AFFILIATION AGREEMENT
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THIS AGREEMENT is made and entered into this 9th day of August, 1996, by
and among , a physician licensed to
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practice medicine in the Commonwealth of Massachusetts (the "Physician"),
Medical Care Partners, P.C., a Massachusetts professional corporation with its
principal offices at 000 Xxxxxx Xxxxxx, Xxxxxxx, XX 00000 ("MCP") and
Physicians Quality Care, Inc., a Delaware corporation with principal offices at
000 Xxxxxx Xxxxxx, Xxxxxxx, XX 00000 ("PQC").
Recitals
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Physician owns and operates a medical practice (the "Practice") and certain
assets utilized in connection therewith.
PQC and MCP have entered into an asset purchase agreement with the
Physician (the "Asset Purchase Agreement") pursuant to which MCP is acquiring
substantially all of the assets used in the Practice.
Now therefore, in consideration of the respective representations,
warranties, covenants, agreements and conditions hereinafter set forth, and
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
AGREEMENT TO AFFILIATE
1.01 Agreement to Affiliate. In consideration of the agreement of PQC to
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make the Affiliation Payments set forth in Section 1.02, the Physician agrees to
leave his current practice, to become affiliated with MCP as a licensed
physician and to enter into and keep in full force and effect during its stated
term the Employment Agreement in the form attached hereto as Exhibit A.
1.02 Affiliation Payments. In consideration of the Physician performing
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the Physician's obligations under Section 1.01, PQC agrees that PQC, either
directly or through one of its affiliates, shall make the following payments to
the Physician:
(i) The amount of cash set forth on Annex A; and
(ii) The number of shares of Common Stock of PQC (the "Shares")
determined in accordance with Section 1.03 with an aggregate fair market value
set forth on Annex B-1, subject to the conditions set forth in Sections 1.03.
1.03 Shares of PQC. (a) The fair market value of the Shares issued to
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the Physician pursuant to Section 1.02 shall be equal to the per share purchase
price paid by purchasers who are not affiliated with PQC in the offering of
Common Stock of PQC which shall close in conjunction with the closing date under
the Asset Purchase Agreement (the "Closing Date").
(b) The Physician agrees to enter into, and the Shares shall be subject to,
the Stockholder's Agreement attached hereto as Exhibit B. PQC agrees to enter
into, and make the Shares subject to, the Registration Rights Agreement attached
hereto as Exhibit C.
(c) The Physician represents, warrants and covenants to PQC as follows:
(i) The Physician is acquiring the Shares for the Physician's own
account for investment only, and not with a view to, or for sale in connection
with, any distribution of the Shares in violation of the Securities Act of 1933
(the "Securities Act"), or any rule or regulation under the Securities Act.
(ii) The Physician has received a copy of the Confidential Private
Placement Memorandum, dated July 29, 1996, with respect to PQC and the Shares
and has had such opportunity as the Physician has deemed adequate to obtain from
representatives of PQC such information as is necessary to permit the Physician
to evaluate the merits and risks of his investment in PQC.
(iii) The Physician has sufficient experience in business, financial
and investment matters to be able to evaluate the risks involved in the
acquisition of the Shares and to make an informed investment decision with
respect to such acquisition.
(iv) The Physician can afford a complete loss of the value of the
Shares and is able to bear the economic risk of holding such Shares for an
indefinite period.
(v) The Physician understands that (i) the Shares have not been
registered under the Securities Act and are "restricted securities" within the
meaning of Rule 144 under the Securities Act, (ii) the Shares cannot be sold,
transferred or otherwise disposed of unless they are subsequently registered
under the Securities Act or an exemption from registration is then available;
(iii) in any event, the exemption from registration under Rule 144 will not be
available for at least two (2) years and even then will not be available unless
a public market then exists for the common stock of PQC, adequate information
concerning PQC is then available to the public, and other terms and conditions
of Rule 144 are complied with; and (iv) there is now no registration statement
on file with the Securities and Exchange Commission with respect to any stock of
PQC and PQC has no obligation or current intention to register the Shares under
the Securities Act.
