FORM OF MERGER AGREEMENT
Agreement entered into as of__________________, 199__ by and among
Physicians Quality Care, Inc., a Delaware corporation ("PQC"), Medical Care
Partners, P.C., a Massachusetts professional corporation ("MCP"), ___________
______, a Massachusetts professional corporation (the "Company"), and
___________________, the sole stockholder of the Company (the "Stockholder").
MCP, PQC, the Company and the Stockholder are referred to collectively herein as
the "Parties."
This Agreement contemplates a merger of the Company into MCP. In such
merger, the Stockholder will receive cash and/or shares of Class A Common Stock,
par value $0.01 per share (the "Common Stock") of PQC in exchange for the
Stockholders' capital stock of the Company.
Now, therefore, in consideration of the representations, warranties and
covenants herein contained, the Parties agree as follows.
ARTICLE I
THE MERGER
1.1 The Merger. Upon and subject to the terms and conditions of
----------
this Agreement, the Company shall merge with and into MCP (with such merger
referred to herein as the "Merger") at the Effective Time (as defined below).
From and after the Effective Time, the separate corporate existence of the
Company shall cease, and MCP shall continue as the surviving corporation in the
Merger (the "Surviving Corporation"). The "Effective Time" shall be the time at
which the Company and MCP file the articles of merger or other appropriate
documents prepared and executed in accordance with the relevant provisions of
the Massachusetts General Laws (the "Articles of Merger") with the Secretary of
State of the Commonwealth of Massachusetts. The Merger shall have the effects
set forth in Section 16 of Chapter 156A and Section 80 of Chapter 156B of the
Massachusetts General Laws.
1.2 The Closing. The closing of the transactions contemplated by
-----------
this Agreement (the "Closing") shall take place at the offices of Xxxx and Xxxx
in Xxxxxx, Xxxxxxxxxxxxx 00000, commencing at 9:00 a.m. local time on January
10, 1997 or such later date as shall be mutually agreeable to the Parties hereto
as soon as practicable after the satisfaction or waiver of all conditions to the
obligations of the Parties to consummate the transactions contemplated hereby
(the "Closing Date").
1.3 Actions at the Closing. At the Closing, (a) the Company shall
----------------------
deliver to MCP and PQC the various certificates, instruments and documents
referred to in Article V, (b) MCP and PQC shall deliver to the Company the
various certificates, instruments and documents referred to in Article VI, (c)
the Company and MCP shall file with the Secretary of
State of the Commonwealth of Massachusetts the Articles of Merger, (d) the
Stockholder shall deliver to MCP for cancellation the certificate(s)
representing his/her Shares (as defined in Section 1.5(a) below), and (e) the
Stockholder shall receive the amount of cash (by check) and/or the number of
shares of Common Stock with an assumed value, as determined and provided in
Section 1.12, as set forth opposite the Stockholder's name on Schedule 1.3
attached hereto (collectively, the "Merger Consideration").
1.4 Additional Action. The Surviving Corporation may, at any time
-----------------
after the Effective Time, take any action, including executing and delivering
any document, in the name and on behalf of either the Company or MCP, in order
to consummate the transactions contemplated by this Agreement.
1.5 Conversion of Securities. At the Effective Time, by virtue of
------------------------
the Merger and without any action on the part of any Party or the holder of any
of the following securities:
(a) Each share of common stock of the Company (the "Shares")
held by the Stockholder or held in the Company's treasury immediately prior to
the Effective Time shall be cancelled and retired without payment of any
consideration therefor, other than the payment of the Merger Consideration to
the Stockholder as set forth in Section 1.3.
(b) Each share of common stock, $0.01 par value per share, of
MCP issued and outstanding immediately prior to the Effective Time shall be
converted into and thereafter evidence one (1) share of common stock, $0.01 par
value per share, of the Surviving Corporation.
1.6 Dissenting Stockholder. The Stockholder represents that the
----------------------
Stockholder has voted the Shares owned beneficially or of record by the
Stockholder in favor of the adoption of this Agreement and the Merger and,
consequently, shall not be entitled to, and shall not, demand and perfect
appraisal rights in accordance with Section 16 of Chapter 156A and Section 86 of
Chapter 156B of the Massachusetts General Laws.
1.7 Certificate of Incorporation. The Articles of Organization of
----------------------------
the Surviving Corporation shall be the same as the Articles of Organization of
MCP immediately prior to the Effective Time.
1.8 By-laws. The By-laws of the Surviving Corporation shall be the
-------
same as the By-laws of MCP immediately prior to the Effective Time.
1.9 Directors and Officers. The directors and officers of the
----------------------
Surviving Corporation as of the Effective Time shall be those officers and
directors immediately prior to the Effective Time.
1.10 No Further Rights. From and after the Effective Time, no Shares
------------------
shall be deemed to be outstanding, and holders of certificates formerly
representing Shares shall cease to have any rights with respect thereto except
as provided herein or by law.
2
1.11 Closing of Transfer Books. At the Effective Time, the stock
-------------------------
transfer books of the Company shall be closed and no transfer of Shares shall
thereafter be made. If, after the Effective Time, certificates formerly
representing Shares are presented to the Surviving Corporation, they shall be
cancelled and exchanged for the Merger Consideration as set forth on Schedule
--------
1.3.
---
1.12 Shares of PQC.
-------------
(a) The Parties agree that the per share fair market value of
the Common Stock to be included in the Merger Consideration is $2.50.
(b) The Stockholder agrees to enter into, and the shares of
Common Stock shall be subject to, the Stockholder's Agreement, dated as of
August 30, 1996 among certain Class A Stockholders of PQC and the Class B Common
Stockholder (the "Stockholders Agreement").
(c) The Stockholder represents, warrants and covenants to PQC
as follows:
(i) The Stockholder is acquiring the Common Stock for
the Stockholder's own account for investment only, and not with a view to, or
for sale in connection with, any distribution of the shares of Common Stock in
violation of the Securities Act of 1933 (the "Securities Act"), or any rule or
regulation under the Securities Act.
(ii) The Stockholder has received a copy of the
Confidential Private Placement Memorandum, dated December 10, 1996, as
Supplement on December 12, 1996, with respect to PQC and the Common Stock and
has had such opportunity as the Stockholder has deemed adequate to obtain from
representatives of PQC such information as is necessary to permit the
Stockholder to evaluate the merits and risks of the Stockholder's investment in
PQC.
(iii) The Stockholder has sufficient experience in
business, financial and investment matters to be able to evaluate the risks
involved in the acquisition of the shares of Common Stock and to make an
informed investment decision with respect to such acquisition.
(iv) The Stockholder can afford a complete loss of
the value of the shares of Common Stock and is able to bear the economic risk of
holding such Common Stock for an indefinite period.
(v) The Stockholder understands that (i) the shares
of Common Stock have not been registered under the Securities Act and are
"restricted securities" within the meaning of Rule 144 under the Securities Act,
(ii) the Common Stock 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
capital stock of PQC, adequate information concerning PQC is then available to
the public, and other terms
3
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 Common Stock under the Securities Act.
(vi) A legend substantially in the following form
will be placed on the certificate representing the Common Stock:
"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 Stockholder is an "accredited investor"
as defined in Rule 501 of the rules and regulations under the Securities Act.
1.13 Certain Tax Agreements. The parties intend to adopt this
----------------------
Agreement and Merger as a tax-free reorganization under Section 368(a) of the
Internal Revenue Code of 1986, as amended, (the "Code"). The parties shall not
take a position on any tax return or engage in any activities inconsistent with
this Section 1.13. Without limiting the foregoing the Stockholder agrees that:
(a) The Stockholder has not sold, exchanged, transferred or
disposed of or received any shares of the Company's capital stock in
contemplation of the Merger, and the Stockholder has no present intent to sell,
exchange, transfer, dispose of or receive the Company's capital stock in
contemplation of the Merger, nor has the Stockholder entered into any
discussions or negotiations with regard to the possible sale, exchange, transfer
or other disposition of such shares.
(b) The Stockholder is not subject to any obligation to
sell, exchange, transfer or otherwise dispose of all or any of the shares of PQC
to be received by the Stockholder in the Merger. The Stockholder has not entered
into any discussions or negotiations with regard to the possible sale, exchange,
transfer or other disposition of all or any of such shares. The Stockholder has
no plan or intent to engage in any transaction or arrangement that would reduce
the Stockholder's risk of ownership in any way, including without limitation a
short sale, hedging transaction or otherwise, with respect to all or any of such
shares.
