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HomeMy WebLinkAbout11-3524Robert P. Kline, Esquire Kline Law Office 714 Bridge Street Post Office Box 461 New Cumberland, PA 17070-0461 (717) 770-2540 telehone (717) 770-2553 facsimile "F FIL PRO i 8F c dPR _ 7 QM CUPJ'9ER pE ?LANO CoU T Y s YL VA 1Y1,4 FARRELL VETERINARY ASSOCIATES,: IN THE COURT OF COMMON PLEAS INC., a Pennsylvania Corporation, BERNARD C. FARRELL, VMD, and TODD M. HASCO, DVM, PLAINTIFFS VS. CUMBERLAND COUNTY, PENNSYLVANIA NO. PATRICIA S. FARRELL, VMD, DEFENDANT NOTICE CIVIL TERM YOU HAVE BEEN SUED IN COURT. If you wish to defend against the claims set forth in the following pages, you must take action within twenty (20) days after this Complaint and Notice are served, by entering a written appearance personally or by attorney and filing in writing with the Court your defenses or objections to the claims set forth against you. You are warned that if you fail to do so the case may proceed without you and a judgment may be entered against you by the Court without further notice for any money claimed in the Complaint or for any other claim or relief requested by the Plaintiff. You may lose money or property or other rights important to you. YOU SHOULD TAKE THIS PAPER TO YOUR LAWYER AT ONCE. IF YOU DO NOT HAVE A LAWYER OR CANNOT AFFORD ONE, GO TO OR TELEPHONE THE OFFICE SET FORTH BELOW TO FIND OUT WHERE YOU CAN GET LEGAL HELP. Cumberland County Bar Association 32 S. Bedford Street Carlisle, PA 17013 (717) 249-3166 1Y).'1)6 Icy. a w C yOd `- -?' ? FARRELL VETERINARY ASSOCIATES,: IN THE COURT OF COMMON PLEAS INC., a Pennsylvania Corporation, CUMBERLAND COUNTY, PENNSYLVANIA BERNARD C. FARRELL, VMD, and TODD M. HASCO, DVM, PLAINTIFFS NO. CIVIL TERM VS. PATRICIA S. FARRELL, VMD, DEFENDANT COMPLAINT AND NOW, come Farrell Veterinary Associates, Inc., a Pennsylvania corporation, Bernard C. Farrell, VMD, and Todd M. Hasco, DVM, by and through their counsel, Kline Law Office, and respectfully state as follows: 1. Farrell Veterinary Associates, Inc., is a Pennsylvania corporation with its registered office at 108 Carlisle Road, Newville, Cumberland County, Pennsylvania. 2. Plaintiff Bernard C. Farrell, VMD, is an adult individual residing at 905 Center Road, Newville, Cumberland County, Pennsylvania 17241. 3. Plaintiff Todd M. Hasco, DVM, is an adult individual residing at 183 Goodyear Road, Carlisle, Cumberland County, Pennsylvania 17015. 4. Defendant Patricia S. Farrell, VMD, is an adult individual residing at Box 141, Layton, New Jersey 07851. 5. Plaintiff Farrell, Plaintiff Hasco, and Defendant Farrell are all of the shareholders of Farrell Veterinary Associates, Inc., with Plaintiff Bernard C. Farrell owning 380 shares, Plaintiff Todd M. Hasco owning 240 shares, and Defendant Patricia S. Farrell owning 380 shares. 6. On or about November 1, 2003, the corporation and the individual parties entered into a Shareholders Agreement defining the rights and responsibilities of the respective shareholders. Said Shareholders Agreement is incorporated herein as Exhibit "A" to this Complaint. 7. Said Shareholders Agreement, in part, provides for the procedure for the acquisition of a departing shareholder's shares in the event of a resignation by that shareholder. 8. Defendant has not actively participated in the business activities of the Corporation since at least 2008. 9. Plaintiffs have requested that Defendant transfer her share in the Corporation to the Corporation pursuant to the terms and conditions of the Shareholders Agreement. A copy of the request, addressed to Defendant's counsel, is attached as Exhibit "B". 10. Despite this request, Defendant has refused to transfer her shares to the Corporation consistent with the terms of the Agreement, instead requesting that the disposition of her shares be handled in her pending divorce action with Plaintiff Farrell. A copy of said correspondence to that effect from Defendant's counsel is attached as Exhibit "C". 11. Plaintiff Corporation and Plaintiff Hasco are not parties to the pending divorce action. 12. Section 6.8(b) of the Shareholders Agreement provides that the entering into, cancellation, or amendment of any agreement between a shareholder and the company shall require unanimous written consent of all of the shareholders. 13. Section 8.3(a) of the Shareholders Agreement provides that no party may amend or assign any related agreement without prior written consent of all the parties thereto. 14. Any transfer of shares contrary to the specific terms of the Shareholders Agreement would be a violation of the Shareholders Agreement. 15. Any transfer of shares in a divorce action would be a direct violation of Plaintiff Corporation and Plaintiff Hasco's rights pursuant to the Shareholders Agreement. 16. The terms as contained in the proposal communicated to Defendant and as set forth in Exhibit "B" hereto are consistent with the terms of the Shareholders Agreement. WHEREFORE, Plaintiffs respectfully request this Honorable Court, through its equitable powers, to determine that the Shareholders Agreement is a valid agreement between and among the shareholders of the Corporation, that its terms in regard to the acquisition of the shares of a departing shareholder are valid, and that Defendant, Patricia Farrell, VMD, shall convey her shares to the Corporation pursuant to the terms as set forth in Exhibit "A" attached hereto, together with attorneys fees, costs, and such other relief as this Court may deem proper. Respectfully submitted, (fa 4 2a) DATE ROBERT P. KLINE, ESQUIRE 714 Bridge Street Post Office Box 461 New Cumberland, PA 17070-0461 (717) 770-2540 Attorney for Plaintiffs r i PRIVATE AND CONFIDENTIAL Execution Copy ?,-- < SHAREHOLDERS' AGREEMENT . Shareholders' Agreement, dated as of November 1, 2003, among Farrell Veterinary Associates, Inc., a Pennsylvania corporation, (the "Company"), the other persons set forth on the signature page(s) hereto under the designation of "Shareholder" (each such person a "Shareholder"), and the spouses thereof who are not Shareholders. RECITALS: WHEREAS, the Company operates a veterinary practice located at 108 Carlisle Road, Newville PA, 17241 (the "Practice") and the Shareholders as of the date hereof own all of the outstanding shares of common stock of the Company, each in the amount set forth opposite his name on Schedule A (the "Shares"); and - WHEREAS, such Shareholders and the Company wish to enter into this Shareholders' Agreement to, among other things: (a) promote close professional cooperation among the Shareholders who are employees of the Company; (b) protect the Practice; (c) retain professionals of the highest quality; and (d) provide, subject to the terms and conditions hereof, for the orderly disposition of the Shares and the protection of the business and, proprietary information of the Company in the event a new shareholder joins the Company or a Shareholder leaves the Company. NOW, THEREFORE, in consideration of the mutual promises set forth below and other good and valuable consideration, the sufficiency of which is hereby acknowledged; the parties hereto, intending to be legally bound, hereby agree as follows: ARTICLE 1: DEFINITIONS For the purposes hereof and as used in this Agreement, the following capitalized terms have the meanings set forth below: "Affected Shareholder" means a Shareholder who: (a) has died or become Disabled or Insolvent - or Separated; (b) is subject to an Employment Termination; or (c) withdraws from the Company; as the case may be, all as provided herein. "Agreement" means this Shareholders' Agreement, as amended. "Article 4 Sale Trigger Date" means: (a) the date of death of the Affected Shareholder in the case of an Article 4 sale due to death; (b) either the date the Disabled Affected Shareholder gives notice thereof as provided in Section 5.2(c) or the date such Shareholder is finally determined to be Disabled pursuant to Section 4.1(b) at the election of such Shareholder in the case of an -- Article 4 sale due-to Disability;-(c)-.the date_of_tertami .ation_in the case of an Article 4 sale due to Employment Termination; (d) the date the Affected Shareholder gives notice as provided in Section 5.2(c) in the case of Insolvency or Separation; and .(e) the date of the Withdrawal Notice (or deemed Withdrawal Notice) in the case of a sale resulting from a Shareholder's withdrawal. EXHIBIT "A" PRIVATE AND CONFIDENTIAL "Closing" has the meaning set forth in Section 5.2(a). "Closing Date" has the meaning set forth in Section 5.2(a). "Code" means the. Internal Revenue Code of 1986, as amended. "Company" has the meaning set forth in the preamble hereto. "Company Information" has the meaning set forth in Section 6.2(a). "Competitive Business",has the meaning set forth in Section 6.1(a). Execution Copy "Disabled" or "Disability" means; with respect to a Shareholder (a) "Disabled" within the meaning of any,"buyout" disability insurance policy described in Section 4.5(a)(ii) then in effect naming such. Shareholder as insured; or (b) if no such disability insurance is in effect, such Shareholder being] continuously unable to perform all or substantially all of his duties as an employee of the Company during a consecutive 12 month period (or more) or during 12 months (or more) of any consecutive 15 month period; provided that alcohol, drug, or other substance abuse will not constitute Disability for any purpose of any clause of this definition. "Employment Termination" means: the termination of a Shareholder's employment with the Company pursuant to Section 12.1 of such Shareholder's employment agreement with the Company. "Farrell Child" rueans Bernard R. Farrell, son of the Farrell -Shareholders, and/or Katherine Mary Farrell,.'daughter of the Farrell Shareholders, but excludes any of their respective children and any other child of the Farrell Shareholders "Farrell Shareholder" rneans Bernard C. Farrell, VIVID and/or Patricia S. Farrell VMD, but excludes any Farrell Child who may be a Shareholder. "Guarantee" has the meaning set forth in Section 5.1(c). "fiasco" has the'meaning set forth in Section 2.4. "Incompetent" with respect to a Shareholder, has the meaning set forth in Section 6.6. "Insolvent" or "Insolvency" means with respect to any person: (a) admitting an inability to pay debts when due, or malting an assignment for the benefit of creditors; (b) filing a voluntary petition in bankruptcy; (c) being adjudged bankrupt or insolvent or having entered against it a order for relief in any bankruptcy or insolvency proceeding; (d) filinga petition or answer seeking for it any reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any statute, law or regulation;.(e) filing an answer or other pleading admitting or failing to contest the material allegations of a petition filed against it in any proceeding of this nature; (f) seeking,-consenting-to or acquiescing in,-the-appointment of a _. trustee, receiver, or the liquidation of an entity or of all or any substantial part of its properties; (g) the continuation of any proceeding against it seeking reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any statute, law or PRIMATE AND CONFIDENTML Execution Copy regulation, for 90 days after the commencement thereof or the appointment of a trustee, receiver, or liquidator for it or all or any substantial part of its properties without its agreement or acquiescence, which appointment is not vacated or stayed for 90 days or, if the appointment is stayed, for 90 days after expiration of the stay during which period the appointment is not vacated; or (h) if such person is a Shareholder: (i) attachment of a Shareholder's Shares; (ii) entry of judgment against such Shareholder and the issuance of a levy, garnishment, or other process directed against any of such Shareholder's Shares; or (iii) the Transfer of such Shares to a pledgee; judgment creditor, assignee for the benefit of creditors, receiver, trustee in bankruptcy or other similar person (other than pursuant to a Share Pledge Agreement in the cases of clause (h) of this definition). "Insurance Policies" has the meaning set forth in Section 4.5(a). "Losses" mean any and all damages, liabilities, losses and expenses (including reasonable attorneys' fees, expenses .and disbursements). "Practice" has the meaning set forth in the recitals hereto. "Prime Rate" means as of any date, the last published prime lending rate of interest in The Wall Street Journal. "Promissory Note" has the meaning set forth in Section 4.6. "Qualified Appraiser" has the meaning set forth in Section 4.4(b). "Qualified Farrell Child" means a Farrell Child who fulfills the requirements of a Qualified Purchaser. "Qualified Purchaser" has the meaning set forth in Section 3. L. "Related Agreements" has the meaning set forth in Section 7.1(a). "Separated or Separation" means: (a) the termination of the marital relationship of a Shareholder due to his spouse's death, divorce or any other cause other than the death of such Shareholder; or (b) the Transfer of any of such Shareholder's Shares to such spouse or such spouse's estate, heirs or creditors. "Shares" has the meaning set forth in the recitals hereto. "Shareholder" has the meaning set forth in the preamble hereto. "Share Pledge Agreement." means an agreement pledging the Shares to be transferred in certain cases hereunder, substantially in the form of Exhibit 1. "Transfer" means any and all types of transfers, including any direct or indirect sale; conveyance, - ?- assignment, disposition, distribution, encumbrance, pledge, mortgage, hypothecation, bequest or gift, whether for value or without consideration, whether voluntary, involuntary, by operation of law, or otherwise. 3 PRIVATE AND CONFIDENTIAL Execution Copy "Transfer Instruments" has the meaning set forth in Section 53(a)(1)(A). "Transfer Notice" has the meaning set forth in Section 3.2(a). "Withdrawal Notice" has the meaning set forth in Section 42(d). ARTICLE 2: RESTRICTION ON TRANSFERS OF SHARES 2.1. Restriction on Transfers. (a) Subject to Section 2.4, except as expressly permitted or required herein (or in a Share Pledge Agreement), each Shareholder and spouse. agrees that, during his li fedine or upon or after his death, he will not Transfer any portion of his interest in his Shares in the Company, which he now owns or may hereafter acquire to any person, including any other Shareholder, any spouse, family member, heir, executor, trustee, pledgee, creditor, assignee for the benefit of creditors, receiver, or trustee in bankruptcy (or to the Company, except as permitted by Section 5.1). (b) Notwithstanding anything to the contrary herein, none of the restrictions hereof will apply to any person exercising rights under a valid Share Pledge Agreement delivered hereunder upon -a default under the indebtedness secured by such Share Pledge Agreement. 