(vi) A legend substantially in the following form will be placed on
the certificate representing the Shares:
"The shares represented by this certificate have not been registered under
the Securities Act of 1933, as amended, and may not be sold, transferred or
otherwise disposed of in the absence of an effective registration statement
under such Act or an opinion of counsel satisfactory to the corporation to
the effect that such registration is not required."
(vii) The Physician is an "accredited investor" as defined in Rule
501 of the rules and regulations under the Securities Act.
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS
The representations and warranties contained in Article II of the Asset
Purchase Agreement are incorporated herein and made by the Physician to PQC.
The representations and warranties contained in Article III of the Asset
Purchase Agreement are incorporated herein and made by PQC and MCP to the
Physician.
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ARTICLE III
CONDITIONS TO OBLIGATIONS OF PQC
The obligations of PQC under this Agreement are subject to the
delivery on the Closing Date of the documents required to be delivered pursuant
to Article V of the Asset Purchase Agreement and the satisfaction on the Closing
Date of the conditions set forth in Article V of the Asset Purchase Agreement,
each of which deliveries and conditions may be waived in writing in the sole
discretion of PQC.
ARTICLE IV
CONDITIONS TO OBLIGATIONS OF THE PHYSICIAN
The obligations of the Physician under this Agreement are subject to
the delivery on the Closing Date of the documents set forth in Article VI of the
Asset Purchase Agreement and satisfaction on the Closing Date of the conditions
set forth in Article VI of the Asset Purchase Agreement, each of which delivery
and conditions may be waived in writing in the sole discretion of the Physician.
ARTICLE V
TERMINATION
5.01 Optional Termination. This Agreement may be terminated
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at any time prior to the Closing Date as follows:
(i) by the mutual consent of the Physician, MCP and PQC;
(ii) by the Physician, upon a material breach of any
representation, warranty, covenant or agreement on the part of PQC or MCP set
forth in this Agreement or any other agreement referred to herein;
(iii) by PQC or MCP upon a material breach of any
representation, warranty, covenant or agreement on the part of the Physician set
forth in this Agreement or any other agreement referred to herein; and
(iv) by either party if the Closing shall not have occurred by
August 15, 1996, or such other date agreed to by the parties.
5.02 Effect of Termination. (a) In the event this Agreement is
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terminated as provided in Section 5.01 above, (i) each of PQC and Physician
shall deliver to the other parties all documents previously delivered (and
copies thereof in its possession) concerning one another and the transactions
contemplated hereby, and (ii) none of the parties nor any of their respective
stockholders, directors, officers or agents shall have any liability to the
other parties, except for any deliberate breach or deliberate omission resulting
in breach of any of the provisions of this Agreement. In such case, the
breaching party shall be liable only for the expenses and costs of the non-
breaching party, and in no event shall either party be liable for anticipated
profits or consequential damages.
(b) After termination each party shall keep confidential all
information provided by the others pursuant to this Agreement which is not in
the public domain, shall exercise the same degree of
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care in handling such information as it would exercise with similar information
of its own, and shall return any such information upon the other party's
request.
ARTICLE VI
SURVIVAL AND INDEMNIFICATION
6.01 Indemnification.
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(a) Physician shall indemnify, defend, and hold harmless each of MCP
and PQC and their respective subsidiaries and affiliates and their respective
directors, officers, employees and agents or the successor of any of the
forgoing (collectively, "PQC Indemnified Persons"), and reimburse any PQC
Indemnified Persons for, from and against all payments, demands, claims, suits,
judgments, liabilities, losses, costs, damages and expenses, including, without
limitation, interest, penalties and reasonable attorneys' fees, disbursements
and expenses, ("Damages") imposed on or incurred by PQC Indemnified Persons,
directly or indirectly, which relate to or arise out of (i) breach of any
representation and warranty of, or covenant or agreements to be performed by,
Physician contained in this Agreement, the Asset Purchase Agreement or the
Stockholders' Agreement, (ii) any of the liabilities or obligations retained by
Physician pursuant to the Asset Purchase Agreement, (iii) the failure of
Physician or of MCP to comply with any bulk sales laws applicable to the
transactions contemplated hereby, (iv) any Tax liabilities of Physician; and (v)
the conduct of the Practice prior to the Closing Date. Notwithstanding the
foregoing or any other term or condition contained herein or in any other
agreement or instrument referred to herein, the indemnification obligations of
Physician under this Section 6.01(a) and under the Asset Purchase Agreement
shall be limited, in the aggregate, to the purchase price under the Asset
Purchase Agreement and to the consideration under this Agreement.