(c) Until December 31, 1998, the Stockholder shall not,
directly or indirectly, offer, sell, assign, transfer, grant a participation in,
pledge, or otherwise dispose of, or encumber any of the Shares, or any interest
therein (each, a "Transfer") unless and until such Transfer has been approved by
the Company (it being understood that the Company intends to consent to such
Transfer (subject to the Company's rights under the Stockholders Agreement)
unless the Company reasonably concludes that the Transfer may cause the
4
transactions contemplated by this Agreement not to qualify as a tax-free
reorganization pursuant to Section 365 of the Code).
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company and the Stockholder, who join herein individually (not
jointly) and subject to the limitations contained in Section 7.1, represent and
warrant to MCP and PQC that the statements contained in this Article II are true
and correct, except as set forth in the disclosure schedule delivered to MCP and
PQC by the Company and the Stockholder prior to the Closing (the "Disclosure
Schedule"), as of the date hereof and as of the Effective Time. The Disclosure
Schedule shall be initialed by the Parties and shall be arranged in paragraphs
corresponding to the numbered and lettered paragraphs contained in this Article
II, and the disclosures in any paragraph of the Disclosure Schedule shall
qualify only the corresponding paragraph in this Article II.
2.1 Organization, Qualification and Corporate Power. The Company is
------------------------------------------------
a corporation duly organized, validly existing and in corporate and tax good
standing under the laws of the Commonwealth of Massachusetts and has all power
and authority to carry on the businesses in which it is engaged and to own and
use the properties owned and used by it. The Company has furnished to PQC true
and complete copies of its Articles of Organization and By-laws, each as amended
and as in effect on the date hereof. The Company is not in default under or in
violation of any provision of its Articles of Organization or By-laws. The
Company has no subsidiaries or any equity interest in any corporation,
partnership, joint venture or other entity.
2.2 Capitalization. Schedule 2.2 accurately sets forth the authorized
-------------- ------------
and outstanding capital stock of the Company. Schedule 2.2 sets forth a complete
------------
and accurate list of all stockholder of the Company, indicating the numbers of
Shares held by each stockholder. The Shares are all of the issued and
outstanding shares of capital stock of the Company and each Share is duly
authorized, validly issued, fully paid, nonassessable and free of all preemptive
rights. There are no outstanding or authorized options, warrants, rights,
agreements or commitments to which the Company is a party or which are binding
upon the Company providing for the issuance, disposition or acquisition of any
of its capital stock. There are no outstanding or authorized stock appreciation,
phantom stock or similar rights with respect to the Company. There are no
agreements, voting trusts, proxies or understandings with respect to the voting,
or registration under the Securities Act of any Shares. All of the issued and
outstanding Shares were issued in compliance with applicable federal and state
securities laws.
2.3 Authorization. This Agreement and the other agreements,
-------------
documents and instruments to be executed and delivered by the Company pursuant
hereto and the consummation by the Company of the transactions contemplated
hereby and thereby have been approved by all required corporate action,
including approval by the Board of Directors of the Company and all of the
Stockholder. No further corporate or other proceedings on the
5
part of Company are necessary to authorize this Agreement or the other
agreements, documents and instruments to be executed and delivered by the
Company pursuant hereto or the transactions contemplated hereby or thereby.
2.4 Valid and Binding Agreement. The Company and the Stockholder
---------------------------
have the necessary power and authority to enter into this Agreement and the
other agreements, documents and instruments to be executed and delivered by the
Company or the Stockholder pursuant hereto, and to carry out the transactions
contemplated hereby and thereby. Assuming due authorization, execution and
delivery thereof by MCP and PQC, this Agreement and each of the other
agreements, documents and instruments to be executed and delivered by the
Company or the Stockholder pursuant hereto will constitute valid and binding
agreements of the Company and/or the Stockholder, enforceable against Company or
the Stockholder, as the case may be, in accordance with their terms.
2.5 No Violation. Neither the execution and delivery of this
------------
Agreement or the other agreements, documents and instruments to be executed and
delivered by the Company or the Stockholder pursuant hereto nor the consummation
by the Company or the Stockholder of the transactions contemplated hereby or
thereby (a) will violate any provision of the charter documents or By-laws of
the Company, each as currently in effect, (b) subject to obtaining the required
consents and approvals described in Schedule 2.6, will violate or conflict with
------------
any applicable statute, law, ordinance, rule, regulation, order, judgment or
decree or (c) subject to obtaining the required consents and approvals described
in Schedule 2.6, will violate or conflict with or constitute a default (or an
------------
event which, with notice or lapse of time, or both, would constitute a default)
under, or will result in the termination of, or accelerate the performance
required by, or result in the creation of any Security Interest (as defined in
Section 2.12) upon any of the properties of the Company under any contract,
commitment, understanding, arrangement, agreement or restriction of any kind by
which the properties of the Company are bound or affected, or to which the
Company or the Stockholder is a party except for any such violation, conflict or
default that would not have a Material Adverse Effect. The term "Material
Adverse Effect" as used in this Agreement shall mean any change or effect or any
prospective change or effect that, individually or when taken together with
other changes or effects, is or is reasonably likely to be materially adverse to
the medical practice conducted by the Stockholder (the "Practice"), whether now
or after the Effective Time, the financial condition or results of operation of
the Company, MCP or PQC, the financial arrangements contemplated by the
Employment Agreement (as defined in Section 5.5(a)), the value to MCP or PQC of
their affiliation with the Company and the Stockholder or any Party's ability to
consummate the transactions contemplated herein.
2.6 Consents; Filings. Except as set forth in Schedule 2.6 hereto,
----------------- ------------
no registration or filing with, or consent, approval, permit, authorization or
action by, any third-party (including, without limitation, any federal, state,
local, foreign or other governmental agency, instrumentality, commission,
authority, board or body or other person or entity (a "Governmental Entity")) is
required in connection with the execution and delivery by the Company or the
Stockholder of this Agreement or the other agreements, documents and instruments
to be executed and delivered by Company or the Stockholder pursuant hereto or
the consummation by the Company or the Stockholder of the transactions
contemplated hereby or thereby.
6
2.7 Financial Statements. The Company has delivered to MCP and PQC
---------------------
the balance sheets and statements of income for and as at the Company's three
most recent fiscal years (the "Financial Statements") and the fiscal period
ended August 31, 1996 (the "Interim Financial Statements"), and such balance
sheets and statements of income are true, complete and accurate and fairly
present the financial condition and results of operations for and as at the end
of the periods therein referred to on a stand-alone basis.
2.8 Undisclosed Liabilities. The Company has no liabilities or
------------------------
obligations (whether known or unknown, whether absolute or contingent, whether
liquidated or unliquidated and whether due or to become due), except for (a)
liabilities shown on the balance sheet referred to in Section 2.7 for the period
ended August 31, 1996 (the "Most Recent Balance Sheet"), or (b) liabilities
which have arisen since the Most Recent Financial Statements in the Ordinary
Course of Business (as defined in Section 2.12).
2.9 No Material Adverse Change. No event with respect to the Company
--------------------------
or the Practice involving a Material Adverse Effect has occurred since the date
of the Financial Statements.
2.10 Compliance with Law. The Company has complied with, and the
-------------------
Practice has been conducted in compliance with all applicable laws, regulations
and other requirements of all national governmental authorities, and of all
states, municipalities and other political subdivisions and agencies thereof,
having jurisdiction over the Company or the Stockholder, including without
limitation, all such laws, regulations and requirements relating to antitrust,
consumer protection, employee benefit, equal opportunity, health, occupational
safety, pension, pollution or environmental protection matters, except for such
noncompliance as would not have a Material Adverse Effect. Neither Company nor
the Stockholder has received any notification of any asserted present or past
failure to comply with such laws, rules or regulations.