2.2. Transfer Violations. (a) Notwithstanding anything to the contrary herein, any Transfer in violation hereof (or a Share Pledge Agreement) will be void and will. be recognized neither by the Company nor the Shareholders, and the transferee thereof, without regard to the manner:of acquisition of the Shares or the nature of his interest therein, will have no rights as a shareholder of tb.ti. Company, and in particular will have no voting or consensual rights, nor any authority, granted to shareholders of the Company or Shareholders, nor receive any dividends, profits or other-distributions from the Company. If a court of competent jurisdiction holds that such transferee will nevertheless be entitled to exercise any voting or consensual right, authority, benefit or privilege granted to shareholders of the Company or Shareholders hereunder, such transferee will..exercise any such rights he may have in any capacity, by voting his Shares for or against any such decision in the same manner and in the same proportions as all the other Shares have been voted. (b) If any 'T'ransfer in violation hereof is nevertheless held to be valid by a court of competent, jurisdiction, the transferee thereof, without regard to the manner of acquisition of the Shares or the nature of his interest therein, will hold such Shares subject to, and be bound by, the provisions hereof (but will not have any rights hereunder), and such person will not Transfer such Shares except in strict compliance with the terms hereof. 2.3. No Challen.gre. Each party hereto and each person bound by this Agreement, hereby agrees that the restri ctions on Share Transfer herein, are reasonable and proper to achieve the objectives set forth in the recitals hereto and in view of the purposes of the Company and the relationship-of the Shareholders, and-no-such person will-raise-any issue of reasonableness in. defense of any proceeding to enforce such restrictions. 2.4. Hasco Purchase and Pledge. The parties hereto acknowledge that the Farrell PRIVATE AND CONFIDENTIAL Execution Copy Shareholders have sold 240 Shares to Todd M. Hasco, DVM ("Hasco"), pursuan t to a stock purchase agreement, dated as of the date hereof, and Hasco has delivered to the Farrell Shareholders a promissory note secured by a pledge of such Shares pursuant to a stock pledge agreement, dated as of the date hereof. All Shareholders and their spouses approve of each of the foregoing transactions and waive to the extent required any prohibitions or restrictions set forth herein which would prohibit or restrict the foregoing sale or the secured party's exercise of his rights under such promissory note and or stock pledge agreement, including any restrictions on Transfer, the receipt of dividends, profits or distributions of the Company, or on voting or other consensual rights pertaining to such pledged Shares. The parties hereto also agree that any proceeds of any Share Transfer by Hasco will be paid as provided in such promissory note: ARTICLE 3: SALES OF SHARES 3.1. Sales To Third Parties. No Shareholder of the Company may voluntarily Transfer any interest in any Share to any person (other than to the Company or a Shareholder as permitted herein), except pursuant to a bona fide good faith arms' length third party offer, in strict compliance with the provisions hereof and only if such person as a condition precedent to such Transfer, unless otherwise agreed by all the Shareholders: (a) is licensed to practice veterinary medicine in the State where the Practice is located and enters into an employment agreement to which such person will provide veterinary and/or management services to the Company materially similar with the employment agreements of the remaining shareholders; and (b) agrees to become a party to this Agreement (such person, a "Qualified Purchaser"). 3.2. Shareholder Rights of First Refusal. (a) Subject to Section 3.5, if a Shareholder receives a bona fide offer to purchase all or a portion of his Shares (the "Purchased Shares") from a Qualified Purchaser, such Shareholder will promptly notify the Company and the other Shareholders in writing specifying all terms and conditions of such offer, including the name of the proposed purchaser, the number of such Shares to be purchased, the purchase price, and the method of payment, together with a copy of any offer received from such Qualified Purchaser (the "Transfer Notice"). The Transfer Notice will also contain an offer to sell such Shares to the other Shareholders in accordance with the provisions of this Article 3. Each other Shareholder may elect to purchase any number. of such Shares at the price and upon the terms set forth in the Transfer Notice (subject to Section 3.4), by delivering written notice thereof to the Company-and each other Shareholder (a "Purchase Notice") within 90 days of the date of receipt of the Transfer Notice. If the number of Shares the other Shareholders elect to purchase in the Purchase Notices exceeds the number of Purchased Shares, such Purchased Shares will be allocated among such other Shareholders in proportion to the Shares held by each such Shareholder. (b) If upon the expiration of such 90 day period, the other Shareholders have elected to purchase less than all of the Purchased Shares, such other. Shareholders will have an additional 15 days to deliver Purchase Notice(s) electing to purchase all of the remaining Purchased Shares. (c) if, such other Shareholders fail to deliver such Purchase Notice(s) within such 15 day period, the selling Shareholder, may, in his sole discretion, elect within 10 days. thereafter to: (i) - sell all of the Purchased Shares (including the Purchased Shares which the other Shareholders have elected to purchase in the Purchase Notices) to the Qualified Purchaser, in strict compliance with the terms of the Transfer Notice and Section 3.4; (ii) sell the number of Purchased Shares PRIVATE AND CONMENTML Execution Copy which the other Shareholders have not elected to purchase to the Qualified Purchaser, and sell the Purchased Shares which the other Shareholders have elected to purchase to such other Shareholders (and such other Shareholders will purchase such Shares), all in strict compliance with the terms of the Transfer Notice and Section 3.4; or (iii) cancel the sale to the Qualified Purchaser and to the other Shareholders; provided that, in each case, if such Transfer does not Close pursuant to Sections 5.2 and 5.3 within 60 days of the expiration of such 15 day period, then such Shares will again become subject to all of the provisions of this Article 3 and the other restrictions on Transfer herein. (d) If upon the expiration of the period during which Purchase Notices may be delivered pursuant to Sections 3.2(a) and (b), the other Shareholders have delivered Purchase Notice(s) for all of the Purchased Shares, the selling Shareholder, will sell all of such Purchased Shares to such other Shareholders, and such other Shareholders will purchase such Shares; all in strict compliance with. the terms of the Transfer Notice and Section 3.4. 3.3. Sales to- other Shareholders. Subject to Section 3.5, if a Shareholder receives a good faith bona fide offer to purchase all or a portion of his Shares from another Shareholder (an "Offering Shareholder"), such Shareholder will promptly deliver a Transfer Notice and such sale will be subject to the, provisions of Section 3.2 above; provided that the Offering Shareholder may elect to cancel such sale if the other Shareholders elect to purchase less than all of the Offering Shareholder's Shares. No Shareholder may Transfer Shares to another Shareholder, except pursuant to this Section 3.3 or as otherwise expressly permitted or required herein or pursuant to a valid. Share Pledge Agreement. 3.4. No Liens Pledge of Purchased Shares. If the Transfer Notice requires all or part of the purchase price for the Purchased Shares be secured, then notwithstanding anything to the contrary therein, no liens will be granted on the Company's assets, and any pledge or other encumbrance of the Purchased Shares will be made solely pursuant to a Share Pledge Agreement. '?3.5.`Farre_1 Sales. Notwithstanding anything to the contrary herein and subject to the Share trans ers permitted or required by Article 4, each Farrell Shareholder may,,transfer some or all of his Shares in one or more transactions to (a) the other Farrell Shareholder; and/or (b) a Qualified Farrell Child or both Qualified Farrell Children, as the case maybe; ifi each case in his sole discretion and on any terms acceptable to such Farrell Shareholder without first offering any such Shares to the other Shareholder(s) as otherwise required by Section 3.2, and such other Shareholder(s) will have no right to purchase any such Shares, provided that: (i) each such sale will be subject to S action 3.4 and the other applicable provisions hereof; and (ii) provided that no Transfer made pursuant to this Section 3.5 will result in any Farrell Child holding immediately after such Transfer an equity interest in the Company greater than the non-Farrell Shareholder holding the largest equity interest in the Company, and the number of Shares Transf6, ed pursuant to this Section 3.5 will be reduced as necessary (or allocated among all the Shareholders in proportion to their resultant ownership interest, as the case may be) to comply with this provision. The parties hereto hereby approve each such sale and will take such necessary action to consummate same. PRIVATE AND CONFIDENTIAL Execution Copy ARTICLE 4: OTHER TRANSFERS 4.1. Shareholder Death, Disability. (a) Subject to. Sections 4.7 and 4.8, if an Affected Shareholder dies or becomes Disabled, the other Shareholders will purchase as provided herein from such Affected Shareholder (or his estate) all of the Shares in which such Affected Shareholder (or estate) has an interest. fi(b) A disabled Affected Shareholder will provide prompt written notice thereof to the Company and each other Shareholder and include therewith a report by a licensed physician describing such disability in reasonable detail. Within 30 days of receiving such notice and report, any Shareholder may demand by written notice delivered to the Company and each other Shareholder, that the question of whether a Shareholder is Disabled within the meaning of clause (b) of the definition thereof in Article 1 be determined by majority decision of three physicians licensed to practice medicine in the State where the Affected Shareholder was employed. The Affected Shareholder will thereafter promptly select, and pay the fees and expenses of, one physician; the other Shareholder(s) requesting such determination will promptly select, and pay the fees and expenses of, a second physician; and the two physicians thus selected will promptly choose a third physician (whose fees and expenses will be shared equally by such other Shareholder(s) and the Affected Shareholder). Within 30 days of the selection of the third physician, such physicians will make such determination by majority vote, which will be final and binding upon the parties hereto. Notwithstanding the foregoing, if the parties hereto promptly are able to agree upon the selection of a single physician to make such determination and upon the payment of the fees and expenses thereof the decision of such physician will be made within 30 days of the selection thereof and will be binding upon such parties. (c) If all of the Shareholders die within a period of 45 days: (i) all provisions hereof concerning the purchase and sale of a Shareholder's Shares will be inoperative, invalid, and not binding upon any Shareholder, his heirs, executors, or administrators; (ii) the Company will be dissolved, liquidated, and wound up in accordance with applicable law, unless otherwise agreed in writing by all the Shareholders, or, if no such agreement exists, unless otherwise agreed by all of the representatives of the estates of all of the Shareholders within 120 days of the qualification of the last such representative; and (iii) the estates of the beneficiary Shareholders will retain any life insurance proceeds received as a result of the insured Shareholder's death. 4.2. Shareholder Employment Termination Insolvency, Separation, Withdrawal. (a) Employment Termination. If an Affected Shareholder is subject to Employment Termination, the other Shareholders will purchase as provided herein from such Affected Shareholder all of the Shares in which such Affected Shareholder has an interest. The purchase price for such Shares will be reduced by 30% as provided in Section 4.4. An Affected Shareholder subject to Employment Termination will not be deemed to have resigned or withdrawn and will not be subject to the provisions of Section.4.2(d). -- (b) Insolvency. If an AffectedShareholder becomes Insolvent, the other Shareholders may in their sole discretion at any time thereafter elect to purchase as provided herein from such - Affected Shareholder all of the Shares in which such Affected Shareholder has an interest, by delivering notice thereof to such Affected Shareholder and the Company. PRIVATE AND CONFIDENTIAL Execution Copy Cc(?) Separation. If an Affected Shareholder becomes Separated, such Shareholder will urchase from his, 'pouse or his spouse's estate as provided herein, all of the Shares in which purchase' such spouse or estate has an interest by giving written notice thereof to such spouse (or estate), the other Shareholders and the Company. If such Separated Affected Shareholder fails to Close the purchase of such Shares within the period provided in Section 5.2(c)(3), such Shareholder will be in breach of this Agreement and the other Shareholders may at any tirne'thereafter, in their sole discretion, and in addition to any other remedies they may have, elect to purchase all of such Shares as provided herein from such spouse (or estate), by giving written notice thereof to such Affected Shareholder, such spo? a, ?(?or estate) and the Company. Notwithstanding an ything to the contrary herein, this Section 4.9.i will not apply and be of no effect in the event of a Farrell Shareholder's Separation from the other Farrell -Shareholder: (d) Withdrawal. (i) A Shareholder who wishes to withdraw from the Company, will give notice thereof (a "Withdrawal Notice") to the Company and the other Shareholders, and the other Shane. , lders will purchase as.p-tovided herein from such withdrawing Shareholder all of 56"' Shares in which such Affected Shareholder has an interest. The Closing Date of such purchase will occur no earlier than on the first anniversary of the date the Withdrawal Notice is delivered.. Notwithstanding the foregoing, if once a Withdrawal Notice is delivered (or deemed to be delivered pursuant to Section 4.2(d)(ii), any subsequent Withdrawal Notice will be deemed to have been dated no earlier than the Closing Date of the sale triggered by the preceding Withdrawal Notice. i(ii) A Shareholder who resigns or retires as an employee of the Company will be deemed to: (1) have delivernl a Withdrawal Notice: (A) dated and delivered as of the effective date of such resignation or retirement, as the case may be; (B) which includes a Closing Date on the first anniversary of the date such notice was delivered; and. (2) be a withdrawing Shareholder hereunder. Each withdrawing Shareholder who does not continue to fulfill his duties as employee of the Company through the Closing Date, will be subject to the purchase price discount described in Section 4.2(d)(iv). (iii) Notwithstanding anything to the contrary herein, unless. otherwise unanimously agreed by the Shareholders, each Farrell Shareholder will be deemed to.: (1) have delivered a Withdrawal Notice on the date of his 72nd birthday, dated and delivered as of the date of such birthday and which includes a Closing Date on the first anniversary of such birthday; and (2) be a withdrawing Shareholder hereunder. (iv) The purchase price for the withdrawing Shareholder's Shares will be reduced by: (1) the percentage of the purchase price as initially determined pursuant to Section +.4 based on the time such Shareholder has held his Shares set forth in Schedule 4.2 (d)(iv); provided that such purchase price reduction?wrll not apply to any Shaves sold by: (A) any withdrawing: Farrell Shareholder; ) Hasco, if the Closing of the sale of his Shares resulting from his withdrawal occurs after the date the last Farrell Shareholder has Transferred his last Share (for whatever - -- reason);-or (C).any -other Shareholder, if the Closing of the sale of his Shares resulting from his withdrawal occurs after the date Hasco has Transferred his last Share (for whatever reason); and 4ti:. U J? 