(b) MCP and PQC shall indemnify and hold harmless Physician
(collectively, "Physician Indemnified Persons" and together with the PQC
Indemnified Persons, the "Indemnified Persons"), and reimburse such Physician
Indemnified Persons for, from, and against all Damages imposed on or incurred,
directly or indirectly, by such Physician Indemnified Persons which arise out of
or relate to (i) breach of any representation or warranty of, or covenant to be
performed by, PQC or MCP, in each case contained in this Agreement or the Asset
Purchase Agreement and (ii) the Assumed Liabilities (as defined in the Asset
Purchase Agreement).
(c) An Indemnified Party shall give prompt written notice to an
indemnifying party (the "Indemnifying Party") of any payments, demands, claims,
suits, judgments, liabilities, losses, costs, damages or expenses (a "Claim") in
respect of which such Indemnifying Party has a duty to provide indemnity to such
Indemnified Party under this Section 6.01, except that any delay or failure so
to notify the Indemnifying Party only shall relieve the Indemnifying Party of
its obligations hereunder to the extent, if at all, that it is prejudiced by
reason of such delay or failure.
(d) If a Claim is brought or asserted by a third party (a "Third-Party
Claim"), the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Party and the
payment of all expenses. The Indemnified Party shall have the right to employ
separate counsel in such Third-Party Claim and participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
the Indemnified Party. In the event that the Indemnifying Party, within twenty
(20) days after written notice of any Third-Party Claim, fails to assume the
defense thereof, or in the event the Indemnifying Party fails to demonstrate, to
the reasonable satisfaction of the Indemnified Party, that it has sufficient
assets to meet its indemnification obligations hereunder, the Indemnified Party
shall have the right to undertake the defense, compromise or settlement of such
Third-Party Claim for the account of the Indemnifying
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Party. Anything in this Section 6.01(d) to the contrary notwithstanding, the
Indemnifying Party shall not, without the Indemnified Party's prior written
consent, settle or compromise any Third-Party Claim or consent to the entry of
any judgment with respect to any Third-Party Claim which would have any adverse
effect on the Indemnified Party, except as provided immediately below. The
Indemnifying Party may, without the Indemnified Party's prior written consent,
settle or compromise any such Third-Party Claim or consent to entry of any
judgment with respect to any Third-Party Claim which requires solely money
damages paid by the Indemnifying Party and which includes as an unconditional
term thereof the release by the claimant or the plaintiff of the Indemnified
Party from all liability in respect of such Third-Party Claim.
(e) With respect to any Claim other than a Third Party Claim, the
Indemnifying Party shall have thirty (30) days from receipt of written notice
from the Indemnified Party of such Claim within which to respond thereto. If
the Indemnifying Party does not respond within such thirty (30)-day period, the
Indemnifying Party shall be deemed to have accepted responsibility to make
payment and shall have no further right to contest the validity of such Claim.
If the Indemnifying Party notifies the Indemnified Party within such thirty
(30)-day period that it rejects such Claim in whole or in part, the Indemnified
Party shall be free to pursue such remedies as may be available to the
Indemnified Party under applicable law.
6.02 Survival of Representations; Claims for Indemnification. All
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representations and warranties made by the parties herein or in any instrument
or document furnished in connection herewith shall survive the Closing and any
investigation at any time made by or on behalf of the parties hereto. All such
representations and warranties and the Physician's obligations pursuant to
Sections 6.1(a)(i), (ii) and (iii) and the PQC's and MCP's obligations pursuant
to Section 6.1(b) shall expire on the third anniversary of the Closing Date,
except for claims, if any, asserted in writing prior to such third anniversary,
which shall survive until finally resolved and satisfied in full. The
obligation of the Physician pursuant to Section 6.1(a)(iv) and (v) shall survive
until six (6) months after the expiration of the applicable statute of
limitations with respect thereto. All claims and actions for indemnity pursuant
to this Section 6 shall be asserted or maintained in writing by a party hereto
on or prior to the expiration of such periods.