2.11 Tax Matters.
------------
(a) The Company has filed in a timely manner all Tax Returns
(as defined below) that it was required to file and all such Tax Returns were
correct and complete in all material respects. The Company has timely paid all
Taxes (as defined below) that are shown to be due on any such Tax Returns. The
unpaid Taxes of the Company for tax periods through the date of the Most Recent
Balance Sheet do not exceed the accruals and reserves for Taxes set forth on the
Most Recent Balance Sheet (excluding any accruals and reserves for deferred
Taxes established to reflect timing difference between book and Tax income). The
Company does not have any actual or potential liability for any Tax obligation
of any taxpayer (including without limitation any affiliated group of
corporations or other entities that included the Company during a prior period)
other than the Company. All Taxes that the Company is or was required by law to
withhold or collect have been duly withheld or collected and, to the extent
required, have been paid to the proper Governmental Entity. For purposes of this
Agreement, "Taxes" means all taxes, charges, fees, levies or other similar
assessments or liabilities, including without limitation income, gross receipts,
ad valorem, premium, value-added, excise, real property, personal property,
sales, use, transfer, withholding, employment, payroll and franchise taxes
imposed by the United States of
7
America or any state, local or foreign government, or any agency thereof, or
other political subdivision of the United States or any such government, and any
interest, fines, penalties, assessments or additions to tax resulting from,
attributable to or incurred in connection with any tax or any contest or dispute
thereof. For purposes of this Agreement, "Tax Returns" means all reports,
returns, declarations, statements or other information required to be supplied
to a taxing authority in connection with Taxes.
(b) The Company has delivered to PQC correct and complete
copies of all federal income Tax Returns, examination reports and statements of
deficiencies assessed against or agreed to by the Company since the organization
of the Company. No examination or audit of any Tax Returns of the Company by any
Governmental Entity is currently in progress or, to the knowledge of the
Company, threatened or contemplated. The Company has not waived any statute of
limitations with respect to Taxes or agreed to an extension of time with respect
to a Tax assessment or deficiency.
(c) The Company is not a "consenting corporation" within the
meaning of Section 341(f) of the Internal Revenue Code of 1986, as amended (the
"Code"), and none of the assets of the Company are subject to an election under
Section 341(f) of the Code. The Company has not been a United States real
property holding corporation within the meaning of Section 897(c)(2) of the Code
during the applicable period specified in Section 897(c)(l)(A)(ii) of the Code.
The Company is not a party to any Tax allocation or sharing agreement.
(d) The Company is not nor has ever been a member of an
"affiliated group" of corporations (within the meaning of Section 1504 of the
Code).
(e) The Company is not a party to any agreement, contract,
arrangement or plan that has resulted or would result, separately or in the
aggregate, in the payment of any "parachute payments" within the meaning of
Section 280G of the Code.
2.12 Assets. The Company owns or leases all tangible assets
------
necessary for the conduct of the Practice. Each such tangible asset is free from
material defects, has been maintained in accordance with normal industry
practice, is in good operating condition and repair (subject to normal wear and
tear) and is suitable for the purposes for which it presently is used. Except as
disclosed on Schedule 2.12, no asset of the Company (tangible or intangible) is
-------------
subject to any Security Interest. The term "Security Interest" means any
mortgage, pledge, security interest, encumbrance, charge or other lien (whether
arising by contract or by operation of law), other than (i) mechanic's,
materialmen's and similar liens, (ii) liens arising under worker's compensation,
unemployment insurance, social security, retirement and similar legislation and
(iii) liens on goods in transit incurred pursuant to documentary letters of
credit, in each case arising in the ordinary course of business consistent with
past practice (including with respect to frequency and amount) ("Ordinary Course
of Business").
8
2.13 Leases.
------
(a) Schedule 2.13 contains a complete and accurate listing
-------------
of all leases (the "Leases") pursuant to which the Company leases real or
personal property, which listing sets forth a general description of the leased
property or items, the term, the annual rent, any and all renewal options, and
any requirements for the consent of third parties to assignments thereof. All
such Leases are valid, binding and enforceable in accordance with their terms
and are in full force and effect; no event of default has occurred which
(whether with or without notice, lapse of time or both or the happening or
occurrence of any other event) would constitute a default thereunder on the part
of the Company; and the Company has no knowledge of the occurrence of any event
of default which (whether with or without notice, lapse of time or both or the
happening or occurrence of any other event) would constitute a default
thereunder by any other party.
(b) Except for Leases listed on Schedule 2.13, there are no
-------------
leases, subleases, licenses, occupancy agreements, options, rights, concessions
or other agreements or arrangements, written or oral, granting to any person the
right to purchase, use or occupy any facility occupied by the Company.
(c) With respect to each Lease, the Company has and will
transfer to MCP at the Closing an unencumbered interest in the leasehold
interest covered thereby. The Company enjoys peaceful and undisturbed possession
of all the leased real property, and the Company has in all material respects
performed all the obligations required to be performed by it through the date
hereof.
2.14 Contracts and Commitments.
--------------------------
(a) Schedule 2.14 sets forth a complete and accurate list of
-------------
all contracts known to the Company and the Stockholder after reasonable
investigation which have been entered into by the Company or the Stockholder
related to the Practice, and still in effect as of the date hereof (the
"Contracts"), of the following categories:
(i) Managed care contracts and other contracts with
third-party payors;
(ii) Employment or similar contracts and severance
agreements;
(iii) Contracts (other than Leases set forth on Schedule 2.13)
-------------
related to the Company or the Practice which are not cancelable without
liability on thirty (30) calendar days (or less) notice;
(iv) Options with respect to any property, real or personal,
whether the Company is the grantor or grantee thereunder;
(v) Contracts involving expenditures or liabilities, actual
or potential, in excess of one thousand dollars ($1,000) or otherwise material
to the Practice or the Company;
9
(vi) Promissory notes, loans, agreements, indentures,
evidences of indebtedness, letters of credit, guarantees, or other instruments
relating to an obligation to pay money, individually in excess of or in the
aggregate in excess of one thousand dollars ($1,000), whether the Company shall
be the borrower, lender or guarantor thereunder or whereby any properties of the
Company are pledged;
(vii) Contracts containing covenants limiting the freedom of
the Company or any officer, director, employee, or stockholder of the Company,
to engage in any line of business or compete with any person; and
(viii) Any Contract with the United States, state or local
government or any agency or department thereof.
The Company has made available to PQC true, correct and complete copies within
the Company's or a Stockholder's possession of, and all records relating to, all
of the Contracts listed on Schedule 2.14, including all amendments and
-------------
supplements thereto.
(b) Absence of Breaches or Defaults. To the knowledge of
--------------------------------
the Company or the Stockholder, all of the Contracts are valid and in full force
and effect. The Company and the Stockholder have duly performed all of their
respective obligations under the Contracts, and no violation of, or default or
breach, under any Contracts by the Company or any other party has occurred
except for any violations, defaults, or breaches that would not have a Material
Adverse Effect and neither Company nor any other party, to the best of Company's
or the Stockholder's knowledge after due inquiry, has repudiated any provisions
thereof.
2.15 Permits. The Company, the Stockholder and any other physicians
-------
employed by the Company have all licenses, permits, franchises, approvals,
authorizations, consents or orders of, or filings with ("Permits") any
Governmental Entity or any other person, necessary or desirable to conduct the
Practice as now being conducted, except where the failure to obtain such Permits
would not have a Material Adverse Effect. All Permits of the Company, the
Stockholder and any other physicians employed by the Company are valid and in
full force and effect and are listed on Schedule 2.15. Except as disclosed on
-------------
Schedule 2.15, no notice to, declaration, filing or registration with, or Permit
-------------
or consent from, any governmental or regulatory body or authority, or any other
person or entity, is required to be made or obtained by the Company or the
Stockholder in connection with the execution, delivery or performance of this
Agreement and the consummation of the transactions contemplated hereby, except
as set forth on Schedule 2.15. The Stockholder has not suffered any loss,
-------------
revocation, suspension, expiration without renewal or other failure to keep in
full force and effect and good standing the Stockholder's membership on the
medical staff of the hospitals listed for such Stockholder on Schedule 2.23, or
-------------
any material license, certification, accreditation, clinical privilege or other
right or authorization necessary for the unrestricted practice of medicine by
the Stockholder or for the conduct of the Practice as previously conducted.
2.16 Books and Records. The Company has made and kept (and given MCP
------------------
and PQC access to) books and records (including patient lists) and accounts,
which, in reasonable detail, accurately and fairly reflect the activities of
the Company.
