by the General Partner.
CAPITAL ACCOUNTS
Section 6.4 General Rules
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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 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
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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.
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
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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.
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
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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 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.
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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 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 an
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.
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 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.
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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.
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
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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;
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 not be amended or modified except by the
General Partner with 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 9.13; (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
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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 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 one
(1) year after the later to occur of a Limited Partner's or such Limited
Partner's Immediate Family Member's relationship with the Partnership ceases,
the original Limited Partner, other than Joe Capobianco, (i.e., George
Papadopoulos, Rob Panariello and Greg Franceschini) 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 one (1) mile from 33 Walt Whitman Road, Huntington, New
York and original Limited Partner Joe Capobianco shall not (as an employee,
owner, partner, agent, shareholder, director or officer, or otherwise), directly
or indirectly, without the prior consent of the Partnership, do any of the
following within two (2) miles from 33 Walt Whitman Road, Huntington, 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
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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 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.
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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.
WITNESS, the execution hereof under seal as of the 16th day of
March, 1996.
PROFESSIONAL SPORTS CARE
MANAGEMENT, INC.
ATTEST: General Partner
By:
- - ---------------------------------- -----------------------------------
PATRICK J. WACK, JR. RUSSELL F. WARREN, JR.
Secretary President
- - ---------------------------------- -----------------------------------
Witness JOE CAPOBIANCO
Limited Partner
- - ---------------------------------- -----------------------------------
Witness GEORGE PAPADOPOULOS
Limited Partner
- - ---------------------------------- -----------------------------------
Witness ROB PANARIELLO
Limited Partner
- - ---------------------------------- -----------------------------------
Witness GREG FRANCESCHINI
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 10th day of April, 1996, by and between
PROFESSIONAL SPORTS CARE MANAGEMENT, INC. a Delaware corporation, with offices
at 550 Mamaroneck Avenue, Harrison, New York 10528 ("Management") and BRETT
RICHMAN PT, P.C., a New York professional corporation with offices at 5402
Avenue N, Brooklyn, New York 11234 ("P.C.").
WHEREAS, P.C. is in the business of providing physical therapy
and other rehabilitative and therapeutic services to its patients and clients;
and
WHEREAS, 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 nonprofessional 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.
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 P.C. and to render such further non-professional
services to, or for the benefit of P.C. as shall be hereinafter described in
this Agreement. Management hereby accepts such engagement and
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agrees to exert and furnish customary levels of skill, judgment, effort and care
in furthering the interests of P.C. in the management of the day-to-day
non-professional operations of P.C. and in rendering such further
non-professional services to, or for the benefit of 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 April 10, 1996 and shall automatically renew for
additional one (1) year increments unless terminated in accordance with
Paragraph 8 of this Agreement.
2. REPRESENTATIONS AND WARRANTIES.
2.1 Representations and Warranties of P.C.
P.C. represents and warrants to Management that:
2.1.1 Due Organization; Good Standing; Power.
P.C. is a professional corporation duly organized, validly
existing, and in good standing under the laws of the State of New York. 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
P.C. has been duly and validly authorized by P.C. This Agreement has been duly
executed and delivered by P.C. and is a legal, valid and binding obligation of
P.C. fully enforceable against 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 P.C. that:
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2.2.1 Due Organization; Good standing; Power.
Management is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Delaware and is authorized
to do business in 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 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 Brooklyn, New York. Those officers of 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
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Accounts by the Authorized Signatories shall be signed in a representative
capacity as the authorized representative of 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 P.C. during the term of
this Agreement, Management shall have exclusive authority and the obligation and
duty to manage and administer the non-professional operations of 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 P.C.'s
non-professional personnel, if any, with respect to computing the amount of,
generating, and, in the name of P.C., issuing and mailing by first-class United
States mail, billing statements (the "Bills") to all patients and/or clients of
P.C. for whom P.C. has provided services. When and if appropriate, Management
shall also assist in, subject to the control of 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 P.C., the collection of all monies owed to
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 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
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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 P.C. The legal expenses incurred as a
result of any such assistance or action shall be paid by P.C.