6.03 Confidentiality. The Parties hereto agree to use reasonable
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efforts to preserve in full the confidentiality of all confidential business
records and the attorney-client and work-product privileges. In connection
therewith, each party hereto agrees that:
(a) it will use all reasonable efforts, in any action, suit or
proceeding in which it has assumed or participated in the defense, to avoid
production of confidential business records; and
(b) all communications between any party hereto and counsel
responsible for, or participating in, the defense of any action, suit or
proceeding shall, to the extent possible, be made so as to preserve any
applicable attorney-client or work-product privilege.
6.04 Remedies Cumulative. Except as otherwise provided herein, the
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remedies provided herein shall be cumulative and shall not preclude the
assertion by any Party hereto of any other rights or the seeking of any other
remedies against any other Party hereto.
6.05 Set-off and Recoupment. Any amount or amounts due from any
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Indemnifying Party to PQC under this Article VI may be paid to PQC, at PQC's
option, by set-off or recoupment against any amounts due to the Indemnifying
Party pursuant to this Agreement or pursuant to any agreement between the
Indemnifying Party and PQC, MCP or any of their respective affiliates. Any such
set-off will be without prejudice to PQC's right to pursue any other remedies at
law or in equity available to it.
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ARTICLE VII
GENERAL PROVISIONS
7.01 Amendment and Waiver. No amendment of any provision of this
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Agreement shall in any event be effective unless the same shall be in writing
and signed by the Parties hereto. Any failure of any Party to comply with any
obligation, agreement or condition hereunder may only be waived in writing by
PQC if such failure is by Physician and by Physician if such failure is by PQC,
but such waiver shall not operate as a waiver of, or estoppel with respect to,
any subsequent or other failure. No failure by any Party to take any action
against any breach of this Agreement or default by the other party shall
constitute a waiver of such Party's right to enforce any provision hereof or to
take any such action.
7.02 Notices. All notices, requests, demands and other communications
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hereunder shall be in writing and shall be sent by personal delivery or
registered or certified mail, postage prepaid, or by telecopier as follows:
(a) if to the Physician:
with a copy to:
Xxxxx and Xxxxxxx
000 Xxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000-0000
Attention: Xxxxxxx Xxxxxxxx
(b) if to PQC or MCP:
Physicians Quality Care, Inc.
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxx
Any Party may change its address for receiving notice by written notice given to
the others named above. All notices shall be effective upon the earlier of
actual delivery or when deposited in the mail addressed as set forth above.
7.03 Counterparts. This Agreement may be executed simultaneously in
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two (2) or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same Agreement.
7.04 Parties in Interest. This Agreement shall bind and inure to the
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benefit of the Parties named herein and their respective heirs, successors and
assigns. This Agreement shall not be assignable by any Party without the prior
written consent of the other Parties, except that PQC may assign its rights and
obligations under this Agreement to any affiliate of PQC.
7.05 Entire Transaction. This Agreement and the other agreements,
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documents and instruments referred to herein contain the entire understanding
among the Parties with respect to the
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transactions contemplated hereby and supersede all other agreements and
understandings among the Parties.
7.06 Applicable Law. This Agreement shall be governed by and construed
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in accordance with the internal substantive laws of the Commonwealth
of Massachusetts, and the parties hereby consent to the sole jurisdiction of
Massachusetts courts over all matters relating to this Agreement.
7.07 Headings. The section and other headings contained in this
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Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
7.08 Expenses. Each Party to this Agreement shall pay its own costs
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and expenses in connection with the transactions contemplated hereby.
7.09 Third Parties. Except as specifically set forth or referred to
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herein, nothing herein expressed or implied is intended or shall be construed to
confer upon or give to any person or entity other than the parties hereto and
their successors or assigns, any rights or remedies under or by reason of this
Agreement.
7.10 Severability. If any term, provision, covenant or restriction
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of this Agreement is held by a court of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
[Remainder of Page Intentionally Left Blank]
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7.11 Defined Terms. Any defined terms used herein and not defined
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herein shall have the meaning assigned thereto in the Asset Purchase Agreement.
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to
be duly executed all as of the day and year first written above.
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PHYSICIANS QUALITY CARE, INC.
By:
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Name:
Title:
MEDICAL CARE PARTNERS, P.C.
By:
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Name:
Title:
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