FORM OF MERGER AGREEMENT
Agreement entered into as of December 11, 1996 by and among Physicians
Quality Care, Inc., a Delaware corporation ("PQC"), Flagship Health, P.A., a
Maryland professional association ("Flagship"), _______________________ (the
"Company"), and the stockholders of the Company listed on Schedule I hereto (the
"Stockholders"). Flagship, PQC, the Company and the Stockholders are referred
to collectively herein as the "Parties."
This Agreement contemplates a merger of the Company into Flagship. In such
merger, the Stockholders will receive cash and/or shares of PQC Class A Common
Stock, par value $0.01 per share (the "Common Stock"), in exchange for their
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
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Agreement, the Company shall merge with and into Flagship (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 Flagship shall continue as the surviving corporation in
the Merger (the "Surviving Corporation"). The "Effective Time" shall be the
time at which the Company and Flagship file the Articles of Merger or other
appropriate documents prepared and executed in accordance with the relevant
provisions of the Maryland General Corporation Law (the "Articles of Merger")
with the Department of Assessments of Taxation of the State of Maryland. The
Merger shall have the effects set forth in (S)3-114 of the Maryland General
Corporation Law.
1.2 The Closing. The closing of the transactions contemplated by this
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Agreement (the "Closing") shall take place at the offices of PQC in Baltimore,
Maryland, commencing at 9:00 a.m. local time on such mutually agreeable date 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 and the
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Stockholders shall deliver to Flagship and PQC the various certificates,
instruments and documents referred to in Article V; (b) Flagship and PQC shall
deliver to the Company and the Stockholders the various certificates,
instruments and documents referred to in Article VI; (c) the Company and
Flagship shall file with the Department of Assessments of Taxation of the State
of Maryland the Articles of Merger; (d) each Stockholder (and, in the case of
treasury shares, the Company) shall deliver to Flagship for cancellation the
certificates representing his Shares (as defined in Section 1.5(a) below); and
(e) each 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 such Stockholder's name on
Schedule 1.3 attached hereto (reflecting adjustments for net working capital and
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assets acquired or disposed of or liabilities assumed since the date of
valuations prepared by
Xxxxxx Xxxxxxxx of the Company as contemplated by Schedule 1.14) (the "Merger
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Consideration").
1.4 Additional Action. The Surviving Corporation may, at any time
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after the Effective Time, take any action, including executing and delivering
any document, in the name and on behalf of either the Company or Flagship, in
order to consummate the transactions contemplated by this Agreement.
1.5 Conversion of Securities. At the Effective Time, by virtue of the
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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 (collectively, the
"Shares") held by the Stockholders or held in the Company's treasury immediately
prior to the Effective Time shall be canceled and retired without payment of any
consideration therefor, other than the payment of the Merger Consideration to
the Stockholders as set forth in Section 1.3; and
(b) Each share of common stock, $5.00 par value per share, of Flagship
issued and outstanding immediately prior to the Effective Time shall remain
outstanding and evidence one (1) share of common stock, $5.00 par value per
share, of the Surviving Corporation.
1.6 Dissenting Stockholder. Each Stockholder represents that such
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Stockholder has voted the Shares owned beneficially or of record by such
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 (S)3-201, et. seq. of the Maryland General
Corporation Law.
1.7 Articles of Incorporation. The Articles of Incorporation of the
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Surviving Corporation shall be the same as the Articles of Incorporation of
Flagship immediately prior to the Effective Time.
1.8 Bylaws. The bylaws of the Surviving Corporation shall be the same
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as the bylaws of Flagship immediately prior to the Effective Time.
1.9 Directors and Officers. The directors and officers of the
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Surviving Corporation as of the Effective Time shall be those officers and
directors specified on Schedule 1.9.
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1.10 No Further Rights. From and after the Effective Time, no Shares
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of the Company 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.
1.11 Closing of Transfer Books. At the Effective Time, the stock
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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
canceled and exchanged for the Merger Consideration as set forth in Section 1.3.
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1.12 PQC Common Stock.
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(a) The parties agree that the per share fair market value of the
Common Stock to be included in the Merger Consideration shall be Two Dollars and
Fifty Cents ($2.50).