4.2 Payment of Expenses.
The costs and expenses that shall be paid by P.C. hereunder
shall include compensation of all physical therapists and physical therapy
assistants employed by 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 P.C. pursuant to Paragraph d of Schedule B of this
Agreement.
4.3 Financial Records.
Subject to 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 P.C., and all
matters relating thereto, and all such records shall be available for inspection
by P.C. and P.C.'s representatives at all reasonable times. Management shall
prepare and deliver the following to 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
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preceding the calendar year with respect to which the Annual Report was prepared
and submitted. Management shall coordinate the preparation of all P.C. tax
returns and respond to all audits of 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 P.C.
shall be paid either directly by P.C. or by Management from P.C.'s funds within
the Operating Accounts.
4.4 Operation and Regulatory Reports.
Management shall deliver to P.C. a monthly report which lists
all patients of P.C., utilization of services provided by P.C. and contains such
other and further information as P.C. may reasonably request. Management shall
timely assist 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 P.C., P.C.'s properties, assets or business (or any business
of Management which relates to Management's management of P.C.). 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 P.C. in administration and processing
of all disputes, grievances and complaints between P.C. and all third parties,
subject at all times to the review and final approval of P.C.
4.6 Budget.
Management shall prepare a written annual budget (the
"Budget") for 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 P.C. for acceptance,
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rejection or modification, within thirty (30) days prior to the commencement of
each of 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) P.C., insurance of such kinds, in such amounts, with such
companies and on such terms and conditions as P.C. shall determine in the
exercise of its reasonable judgment. All such policies shall name Management and
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 P.C.'s
business, Management shall promptly notify P.C. of any material changes which
may occur in, relevant Laws of any Government or Governmental Agency having
jurisdiction over P.C., its properties, assets, agents or business. The
foregoing shall not in any way limit 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 P.C., Management shall adopt
procedures that shall assure maximum confidentiality to the records of P.C. and
shall comply with the applicable laws of all Governments and Governmental
Agencies relating to the records of 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
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connected with the administration of this Agreement or when required or
permitted by applicable law and in any case, only with the consent of P.C.
4.10 Location of Operations.
Management shall perform its management and administrative
services for P.C. at and from offices of P.C. and Management.
4.11 Contracts with Patients.
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.
4.12 Contract Compliance.
Management shall, for and on behalf of P.C., assist in the
compliance with the provisions of all contracts and other agreements to which
P.C. is or becomes a party during the term of this Agreement. 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 P.C. with access to all Management facilities applicable to professional
services provided by P.C. and to the books and records of P.C. Management shall
respond promptly to all reasonable requests by P.C. for information, documents
or data.
4.14 Marketing.
Management shall advertise, promote and market P.C. in
accordance with Section 6 of this Agreement.
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4.15 Upon the termination or expiration of the term of this
Agreement, Management shall deliver to 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 P.C. Within 29 days after such
expiration or termination Management shall render a final accounting and
statement to P.C.
5. EMPLOYEES AND INDEPENDENT CONTRACTORS.
All non-professionally licensed persons, 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 P.C.
(collectively, the "Management Employees") shall be employees of or independent
contractors engaged by Management.
6. LICENSING, MARKETING AND PROMOTION.
Management hereby grants to 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 P.C.'s business at such
locations (the "Facilities"), and the right and license to operate its business
at the Facilities. In connection therewith, P.C. agrees to pay the fixed rental
amounts set forth in paragraphs (a) and (b) of Schedule B hereto. The failure of
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 P.C. the right and license to use the name
"Professional Sports Care" in connection with the Facilities and with the
operation of P.C.'s business therein. 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 co-
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extensive with the term of this Agreement. Nothing herein shall give P.C. any
right, title or interest in the licensed name or Facilities except the right to
use the license name and Facilities in accordance with the terms of this
Agreement.