10
2.17 Litigation. Except as set forth on Schedule 2.17, there is no,
----------- -------------
and during the past five (5) years there has not been any, action, order, writ,
injunction, judgment or decree outstanding or any claim, suit, litigation,
proceeding, labor dispute, arbitral action, governmental audit or investigation
(collectively, "Actions") pending or, to the best of the Company's or the
Stockholder's knowledge, threatened (a) against, related to or affecting (i) the
Company, any of the Stockholder, the Practice or the assets of the Company, (ii)
any officers, directors or employees of the Company as such, or (iii) any
stockholder of the Company in such stockholder's capacity as a stockholder of
the Company, (b) seeking to delay, limit or enjoin the transactions contemplated
by this Agreement, (c) that involve the risk of criminal liability (other than
minor traffic violations), or (d) in which the Company is a plaintiff. Neither
the Company nor the Stockholder is in default with respect to or subject to any
judgment, order, writ, injunction or decree of any court or governmental agency,
and there are no unsatisfied judgments against the Company, any of the
Stockholder, the Practice or the Company's assets.
2.18 Transactions with Certain Persons. Except as set forth on
----------------------------------
Schedule 2.18, no officer, director or employee of the Company nor any member of
-------------
any such person's immediate family is presently, or within the past two (2)
years has been a party to any transaction with the Company relating to the
Practice with an aggregate annual value of more than one thousand dollars
($1,000) to the Company or the other parties thereto, including, without
limitation, any contract, agreement or other arrangement (a) providing for the
furnishing of services by, (b) providing for the rental of real or personal
property from, or (c) otherwise requiring payments to (other than for services
as officers, directors or employees of the Company) any such person or
corporation, partnership, trust or other entity in which any such person has an
interest as a stockholder, officer, director, trustee or partner, except that
the Company provides certain medical services to employees and family members as
previously disclosed to PQC.
2.19 Insurance. Schedule 2.19 contains a complete and accurate list
--------- -------------
of all policies or binders of fire, liability, title, worker's compensation,
malpractice and other forms of insurance (showing as to each policy or binder
the carrier, policy number, coverage limits, expiration dates, annual premiums
and a general description of the type of coverage provided) maintained by the
Company on any of its assets, the Stockholder, the Practice or the Company's
employees. Such insurance provides, and during such period provided, coverage to
the extent and in the manner (a) customary for a medical practice and (b) as may
be required by applicable law and by any and all Contracts known to the Company
or the Stockholder to which the Company is a party. The Company is not in
default under any of such policies or binders, and the Company has not failed to
give any notice or to present any claim under any such policy or binder in a due
and timely fashion. No insurer has advised the Company that it intends to reduce
coverage, increase premiums or fail to renew existing policy or binder. There
are no outstanding unpaid claims under any such policies or binders. All
policies and binders provide sufficient coverage for the risks insured against,
are in full force and effect on the date hereof and shall be kept in full force
and effect through the Closing Date.
2.20 Brokers. The Company is not obligated to pay, nor has the
--------
Company retained any broker or finder or other person who is entitled to, any
broker's or finder's fee or any
11
other commission or financial advisory fee based on any agreement or
understanding made by the Company in connection with the transactions
contemplated hereby.
2.21 Benefit Plans.
-------------
(a) Except as set forth in Schedule 2.21, the Company is not
-------------
a party to any pension, retirement, profit sharing, savings, bonus, incentive,
deferred compensation, group health insurance or group life insurance plan or
any similar obligation (an "Employee Benefit Plan"), or to any collective
bargaining agreement or other contract, written or oral, with any trade or labor
union, employees' association or similar organization. The Company does not have
any obligations to provide to its active employees or current retirees any
post-retirement non-pension benefits. No Stockholder has any present intention
of discontinuing the Stockholder's medical practice with the Company except to
become an employee of MCP
(b) The Company (i) is and has been in compliance in all
material respects with all applicable laws respecting employment and employment
practices, terms and conditions of employment, and wages and hours (including,
but not limited to, the Worker Adjustment and Retraining Notification Act, 29
U.S.C. 2101 et seq. ("WARN"), or any similar state or local law), (ii) has made
------
all contributions required to be made under any state unemployment or disability
laws or regulations and has accrued the amount of any such contribution required
for any period prior to the Closing Date which is not yet due and payable and
(iii) is not engaged in any unfair labor practice, and there are no arrears in
the payment of wages or taxes with respect to employees.
(c) Except as set forth in Schedule 2.21, no employee has any
-------------
claims pending against Company (whether under any law, any employment agreement
or otherwise) on account of or for (i) overtime pay, other than overtime pay for
the current payroll period, (ii) wages or salary (excluding bonuses and amounts
accruing under pension and profit sharing plans) for any period other than the
current payroll period, (iii) vacation, time off or pay in lieu of vacation or
time off, other than that earned in respect of the current fiscal year, (iv) any
violation of any statute, ordinance or regulation relating to minimum wages or
maximum hours of work or (v) the Employee Retirement Income Security Act of
1974, as amended ("ERISA").
(d) Except as set forth on Exhibit 2.21 (which liabilities
------------
will be discharged on or prior to the Closing Date) the Company is not, neither
PQC nor MCP shall be, pursuant to any employment agreement, employee benefit
plan or other law, arrangement or understanding, obligated to pay or be liable
for the payment of any compensation (including accrued vacation), severance pay
or other benefit (including any disability benefit or payment or any unfunded
liabilities relating to pension benefits) by reason of the voluntary termination
of employment of any employee, the voluntary or involuntary termination at or
prior to the Effective Time of employment of any employee, or the consummation
of the transactions contemplated by this Agreement.
(e) With respect to all employee benefit plans (as defined in
ERISA) for which any employee is or was eligible to participate in, the Company
or any entity which, within the last five (5) years, has been under common
control or affiliated with Company (an
12
"ERISA Affiliate") within the meaning of Section 414(b), (c) or (m) of the Code,
is in compliance in all material respects with the requirements prescribed by
any and all statutes, orders or governmental rules or regulations currently in
effect, including, but not limited to, ERISA and the Code, applicable to such
employee benefit plans and the Company is in compliance in all material respects
with its obligations under the terms of such plans. None of the employee benefit
plans are subject to Title IV of ERISA. Neither the Company nor any ERISA
Affiliate has ever been obligated to contribute to any "multi-employer plan" as
such term is defined in Section III(37) of ERISA. No employee benefit plan of
the Company or any ERISA Affiliate has engaged in any prohibited transaction as
such term is defined in Section 4975 of the Code or Section 406 of ERISA.
2.22 Fraud and Abuse. Neither the Company nor the Stockholder, nor,
---------------
to the knowledge of the Company or the Stockholder, any other persons or
entities providing professional services for the Practice, have engaged in any
activities which are prohibited under U.S.C. ss.1320a-7b, or the regulations
promulgated thereunder pursuant to such statutes, or related state or local
statutes or regulations, or which are prohibited by rules of professional
conduct, including but not limited to the following: (i) knowingly and willfully
making or causing to be made a false statement or representation of a material
fact in any application for any benefit or payment; (ii) knowingly and willfully
making or causing to be made any false statement or representation of a material
fact for use in determining rights to any benefit or payment; (iii) failure to
disclose knowledge by a claimant of the occurrence of any event affecting the
initial or continued right to any benefit or payment on its own behalf or on
behalf of another, with intent to fraudulently secure such benefit of payment;
and (iv) knowingly and willfully soliciting or receiving any remuneration
(including any kickback, bribe or rebate), directly or indirectly, overtly or
covertly, in cash or in kind or offering to pay or receive such remuneration (a)
in return for referring an individual to a person for the furnishing or
arranging for the furnishing of any item or service for which payment may be
made in whole or in part by Medicare or Medicaid, or (b) in return for
purchasing, leasing, or ordering or arranging for or recommending purchasing,
leasing, or ordering any good, facility, service, or item for which payment may
be made in whole or in part by Medicare or Medicaid.
2.23 Hospital Privileges. Schedule 2.23 hereto lists all of the
------------------- -------------
hospitals at which the Stockholder is a member of the medical staff.
2.24 Employment Agreements. No event permitting termination under
----------------------
the Employment Agreement (as defined in Section 5.5(a)), if they were in effect
at such time of such event, shall have occurred at any time prior to the Closing
Date. The Stockholder has no current intention of terminating an Employment
Agreement with MCP prior to the termination of its initial term.
2.25 Inventory. All inventory of the Company consists of a quality
----------
and quantity usable in the Ordinary Course of Business, except for items which
have been written off or written down to their net realizable value on the Most
Recent Balance Sheet. All inventory not written off has been priced at the lower
of cost and market. The quantities of each type of inventory are not excessive
in the present circumstances of the Company.
13
2.26 Powers of Attorney. There are no outstanding powers of attorney
------------------
executed on behalf of the Company.