'i U PRIVATE AND CONFIDENTIAL Execution Copy (2),116% of the purchase price as original determined pursuant to Section 4.4, if the withdrawing Shareholder ceases to fulfill his duties under his employment agreement with the Company at any time between the Withdrawal Notice date, and the Closing Date (to the extent such duties were actually performed by Shareholder prior to the Withdrawal Notice date); provided that if such cessation was due to death, Disability, or Employment Termination, such purchase will be treated as an Article 4 Transfer for death, Disability, or Employment Termination hereunder, as the case may be. The foregoing purchase price discounts are cumulative. (v) The parties hereto and the persons bound hereby acknowledge and agree that, the other Shareholders, the Company and the Practice would suffer serious damage and disruption and considerable expense if. (1) a non-Farrell Shareholder withdrew prior to the withdrawal of Farrell. Shareholders; and/or (2) failed to give at least one year's notice of such withdrawal. Accordingly, the parties hereto and the persons bound by this Agreement, acknowledge and agree that the purchase price discounts set forth in Section 4.2(d)(iv) are reasonable and proper to ensure the orderly succession of the Company's ownership and the orderly and smooth conduct of the Practice and the Company, and no such person will raise any issue of reasonableness in defense to any proceeding to enforce such discounts. .. 4.3. Transfer. Covenants. (a) Each Shareholder and spouse hereby agrees and binds ?-- himself, herself and each other, and each representative of their respective estates, and each of their:respective family members, heirs, creditors and assigns (including any assigns by operation of law): (i) to sell as provided herein all of the Shares in which he has an interest, if the other Shareholders (or the Company pursuant to Section 5.1) are required, or elect to, purchase such Shares as provided herein; and (ii) that the purchase price for his Shares as determined herein will be in full and complete satisfaction and payment of all of such Shareholder, spouse, representative, family member, heir or assign's right, title, claim and interest in, and to, the Shares, the Company or any of its assets, and each of the foregoing waives and releases any and all claims against all other Shareholders and the Company with respect thereto other than those arising from a breach hereof. (b) Each Shareholder required or electing to purchase Shares pursuant to an Article 4 sale will purchase such Shares in proportion to the number of Shares held by him unless otherwise provided in this Agreement or agreed by all the purchasing Shareholders. (c) Any person (including any Affected Shareholder or an Incompetent or mentally "1 Disabled Shareholder, but excluding a physically Disabled Shareholder) holding any interest in any Share which the other Shareholders are required to purchase, or may elect to purchase (whether such election is exercised or not) under Article 4, will, from the date such purchase obligation or-election right arises, have no rights whatsoever as a,.shareholder of the Company or a Shareholder and in particular will have no voting or consensual rights, or any authority, benefit _or privilege_granted to shareholders of the Company, provided that: (i) such Shareholder will. have the right to its share of any dividend, profit or distribution that maybe declared by the Company and to which such Shareholder would otherwise be entitled; and (ii) if the other Shareholders are required, or have exercised their election to, purchase such Shares in accordance herewith, the person holding such Shares will have the right to receive the purchase 9 PRIVATEAND c-ONFIDENTL4L Execution Copy price in exchanp therefor as provided herein. If a court of competent jurisdiction holds that such person will nevertheless be entitled to exercise any voting or consensual right or authority granted to shareholders of the Company or Shareholders hereunder, such person or person will exercise any such rights he may have in any capacity, by voting his Shares for or against any such decision in the same manner in the same proportions as all the other Shares have been voted. The restrictions on such Shares set forth in this Section 4.3(c) will.lapse and be of no further effect upon their sale in accordance with Article 4. Notwithstanding the foregoing, the foregoing restrictions will not apply to Shares owned by a physically Disabled Shareholder so long as such Shareholder holds such Shares (but will apply to an Incompetent or a mentally Disabled Shareholder). _A V11 4.4. Determination of Purchase Price. ( The purchase price for Article 4 Share sales will equal to the product of (A) the Fair Market Value of the Company (the "Fair Market Value") as determined in Section 4.4(b) or 4.4(c) as of the end of the fiscal quarter immediately preceding the Article 4 Sale Trigger Date, multiplied by (B) a fraction: (1) the numerator of which is the number of Shares to be sold, and (2) the denominator of which is the number of Shares outstanding; provided that the purchase price will be reduced: (i) by 30% if an Affected Shareholder is subject to an Employment Termination; and (ii)- in the case of a sale resulting from a Shareholder withdrawing from the Company, by: •^ ti (1) the percentage of the purchase price (as such purchase price is initially rfv determined pursuant to Section 4.4) based on the time such Shareholder has held his- Shares, as set forth in Schedule 4.2(d)(iv); provided that such purchase price reduction will not apply-to any Shares sold by: (Aj anywithdrawing Farrell ,Shareholder' (B) Hasco, if the Closing of the sale of is.Shares resulting from his z?•7thdrawal ccurs after the date the last Farrell Shareholder has Transferred his last Share (for whatever reason); or (C) any other Shareholder, if the Closing of the sale of his Shares resulting from his withdrawal. occurs after the date Hasco has Transferred his last Share (for whatever reason); and (2) 10, % of the purchase rice as on all determined pursuant.,_to Section 4 4, if t}ie: wit?.dravyng? Slim elioTder ceases to fulfill'his duties,clex lliemplornent agreement with the oznpany (other than for death, Disability or Employment Termination) at-anyl time ?etween.the Withdrawal Notice datenard,the G1Qs_irlg_Date (to the extent such auties were actually performed by Shareholder prior to the WAdrawal Notice date). (b) Subject to 4.4(c), the Fair Market Value will be determined as of the end of the applicable period in accordance with the principles set forth in Schedule 4.4(b), b....a disinterested third party. .uvitli.experti.se,in the.apprasal of businesses.,qiMilar to the practice and the business of the Company (a! Qualified Appraiser") promptly selected by mutual agreement of the Affected Shareholder (or his representatives or spouse) and the Company (who will share equally the fees and expenses tliereofl. If the Affected Shareholder (or his representatives or spouse) and the -Companyare und[ile to agree upon such appraiser by the 90a' day before the Closing Date of-any Article 4 sale, the Company and the Affected Shareholder (or his representatives or spouse) promptly will each select (and pay the fees and expenses of) one Qualified Appraiser, and such Qualified Appraisers promptly will select a third Qualified Appraiser (whose fees and expenses' 10 PRIVATE AND CONFIDENTIAL Execution Copy will be shared equally by Affected Shareholder (or his representatives or spouse) and the Company). The Fair Market Value will be determined-in accordance with the principles of Schedule 4.4 by majority vote of such appraisers within 30 days of the selection of the third Qualified Appraiser (or in the event of a sole Qualified Appraiser, by decision thereof within 30 days of his selection): The Closing of any Article 4 sale will be delayed to the extent necessary to determine the purchase price as provided in this Section 4.4. The Fair Market Value as determined by such Qualified Appraiser(s) will be final and binding upon the Company, the transferor of such Shares and the other Shareholders. (c) Notwithstanding anything to the contrary herein, if an appraisal or Shareholder determination pursuant to Section 4.4(d) exists determining in each case the Fair Market Value in accordance with the principles of Section 4.4. as of a date that is no earlier than 180 days prior to the end of the quarter immediately preceding the Article 4 Sale Trigger Date, such appraisal or determination will be used to determine the purchase price for such sale. (d) the Shareholders may from time to time by unanimous consent determine the Fair Market Value as of the end of the applicable fiscal year in accordance with the principles in Schedule 4.4(b), and.such Fair Market Value: (i) will be used to determine the price of applicable Article 4 Transfers as provided in Section 4.4(c); and (ii) may be used in connection with any adjustment of the amount payable under the Insurance Policies pursuant to Section 4.5(c). The Shareholders may by unanimous consent elect to employ one or more appraisers to assist in making such determination, and the fees. and expenses of such appraiser(s) will be paid by the Company. 4.5. Insurance Policies. (a) To fund the purchase of the Shares of a deceased or Disabled Affected Shareholder hereunder, as the case may be, each Shareholder will, if, and to the extent unanimously agreed by the Shareholders, purchase and continuously maintain in full force. and appropriate life insurance policies and/or "buyout' disability insurance policies (such life and/or disability insurance policies, the "Insurance Policies. All Insurance Policy premiums will be paid by.the Company on behalf the applicable Shareholder(s) and deducted from the salary or other compensation payable by the Company to such Shareholder(s). (b) Each Shareholder: (1) will use any proceeds received from the applicable Insurance Policies to pay as provided herein for the purchase of the deceased or Disabled Affected Shareholder's Shares as the case may be; (2) will direct the placement of, or immediately place any proceeds received from the Insurance Policies in escrow with the counsel of the Company for such purpose; (3) will deliver to the Company and each other Shareholder annually and upon demand, true and complete copies of each Insurance Policy owned by such Shareholder; and (4) hereby assigns each Insurance Policy with respect to.which he is the beneficiary, to the insured Shareholder as collateral to secure the payment of the purchase price of such Shares; and agrees to execute any documents or instruments required by the applicable insurance companies to perfect such security interest; provided that the following rights will expressly be excluded from such assignment: (A) the right to: (i) designate and change the beneficiary; (ii) elect any - -settlement option. available-in.the Insurance Policy; (iii) surrender the Insurance Policy; (iv) - -- obtain Insurance Policy loans; (v) collect and receive all distributions or shares of surplus,- dividend deposits or additions to the Insurance Policy now or hereafter made; (iv) exercise all non-forfeiture rights permitted by the terms of the policy or allowed by the insurance company (including the right to receive all benefits and advantages derived from the exercise of such non- PRIVATE AND CONFIDENTIAL Execution Copy forfeiture rights); and (B) any other right or power that would constitute an incident of ownership under Code Sections 2042 and/or 2035 and/or Revenue Ruling 82445 of the Code, or any amendment thereof. (c) No Shareholder will cancel, surrender, borrow against, assign, or change the nature or value of any Insurance Policy owned by such Shareholder or take or permit any action or make or permit any orni ssion to impair the validity of the Insurance Policies or the payment of the proceeds thereof, to finance the relevant Share sales as provided herein. The Shareholders will as applicable cause the Insurance Policies to be amended, renewed or replaced to reflect Shareholding changes that are permitted hereunder. To the extent unanimously agreed, the Shareholders may also amend, renew or replace the Insurance Policies to reflect any material change in the Fair Market Value of the Company. (d) Any .In.5urance Policy proceeds remaining after the full payment of the Shares of the deceased or Disabled Shareholder and all Closing expenses and fees will be paid to the relevant beneficiary or beneficiaries. 4.6. Payment of Transfers. (a) The purchase price of all Article 4 Share Tr ers will be paid by the delivery by the purchasing Shareholders (as co-signers) to, the Affec Shareholder or his spouse or their respective estates, as applicable of a 1 unsecured fixed-rate promis4ory note, bearing annual interest at the Prime Rate etermin as o e"'' day prior to the Closing Date, payable in equal monthly installments of principal and interest substantially in the form of Exhibit 4.6 (the "Promissory Note"); provided that in the case•of Article 4 Transfers caused by the A`tfected Shareholder's death, Disability or withdrawal: ! i) the purchase price will be paid in cash at the Closing from Insurance Policy proceeds to the extent such proceeds are available in the case of death- or Disability, and 5% of the purchase price will be paid `in cash in the case of withdrawal; Vi(ii). the maturity of the Promissory Note will be, 5 years, .thc. case of death and 7 years in , the case of M aVility or withdrawal; and (iii) the Promissory Note will be secured by a Share Pledge Agreement. _? ., & Notwithstanding anything to the contrary herein, at no time will the Promissory Note interest. rate be lower than the "imputed rate" for Federal tax purposes.