Subject to all times to the direction, review and final
approval of P.C., Management shall exert reasonable commercial efforts to seek
new business for P.C. and to advertise, promote and market or cause to be
advertised, promoted and marketed, P.C.'s services through any and all media
determined to be beneficial to P.C.'s business and consistent with the
applicable laws and regulations governing 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 P.C. in connection with the Promotion Campaign prior to implementing each
part thereof.
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 P.C. therein: "Facility," "Institution," "Clinic" or
"Center" or any other words that could cause the appropriate regulatory bodies
to deem 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 P.C. shall not generate adequate revenues
to timely compensate Management as provided hereinabove, Management may, in its
discretion, advance amounts required to meet P.C.'s ongoing operating expenses
for P.C.'s benefit. Such
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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 P.C. may terminate this Agreement, with or
without cause, upon ninety (90) days' prior notice to the other party.
9. INDEMNIFICATION.
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 P.C., its agents, servants, employees and
independent contractors whether or not in connection with the services to be
exclusively provided by P.C. under this Agreement; and (b) any breach of or
default of P.C. under any covenant, promise, agreement, representation or
warranty set forth in this Agreement.
Management shall indemnify and hold harmless 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.
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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 P.C. of any covenants,
promises, agreements, representations and warranties provided by this Agreement,
and the failure of Management or 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 P.C. or Management of a petition
commencing a voluntary case under the federal bankruptcy law; a general
assignment by either P.C. or Management for the benefit of creditors; an
admission in writing by either P.C. or Management of its inability to pay its
debts as they become due; the filing by either 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 P.C. or Management of 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 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 P.C. or Management, of an
involuntary case under the Bankruptcy Code, or a proceeding under any
receivership, composition, readjustment, liquidation, insolvency,
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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 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. 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:
12.1 If to Management:
Professional Sports Care Management, Inc.
550 Mamaroneck Avenue
Harrison, New York 10528
Attention: Mr. Russell F. Warren, Jr.
with copy to:
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Andrew W. Bank, Esq.
Gould & Wilkie
One Chase Manhattan Plaza
New York, New York 10005
13.2 If to P.C.:
Brett Richman PT, P.C.
5402 Avenue N
Brooklyn, New York 11234
Attention: Brett Richman, PT
with a copy to:
Steven Chudnow, Esq.
Schulte Roth & Zabel
900 Third Avenue
New York, New York 10022
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.
13. 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.
14. ENTIRE AGREEMENT; MODIFICATION.
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,
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discharged or terminated orally, but only by an instrument in
writing signed by the parties hereto.
15. 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.
16. ASSIGNABILITY.
This Agreement shall not be assignable by P.C. without the
prior written consent of Management.
17. BINDING EFFECT; BENEFIT.
This Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors. Nothing in this
Agreement, express or implied, is intended to confer upon any other person or
entity any rights, remedies, obligations or liabilities.
18. GENERAL.
18.1 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.
18.2 Governing Law.
This Agreement shall be construed and performed in accordance
with, and governed by, the laws of the State of New York.
18.3 Invalidity of Sections.
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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.
18.4 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.
18.5 Counterparts.
This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original.
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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: BRETT RICHMAN PT, P.C.
By______________________ By_____________________________
Secretary President
ATTEST: PROFESSIONAL SPORTS CARE
MANAGEMENT, INC.
By_______________________ By______________________________
PATRICK J. WACK, JR RUSSELL F. WARREN, JR.
Secretary President
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EXHIBIT A
AUTHORIZED SIGNATORIES
Russell F. Warren, Jr.
Patrick J. Wack, Jr.