2.27 Employees. Schedule 2.27 contains a list of all employees of
---------- -------------
the Company along with the position and the rate of compensation of each such
person. To the knowledge of the Company or the Stockholder, no employee or group
of employees has any plans to terminate employment with the Company or not to
continue as an employee of the Surviving Corporation after the Effective Time.
The Company is not a party to or bound by any collective bargaining agreement,
nor has any of them experienced any strikes, grievances, claims of unfair labor
practices or other collective bargaining disputes.
2.28 Environmental Matters.
----------------------
(a) The Company has complied with all applicable
Environmental Laws (as defined below). There is no pending or, to the knowledge
of the Company or the Stockholder, threatened civil or criminal litigation,
written notice of violation, formal administrative proceeding, or investigation,
inquiry or information request by any Governmental Entity, relating to any
Environmental Law involving the Company. For purposes of this Agreement,
"Environmental Law" means any federal, state or local law, statute, rule or
regulation or the common law relating to the environment or occupational health
and safety, including without limitation any statute, regulation or order
pertaining to (i) treatment, storage, disposal, generation and transportation of
industrial, toxic or hazardous substances or solid or hazardous waste; (ii) air,
water and noise pollution; (iii) groundwater and soil contamination; (iv) the
release or threatened release into the environment of industrial, toxic or
hazardous substances, or solid or hazardous waste, including without limitation
emissions, discharges, injections, spills, escapes or dumping of pollutants,
contaminants or chemicals; (v) the protection of wild life, marine sanctuaries
and wetlands, including without limitation all endangered and threatened
species; (vi) storage tanks, vessels and containers; (vii) underground and other
storage tanks or vessels, abandoned, disposed or discarded barrels, containers
and other closed receptacles; (viii) health and safety of employees and other
persons; and (ix) manufacture, processing, use, distribution, treatment,
storage, disposal, transportation or handling of pollutants, contaminants,
chemicals or industrial, toxic or hazardous substances or oil or petroleum
products or solid or hazardous waste. As used above, the terms "release" and
"environment" shall have the meaning set forth in the federal Comprehensive
Environmental Compensation, Liability and Response Act of 1980 ("CERCLA").
(b) There have been no releases of any Materials of
Environmental Concern (as defined below) into the environment at any parcel of
real property or any facility formerly or currently owned, operated or
controlled by the Company. With respect to any such releases of Materials of
Environmental Concern, the Company has given all required notices to
Governmental Entities (copies of which have been provided to PQC). The Company
is not aware of any releases of Materials of Environmental Concern at parcels of
real property or facilities other than those owned, operated or controlled by
the Company that could reasonably be expected to have an impact on the real
property or facilities owned, operated or controlled by the Company. For
purposes of this Agreement, "Materials of Environmental Concern" means any
chemicals, pollutants or contaminants, hazardous
14
substances (as such term is defined under CERCLA), solid wastes and hazardous
wastes (as such terms are defined under the federal Resources Conservation and
Recovery Act), toxic materials, oil or petroleum and petroleum products.
(c) Set forth in Schedule 2.28(c) is a list of all
---------------
environmental reports, investigations and audits relating to premises currently
or previously owned or operated by the Company (whether conducted by or on
behalf of the Company or a third party, and whether done at the initiative of
the Company or directed by a Governmental Entity or other third party) which the
Company has possession of or access to.
2.29 Disclosure. No representation or warranty by the Company or the
----------
Stockholder contained in this Agreement or in any other document delivered to
MCP or PQC in connection with their due diligence investigation of the Company,
taken as a whole, contains or will contain any untrue statement of a material
fact or omits or will omit to state any material fact necessary, in light of the
circumstances under which it was or will be made, in order to make the
statements herein or therein not misleading. The Company and the Stockholder
have disclosed to PQC all material information relating to the Practice, the
Company, the Stockholder and the transactions contemplated by this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PQC
AND MCP
Each of MCP and PQC represents and warrants to the Company and the
Stockholder as of the date hereof and as of the Effective Time as follows:
3.1 Organization. Each of MCP and PQC is a corporation duly
------------
organized, validly existing and in good standing under the laws of the
jurisdictions of their incorporation, and each of MCP and PQC has the power and
authority to carry on its business as presently being conducted. PQC has
provided the Company with complete and accurate copies of the Articles of
Incorporation and By-Laws of PQC and the Articles of Organization and By-laws of
MCP.
3.2 Capitalization of MCP and PQC. Schedule 3.2 accurately sets
----------------------------- ------------
forth the number of authorized and outstanding shares of Capital Stock of PQC.
Except for Physicians Quality Care of Massachusetts, Inc. and Physician Quality
Care of Maryland, Inc., PQC is not the owner of record of the equity securities
of any issuer. MCP's authorized capital stock consists of 1,000 shares of Common
Stock, $0.01 par value per share, all of which are outstanding. Except as set
forth in Schedule 3.2 and as provided for in Section 1.14, there are not, and on
------------
the Closing Date there will not be, outstanding (i) any options, warrants or
other rights to purchase any capital stock of PQC or MCP; (ii) any securities
convertible into or exchangeable for shares of such stock; or (iii) any other
commitments of any kind for the issuance of additional shares of capital stock
or options, warrants or other securities of PQC or MCP
15
3.3 Authorization. The Board of Directors of each of MCP and PQC has
--------------
duly authorized the execution and delivery of this Agreement and the other
agreements, documents and instruments to be executed and delivered by MCP and
PQC pursuant hereto and the consummation by MCP and PQC of the transactions
contemplated hereby and thereby. No further corporate or other proceedings on
the part of PQC or MCP are necessary to authorize this Agreement or the other
agreements, documents and instruments to be executed and delivered by PQC
pursuant hereto or the transactions contemplated hereby or thereby.
3.4 Valid and Binding Agreement. Each of MCP and PQC has the necessary
----------------------------
power and authority to enter into this Agreement and the other agreements,
documents and instruments to be executed and delivered by MCP and PQC pursuant
hereto, and to carry out the transactions contemplated hereby and thereby. When
fully executed and delivered, this Agreement and each of the other agreements,
documents and instruments to be executed and delivered by MCP and PQC pursuant
hereto will constitute valid and binding agreements of MCP and PQC, enforceable
against them in accordance with their terms.
3.5 No Violation. Neither the execution and delivery of this Agreement
-------------
or the other agreements, documents and instruments to be executed and delivered
by MCP and PQC pursuant hereto nor the consummation by MCP and PQC of the
transactions contemplated hereby or thereby (a) will violate any provision of
the Certificate of Incorporation or By-laws of PQC or the Articles of
Organization or By-laws of MCP, each as currently in effect, (b) will violate or
conflict with any applicable statute, law, ordinance, rule, regulation, order,
judgment or decree or (c) will violate any contract or commitment which
violation would have the effect of preventing PQC or MCP from performing its
obligations hereunder or preventing PQC or MCP or any of their respective
affiliates from consummating the transactions contemplated herein and in the
agreements and instruments to be executed and delivered by MCP and PQC and their
respective affiliates in connection therewith.
3.6 Consents; Filings. No registration or filing with, or consent,
------------------
approval, permit, authorization or action by, any third party (including,
without limitation, any federal, state, local, foreign or other governmental
agency, instrumentality, commission, authority, board or body or other person or
entity) is required to be made by MCP or PQC in connection with the execution
and delivery by MCP and PQC of this Agreement or the other agreements, documents
and instruments to be executed and delivered by MCP and PQC pursuant hereto or
the consummation by MCP and PQC of the transactions contemplated hereby or
thereby.
3.7 Capital Stock. All shares of Common Stock issued to the Stockholder
--------------
in connection with the transactions contemplated by this Agreement shall be duly
authorized, validly issued, fully paid and nonassessable and not subject to any
pre-emptive rights created by statute, PQC's Certificate of Incorporation or
By-laws, or any agreement to which PQC is a party or by which PQC is bound.
3.8 Brokers. Neither PQC nor MCP is obligated to pay, nor have PQC or
--------
MCP retained any broker or finder or other person who is entitled to, any
broker's or finder's fee
16
or any other commission or financial advisory fee based on any agreement or
understanding made by PQC or MCP in connection with the transactions
contemplated hereby.