` 4.7. Transfers to Qualified Farrell Child Upon Death or Disability of A Farrell Shareholder. Notwithstanding anything to the contrary herein, upon the death or Disability of any Farrell Shareholder, such Shareholder (or his estate) may elect to sell Shares to any Qualified Farrell Child. (whether or not a Shareholder) in accordance with, and subject to the conditions of, Section 3.5, by delivering notice thereof to the other Shareholders no later than 90 days after the applicable Article 4 Trigger Date; provided that no Transfer made pursuant to this Section 4.7 Will result in any Farrell Child holding immediately after such Transfer an equity interest in the Company greater. than the non-Farrell Shareholder holding- the4ar-gest-equity-interest _in-the Company, and the number of any Shares Transferred pursuant to this Section 4.7 will be reduced (or allocated among all the Shareholders in proportion to their resultant ownership interest, as the case may be) as necessary to comply with this provision. If such Farrell Shareholder (or his 12 PRIVATE AND CONFIDENTIAL Execution Copy estate) fails to timely deliver such notice as provided above, his right to elect to sell shares to a Farrell Child pursuant to Section 3.5 and this Section 4.7 will lapse, and such Farrell Shareholder's Shares will be Transferred as provided in Articles 4 and 5. 4.8. Farrell Child Option Upon Death of the Last Surviving Farrell Shareholder. (a) At . any time after the death of the last surviving Farrell Shareholder until 5 PM local time, December 20, 2,014, any Qualified Farrell Child (whether or not a Shareholder), may elect, by delivering tiunely notice thereo f to the other Shareholders (and estate, as the case may be), to purchase from the other Shareholders (and estate, as the case may be), a number of Shares such that such Qualified Farrell Child holds an equity interest immediately after such sale equal to the equity interest 'of the Shareholder with the greatest equity interest immediately after such sale; provided that no Transfer made pursuant to this Section 4.8 will result in.any Farrell Child (whether or not such person is a purchaser or seller under this Section 4.8) holding immediately after such Transfer an equity interest in the Company greater than the non-Farrell Shareholder holding the largest equity interest in the Company, and the number of any Shares Transferred pursuant to this Section-4.8 will be reduced (or allocated among all the Shareholders in proportion to their resultant ownership interest, as the case may be) as necessary to comply with this provision. Upon delivery of such notice, the other Shareholders (and estate, as the case may be) will sell to such. Qualified Farrell Child the requisite amount of Shares at a purchase price determined pursuant to Section 4.4 and paid in accordance with Section 4.5 at a Closing to occur in accordance with Section 5.2. (b) Each Farrell Child's option to purchase Shares pursuant to this Section 4.8 will irrevocably expire at 5:00 PM December 20, 2014. 4.9 Limits on Transfers to Farrell Child. Notwithstanding anything to the contrary herein: (a) no Transfer will be made to any Farrell Child hereunder (including pursuant to Section 3.5), unless such person: (ii) is a Qualified Farrell Child; and (ii) agrees to become a party hereto and subject to all of the restrictions hereof; and (b) that no Transfer or combination of Transfers made solely pursuant to Section 3.5, 4.7 and/or 4.8 will result in any Farrell Child holding ..immediately after any such Transfer or Transfers an equity interest in the Company greater than the non-Farrell Shareholder holding the largest equity interest in the Company after such Transfer or Transfers, and the number of any Shares Transferred pursuant to one or more of such Sections, whether in one or more transactions, will be reduced (or allocated among all the Shareholders in proportion to their resultant ownership interest, as the case may be) as necessary to comply with this clause (b). ARTICLE 5: PURCHASES BY THE COMPANY; CLOSINGS; ETC. 5.1. Purchases by the Company, Guarantee. (a) Instead of purchasing the Shares of the selling Shareholder pursuant to Article 3 or the Shares of an Affected Shareholder (or of his spouse),pursuant to Section 4.1 or 4.2, the remaining Shareholders (other than the transferor of such Shares or any person claiming through such transferor) may; by unanimous agreement, elect - to -cause-the-Company-.to .purchase.all or a.portion of such Shares, and upon such election, the transferor of such Shares, will sell to the. Company, and the Company will purchase, such Shares upon the terms and conditions hereof, and will deliver a Promissory Note and Share Pledge Agreement to the extent such remaining Shareholders were required to deliver same. IVnless otherwise agreed by all the Shareholders in writing, no Shareholder may Transfer his Shares to 13 PRIVATE AND CONFIDENTIAL the Company except pursuant to this Section 5.1. Execution Copy (b) If Section 4.6 provides that the Promissory Note delivered in connection with an Article 4 sale of an Affected Shareholder's Shares will be secured by a Share Pledge Agreement, or a Share Pledge Agreement is to be delivered in an Article 3 sale pursuant to Section 3.4, and in each case, the purchasing Shareholders have determined that the Company will purchase such Shares pursuant to Section 5.1(a), such purchasing Shareholders will deliver a guarantee to the seller of such Shares, pursuant to which they jointly and severally guarantee the Company's obligations under any Promissory Note, substantially in the form of Exhibit 5.1(b) (the . "Guarantee") (c) If the Shares of a deceased or Disabled Affected Shareholder are to be purchased by the Company pursuant to this Section 5.1, then each Shareholder who receives Insurance Policy proceeds will, as. directed by the Company, contribute such proceeds to the capital of the Company or otherwise as directed by the Company transfer such proceeds to the Company so as to permit the Company to purchase the deceased or Disabled Shareholder's Shares; provided that such contribution or transfer will not be required to the extent the Company pays the Share purchase price in immediately available funds up to the aggregate amount of such Insurance Policy proceeds. (d) If the Company delivers a Promissory Note in connection with an Article 4 sale, the Company wil l purchase- and maintain at its sole expense business interruption insurance in customary form and substance reasonably satisfactory to the lender under such note to insure all payments thereunder. The Company will not be required to obtain such insurance in connection with any Article 3 sale. 5.2. q__si g Place and Time. (a) The closing (the "Closing") of each Share Transfer hereunder, will take place at the registered office of the Company (or, if agreed by all the parties hereto, by correspondence or at another place selected by such parties), on a date (the "Closing Date") detennined as follows: 7 J(b) In the case of an Article 3 sale, the Closing Date will be a date chosen by the purchasers of the Shares: (i) no later-than 60 days after the expiration of the period during which Purchase Notices may be delivered pursuant to Section 3.2(a) and (b) in the case of any sale pursuant to such Sections; (ii) in the case of any sale pursuant to Section 3.5, 4.7 or 4.8, no later than 90 days after the election to cause such sale has been made. (c) Upon the death, Disability, Insolvency, Employment Termination orLSeparation of an Affected Shareholder.jhe Affected Shareholder, or his legal representative will give prompt written notice thereof (including the physician's report required by Section 4.1(b) in the case of Disability) to the Company and the other Shareholders. L ubject to Section 4.4(b), the Closing Date of the relevant Article 4 Share sale will be no earlier than 60 days after the receipt of such notice and (subiect to such 60 day period) no later than: (1) --150-days-after-the-last of the Affected Shareholder's -legal xepresentatives.is qualified.__ in th.c. case of death; (2) 90 days! after the Affected Shareholder has been determined to be Disabled; 14 PRIVATE AND CONFIDENTIAL Execution Copy (3) 365 days after the Affected Shareholder's Employment Termination, (3) 180 days after the Affected Shareholder's Insolvency or Separation; or? (d) in the case of withdrawal, 365 days after the date the Withdrawal Notice was delivered. 5.3. Deliveries at Closing. (a) At each Closing: (1) the selling party will deliver to the purchasing part(ies): (A) such duly executed instrument(s) of transfer as reasonably requested by the purchasing party evidencing the sale of the Shares free and clear of all liens, claims and encumbrances other than a Share Pledge Agreement if applicable (collectively the "Transfer Instruments"); (B) confirmation in form reasonably satisfactory to the Company that the relevant representations and warranties in Section 7.1 are true and correct as of the Closing Date. (C) evidence reasonably satisfactory to the Company that the selling party has complied with Section 6.2; (D) in the case of an Article 3 sale, any document that the Transfer Notice contemplates is to be delivered by the selling party to the purchasing party(ies); and (E) any other documents that the purchasing party(ies) or the Company will reasonably require; and -(2) the purchasing party(ies) will deliver to the selling party: (A) the cash portion of the purchase price (if any) in immediately available US funds; (B) confirmation in form reasonably satisfactory to the Company that the relevant representations and warranties set forth in Section 7.1 are true and correct as of the Closing Date. (C) if applicable, a duly executed Promissory Note; (D) in the case of an Article 3 sale, any document that the Transfer Notice - - - ---- -- --contemplates-is-to - be delivered by_tbe_purchasing party(ies) to the selling party; (E) if applicable, a duly executed Share Pledge Agreement; (F) if applicable, a duly executed Guarantee; and 15 PRIVATEANU CONFI.DENTML Execution Copy (C7) any other documents that the selling party or the Company will reasonably require. 5.4. Repayment of Loans: Resignations. Upon the sale of all of the Shares of the selling. party in accordance herewith: (a) all loans, advances and accounts of any nature whatsoever between the Company and such party (or such party's estate) will become immediately due and payable, and the Company and such party (or estate) will have set-off rights with respect to such loans, advances and accounts; provided that no person Transferring any Shares without fully complying with this Agreement will have any rights under this Section; and (b) such party will resign from all positions he may have as officer or director of the Company. ARTICLE 6: COVENANTS, 6.1. Non Competition. (a) While a shareholder and/or an employee of the Company, yiyher_e; and any former shareholder and/or employee of the such person will not at anytime or a_r_r _ Compafiy will not for a period o five years fter he ceases to be a shareholder and/or employee of the Company (which ever occurs within the Restricted Area; in each case, directly or indirectly, engage in, form, acquire, finance, assist, support or be associated with, as an owner, equity member, manager, employee, consultant, agent, independent contractor, partner, co- venturer or otherwise, a business or practice (including a mobile practice) competitive with the practice or the business of the Company (a "Competitive Busine w") or attempt to do any of the foregoing. For the purposes hereof, "Restricted Area" means aj4?r- mile radius of any place of business of the Company if the Competitive Business is providing veterinary services to small animals exclusively, and a 25 air-mile radius in all other cases, including mixed and large animals. (b) While a shareholder and/or an employee of the Company, such person will not at anytime or anywhere, for any purpose; and any former shareholder and/or employee of the Company will not for a period of five years after he ceases to be a shareholder and/or employee of the Company (whi ch `ever occurs later) will not, anywhere; for the purpose of engaging in a Competitive Business; directly or indirectly, take away, divert, or interfere with any client, customer, account, business or patronage of the Company, and will not direct, solicit, request, advise, entice, induce, urge or encourage any of the foregoing to obtain any services included in, or related to, a Competitive Business from persons other than the Company and/or not to do business with the Company, or attempt to do any of the foregoing.. .(c) Each shareholder and/or employee, or former shareholder and/or former employee of the Company, will not at anytime, anywhere, directly or indirectly: (i) hire away, or direct, solicit, request, advise, entice, induce, urge or encourage any equity member, director, officer, manager, employee or independent contractor of the Company to leave the Company, or violate the terms of the Company's contract with any of them; or (ii) use or employ any name under which the Company lawfully does business, or any name substantially similar thereto; or attempt - to do any-of -the-foregoing. • (d) While an employee and/or shareholder of the Company, such person will not at anytime or anywhere, for any purpose; directly or indirectly, solicit or call; write to, or otherwise 16 PRIVATE AND C0IV rDENTL4L Execution Copy contact any client, customer, account, business or patronage of the Company; except in each case as directed by the Company, and only to the extent necessary to further the affairs of the Company. 6.2. Company Information. (a) No shareholder or former shareholder of the Company will, directly or indirectly, at any time, use or disclose to any person any proprietary or confidential information, trade secret, know how, or any book, record, report, manual, handbook, form, log, phone or email log, instrument, document, list, listing, program, software, tape, data,... Rolodex, or any other information stored in. any form relating to: (i) any past, present or prospective client or patient of the Company (including, any address or email address book, client or mailing list, or the amount, nature and type of services, equipment and methods used and preferred by such clients and the fees paid by such clients); (ii) any services rendered by the Company; (iii) the Company's ownership, management, employees, agents, referrers of clients, financial affairs, internal structure, methods, and medical and other systems or procedures; or (iv) any other matter which could be used in any way to injure, damage or interfere with the Company's business:, professional methods. and operations; including all client lists, employee, procedure and policy manuals and handbooks; in each case, whether-or not prepared by such person (all such information, "Company Information"); provided that so long as such person is a Shareholder or is employed by the Company, such person may use and disclose. Company Information, in each case as authorized by the Company, and only to the extent necessary to further the affairs of the Company. ?-- (b) All Company Information will at all times remain the property of the Company, and upon ceasing to be a:shareholder or employee of the Company (whichever occurs later) such person will: (i) immediately return to the Company all Company Information in his possession (including any such information stored by electronic means); (ii) erase all Company Information stored in his computers; and (iii) neither use nor make nor retain any copies of any Company Information. 