Brett Richman, PT
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SCHEDULE A
LIST OF FACILITIES PURSUANT TO PARAGRAPH 6
OF THE MANAGEMENT AND LICENSE AGREEMENT
1. Location: 5402 Avenue N
Brooklyn, New York
2. Location: 1390 Pennsylvania Avenue
Brooklyn, New York
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SCHEDULE B
SCHEDULE OF COMPENSATION DUE MANAGEMENT
UNDER SECTION 7 OF THE 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
$168,000.00 per year.
b) Fixed Rental of furniture, fixtures and equipment provided
to the Facilities in the amount of $50,000.00 per year.
c) A Management Fee of $375,000.00 per year, payable in equal
monthly installments of $31,250.00 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 52,000 patient treatments per year by P.C. To the
extent that 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 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 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.
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f) A monthly License Fee of $4,200.00 for the license of the
name granted to P.C. in Paragraph 6 of the Agreement.
MANAGEMENT AND LICENSE AGREEMENT
THIS MANAGEMENT AND LICENSE AGREEMENT (the "Agreement") is made and
entered into as of this 17th day of April, 1996, by and between PROFESSIONAL
SPORTS CARE HUNTINGTON, L.P., a New York limited partnership, with offices at
550 Mamaroneck Avenue, Harrison, New York 10528 ("Management") and ROBERT
PANARIELLO, PT, P.C., a New York Professional Corporation with offices at Nassau
West Omni, 333 Earl Ovington Boulevard, Uniondale, New York ("Panariello, PT,
P.C.").
WHEREAS, Panariello, PT, P.C. is in the business of providing physical
therapy and other rehabilitative and therapeutic services to its patients and
clients at 33 Walt Whitman Road, Huntington, New York (the "Facility"); and
WHEREAS, Panariello, 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.
Panariello, 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
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operations of Panariello, PT, P.C. and to render such further
non-professional services to, or for the benefit of Panariello, 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 Panariello, PT, P.C. in the
management of the day-to-day non-professional operations of Panariello, PT, P.C.
and in rendering such further non-professional services to, or for the benefit
of Panariello, 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
April 17, 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 Panariello, PT, P.C.'s operations at the Facility.
2. REPRESENTATIONS AND WARRANTIES.
2.1 Representations and Warranties of Panariello, PT, P.C. Panariello,
PT, P.C. represents and warrants to Management that:
2.1.1 Due Organization; Good Standing; Power.
Panariello, PT, P.C. is a professional corporation duly organized,
validly existing, and in good standing under the laws of the State of New York.
Panariello, 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.
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The execution, delivery and performance of this Agreement by
Panariello, PT, P.C. has been duly and validly authorized by Panariello, PT,
P.C. This Agreement has been duly executed and delivered by Panariello, PT, P.C.
and is a legal, valid and binding obligation of Panariello, PT, P.C. fully
enforceable against Panariello, 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 Panariello, PT, P.C. that:
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 Panariello, 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
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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 Long Island, New York. Those officers of Panariello, 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 Panariello, 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 Panariello, PT, P.C. during the
term of this Agreement, Management shall have exclusive authority and the
obligation and duty to manage and administer the non-professional operations of
Panariello, 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 Panariello, PT, P.C.'s
nonprofessional personnel, if any, with respect to computing the amount of,
generating, and, in the name of Panariello, PT, P.C., issuing and mailing by
first-class United States mail, billing statements (the "Bills") to all patients
and/or clients of Panariello, PT, P.C. for whom Panariello, PT, P.C. has
provided services. When and if appropriate, Management shall also assist in,
subject to the control of Panariello, PT, P.C., the provision of Bills together
with
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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 Panariello, PT, P.C., the collection of all monies
owed to Panariello, 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 Panariello, 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 Panariello, 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 Panariello, PT, P.C. The legal expenses
incurred as a result of any such assistance or action shall be paid by
Panariello, PT, P.C.
4.2 Payment of Expenses.
The costs and expenses that shall be paid by Panariello, PT, P.C.
hereunder shall include compensation of all physical therapists and physical
therapy assistants employed by Panariello, 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
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connection with this management agreement shall be paid by Panariello,
PT, P.C. pursuant to Paragraph 7(d) of this Agreement.