3.9 Fraud and Abuse. Neither MCP nor PQC has engaged in any activities
----------------
which are prohibited under U.S.C. ss. 1320a-7b, or the regulations promulgated
thereunder pursuant to such statutes, or related state or local statutes or
regulations, or which are prohibited by rules of professional conduct, including
but not limited to the following: (i) knowingly and willfully making or causing
to be made a false statement or representation of a material fact in any
application for any benefit or payment; (ii) knowingly and willfully making or
causing to be made any false statement or representation of a material fact for
use in determining rights to any benefit or payment; (iii) failure to disclose
knowledge by a claimant of the occurrence of any event affecting the initial or
continued right to any benefit or payment on its own behalf or on behalf of
another, with intent to fraudulently secure such benefit of payment; and (iv)
knowingly and willfully soliciting or receiving any remuneration (including any
kickback, bribe or rebate), directly or indirectly, overtly or covertly, in cash
or in kind or offering to pay or receive such remuneration (a) in return for
referring an individual to a person for the furnishing or arranging for the
furnishing of any item or service for which payment may be made in whole or in
part by Medicare or Medicaid, or (b) in return for purchasing, leasing, or
ordering or arranging for or recommending purchasing, leasing, or ordering any
good, facility or item for which payment may be made in whole or in part by
Medicare or Medicaid.
ARTICLE IV
COVENANTS
4.1 Reasonable Efforts to Close. Each of Company, the Stockholder, MCP
----------------------------
and PQC shall use its or their respective reasonable efforts to proceed to the
closing of the transactions contemplated hereby and to satisfy any of the
conditions precedent to the other Parties' obligations set forth in Articles V
and VI to the extent such conditions are within such Party's control.
4.2 Notices and Consents. The Company and the Stockholder shall use
---------------------
their respective best efforts to obtain, at their expense, all such waivers,
permits, consents, approvals or other authorizations from third parties and
Governmental Entities, and to effect all such registrations, filings and notices
with or to third parties and Governmental Entities, as may be required by or
with respect to the Company or the Stockholder in connection with the
transactions contemplated by this Agreement (including without limitation those
listed in Schedule 2.6.
4.3 Conduct of Business. Without the prior written consent of PQC
--------------------
(which consent shall not be unreasonably withheld), the Company shall not and
the Stockholder shall not permit the Company to:
(a) take any action to amend the Company's Articles of
Organization or By-laws or other organizational documents;
17
(b) issue any stock, bonds or other corporate securities or grant
any option or issue any warrant to purchase or subscribe to any of such
securities or issue any securities convertible into such securities or authorize
the transfer of any of its outstanding capital stocks;
(c) split, combine or reclassify any shares of its capital stock;
declare, set aside or pay any dividend or other distribution (whether in cash,
stock or property or any combination thereof) in respect of its capital stock;
(d) incur any obligations or liabilities (absolute or contingent)
greater than one thousand dollars ($1,000) in the aggregate, except current
liabilities incurred and obligations under contracts entered into in the
Ordinary Course of Business;
(e) acquire, sell, lease, encumber or dispose of any assets or
property, corporation, partnership, association or other business, other than
purchases and sales of assets in the Ordinary Course of Business;
(f) discharge or satisfy any Security Interest or pay any
obligation or liability other than in the Ordinary Course of Business;
(g) mortgage or pledge any of its property or assets or subject any
such assets to any Security Interest;
(h) take any action or fail to take any action permitted by this
Agreement with the knowledge that such action or failure to take action would
result in (i) any of the representations and warranties of the Company and the
Stockholder set forth in this Agreement becoming untrue or (ii) any of the
conditions to the Merger set forth in Article V not being satisfied;
(i) merge or consolidate with or into any corporation or other
entity;
(j) make, accrue or become liable for any bonus, profit sharing or
incentive payment, except for accruals under existing plans, if any, or increase
the rate of compensation payable or to become payable by it to any of its
officers, directors or employees, other than increases in the Ordinary Course of
Business consistent with past practice;
(k) make any election or give any consent under the Code or the tax
statutes of any state or other jurisdiction or make any termination, revocation
or cancellation of any such election or any consent or compromise or settle any
claim for past or present tax due;
(l) waive any rights of material value;
(m) modify, amend, alter or terminate any of its executory
contracts of a material value or which are material in amount;
18
(n) take or permit any act or omission constituting a breach
or default under any contract, indenture or agreement by which it or its
properties are bound;
(o) fail to use its reasonable efforts to (i) preserve the
possession and control of its assets and the Practice, (ii) keep in faithful
service its present officers and employees, (iii) preserve the goodwill of its
patients, suppliers, agents, brokers and others having business relations with
it, and (iv) keep and preserve its business existing on the date hereof until
after the Closing Date;
(p) fail to operate its business and maintain its books, accounts
and records in the customary manner and in the Ordinary Course of Business and
maintain in good repair its business premises, fixtures, machinery, furniture
and equipment;
(q) enter into any leases, contracts, agreements or understandings
which are required to be performed in whole or in material part after the
Closing Date;
(r) engage any new employee;
(s) materially alter the terms, status or funding condition of any
Employee Plan; or
(t) commit or agree to do any of the foregoing in the future.
4.4 Access to Management, Properties and Records. From the date of this
---------------------------------------------
Agreement until the Closing Date, the Company shall afford the officers,
attorneys, accountants and other authorized representatives of PQC free and full
access upon reasonable notice and during normal business hours to all management
personnel, offices, properties, books and records of the Company, and all
properties under the management of the Company and all records relating thereto,
so that PQC may have full opportunity to make such investigation as it shall
desire to make of the management, business, properties and affairs of the
Company and the properties under the management of the Company, and PQC shall be
permitted to make abstracts from, or copies of, all such books and records. The
Company shall furnish to PQC such financial and operating data and other
information as to the business of the Company as PQC shall reasonably request.
4.5 Taxes. The Company and the Stockholder will, on a timely basis,
------
file all Tax Returns for and pay any and all taxes which shall become due or
shall have accrued on account of the operation of the business of the Company on
or prior to the Closing Date.
4.6 Financial Information. Between the execution of this Agreement and
----------------------
the Closing Date, the Company shall provide PQC with such access as PQC shall
reasonably request to the financial and accounting records of the Company and
shall provide PQC with copies of all financial statements or other financial
data prepared by the Company.
4.7 Compliance with Laws. The Company and the Stockholder will comply
---------------------
in all material respects with all laws and regulations which are applicable to
them and the Practice
19
or to the conduct of its practice and will perform and comply in all material
respects with all contracts, commitments and obligations by which it or each of
them is bound.
4.8 Exclusive Dealing. The Company and the Stockholder will not,
------------------
directly or indirectly, through any officer, director, agent or otherwise, (a)
solicit, initiate or encourage submission of proposals or offers from any person
relating to any affiliation transaction between the Company or the Stockholder
and any healthcare company or practice management company or any acquisition or
purchase of all or a material portion of the assets of the Company, or any
equity interest in the Company or any equity investment, merger, consolidation
or business combination with the Company, or (b) participate in any discussions
or negotiations regarding, or furnish to any other person, any non-public
information with respect to, or otherwise cooperate in any way with, or assist
or participate in, facilitate or encourage, any effort or attempt by any other
person to do or seek any of the foregoing except to inform such person of the
Company's obligations hereunder.
4.9 Notice of Breaches. The Company shall promptly deliver to PQC
-------------------
written notice of any event or development that would (a) render any statement,
representation or warranty of the Company in this Agreement (including the
Disclosure Schedule) inaccurate or incomplete in any material respect, or (b)
constitute or result in a breach by the Company of, or a failure by the Company
to comply with, any agreement or covenant in this Agreement applicable to such
party. PQC or MCP shall promptly deliver to the Company written notice of any
event or development that would (i) render any statement, representation or
warranty of PQC or MCP in this Agreement inaccurate or incomplete in any
material respect, or (ii) constitute or result in a breach by PQC or MCP of, or
a failure by PQC or MCP to comply with, any agreement or covenant in this
Agreement applicable to such Party. No such disclosure shall be deemed to avoid
or cure any such misrepresentation or breach.
4.10 Severance Obligations. The Company shall satisfy all severance
----------------------
obligations related to each person employed by the Company prior to or at the
Closing Date who is, or as a consequence of the transactions contemplated by
this Agreement will be, entitled to any severance or compensation from the
Company or the Stockholder.