6.3. Remedies, etc. (a) The parties hereto agree that: (i) the Company would suffer serious damage and loss of goodwill if any shareholder employee or former shareholder employee of the Company competed with the Company; and (ii) the areas covered by Sections 6.1 and 6.2, and the nature and duration of the restrictions thereof, are reasonable in duration and scope, and necessary for the proper protection of the Company and the Shareholders, and no party hereto will raise any issue of reasonableness in defense of any proceeding to enforce such covenants. If any part of Section 6.1 or 6.2 is held to be invalid or unenforceable, such provision will be revised and applied in a manner that renders it lawful and enforceable to the fullest scope, extent, and maximum duration and area, that is possible, consistent with such lawfulness and enforceability. (b) If any person breaches any provision of Section 6.1 or 6.2, in addition to all other legal and equitable remedies available to the Company and the. non-breaching Shareholder(s) (all of which may be exercised cumulatively): (i) any payment obligation of any Shareholder or the _-_.Company to the breaching person under any indebtedness incurred to finance any Article 3, 4 or 5 Share sale hereunder, wit terminate, and neither the Company nor such Shareholder-will-have -- - ?. any further obligation with respect to such payment; and '(ii) the duration of the time periods specified in Section .1 will be extended beyond their then-scheduled termination date for a period equal to the duration of the violation. 17 PRIVATEA ND CONFIDENTML Execution Copy 6.4. Consent of Spouse Other Persons Bound. (a) The spouse of each Shareholder, by signing his name in the space provided under his name, approves of this Agreement and consents to be bound by its terms. (b) Each Shareholder will promptly cause his current spouse (or any new spouse) to sign this Agreement and will cause his spouse and any person claiming through such spouse to comply with the provisions hereof. (c) Each Shareholder and spouse agrees and binds himself, herself and each other, and each representative of their respective estates, and each of their respective family members, heirs, creditors and assigns (including any assigns by operation of law), and each other person claiming through him, her or any of the foregoing persons, to strictly comply with the Transfer restrictions, all other restrictions pertaining to the Shares, and all other obligations set forth herein; and waives, for himself, herself and for each of the foregoing persons, to the fullest extent permitted by law, any and all applicable rights, claims, remedies, privileges and benefits whatsoever, he, she or such person may have other than those expressly granted to him, her or such person hereunder. (d) No person will vote his Shares or use his rights as a Shareholder of the Company in any manner, which would-be inconsistent with the purposes hereof. 6.5. Legend on Stock Certificate. Every certificate representing the Shares will bear the following legend: The stock represented by this certificate is subject to, and may not be pledged, encumbered, sold or transferred, in any manner whatsoever except in accordance with, the provisions of the Shareholders' Agreement, dated as of November 1, 2003, as amended, to which the Company and its Shareholders are parties, a copy of which is on file at the principal office of the Company. Each Shareholder agrees to promptly deliver to the appropriate officer of the Company any certificates previously issued for the purpose of adding the foregoing legend thereto. 6.6. Incompetence. If any Shareholder is unable to perform all or substantially all of his duties as an employee of the Company and/or hereunder because he is mentally incompetent ("Incompetent"), then the other Shareholders may by written unanimous consent suspend such Incompetent Shareholder's voting and consensual rights, and such Shareholder will have no right to participate in. any decision of the Company until the earlier of the date such Shareholder is no longer Incompetent, and the date such Shareholder becomes Disabled. During such suspension, such Incompetent Shareholder will have the right to his share of any dividend,.profit or distribution that may be declared by the Company. Any disagreement among the parties as to whether such Shareholder is Incompetent will be resolved in accordance with Section 4.1(b). - 6.7. Directors. So long as -a Shareholder owns-.Shares.representing at least a 24% equity interest in.the Company: (i) the presence in person or by proxy of such. Shareholder will be required to constitute a quorum at each Shareholders' meeting; and (ii) such Shareholder will be a director of the Company and the presence in person or by proxy of such Shareholder will be 18 PRIVATE AND CONFIDENTIAL Execution Copy required to constitute a quorum at each directors' meeting. Each Shareholder will vote his Shares (or execute the appropriate unanimous written consent) to effect the foregoing. 6.8. Unanimous Consent. The following actions will require the unanimous written consent of all of the Shareholders: (a) the issuance.of any shares of capital stock of the Company (or any rights to acquire any such shares); (b) the entering into, cancellation or amendment of any agreement between a Shareholder (or any person related thereto) and the Company; - (c) the merger, consolidation or dissolution of the Company; and/or (d) the sale of substantially all of the assets of the Company. ARTICLE 7: REPRESENTATIONS AND WARRANTIES, INDEMNIFICATION 7. 1, Representations and Warranties. Each party hereto (or to a Closing) represents and. warrants to each other party hereto (or to a Closing), as of the date hereof and as of each Closing Date: (a) This Agreement, each Promissory Note, Transfer Instrument, Share Pledge Agreement and Guarantee, if any, to which he is a party or made by him (collectively and including this Agreement: the "Related Agreements") has been duly authorized, permitted, executed and delivered by such party and is the valid and binding obligation of such party, enforceable in accordance with its terms (except as enforceability may be limited by bankruptcy, insolvency, conservatorship, receivership, liquidation, reorganization, moratorium or similar laws affecting creditors rights generally). The execution, delivery and performance of each Related Agreement will not violate, contravene, result in a breach of any instrument, agreement, judgment or, to the knowledge of such party, any law, rule, regulation or decree, in each case binding such party. Such person is not a party to (and has no knowledge of) any litigation or other claim or proceeding, pending or threatened, which calls into question the validity or enforceability of any Related Agreement or seeks to delay or prevent any transaction contemplated thereby. (b) Each Share owned by such party is free of any lien, pledge, restriction, contractual obligation, charge, encumbrance or restraint on transfer whatsoever (other than those contemplated by the Related Agreements), and if to be Transferred at the Closing, upon execution by such person of the Transfer Instruments with respect to such Share, good and marketable title thereto will be duly .transferred to the permitted Transferee thereof, free and clear of any lien, pledge, restriction, contractual obligation, charge, encumbrance or restraint on transfer whatsoever (other than those contemplated by the Related Agreements). (c) Such party is not Insolvent (unless such party is an Affected Shareholder whose Shares are being Transferred due to Insolvency). (d) If such Party--is a purchasing-.PartY, such party has not or-is-not-acquiring the Shares - for the purpose of resale or disposition in any manner as would require registration of the sale thereof pursuant to any applicable federal or state securities law and acknowledges that the Shares may not be resold in the absence of registration, or the availability of an exemption from 19 PRIVATE AND CONFIDENTIAL Execution Copy such registration, under such laws. (e) No representation or warranty in any Related Agreement or in any certificate, schedule, statement or other document furnished or to be furnished by such party pursuant thereto or in connection with the transactions contemplated thereby contains any untrue statement of a material fact or omits to state an y material fact required to be stated therein or necessary to make.the statements therein not misleading. 7.2. Indemnification. (a) Each Share Transferee and Transferor, or party hereto (each an "Indemnifying Party") will pay, reimburse, defend, indemnify and hold harmless each Shareholder, the Company, and its managers, directors, officers, employees, and their respective agents, attorneys and representatives (each an "Indemnified Party"), from and against any Losses arising out of any: (i) breach by such Indemnifying Party of any representation or warranty, covenant or other provision of any Related Agreement to which such Indemnifying Party is a party or is bound and any action; and/or (ii) act, action or omission of any spouse, family member, heir, representative, creditor and/or assign (including by operation of law) of such Indemnifying Party and/or his spouse. (b) Indemnified Party will give prompt written notice to Indemnifying Party under each claim for indemnification hereunder specifying the amount and nature of the claim, and in the case of a third party claim, Indemnifying Party will promptly at its sole expense defend such claim, provided that Indemnified Party may participate at its own expense in such defense. Failure to give timely notice of a matter which may give rise to an indemnification claim hereunder will not affect the rights of Indemnified Party, to the extent such failure does not materially adversely affect Indemnifying Party's ability to defend such claim. Indemnifying Party will not, without the prior written consent of Indemnified Party (such consent not to be unreasonably withheld or delayed), consent to the entry of any judgment or enter into any settlement binding the Indemnified Party unless such judgment or settlement unconditionally releases Indemnified Party from all liability and respect to such claim or litigation. ARTICLE S: MISCELLANEOUS 8.1. Further Assurances Amendments to Schedules. (a) Each party hereto will cooperate with the other parties hereto and execute all reasonable. documents and take such other reasonable actions necessary or appropriate to carry out the provisions of the Related Agreements and the'transactions contemplated thereby, including to: (i) obtain the payment to the proper recipient hereunder of any Insurance Policy proceeds; (ii) consummate any Closing contemplated hereunder: and (iii) execute any necessary or appropriate amendment(s) to the by-laws and articles. of incorporation of the Company. Without limiting the foregoing, each party hereto will also enter into appropriate amendments to any Related Agreement upon the permitted accession of any additional non-Farrell Shareholder as necessary or reasonably requested by any Shareholder to preserve the intent and effect of Sections 3.5, 4.7 and 4.8. - J b) In the-event-of any conflict -between any-Related-Agreement and the by-laws and articles.of incorporation of the Company, the Related Agreement will prevail as between or among the parties thereto. 20 PRIVATEA ND CONFIDENTIAL Execution Copy ?-- (c) The Company promptly will amend and update Schedule A as appropriate to reflect any. transactions made in accordance herewith or any Related Agreement, and deliver updated copies thereof to the Shareholders. 8.2. Notices: Each notice and other communication under any Related Agreement (except as otherwise:provided therein) will be in writing and will be deemed to be effective only if delivered by hand, by facsimile transmission, by overnight courier service or by prepaid registered or certified mail, return receipt requested, as follows: (1) If W the Company to: Farrell Veterinary Associates, Inc. Attention: Bernard C. Farrell, VMD, President 108 Carlisle Road Newville PA, 17241 Tel: 717-776-6311 Fax: 717-776-4353 with a copies to: Jacqueline M. Verney, Esq. 44 S. Hanover Street Carlisle, PA Tel: 717-243-9190 Fax: 717-243-3518 Charlotte-Lacroix, DVM, Esq. Priority Veterinary Legal Consultants 24 Coddington Road Whitehouse Station, NJ 08889 Tel: 908-534-2065 Fax: 908-534-8685 Robert P. Kline, Esq. 714 Bridge Road New Cumberland, PA Tel: 717-774-0238 (2) If to a Shareholder or his spouse, to the address set forth under his name on the relevant. signature page hereto with a copy to Charlotte Lacroix, Esq. at the coordinates set forth above; or to such other address as a party thereto may specify by written notice to the other from time to time in accordance with this Agreement or such other Related Agreement. Each notice and other communication under any Related Agreement (except as otherwise provided therein) will be . deemed to have been duly given upon receipt thereof, or in the case of facsimile transmission upon written confirmation of such transmission. 8.3. Amendments Assignments Waiver, Third Parties. (a) No party hereto may amend -.- or. assign any -Related Agreement (except as expressly-otherwise provided therein) without the. ?- prior written consent of all the parties thereto (except as provided in Section 8.1(b) with respect to the amendment of certain schedules hereto). All waivers of any provision or breach of any Related Agreement will be in writing and signed by the waiving party. The waiver by any party 21 PRIVATE AND CONFIDENTL4L Execution copy thereto of any provision'or breach thereof will not waive any. other provision or breach or be deemed another waiver of the same provision or breach.. (b) The obligations, restrictions and duties of each Related Agreement will be binding on the parties thereto, and their successors, heirs and assigns and any direct or indirect Transferor or Transferee of any Shares. 8.4. Entire Agreement Severability Survival. (a) The Related Agreements and the instruments delivered thereunder constitute the entire agreement between the parties thereto and supersede all prior agreements and understandings, written or oral, between the parties relating to the subject matter thereof. .(b) Each provision of each Related Agreement is severable. If any provision thereof is found to be unenforceable, or in violation of any statute, rule, regulation, order or decree of any governmental authority, court or agency, then such provision will be modified to the minimum extent necessary so as to render it enforceable and.cure such violation, and all other provisions thereof will remain in full force and effect notwithstanding such violation. (c) The provisions hereof and of each Related Agreement will survive the termination hereof or thereof, to the extent necessary and appropriate to permit any arty bring maintain any action based on the breach hereof or thereof. 