4.3 Financial Records.
Subject to Panariello, 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
Panariello, PT, P.C., and all matters relating thereto, and all such records
shall be available for inspection by Panariello, PT, P.C. and Panariello, PT,
P.C.'s representatives at all reasonable times. Management shall prepare and
deliver the following to Panariello, 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 Panariello, PT, P.C. tax returns and respond to all audits of
Panariello, 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 Panariello, PT, P.C. shall be
paid either directly by Panariello, PT, P.C. or by Management from Panariello,
PT, P.C.'s funds within the Operating Accounts. Robert Panariello, PT shall
arrange for the preparation of his personal tax returns and make all payments
for any expenses incurred in connection therewith.
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4.4 Operation and Regulatory Reports.
Management shall deliver to Panariello, PT, P.C. a monthly report
which lists all patients of Panariello, PT, P.C., utilization of services
provided by Panariello, PT, P.C. and contains such other and further information
as Panariello, PT, P.C. may reasonably request. Management shall timely assist
Panariello, 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 Panariello, PT, P.C., Panariello, PT, P.C.'s properties,
assets or business (or any business of Management which relates to Management's
management of Panariello, PT, P.C.). Panariello 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 Panariello, PT, P.C. in administration and
processing of all disputes, grievances and complaints between Panariello, PT,
P.C. and all third parties, subject at all times to the review and final
approval of Panariello PT, P.C.
4.6 Budget.
Management shall prepare a written annual budget (the "Budget") for
Panariello, 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 Panariello, PT, P.C. for acceptance, rejection or
modification, within thirty (30) days prior to the commencement of each of
Panariello, PT, P.C.'s calendar years. The Budget shall delineate all management
and administrative costs and expenses.
4.7 Insurance.
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Management shall procure on behalf of (and with the prior written
approval of) Panariello, PT, P.C., insurance of such kinds, in such amounts,
with such companies and on such terms and conditions as Panariello, PT, P.C.
shall determine in the exercise of its reasonable judgment. All such policies
shall name Management and Panariello, 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 Panariello, PT,
P.C.'s business, Management shall promptly notify Panariello, PT, P.C. of any
material changes which may occur in, relevant Laws of any Government or
Governmental Agency having jurisdiction over Panariello, PT, P.C., its
properties, assets, agents or business. The foregoing shall not in any way limit
Panariello, 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 Panariello, PT, P.C., Management
shall adopt procedures that shall assure maximum confidentiality to the records
of Panariello, PT, P.C. and shall comply with the applicable laws of all
Governments and Governmental Agencies relating to the records of Panariello, 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 Panariello, PT, P.C.
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4.10 Location of Operations.
Management shall perform its management and administrative
services for Panariello, PT, P.C. at and from offices of Panariello, PT, P.C.
and Management.
4.11 Contracts with Patients.
Panariello, 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.
4.12 Contract Compliance.
Management shall, for and on behalf of Panariello, PT, P.C.,
assist in the compliance with the provisions of all contracts and other
agreements to which Panariello, PT, P.C. is or becomes a party during the term
of this Agreement. Panariello, 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 Panariello, PT, P.C. with access to all Management facilities applicable
to professional services provided by Panariello, PT, P.C. and to the books and
records of Panariello, PT, P.C. Management shall respond promptly to all
reasonable requests by Panariello, PT, P.C. for information, documents or data.
4.14 Marketing.
Management shall advertise, promote and market Panariello, PT,
P.C. in accordance with Section 6 of this Agreement.
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4.15 Upon the termination or expiration of the term of this
Agreement, Management shall deliver to Panariello, 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 Panariello, PT, P.C. Within 29
days after such expiration or termination Management shall render a final
accounting and statement to Panariello, PT, P.C.