4.11 Confidentiality. All information not previously disclosed to the
----------------
public or generally known to persons engaged in the respective businesses of the
Company or PQC which shall have been furnished by PQC or the Company to the
other Party in connection with the transactions contemplated hereby or as
provided pursuant to this Agreement shall not be disclosed to any person other
than their respective employees, directors, attorneys, accountants or financial
advisors or other than as expressly contemplated herein. In the event that the
transactions contemplated by this Agreement shall not be consummated, all such
information which shall be in writing shall upon request be returned to the
Party furnishing the same, including, to the extent reasonably practicable, all
copies or reproductions thereof which may have been prepared, and none of the
Parties, without the consent of PQC and the Company, shall at any time
thereafter disclose to third parties, or use, directly or indirectly, for its
own benefit, any such information, written or oral, about the business of the
other Party hereto.
20
ARTICLE V
CONDITIONS TO MCP'S AND PQC'S OBLIGATIONS
The obligation of each of MCP and PQC to consummate the Merger is
subject to the satisfaction on the Closing Date of the following conditions
precedent, each of which may be waived in writing by MCP and PQC:
5.1 Approval of Merger. This Agreement and the Merger shall have been
-------------------
unanimously approved by the Board of Directors of the Company and the
Stockholder and the Stockholder shall not be entitled to exercise appraisal
rights.
5.2 Continued Truth of Representations and Warranties of The Company;
-----------------------------------------------------------------
Compliance with Covenants and Obligations; Disclosure Schedule. The
---------------------------------------------------------------
representations and warranties of the Company and the Stockholder shall be true
on and as of the Closing Date as though such representations and warranties were
made on and as of such date, except for any changes permitted by the terms
hereof or consented to in writing by PQC. The Company and the Stockholder shall
have performed and complied with all terms, conditions, covenants, obligations,
agreements and restrictions required by this Agreement to be performed or
complied with by it prior to or at the Closing Date. Neither PQC nor MCP shall,
acting in their sole discretion, object to any matter included on the Disclosure
Schedule to be delivered pursuant to Article II hereof; provided, however, in
the event that PQC or MCP objects to any matter included in the Disclosure
Schedules, the Company shall be entitled to terminate this Agreement.
5.3 No Proceedings or Litigation. No action by any Governmental Entity
-----------------------------
or other person shall have been instituted or threatened which questions the
validity or legality of the transactions contemplated hereby and which could
reasonably be expected to result in a Material Adverse Effect. There shall not
be any statute, rule or regulation that makes the Merger or the other
transactions contemplated hereby illegal or otherwise prohibited.
5.4 Material Changes; Due Diligence. Between the date of the Financial
--------------------------------
Statements and the Closing, there shall not have been any material adverse
change in the business, prospects, operations or conditions of the Company or
the Practice. MCP and PQC shall have completed to their satisfaction, both as to
scope and substance, their due diligence investigation of the Company and the
Practice.
5.5 Closing Deliveries. Simultaneously with the Closing, the Company
-------------------
and the Stockholder shall deliver or cause to be delivered to PQC the following:
(a) employment agreements (the "Employment Agreements") between MCP
and the Stockholder and any other physician employed by the Practice, which, in
the case of the Stockholder shall be in the form attached hereto as Schedule
--------
5.5(a);
------
(b) Instrument of Joinder to the Stockholders Agreement;
21
(c) An assignment of the Lease, in form satisfactory to PQC with
respect to the premises at 0 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 000, Xxxxxxxxxxx,
Xxxxxxxxxxxxx (the "Premises Lease");
(d) certificates of duly authorized officers of the Company, dated
the Closing Date, setting forth the resolutions of the Board of Directors and
Stockholder of the Company authorizing the execution and delivery by the Company
of this Agreement and the consummation of the transactions contemplated hereby,
and certifying that such resolutions were duly adopted and have not been
rescinded or amended;
(e) a report of a reputable lien search firm indicating that there
are no liens of record against any of the Company's assets (except for the liens
which are (i) acceptable to MCP and PQC in their sole discretion or (ii) arising
under equipment leases listed on Schedule 5.5(e));
----------------
(f) a release from any party with a mortgage or lien on any of the
assets of the Company;
(g) the consents of all parties necessary for the consummation of
the Merger and to consummate the other transactions contemplated by this
Agreement;
(h) a tax lien waiver from the Department of Revenue of the
Commonwealth of Massachusetts; and
(i) such other agreements, consents and documents as PQC shall
reasonably request in connection with (i) its due diligence investigation of the
Company, (ii) the affiliation of the Stockholder with MCP and PQC, (iii) the
transactions contemplated by this Agreement and the Employment Agreements.
5.6 Financing. PQC shall be entitled to, and shall have satisfied all
----------
conditions with respect to borrowing under, the Class B Common Stock and Warrant
Purchase Agreement, dated August 30, 1996, between PQC and affiliates of Xxxx
Capital, Inc.
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF THE COMPANY
AND THE STOCKHOLDER
The obligations of Company and the Stockholder under this Agreement are
subject to the fulfillment, at the Closing Date, of the following conditions
precedent, each of which may be waived in writing in the sole discretion of
Company:
6.1 Continued Truth of Representations and Warranties of PQC;
---------------------------------------------------------
Compliance with Covenants and Obligations. The representations and warranties of
------------------------------------------
MCP and PQC shall be true on and as of the Closing Date as though such
representations and warranties were made on and as of such date, except for any
changes permitted by the terms hereof or consented to in writing by the Company.
MCP and PQC shall have performed and complied with all
22
terms, conditions, covenants, obligations, agreements and restrictions required
by this Agreement to be performed or complied with by it prior to or at the
Closing Date.
6.2 No Proceedings or Litigation. No action by any governmental
-----------------------------
authority or other person shall have been instituted or threatened which
questions the validity or legality of the transactions contemplated hereby and
which could reasonably be expected to damage PQC materially if the transactions
contemplated hereby are consummated. There shall not be any statute, rule or
regulation that makes the Merger or the other transactions contemplated hereby
illegal or otherwise prohibited.
6.3 Offers of Employment. MCP shall have extended offers of
---------------------
employment to the persons listed on Schedule 2.27.
6.4 Deliveries by PQC. Simultaneously with the Closing, PQC shall
-----------------
deliver or cause to be delivered to the Stockholder:
(a) the Merger Consideration;
(b) certificates of duly authorized officers of MCP and PQC, dated
the Closing Date, setting forth the resolutions of the Board of Directors of MCP
and PQC authorizing the execution and delivery by MCP and PQC of this Agreement
and the consummation of the transactions contemplated hereby, and certifying
that such resolutions were duly adopted and have not been rescinded or amended;
and
(c) such other instruments, consents and documents as the
Stockholders shall reasonably request in connection with the transactions
contemplated by this Agreement.
6.5 Assumption of Xxxxxx-Xxxxxx Agreement. By virtue of the Merger, MCP
--------------------------------------
shall have assumed the employment agreement between the Company and Xx.
Xxxxxx-Xxxxxx, MCP agrees to renegotiate such agreement in good faith upon its
expiration on July 31, 1997.
6.6 Amendment of Vanderleeden Agreement. The Agreement between the
------------------------------------
Company and Xx. Xxxx Xxxxxxxxxxxx shall have been amended or superseded in a
manner acceptable to the Company, PQC and MCP.
6.7 Determination of Base Compensation Pool Amount. Xx. Xxxxx
-----------------------------------------------
Izenstein and MCP shall have agreed upon a Base Compensation Pool Amount to be
included in the Employment Agreement to be entered into between Xx. Xxxxxxxxx
and MCP at the Closing. Such Base Compensation Pool Amount shall have been based
on a budget for Responsibility Center J that is reasonably acceptable to Xx.
Xxxxxxxxx and MPC.
23
ARTICLE VII
INDEMNIFICATION
7.1 Indemnification.
----------------
(a) The Stockholder shall indemnify, defend, and hold harmless
PQC, MCP and their respective subsidiaries and affiliates and their directors,
officers, employees and agents or the successor of any of the forgoing
(collectively, "PQC Indemnified Parties"), and reimburse such PQC Indemnified
Party 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
(collectively, "Damages"), imposed on or incurred by a PQC Indemnified Party
which relate to or arise out of:
(i) breach of any representation and warranty of, or
covenant or agreements to be performed by, the Company or the Stockholder, in
each case contained in this Agreement or the Stockholders Agreement;
(ii) failure of the Stockholder to have good, valid and
marketable title to the issued and outstanding Shares held by the Stockholder,
free and clear of all liens, claims, pledges, options, adverse claims or charges
of any nature whatsoever;
(iii) any claim by a Stockholder or former stockholder of
the Company, or any other person, firm, corporation or entity, seeking to
assert, or based upon: (A) ownership or rights to ownership of any shares of
stock of the Company; (B) any rights of a stockholder, including any option,
preemptive rights or rights to notice or to vote; (C) any rights under the
Articles of Organization or By-laws of the Company; or (D) any claim that such
stockholder's shares were wrongfully repurchased by the Company;
(iv) any Tax liabilities of the Company or the
Stockholder;
(v) the conduct of the Practice prior to the Closing
Date;
(vi) any liability of the Company incurred prior to the
Closing Date; and
(vii) any liability incurred by PQC or MCP relating to
agreements or obligations of the Company or the Stockholder, whether written or
oral, that are not specifically identified on the Disclosure Schedule.