8.5. Injunctive Relief Strict Compliance Specific Performance. The parties hereto agree that: -(a) immediate and irreparable harm will result from a breach of the restrictions on Transfer herein or any provision of Article 6; (b) any remedy at law for a breach of such provisions is inadequate and difficult to determine; (c) the Company and the Shareholders will be entitled to temporary and permanent injunctive and other equitable relief to enjoin any violation of such provisions, in addition to any other available remedies (all of which may be exercised cumulatively), and no bond or other security will be required of the plaintiff in connection with any such relief; (d) stri ct compliance will be required with each and every provision hereof; and (e) the Shares are unique, that failure to perform the obligations provided by this Agreement will result in irreparable damage, that remedies at law for any breach of this Agreement will be inadequate and that specific performance of these obligations may be obtained by suit in equity. 8.6. Counterparts Telecopy Execution and Delivery. Each Related Agreement (other than a Promissory Note or other negotiable instrument) may be executed in any number of counterparts, each of which will be deemed an original. A facsimile, telecopy or other reproduction of any Related Agreement (other than a Promissory Note or other negotiable instrument) may be executed by one or more parties thereto, and an executed copy thereof may be delivered by one or more parties by facsimile or similar electronic transmission device pursuant to which the signature of or on behalf of such party can be seen, and such execution and delivery will be considered valid, binding and effective for all purposes. At the request of any party thereto, all parties agree to execute an original of any Related Agreement-(other than a Promissory Note or other negotiable instrument) as well as any facsimileor other reproduction thereof. . 8.7. Internretation. The headings contained in any Related Agreement are for ^ convenience of reference only and the headings will not be considered a part thereof or used to 22 PRIVATE AND CONFIDENTIAL Execution Copy construe any provision thereof. All references therein to articles, sections and other provisions, or to exhibits and schedules will be to articles, sections and other provisions, or to exhibits and schedules thereof unless otherwise. specified. Capitalized terms used without definition in the schedules to any Related Agreement will have the respective meanings ascribed to them therein. The schedules hereof are incorporated by reference herein.. Words in any Related Agreement in the singular or plural include the singular and plural and pronouns therein stated in either the masculine, the feminine or neuter gender will include the masculine, feminine and neuter, and the term "including" in any Related Agreement will mean by way of example and not by way of limitation. 8.8. Governing Law. This Agreement will be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania, without giving effect to the conflict of law principles thereof. 8.9. Costs Attorney's Fees. If any action at law or in equity is necessary to enforce or interpret the terms hereof, the prevailing parry will be entitled to recover from the losing party entitled to recover all reasonable costs and expenses incurred by such party in connection therewith, including reasonable attorneys' fees, costs, and disbursements in addition to any other available relief. IN WITNESS WHEREOF, the parties have executed this Shareholders' Agreement as of the date first above written, or in the case of Shareholders joining the Company after such date, or their spouses, as of the date set forth below their signature: FARRELL VETERINARY ASSOCIATES, INC By: ?- Name:,,tricia S. Farrell, Title: Vice President 23 PRIVATE AND CONFIDENTIAL SHAREHOLDERS' AGREEMENT Execution Copy The spouse of each Shareholder, by signing-his name in the space provided under his name, approves of this Shareholders' Agreement and consents to be bound by its terms, and waives certain rights as provided in Section 6.4, and binds all .of his representatives, family members, heirs, creditors and assibms (including any assigns by operation of law) to-the same. Shareholder. Spouse Name: Bernard C. Farrell, VMD N/A Address: 530 Doubling Gap Road Newville PA, 17241 Tel: 717-776- 3898 Fax: 717-776-4419 Name: Patricia S. Farrell, N/A Address: 530 Doubling Gap Road Newville PA,' 17241 Tel: 717-776 3898 Fax: 717-776-4419 Name: Todd M. Hasco, DVM Address: 176 Bloserville Road Carlisle, PA 17013 Tel: 717-776-4770 44 (?KJ M Aq /'q J 4"1011 Name: Karen.Hasco Address: [if different from Shareholder) ?? k?velr_ 24 pRIVATEAND CONFIDENTIAL Execution Copy SCHEDULE A SHARES AND PERCENTAGE INTERESTS OF THE SHAREHOLDERS Shareholder Number of Shares Percentage Interest B. Farrell 380 38% P. Farrell 380 38% Hasco 240 24% 25 PRIVATEA ND CONFIDENTIAL Execution Copy EXHIBIT 1 FORM OF SHARE PLEDGE AGREEMENT Share Pledge Agreement, dated as of [insert date], among [insert name or names] ("Borrower"), [insert name] ("Secured Party") and Farrell Veterinary Associates, Inc., a Pennsylvania corporation (the "Company"). RECITALS: WHEREAS, on the date hereof, Borrower has: (a) acquired from Secured Party [insert number] shares of common stock of the Company (the "Shares") pursuant. to the terms of the Shareholders' Agreement, dated as of November 1, 2003 among the Company, the Shareholders, and their spouses (the "SA"); and (b) delivered to Secured Party a [insert number] year [insert number] % fixed-rate secured promissory note in the principal amount of $ [insert number], of even date herewith (the "Note"), in [partial] payment for such Shares (capitalized terms used herein without definition with have the respective meanings set forth in the SA); and WHEREAS, to induce Secured Party to sell the Shares to Borrower and accept the Note in partial. payment thereof, Borrower has agreed to pledge the Shares to Secured Party and execute and deliver, and cause the Company to execute and deliver, this Agreement. NOW, THEREFORE, in consideration of the mutual promises set forth in the SA, the Note, below and other good and valuable consideration, the sufficiency of which is hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows: 1. Pledge. (a) Borrower hereby: (i) pledges the Shares to Secured Party and grants and assigns to Secured Party a security interest in same to secure the full and prompt payment, discharge and satisfaction of: (1) all of Borrower's obligations under the Note; and (2) all obligations of Borrower and the Company hereunder, including;the prompt payment of all reasonable costs, fees and expenses (including reasonable attorneys' fees, expenses and disbursements) incurred in connection with the enforcement of Secured Party's rights hereunder and under the Note (collectively, the "Obligations"); and (ii) concurrently with the execution hereof delivers the Share certificate(s) to Secured Party endorsed in blank, or with assignment powers attached thereto, duly endorsed in blank. Borrower and the Company will execute all documents and take all such other actions as Secured Party may reasonably request to accomplish the purposes hereof. (b) During the term hereof, so long as there is no default as provided in Section 5, Secured Parry will hold the Shares in a secure place and will be responsible and liable to Secured Party for their safe keeping: 2. Dividends and Distributions. So long as there is no default as provided in Section 5, all distributions made by the. Company during the term hereof with respect to the Shares, including any dividends, any stock of the Company or of any other entity, pursuant to a stock split, stock dividend, . exchange of shares or otherwise, and any proceeds derived with respect to the Shares in connection with any sale or exchange of the Company's shares, will be delivered to Borrower. 3. Voting Rights. So long as there is no default as provided in Section 5, Borrower may exercise a?nyA:ar?d au ygttng and otheLCOnsensual xghts .pertaining to the Shares, provided that such exercise is not inconsistent with the purposes hereof. 4. Team. This pledge and security interest will remain in full force and effect until all 28 PRIVATE. AND CONFIDENTIAL Execution Copy Obligations are paid and discharged in full, whether or not this Agreement is superseded, amended, extended. or renewed. Upon the termination of such pledge and security interest, Secured Party will promptly deliver the Shares to Borrower. 5. Default. (a) If Borrower or the Company breaches, or defaults under, any Obligation, Secured Party will deliver written notice thereof to Borrower. No earlier than 5 days after the date such notice is delivered, Secured Party may, in addition to exercising at its sole discretion any and/or all rights and remedies hereunder, or of a secured party under the Uniform Commercial Code (as amended): (1) retain all distributions and payments made in respect of the Shares (and all such distributions and payments will be the property of Secured Party); (2) cause the certificate(s) representing the Shares to be registered in its name; (3) exercise any and all voting and other consensual rights pertaining to the Shares; and/or (4) sell the Shares for fair market value and upon reasonable terms, without regard to the restrictions on Transfer.set forth in the SA. All distributions and proceeds from the Shares (including from the sale thereof) will be distributed as follows: (A) first, to the payment of any costs and expenses incurred by Secured Party in connection with the foregoing; (B) second, to the payment of the Obligations; and (C) third., to Borrower or as otherwise required by law. (b) The rights and remedies of Secured Party contained hereunder, under the Note, the SA, or any other agreement between Secured Party and Borrower, or to which Secured Party and Borrower are parties, or that are otherwise available to Secured Party will be cumulative and concurrent, may be pursued separately, successively or together against Borrower or the Company at the sole discretion of Secured Party, and may be exercised as often as occasion therefor will arise. .(c) No waiver by Secured Party of any right or remedy available to it will be effective unless in a r writing signed by Secured Party. No failure or delay by Secured Party in exercising any right, power or privilege hereunder will operate as a waiver of such right, power or privilege and no single or partial exercise of any such right, power or privilege by Secured Party will preclude any other or further exercise of such right, power or privilege or the exercise of any other right, power or privilege. b. Borrowers Obligations Joint and Several. If there is more than one Borrower under a Note, each obligation of the Borrowers hereunder will be joint and several. 7. Notice. Any notice hereunder will be delivered in accordance with Section 8.2 of the SA. 8. Governin Law. This Agreement will be governed by the laws of the Commonwealth of Pennsylvania, without giving effect to the conflict of laws principles thereof. 9. Assignment. This Agreement will be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. This Agreement may be assigned by Secured Party without Borrower's or the Company's consent, but will not be assigned by Borrower or the Company (including in each case by operation of law) without the prior written consent of Secured Party. AH amendments hereto must be in writing and signed by all the parties hereto. . 10. Related Agreement. This Agreement is a Related Agreement as defined in the SA, and all the relevant provisions therein applicable to Related Agreements are hereby incorporated herein by reference. - - - - ---1-1.--Inconsistent Action. -The -Company - will-not-take .any action inconsistent with the purposes hereof, including, recording any transfer of the Shares, except as permitted by this Agreement. IN WITNESS WHEREOF, the parties have executed this Share Pledge Agreement as of the date first above written. 29 PRIVATE AND coNFIDEIVTIAL Execution Copy BORROWER Name: FARRELL VETERINARY ASSOCIATES,. INC. Name: Title: SECURED PARTY Name: 30 PRIVATE AND CONFIDENTIAL Execution Copy EXHIBIT 4.6 FORM OF PROMISSORY NO'T'E m [date] FOR VALUE RECEIVED, the undersigned ("Borrower"), promises to pay to the order of ("Lender"), at [Lender's Address] or at such ? other.;place as Lender may from time to time designate to Borrower in writing, in lawful money of the United States of. America, the principal sum of , together with interest, in the manner provided below. This Promissory Note (the "Note") has been executed and delivered pursuant to the Shareholders' Agreement (the "SA"), dated as of November 1, 2003 among, Farrell Veterinary Associates, Inc., a Pennsylvania corporation (the "Company"), the Shareholders, and their spouses: Capitalized terms used in this Note without definition will have the respective meanings set forth in the SA. [This Note is secured by the pledge by Borrower to Lender of Shares, pursuant to a Share Pledge Agreement, of even date herewith among Borrower, Lender and the Company.] 1. Payment. The outstanding principal amount hereunder will bear interest at the rate of _% per annum commencing on the date hereof. Principal and interest will be due and payable in equal consecutive monthly installments of $ commencing on the first day of the first month iinmediitely succeeding the date hereof and continuing on the first day of every month thereafter until paid in full. Each installment will be credited first.to accrued interest and then.to principal. Any payment not made within five business days of its due date will incur a late charge of interest at the lesser of 12% per annum and the maximum allowed by law, from the due date. through the, date it is received by Lender. 2. Prepayment. Borrower may, without premium or penalty, at any time and from time to time,. prepay all or any portion of the outstanding principal balance due hereunder together with. all accrued interest thereon. Any partial prepayments will be applied to installments of principal in inverse order of their maturity. 3. Set-off-, Breach of Non-Competition and Confidentiality. Borrower will have no right to withhold and set-off against any amount due hereunder the amount of any claim for indemnification or payment of damages to which Borrower may be entitled from Lender; provided that this Note will become cancelled, null and void and of no further effect, and no further payments will be due by Borrower to Lender hereunder if Lender is in material breach of his non-competition and/or confidentiality obligations under Sections 6.1 and 6.2 of the SA. 4. Default. 4.1 _ The occurrence of any one or more of the following events will constitute an event ----------- -- of default hereunder ("Event of Defau t")' .