5. EMPLOYEES AND INDEPENDENT CONTRACTORS.
All non-professionally licensed persons, 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
Panariello, PT, P.C. (collectively, the "Management Employees") shall be
employees of or independent contractors engaged by Management.
6. LICENSING, MARKETING AND PROMOTION.
Management hereby grants to Panariello, PT, P.C. the right and license
to use the office space leased by Management at the Facility in connection with
the operation of Panariello, PT, P.C.'s business at the Facility, and the right
and license to operate its business at the Facility. In connection therewith,
Panariello, PT, P.C. agrees to pay the fixed rental amounts set forth in
paragraphs (a) and (b) of Schedule A hereto. The failure of Panariello, PT, 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 Panariello, PT, P.C. the right and license
to use the name "Professional Sports Care" in connection with the Facility and
with the operation of Panariello, PT, P.C.'s business therein. Panariello, PT,
P.C. agrees to maintain the highest professional standards of
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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 Panariello, PT, P.C. any right, title or interest in
the licensed name or Facility except the right to use the license name and
Facility in accordance with the terms of this Agreement.
Subject to all times to the direction, review and final approval of
Panariello, PT, P.C., Management shall exert reasonable commercial efforts to
seek new business for Panariello, PT, P.C. and to advertise, promote and market
or cause to be advertised, promoted and marketed, Panariello, PT, P.C.'s
services through any and all media determined to be beneficial to Panariello,
PT, P.C.'s business and consistent with the applicable laws and regulations
governing Panariello, 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 Panariello,
PT, P.C. in connection with the Promotion Campaign prior to implementing each
part thereof.
Panariello, PT, 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 Panariello, PT, P.C. therein: "Facility,"
"Institution," "Clinic" or "Center" or any other words that could cause the
appropriate regulatory bodies to deem Panariello, PT, 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 A attached hereto.
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To the extent that Panariello, 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 Panariello, PT, P.C.'s
ongoing operating expenses for Panariello, 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 Panariello, PT, P.C. may terminate this Agreement, with
or without cause, upon ninety (90) days' prior notice to the other party.
9. INDEMNIFICATION.
Panariello, 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 Panariello, PT, P.C., its agents,
servants, employees and independent contractors whether or not in connection
with the services to be exclusively provided by Panariello, PT, P.C. under this
Agreement; and (b) any breach of or default of Panariello, PT, P.C. under any
covenant, promise, agreement, representation or warranty set forth in this
Agreement.
Management shall indemnify and hold harmless Panariello, 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,
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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 Panariello, PT, P.C. of any
covenants, promises, agreements, representations and warranties provided by this
Agreement, and the failure of Management or Panariello, 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 Panariello, PT, P.C. or Management of a petition
commencing a voluntary case under the federal bankruptcy law; a general
assignment by either Panariello, PT, P.C. or Management for the benefit of
creditors; an admission in writing by either Panariello, PT, P.C. or Management
of its inability to pay its debts as they become due; the filing by either
Panariello, 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 Panariello, PT, P.C. or Management of
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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 Panariello, 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 Panariello, 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 Panariello, 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 Panariello, 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
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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. Panariello, PT, P.C. also acknowledges and agrees
that Management's contacts and reputation in the physical therapy 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 Panariello, PT, P.C. Accordingly, Panariello, PT, P.C. and Robert
Panariello, PT, covenant that for a period of one (1) year after the termination
of this Agreement or any extensions thereof, or ceasing relationship with
Management, neither Panariello, PT, P.C. nor Robert Panariello, 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 one (1) mile from any of 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 Panariello, PT, P.C. or Robert Panariello, 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 Panariello
PT, P.C. or Robert Panariello, PT or any services which were rendered by
Management to or for the account of Panariello, PT, P.C. or Robert Panariello,
PT or to or for the benefit or account of any other person or entity.
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12.3 Solicit for employment or employ to or for the benefit or account
of Panariello, PT, P.C. or Robert Panariello, PT or to or for the benefit or
account of any other person or entity any employee of Management, nor shall
Panariello, PT, P.C. or Robert Panariello, 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.