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 the Stockholder under this Section 7.1 shall be limited, in the
aggregate, to the Merger Consideration paid to the Stockholder.
24
(b) PQC shall indemnify and hold harmless the Stockholder and
his respective agents or the successors of any of the foregoing (collectively,
"Company Indemnified Parties" and together with the PQC Indemnified Parties (the
"Indemnified Parties")), and reimburse such Company Indemnified Parties for,
from, and against all Damages imposed on or incurred by such Company Indemnified
Persons which relate to or arise out of any breach of any representation or
warranty of, or covenant to be performed by, PQC or MCP, in each case contained
in this Agreement.
7.2 Method of Asserting Claims.
---------------------------
(a) 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 Article VII, 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.
(b) 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 Party.
Anything in this Section 7.2(b) 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 ThirdParty 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.
(c) 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
25
Party shall be free to pursue such remedies as may be available to the
Indemnified Party under applicable law.
7.3 Survival. All 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
Stockholder's obligations pursuant to Section 7.1(a)(i) and PQC's obligations
pursuant to Section 7.1(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 Stockholder pursuant to Section 7.1(a)(ii), (iii), (iv),
(v), (vi), (vii) and (viii) 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 Article VII shall be asserted
or maintained in writing by a party hereto on or prior to the expiration of such
periods.
7.4 Confidentiality. The Parties hereto agree to use reasonable 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.
7.5 Remedies Cumulative. Except as otherwise provided herein, the
--------------------
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.
7.6 Set-off and Recoupment. Any amount or amounts due from any
-----------------------
Indemnifying Party to PQC under this Article VII 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.
ARTICLE VIII
TERMINATION
8.1 Optional Termination. This Agreement may be terminated and
---------------------
the transaction contemplated herein abandoned at any time prior to the Closing
as follows:
(a) by the mutual consent of the Company, MCP and PQC;
26
(b) by the Company, upon a material breach of any representation,
warranty, covenant or agreement on the part of PQC or MCP set forth in this
Agreement, or if any representation or warranty of PQC or MCP has become
materially untrue, in either case such that the conditions set forth in Article
V would be incapable of being satisfied by January 31, 1997 provided, that in
any case, a willful breach will be deemed to cause such conditions to be
incapable of being satisfied for purposes of this paragraph (b);
(c) by PQC upon a material breach of any representation, warranty,
covenant or agreement on the part of the Company or the Stockholder set forth in
this Agreement, or if any representation or warranty of the Company has become
materially untrue, in either case such that the conditions set forth in Article
V would be incapable of being satisfied by January 31, 1997; provided, that (i)
in any case, a willful breach will be deemed to cause such conditions to be
incapable of being satisfied for purposes of this paragraph (c). Any breach on
the part of the Company or the Stockholder of the representations and warranties
contained in Article II or the covenants contained in Article IV, which permits
termination of this Agreement shall permit PQC to immediately terminate any
other agreement between the Company or the Stockholder and PQC or MCP; or
(d) by either Party if the Closing shall not have occurred by
January 31, 1997, or such other date agreed to by the Parties.
8.2 Effect of Termination. In the event this Agreement is terminated as
----------------------
provided above, (a) each of PQC and the Company shall, upon the other Party's
request, deliver to the other Parties all documents previously delivered (and
copies thereof in its possession) concerning one another and the transactions
contemplated hereby, and (b) none of the Parties nor any of their respective
Stockholder, directors, officers or agents shall have any liability to the other
Parties, except for any deliberate breach or deliberate omission resulting in a
material 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. 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
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 IX
MISCELLANEOUS
9.1 Press Releases and Announcements. No Party shall issue any press
---------------------------------
release or public disclosure relating to the subject matter of this Agreement
without the prior written approval of the other Parties; provided, however, that
any Party may make any public disclosure it believes in good faith is required
by law or regulation (in which case the disclosing Party shall advise the other
Parties and provide them with a copy of the proposed disclosure prior to making
the disclosure).
27
9.2 No Third Party Beneficiaries. This Agreement shall not confer any
-----------------------------
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns; provided, however, that the provisions in
Article I concerning payment of the Merger Consideration are intended for the
benefit of the Stockholder.
9.3 Entire Agreement. This Agreement (including the documents referred
-----------------
to herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements, or representations by or among the Parties,
written or oral, with respect to the subject matter hereof.
9.4 Succession and Assignment. This Agreement shall be binding upon and
--------------------------
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Parties.
9.5 Counterparts. This Agreement may be executed in two (2) or more
-------------
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
9.6 Headings. The section headings contained in this Agreement are
---------
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.7 Notices. All notices, requests, demands, claims, and other
--------
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly delivered two (2)
business days after it is sent by registered or certified mail, return receipt
requested, postage prepaid, or one (1) business day after it is sent via a
reputable nationwide overnight courier service, in each case to the intended
recipient as set forth below:
If to the Company or the Stockholder:
-------------------------------------
To the address set forth on the signature page below with a
copy to:
Xxxxxxx Xxxxxxxx
Xxxxx & Xxxxxxx
000 Xxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000-0000
If to PQC or MCP:
-----------------
Physicians Quality Care, Inc.
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxx
28
Any Party may give any notice, request, demand, claim, or other communication
hereunder using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail, or electronic mail), but no
such notice, request, demand, claim, or other communication shall be deemed to
have been duly given unless and until it actually is received by the Party for
whom it is intended. Any Party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Parties notice in the manner herein set forth.
9.8 Governing Law. This Agreement shall be governed by and
--------------
construed in accordance with the internal laws (and not the law of conflicts)
of the Commonwealth of Massachusetts.
9.9 Amendments and Waivers. The Parties may mutually amend any
-----------------------
provision of this Agreement at any time prior to the Effective Time. No
amendment of any provision of this Agreement shall be valid unless the same
shall be in writing and signed by all of the Parties. No waiver by any Party of
any default, misrepresentation, or breach of warranty or covenant hereunder,
whether intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
9.10 Severability. If any term, provision, covenant or restriction 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.
9.11 Expenses. Except as otherwise expressly provided herein (including
---------
Section 4.14), each Party to this Agreement shall pay its own costs and expenses
in connection with the transactions contemplated hereby.
9.12 Further Assurances. From time to time, at the request of any Party
-------------------
hereto and without further consideration, the other Parties will execute and
deliver to such requesting Party such documents and take such other action (but
without incurring any material financial obligation) as such requesting Party
may reasonably request in order to consummate more effectively the transactions
contemplated hereby.
9.13 Specific Performance. Each of the Parties acknowledges and agrees
---------------------
that one (1) or more of the other Parties would be damaged irreparably in the
event any of the provisions of this Agreement are not performed in accordance
with their specific terms or otherwise are breached. Accordingly, each of the
Parties agrees that the other Parties shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and provisions hereof in any
action instituted in any court of the United States or any state thereof having
jurisdiction over the Parties and the matter, in addition to any other remedy to
which it may be entitled, at law or in equity.
9.14 Construction. The language used in this Agreement shall be
-------------
deemed to be the language chosen by the Parties hereto to express their mutual
intent, and no rule of strict
29
construction shall be applied against any Party. Any reference to any federal,
state, local, or foreign statute or law shall be deemed also to refer to all
rules and regulations promulgated thereunder, unless the context requires
otherwise.
9.15 Incorporation of Exhibits and Schedules. The Exhibits and
----------------------------------------
Schedules identified in this Agreement are incorporated herein by reference
and made a part hereof.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
PHYSICIANS QUALITY CARE, INC.
By:
--------------------------------
Title:
-----------------------------
[ ]
----------------------------
----------------------------
MEDICAL CARE PARTNERS, P.C.
----------------------------
30