__---- (a) If (i) Borrower fails to pay when due any payment of principal or interest on this Note; or (ii) if Borrower fails to make any other payment when due, or breaches any 31 PRIVATE AND CONFIDENTIAL Execution Copy other tern hereunder, [or] the SA [or the Share Pledge Agreement], or Borrower or the guarantors breach any guarantee of Borrower's obligations. hereunder, and such failure to pay or breach is not cured within 15 days after Lender has given Borrower written notice thereof, and/or (b) Borrower or any guarantor of Borrower's obligations: (i) becomes insolvent or takes any action which constitutes its admission of inability to pay. its debts as they mature; (ii) makes an assignment for the benefit of creditors, files a petition in bankruptcy, petition or applies to any tribunal for the appointment of a custodian, receiver or a trustee for it or a substantial portion of its assets; (iii) commences any proceeding under any bankruptcy, reorganization, arrangement, readjustment of debt, dissolution or liquidation or statute of any jurisdiction, whether now or hereafter in effect; (iv) has filed against it any such petition or application in which an order for relief is entered or which remains un-dismissed for a period of 90 days or more; (v) indicates its consent to, approval of or acquiescence in any such petition, application, proceeding or order for relief or the appointment of a custodian, receiver or trustee for it or a substantial portion of its assets; or (vi) suffers` any such custodianship, receivership or trusteeship to continue undist;harged for a period of 90 days or more. 4.2. Upon the occurrence of an Event of Default, Lender may, at its option: (a) by written notice to Borrower, declare the entire unpaid balance of this Note (together with all interest accrued thereon) immediately due and payable; and (b) exercise any and all rights and remedies available to it under applicable law, including, the right to collect. from Borrower all sums due under this Note: [or the Share Pledge. Agreement] or under any guarantee of Borrower's obligations hereunder. The rights and remedies of Lender under this Note [,and] the SA (if any) [and the Share Pledge Agreement,] under any guarantee of Borrower's obligations hereunder and under any other agreement, at law and in equity are cumulative and concurrent, may be pursued separately; successively, together or in any combination at the sole discretion of Lender, and may be exercised as often as occasion therefor will arise. No waiver by Lender of any right or remedy under this Note will be effective unless in a writing signed by Lender. Neither the failure nor any delay in exercising any right, power or privilege under this Note will operate as a waiver of such right, power or privilege and no single or partial exercise of any such right, power or privilege by Lender will preclude any-other or further exercise of such right, power or privilege or the exercise of any other right, power or privilege. 4.3. Borrower will pay on demand all costs and expenses incurred by or on behalf of Lender in connection with Lender's exercise of any or all of its rights and remedies under this Note, [or the Share Pledge Agreement] or any guarantee of Borrower's obligations hereunder, including reasonable attorneys' fees, expenses and disbursements. 4.4. Borrower hereby waives presentment, demand, protest and notice of dishonor and protest. 5. Obligations Joint and Several. If there is more than one Borrower hereunder,.each - --obligation-.fsuch-Borrower hereunder will be joint and several 6. Borrower Life Insurance. (a) Lender in its sole discretion, may at any time after the date hereof, require Borrower at Borrower's sole expense to purchase and continuously maintain 32 PRITIATE AND CONFIDENTL4L Execution Copy in full force and effect with respect to itself as insured so long as any amount is outstanding hereunder or under. the Pledge Agreement, a .life insurance policy in form and substance satisfactory to Lender in their sole discretion naming Lender (and their heirs and assigns) as beneficiaries, in an amount of not less than the total amount (principal plus interest) due under this Note or any amendment thereof. Lender will retain all proceeds from such life insurance and apply the same to any amount Borrower may owe hereunder, under the Pledge Agreement, and any :other amount Borrower may owe to Lender (collectively the "Obligations"); provided that any such application will not release Borrower from any Obligations to the extent such insurance proceeds are insufficient to fully discharge same. If any life insurance proceeds remain after all such obligations have been fully discharged, such proceeds will be paid as directed by Borrower. .(b) Borrower will not cancel, surrender, borrow against, assign, or change the nature or value of any of such life insurance policy or take or permit any action or make or permit any omission to impair the validity of such policy or the payment of the proceeds thereof to Lenders as provided in Section 6(a). . (c) Notwithstanding anything to the contrary herein or in any other agreement, Lenders may declare all Obligations to be immediately due and payable to Lenders upon Borrower's death. .7. Notices. Any notice required or permitted to be given hereunder will be given in accordance with Section 8.2 of the SA. 8. Governing Law. This Note will be govemed.by the laws of the Commonwealth of Pennsylvania, without giving effect to the conflicts of laws principles thereof. 9. Assignment. This Note will bind Borrower and. its successors and assigns and may be assigned or transferred by Lender without the consent of Borrower. This Note will not be assigned or transferred by Borrower (including.by operation of law) without the express prior written consent of Lender. 10. Related Agreement. This Note is a Related Agreement as defined in the SA, and all the relevant provisions therein applicable to Related Agreements are hereby incorporated herein by reference. IN WITNESS WHEREOF, Borrower has executed and delivered this Note as of the date first above written. By: By: Name: Name: 33 PRIVATE AND CONFIDENTIAL Execution Copy EXHIBIT 5.1(b) FORM OF SHAREHOLDERS' GUARANTEE Guarantee("Guarantee") dated as of [insert date], by [insert name] (collectively, "Guarantors") to [insert name] ( "Lender"). RECITALS: WHEREAS, the-Company has purchased from Lender [insert number] Shares of the Company (the "Purchased Shares") pursuant to Section. 5. 1 (a) of the Shareholders' Agreement (the "SA"), dated as of November 1, 2003 among Farrell Veterinary Associates, Inc., a Pennsylvania corporation (the "Company"), the Shareholders, and their spouses (capitalized terms used in this Guarantee without definition will have the respective meanings. set forth in the SA), and has delivered a [insert number] year [insert nutnber]% fixed-rate secured promissory note in the principal amount of $ [insert number], of even date herewith (the "Note"), in [partial] payment'of such Shares; WHEREAS, the Company has pledged the Purchased Shares to-secure the Note, pursuant to a Share Pledge Agreement, of even date herewith between Lender and the Company (the "SPA"); and WHEREAS, Guarantors, who are all Shareholders of the Company, have entered into this Guarantee pursuant to Section 5.1(c) of the SA and to induce Lender to accept the Note. NOW, THEREFORE, in consideration of the mutual promises set forth in the SA, the Note, the SPA, below and other good and valuable consideration, the, sufficiency of which is hereby acknowledged, the Guarantors, intending to be legally bound, hereby agree as.follows: .1. Guarantee. Guarantors, jointly and severally, unconditionally, irrevocably and absolutely: (a) guarantee the Company's full and prompt performance of each obligation under the Note and the SPA, including the obligation to pay all principal and interest and all other amounts due to Lender thereunder, and to perform each term, condition and requirement of, the Note and the SPA, and the payment of all reasonable costs, fees and expenses (including reasonable attorneys' fees, expenses and disbursements incurred by Lender in enforcing any of the foregoing obligations; and (b) will pay upon Lender's demand. all reasonable costs, fees and expenses (including reasonable attorneys' fees, expenses and disbursements incurred by Lender in enforcing any obligation of any Guarantor hereunder (each of the foregoing, an "Obligation'; regardless of the willingness or ability of the Company to perform any Obligation; whether or not any Obligation is valid, enforceable, reduced or extinguished or increased; whether or not recovery may be or become barred by any statute of limitations or otherwise; despite any arrangement or composition entered into in connection with any bankruptcy or other proceeding; and without any counterclaim, set-off, or deduction. 2. Subordination. Any indebtedness, liability or obligation of the Company to any Guarantor, whether now or hereafter existing (but excluding, so long as, but only so long as, no default exists under the Obligations, Guarantor's compensation as employee of the Company or 34 t- any dividend profit or other distribution made by the Company to such Guarantor as shareholder of the Company (collectively "Indebtedness"), will be subordinated to the prior payment and performance in full of the Obligations. Each Guarantor agrees that so long as any Obligation remains unperformed, Guarantor will not, without the prior written consent of Lender: (a) assert, collect or enforce any Indebtedness; (b) commence, prosecute or participate in any administrative, legal or equitable action, or take any other action to collect, enforce or recover any Indebtedness; or (c) commence or join with any creditor in commencing any bankruptcy, insolvency or similar proceeding with respect to the Company or take any other action that could cause the insolvency of the Company. 3. Guarantor Waivers. Each Guarantor hereby waives, to the fullest extent permitted by law: (a) any requirement that Lender, before proceeding under any Guarantor, first pursue any remedy against the Company or demand performance from the Company, whether such remedy is pursuant to the Note, the SPA, applicable law or equity, or that Lender first proceed against or exhaust any security held by Lender at any time; (b) any defense arising from the lack of authority of any Guarantor or the or revocation hereof by any Guarantor or any by other person or by the failure of Lender to file or enforce any claim against the estate (either in administration, bankruptcy or any other proceeding) of any person; (c) any defense arising by reason of any presentment, demand for payment or performance or otherwise, protestor notice of any other kind or lack thereof; (d) any defense based upon an election of remedies by Lender which destroys or otherwise impairs the subrogation rights of any Guarantor or the right of any Guarantor to proceed against the Company for reimbursement, indemnity or contribution, or. any defense with respect to any other right or remedy of Guarantor; :(e) any notice to any Guarantor, to the Company, or to any other person, including any notice of the acceptance of this Guarantee or of the creation, renewal, extension, modification, accrual of any Obligation, or of any default thereunder, or of any enforcement of any right or remedy with respect thereto or notice of any other matter relating thereto; (f) any statute of limitations affecting any Guarantor's liability hereunder or of the enforcement thereof; (g) any requirement of diligence or promptness on the part of Lender; (h) any and all suretyship defenses under applicable law; (i) any principles or provisions of law, statutory or otherwise, which are or might be in conflict with the terms hereof; and 0) any right to set-off, recoupment or counterclaim or any other circumstance which might otherwise constitute a defense available to, or a discharge of, the Company, any Guarantor or any other guarantor with respect to the Obligations. 4. Bankruptcy. No obligation of any Guarantor hereunder will be reduced, limited, impaired, discharged, deferred, suspended or terminated by any proceeding, voluntary or involuntary, involving the bankruptcy, insolvency, receivership, reorganization, liquidation or arrangement of the Company, or by any defense which the Company may have by reason of any order, decree or decision of any court or administrative body resulting from any such proceeding. Each Guarantor agrees that any interest on any portion of the Obligations which accrues after the commencement of any proceeding referred to in the preceding sentence (or, if interest on any portion of the Obligations ceases to accrue by operation of law by reason of the commencement of such proceeding, such interest as would have accrued on such portion of the Obligations if uch proceeding not been commenced) will be included in the Obligations, because it is the _? _ intention of each Guarantor, Lender and the Compariyhat-the-Obligations-be determined without ?- regard to any rule of law or order which may relieve the Company of any portion of any Obligation. Each Guarantor will permit any trustee in bankruptcy, receiver, debtor in possession, assignee for the benefit of creditors or any similar person to pay Lender, or allow the claim of 35 Lender in respect of, any such interest accruing after the date on which.any such proceeding is commenced. 5. Guarantors Joint and Several: Upon the Company's default to perform' any Obligation, each Guarantor will be jointly and severally responsible and liable for the Company's failure to perform such Obligation. Each Guarantor's performance of some, but not all, of the Obligations will in no way limit, affect, modify or abridge any Guarantor's liability for those Obligations which have.hot been performed. 6. Guarantor. Reporting. So long as any Obligation remains outstanding or unperformed, each Guarantor will deliver to Lender: (a) no later than 60 days after the end of each calendar year such Guarantor's balance sheet and income and expense statement for the preceding year, (b) such Guarantor's complete income tax return (together with all schedules and amendments thereto) ,no later than 15 days after each such document was filed; and (c) any other document that Lender may reasonably require. Each Guarantor hereby represents and covenants that each document delivered pursuant to this Section 6,.will be as of the date it was delivered, true, correct and complete in all material respects, will fairly present the financial condition of such Guarantor as of the date thereof, will be prepared in accordance with Generally Accepted Accounting Principles (GAAP), fairly present the results of such Guarantor's operations for the periods covered thereby in accordance with GAAP, and will be consistent with the books and records of such.Guarantor (which, :in turn, will be at all times accurate and complete in all material respects). All material transactions and all indebtedness, liabilities and material obligations of any type, direct or indirect, contingent or otherwise of such Guarantor will be reflected in the applicable documents to be delivered pursuant to this Section 6 in accordance with GAAP. 7. Guarantor Informed. Each Guarantor acknowledges and agrees that it: (a) has full knowledge of the terms of the Note, the SPA and the SA and the Company's obligations thereunder; (b) fully understands all rights and remedies of Lender in the event of default by the Company with respect to any of Obligation; and (c) has full knowledge of the financial condition of the Company and assumes the obligation to keep itself fully informed as to the Company's financial condition and its performance of its obligations under the Note and the SPA. Lender will have no obligation to disclose to any Guarantor any information concerning the Company, the Note, the SPA or the SA, or any other facts material to Guarantor, regardless of whether Lender knows: such facts are unknown to Guarantor and would materially increase the risk to Guarantor beyond that which Guarantor might have intended to assume under this Guarantee. 