12.5 The parties hereto agree that to the extent than 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 Panariello, PT, P.C. or Robert Panariello, PT
of the provisions of Paragraph 12 of this Agreement would cause irreparable
injury to Management,
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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 Panariello, PT, P.C. and Robert Panariello, 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 Panariello PT, P.C. exercise their option to cancel the Management
Agreement or when Robert Panariello, PT does not provide physical therapy
therapeutic services exclusively for Panariello, PT, P.C. or should Robert
Panariello, 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 tin 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:
13.1 If to Management:
Professional Sports Care Huntington, L.P.
c/o Professional Sports Care Management, Inc.
550 Mamaroneck Avenue
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
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13.2 If to Panariello, PT, P.C.:
Nassau West Omni
333 Earl Ovington Boulevard
Uniondale, New York 11553
Attention: Robert Panariello, PT
with a copy to:
Mr. Pat Martorella
Fisher & Martorella
99 Tulip Avenue
Floral Park, New York 11001
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.
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.
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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 Panariello, 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. 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.
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.
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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: ROBERT PANARIELLO, PT, P.C.
By______________________ By_____________________________
Secretary President
ATTEST: PROFESSIONAL SPORTS CARE
HUNTINGTON, L.P.
By: Professional Sports Care
Management, Inc., General
Partner
By_______________________ By ______________________________
PATRICK J. WACK, JR. RUSSELL F. WARREN, JR.
Secretary President
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EXHIBIT A
AUTHORIZED SIGNATORIES
Russell F. Warren, Jr.
Patrick J. Wack, Jr.
Michael P. Neuscheler
Robert Panariello, PT.
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SCHEDULE A
SCHEDULE OF COMPENSATION DUE MANAGEMENT
UNDER SECTION 7 OF THE RESTATED AND AMENDED MANAGEMENT
AND LICENSE AGREEMENT ("AGREEMENT")
a) Fixed Rental of Facility space and leasehold improvements, pursuant
to Paragraph 6 of the Agreement in the amount of $72,000.00 per year.
b) Fixed Rental of furniture, fixtures and equipment provided to the
Facility 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 Panariello,
PT, P.C. To the extent that Panariello, PT, 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 Panariello, PT, 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 Panariello, PT,
P.C. in the absolute
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discretion of Management, with a ten (10%) percent markup for overhead
and administration and a fifteen (15%) percent markup for profit on such costs.
f) A monthly License Fee of $0.00 for the license of the name granted
to Panariello, PT, P.C. in Paragraph 6 of the Agreement.
PROMISSORY NOTE
$245,000.00 April 22, 1996
FOR VALUE RECEIVED, PROFESSIONAL WORK CARE, L.L.C., a New York
limited liability company, having an address at 550 Mamaroneck Avenue, Harrison,
New York 10528 ("Maker"), hereby covenants and promises to pay to BUSINESS
HEALTHCARE, a professional corporation, having an address at 83 Wooster Heights
Road, Danbury, Connecticut 06810 (hereinafter referred to as the "Payee"), or
order, at the Payee's business address first above written or at such other
address as Payee may designate in writing, Two Hundred Forty Five Thousand and
00/100 Dollars ($245,000.00), lawful money of the United States of America. The
amount covered by this Note includes interest at the rate of eight (8%) percent
per annum on the unpaid principal balance.
Principal and interest under this Note shall be due and
payable as follows:
a. $40,833.33 on April 21, 1997;
b. $40,833.33 on April 21, 1998;
c. $40,833.34 on April 21, 1999; and
d. subject to the following paragraph, $122,500.00 on April
21, 1999.
In the event that certain Employment Agreement dated the date
hereof between Professional Work Care Danbury, P.C. and Nathaniel Selleck, M.D.
(the "Employment Agreement") is terminated in accordance with the terms
contained in Paragraph 7 therein and the effective date of such termination is
prior to April 21, 1997, then as of such date the amount of outstanding
principal due pursuant to paragraph d above shall be reduced by seventy five
(75%) percent. In the event the Employment Agreement is terminated in accordance
with the terms contained therein and the effective date of such termination is
between April 21, 1997 and April 21, 1998, then as of such date the amount of
outstanding principal due pursuant to paragraph d above shall be reduced by
fifty (50%) percent.
I. Default.
Maker agrees that upon an Event of Default, as defined herein,
the entire indebtedness due under this Note shall, at the option of the Payee,
accelerate and become immediately due and payable without demand or notice of
any kind. Notwithstanding anything to the contrary contained herein, Maker
further agrees that the unpaid balance hereof shall bear interest at a fixed per
annum rate of the lesser of thirteen percent (13%) or the highest lawful rate
permitted under applicable law.
For purposes of this Note, an Event of Default shall mean:
A. The failure by Maker to pay any installment of principal
due under this Note within five (5) days after notice from
the Payee that such installment has not been paid as of
the date provided for herein;
B. The filing of an application by Maker for a consent to the
appointment of a receiver, trustee or liquidator of itself
or of all of its assets; or the filing by Maker of a
voluntary petition in bankruptcy or the filing of a
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pleading in any court of record admitting in writing its
inability to pay its debts as they may become due; or the
making by Maker of a general assignment for the benefit of
creditors; or the filing by Maker of an answer admitting
the material allegations of or consenting to or defaulting
in answering a petition filed against it in any bankruptcy
proceeding; or
C. There shall be commenced against the Maker or any of its
subsidiaries any case, proceeding or other action of a
nature referred to in clause B. of this Section I., which
(a) results in the final entry of an order for relief or
any such adjudication or appointment, or (b) remains
unstayed, undismissed, undischarged or unbonded for a
period of ninety (90) days.
II. Notices.
Any notice, request or other communication required or
permitted to be given under any of the provisions of this Note shall be in
writing and shall be deemed given on the date the same is sent by certified or
registered mail, return receipt requested, postage prepaid and addressed to the
party for which intended at its address first set forth above.
III. Miscellaneous.
A. Prepayment. Maker shall have the right to prepay the
indebtedness evidenced by this Note, in whole or in part, without penalty, upon
ten (10) days prior written notice to Payee.
B. Course of Dealing. No delay or omission by Payee in
exercising any right hereunder, nor failure by Payee to insist upon the strict
performance of any terms herein, shall operate as a waiver of such right, any
other right hereunder, or any terms herein. No waiver of any right shall be
effective unless in writing and signed by Payee, nor shall a waiver on one
occasion be constituted as a bar to, or waiver of, any such right on any future
occasion.
C. Amendments. This Note may be amended or varied only by a
document, in writing, of even or subsequent date hereof, executed by Maker and
Payee.
D. Governing Law. This Note shall be governed by and construed
in accordance with the laws of the State of Connecticut.
E. Successors and Assigns, Survival. This Note shall be
binding upon the Maker and its successors, and shall inure to the benefit of
Payee and their heirs, executors, administrators, successors and assigns. Payee
shall have the right to assign this Note without Maker's consent.
F. Headings. The descriptive headings in this Note are for
convenience of reference only, and shall not be deemed to affect the meaning or
construction of any of the provisions hereof.
G. Capitalized Terms. All capitalized terms not defined herein
have the same meaning as such terms have when used in the Agreement of Sale.
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H. Waivers. Maker hereby waives diligence, demand, presentment
for payment, notice of nonpayment, protest and notice of protest, except as
otherwise expressly provided herein.
IN WITNESS WHEREOF, Maker has executed this Note on the date
first above written.
PROFESSIONAL WORK CARE, L.L.C.
______________________________ By:________________________________
Witness Name: Hunter Giroux
Manager
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