8. Remedies Cumulative. The rights and -remedies of Lender hereunder, the Note, the SA, or under any other.agreement between Lender and Company and/or any Guarantor, or to which Lender and/or the Company and/or any Guarantor are parties, or that are otherwise available to Lender, will be cumulative and concurrent, may be pi=rsued separately, successively or together against any Guarantor at the sole discretion of Lender, and may be exercised as often as occasion therefor will arise. 9. Waiver. No waiver by Lender of any right or remedy available to it will be effective - ----- ---unless-in-a_writing-sign:ed by Lender. No failure or delay by Lender in exercising any right, power or privilege hereunder will operate as a waiver of such right, power or privi ege ari no - single .or partial exercise of any such right, power or privilege by bender will preclude any other or further exercise of such right, power or privilege or the exercise of any other right, power or 36 privilege. 10. Notices. Any notice hereunder will be delivered in accordance with Section 8.2 of the SA. 11. Miscellaneous. This Guarantee will remain in full force and effect until all Obligations have been fully satisfied, performed and discharged, and may-not be assigned by Guarantors without Lender's prior written consent, but may be assigned by Lender without Guarantors' consent: This Guarantee will be binding upon the Guarantors and their respective heirs, successors and permitted assigns. The benefits hereof will inure to Lender and its heirs, successors and assigns. All amendments hereto must be in writing and signed by Lender and each Guarantor. 12. Governing Law. This Guarantee will be governed by the laws of the Commonwealth of Pennsylvania, without giving effect to the conflict of laws principles thereof. 13. Related Agreement. This Agreement is a Related Agreement as defined in the SA, and all the relevant provisions therein applicable to Related Agreements are hereby incorporated herein by reference. Without limiting the foregoing, each Guarantor hereby makes to Lender on the date hereof the representations and warranties set forth in Section 7.1 of the SA. IN WITNESS WHEREOF, each Guarantor has executed this Guarantee as of the date first above written. Name: 3? February 8, 2011 Samuel L. Andes, Esquire 525 North 121' Street Lemoyne, PA 17043 Re: Farrell Veterinary Clinic, Inc. Dear Sam: ROBERT P. KLm, ESQ. I have reviewed this matter with both Bernie Farrell and Todd Hasco following our recent telephone conversation. First and foremost, I fmd it unlikely that Mr. Elicker would decide to violate a Shareholders Agreement and take jurisdiction over a matter that directly impacts a shareholder who is not a party to the divorce action. While I agree that he must consider capital gains tax implications to both parties in rendering his decision, whatever allowances he may make to either party in that regard does not affect the actual mechanics set forth in the Shareholders Agreement. In my letter of November 5, 2010, I advised you that it is my client's position that your client's shares in the corporation, for the purposes of the Shareholder Agreement, are valued at $434,435.56 and I provided you with the manner in which that sum was calculated. In that same letter; I also advised you of the financing arrangement provided for in the Shareholder Agreement, that being a five percent down payment with the remaining balance to be secured by a note amortized over a period of seven years with interest at the prime rate (currently 3.25%). Therefore, my clients are prepared to make a down payment to your client in the amount of $21,721.78, with the balance of $412,713.78 payable over seven years at an interest rate of 3.25%. Please confirm your client's acceptance or rejection of this proposal within ten (10) days of the date of this letter. Please be advised that my clients are prepared to initiate litigation to specifically enforce the Shareholder Agreement in order to obtain a final resolution of this matter. Very truly yours, Robert P. Kline, Esquire RPK/srf 714 Bridge Street cc: Farrell Veterinary Clinic, Inc. P.o. Box 461 EXHIBIT "B„ New Cumberland, PA 17070 (717) 770-2540 (717) 243-5940 Fax (717) 770-2553 ' . SAMUEL L. ANDES ATTORNEY AT LAW MAILING ADDRESS: P. O. BOX 168 LEMOYNE, PA 17043-0168 525 NORTH TWELFTH STREET P. O. BOX 168 LEMOYNE, PENNSYLVANIA 17043 TELEPHONE (717) 761-5361 E-MAIL: LawAndespaol.com Robert P. Kline, Esquire 714 Bridge Street P.O. Box 461 New Cumberland, PA 17070 18 February 2011 RE. Farrell Veterinary Clinic, Inc. Dear Rob: I write in response to your letter of 8 February 2011. PAX (717) 761-1435 My client is not willing to transfer her interest in the corporation pursuant to the Stockholders Agreement. We are not asking the Divorce Master to deal with Dr. Hasco's ownership interest in the business. We are simply asking that the court divide the marital portion of the business owned by Pat and Bernie Farrell. I disagree with your assessment of the (natter and think, quite honestly, that the method I have discussed with my client is the proper method of dealing with the corporation, at least the portion of the corporation owned by Bernie and Pat Farrell. I am trying to work something out with Brad Griffie. When we do, Bernie Farrell wiil be free to transfer or sell any portion of the interest he acquires from Pat Farrell to Dr. Hasco on whatever terms the two of them agree upon. In that way, Dr. Hasco will be fully protected and Bernie Farrell may well end up paying no more to acquire his wife's interest in the property through the divorce than he would under your proposal. Sincerely, Samuel L. Andes amh EXHIBIT "C" Robert P. Kline, Esquire Kline Law Office 714 Bridge Street Post Office Box 461 New Cumberland, PA 17070-0461 (717) 770-2540 telephone (717) 770-2553 facsimile FILED-OFFICE OF THE PROTHONOTARY 2011 MAY 25 AM 11* 40 CUMBERLAND COUNTY FARRELL VETERINARY ASSOCIATES,: IN THE COURT OF COMMON PLEAS INC., a Pennsylvania Corporation, CUMBERLAND COUNTY, PENNSYLVANIA BERNARD C. FARRELL, VMD, and TODD M. HASCO, DVM, PLAINTIFFS VS. : NO. 11-3524 CIVIL TERM PATRICIA S. FARRELL, VMD, DEFENDANT PLAINTIFFS' ANSWER TO DEFENDANT'S NEW MATTER AND NOW, come the above-named Plaintiffs, by their attorney, Robert P. Kline, Esquire, and answer the New Matter of the Defendant as follows: 17. Admitted. 18. Denied. On the contrary, in the divorce pleadings, Bernard Farrell filed a no fault divorce. A copy of the Divorce Complaint is attached hereto as Exhibit "A". On the contrary, it was Patricia Farrell who raised the economic issues in the divorce action. However, even Patricia Farrell did not specifically identify the corporation in her Petition For Economic Relief, attached hereto as Exhibit "B". 19. Admitted in part; denied in part. Admitted that economic claims in the Farrells' divorce action are pending before the Divorce Master. It is specifically denied, however, that the Divorce Master has taken any action or jurisdiction in regard to the Shareholder Agreement which the Plaintiffs seek to enforce. 20. Denied.. On the contrary, it is the understanding of the undersigned that Bernard Farrell's counsel in the divorce action has consistently maintained that the disposition of Patricia Farrell's interest in the corporation should be resolved through the Shareholder Agreement, as set forth in Plaintiff's Inventory and Appraisement in the divorce action attached hereto as Exhibit "C". 21. Denied. On the contrary, this is an action by Plaintiffs to enforce Patricia Farrell's obligations under the Shareholder Agreement. Further, as stated above, it is Patricia Farrell, and only Patricia Farrell, who is requesting that the distribution of her interest in the corporation be addressed through the divorce action. 22. The allegation concerning Defendant's settlement proposal in a divorce action is irrelevant to the enforcement of the Shareholder Agreement and, therefore, is denied. To the contrary, the Shareholder Agreement provides for the specific mechanism for the disposition of the corporation upon the withdrawal of a shareholder which Defendant, through her proposals, consistently seeks to avoid. 23. Any factual allegation related to the dissolution of the Farrells' marriage is irrelevant to the enforcement of the Shareholder Agreement and, therefore, is specifically denied. 24. Any factual allegation related to the dissolution of the Farrells' marriage is irrelevant to the enforcement of the Shareholder Agreement and, therefore, is specifically denied. 25. Any factual allegation related to the dissolution of the Farrells' marriage is irrelevant to the enforcement of the Shareholder Agreement and, therefore, is specifically denied. By way of further answer, Defendant had substantially removed herself from the day- to-day operation of the corporation prior to learning of her husband's extramarital affair. 26. Denied as stated. Plaintiff Bernard C. Farrell specifically denies that he made the statements to the Defendant as set forth in Subparagraphs (a), (b), and (c) of Defendant's New Matter. Plaintiff Bernard C. Farrell did advise Defendant that Defendant should not place the staff at the veterinary hospital, including Plaintiff Hasco, in the middle of their personal differences and that Defendant should abstain from disrupting the operations of the veterinary hospital. Further, at no time has Plaintiff Bernard C. Farrell made any statement to Defendant Patricia Farrell regarding any alleged threatened resignation by Plaintiff Hasco. 27. Denied as stated. It is specifically denied that Plaintiff Hasco had any involvement whatsoever in the negotiation of any "private agreement" between Plaintiff Farrell and Defendant Farrell. The "private agreement" outlines the terms and conditions which Defendant Patricia Farrell imposed upon Plaintiff Bernard Farrell to which Plaintiff Bernard Farrell acquiesced; in fact, there was not any negotiation between Plaintiff Bernard Farrell and Defendant Patricia Farrell in regard to this agreement. Further, Plaintiff Hasco is not a party to this agreement, had no knowledge of the agreement until after the fact, and first learned of Defendant Patricia Farrell's resignation when she personally told him of her resignation at the veterinary hospital. Prior to that time, Plaintiff Hasco had no knowledge of any intent of Defendant Patricia Farrell to resign, nor had he requested any such resignation. 28. Denied. The response to Paragraph 27 is incorporated herein. The agreement was entered into at the request of Defendant Patricia Farrell. Plaintiff Hasco had no knowledge of the agreement and certainly did not request that Patricia Farrell present the agreement to Plaintiff Bernard Farrell. Any reference to an alleged threatened "resignation" by Plaintiff Hasco is not based in any fact whatsoever and is specifically denied. 29. Denied. The allegation of this paragraph is a legal conclusion to which no responsive pleading is required and, to that extent, it is denied. By way of further answer, the fact that said agreement contains terms and conditions which are inconsistent with the Shareholder Agreement would relegate it to, at best, a conditional resignation from the corporation and not consistent with the specific terms of a withdrawal notice pursuant to the Shareholder Agreement. 30. Denied. Prior to the parties Farrells' separation, Defendant Farrell had already substantially removed herself from the day-to-day operation of the corporation. Further, Defendant Patricia Farrell removed herself from the corporation of her own accord and not at the request of either Plaintiff Hasco or Plaintiff Bernard Farrell. 31. Denied.. The allegation of this paragraph is a legal conclusion to which no responsive pleading is required. To the extent a response is required, it is denied. By way of further answer, while there are provisions in the Shareholder Agreement indicating that the interest shall be purchased within one year of separation, at no time has Defendant Patricia Farrell sought to enforce this provision of the Agreement. By way of further answer, Defendant Patricia Farrell's continued receipt of payments from the corporation has tolled any time limitations imposed by that agreement. 32. Denied.. The allegation of this paragraph is a legal conclusion to which no responsive pleading is required. To the extent a response is required, the allegation is denied. By way of further answer, Defendant Patricia Farrell's continued receipt of payments from the corporation has tolled any time limitations imposed by that agreement, and Defendant Patricia Farrell has never sought to enforce the time limit provision of the Agreement. 33. Admitted that the corporation operates its veterinary practices at two (2) locations, one of which is owned by Defendant Patricia S. Farrell and the other of which is owned by Plaintiff Bernard Farrell. The remaining allegations of this paragraph are denied as there are proper leases in place between the corporation and the respective owners of the real estate and the ownership of the real estate is not relevant to the disposition of the parties' interests pursuant to the Shareholder Agreement. 34. The allegation of this paragraph lacks any specificity which would allow the answering party to respond appropriately and, to that extent, it is denied. Further, the allegation appears to include a legal conclusion to which no response is required and, to that extent, the allegation is denied. 35. Denied. It is specifically denied that this Court has taken jurisdiction of the corporation and the ownership interest therein in the divorce action pending between Defendant Patricia Farrell and Plaintiff Bernard C. Farrell. On the contrary, this Court, nor the Divorce Master appointed by this Court, has the authority to override or supersede the contractual relationship between the parties to a divorce action and a third party that is not involved in the divorce action. Further, the Divorce Master cannot make a determination as to the ownership interest of a corporation as between a party in the divorce action and a non- involved third party. Further, the undersigned is unaware of any written Order or recommendation from either this Court or the Divorce Master indicating that the determination of the parties' interest pursuant to the Shareholder Agreement, including the interests of Plaintiff Todd Hasco, an unrelated third party to the divorce action, is to be determined as part of the divorce action. WHEREFORE, Plaintiffs respectfully request this Honorable Court, through its equitable powers, to determine that the Shareholders Agreement is a valid agreement between and among the shareholders of the Corporation, that its terms in regard to the acquisition of the shares of a departing shareholder are valid, and that Defendant, Patricia Farrell, VMD, shall convey her shares to the Corporation pursuant to the terms as set forth in Plaintiffs' Complaints and the exhibits thereto, together with attorneys fees, costs, and such other relief as this Court may deem proper. 7, L) Y" Zc?) f DATE Respectfully submitted, "??a ?V-.-.z ?- ROBERT P. KLINE, ESQUIRE 714 Bridge Street Post Office Box 461 New Cumberland, PA 17070-0461 (717) 770-2540 Attorney for Plaintiffs