(b) The Stockholders agree to enter into, and the shares of Common
Stock shall be subject to, the Stockholders Agreement dated as of August 30,
1996, by and among PQC and certain of its Stockholders, as amended and in effect
from time to time (the "Stockholders Agreement") attached hereto as Exhibit A.
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(c) Each 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, as amended (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 as of December 10, 1996, and the supplement
thereto dated as of the date hereof, 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: (A) 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, (B) 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; (C) 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 and conditions of Rule 144 are complied with; and
(D) 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:
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"The shares represented by this certificate were issued in a private placement,
without registration under the Securities Act of 1933, as amended (the "Act"),
and may not be sold, assigned, pledged or otherwise transferred in the absence
of an effective registration under the Act covering the transfer or an opinion
of counsel, satisfactory to the issuer, that registration under the Act is not
required."
(vii) Except as set forth on Schedule 1.12(c), each Stockholder
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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
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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 each Stockholder agrees that:
(a) Such Stockholder has not sold, exchanged, transferred or disposed
of or received any shares of the Company's capital stock in contemplation of the
Merger except as disclosed on Schedule 1.13 attached hereto, and such
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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 such
Stockholder entered into any discussions or negotiations with regard to the
possible sale, exchange, transfer or other disposition of such capital stock.
(b) Such Stockholder is not subject to any obligation to sell,
exchange, transfer or otherwise dispose of all or any of the Common Stock of PQC
to be received by such Stockholder in the Merger. Such 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 the Common Stock. Such
Stockholder has no plan or intent to engage in any transaction or arrangement
that would reduce such 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 Common Stock.
1.14 Adjustments to Merger Consideration Due to Changes in Net Working
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Capital. The Merger Consideration shall be subject to adjustment for changes in
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net working capital from the date of the valuation of the Company prepared by
Xxxxxx Xxxxxxxx, such adjustment to be calculated as set forth on Schedule 1.14
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attached hereto.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company and the Stockholders, who join herein individually (not jointly)
and subject to the limitations contained in Section 7.1, represent and warrant
to Flagship and PQC that the statements contained in this Article II are true
and correct, except as set forth in the disclosure schedule attached hereto (the
"Disclosure Schedule"), as of the date hereof and as of the Effective Time.
Each representation or warranty made by a Stockholder herein regarding the
Stockholders of the Company shall be deemed to have been made only with respect
to the Stockholder making the representation or warranty and not with respect to
any
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other Stockholder. The Disclosure Schedule 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
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professional association duly organized, validly existing and in corporate and
tax good standing under the laws of the State of Maryland 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 Incorporation and Bylaws, 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 Incorporation or Bylaws. Except
as set forth in Schedule 2.1 hereto, the Company has no subsidiaries or any
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equity interest in any corporation, partnership, joint venture or other entity.
2.2 Capitalization. Schedule 2.2 accurately sets forth the authorized
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and outstanding capital stock of the Company. Schedule 2.2 sets forth a
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complete and accurate list of all stockholders 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
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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 Stockholders. No
further corporate or other proceedings on the 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 each Stockholder
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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 any Stockholder pursuant hereto, and to carry out the transactions
contemplated hereby and thereby. Assuming due authorization, execution and
delivery thereof by Flagship and PQC, this Agreement and each of the other
agreements, documents and instruments to be executed and delivered by the
Company or the Stockholders pursuant hereto will constitute valid and binding
agreements of the Company and/or the Stockholders, enforceable against the
Company and/or the Stockholders, as the case may be, in accordance with their
terms,
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except to the extent that enforceablitity is limited by bankruptcy or similar
laws or by general principles of equity.
2.5 No Violation. Except as set forth in Schedule 2.5 hereto, neither
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the execution and delivery of this Agreement or the other agreements, documents
and instruments to be executed and delivered by the Company or the Stockholders
pursuant hereto nor the consummation by the Company or the Stockholders of the
transactions contemplated hereby or thereby: (a) will violate any provision of
the charter documents or Bylaws of the Company, each as currently in effect; (b)
subject to obtaining the required consents and approvals described in Schedule
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2.6, will violate or conflict with any applicable statute, law, ordinance, rule,
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regulation, order, judgment or decree except that no representation or warranty
is made under this section with regard to laws referred to in Section 2.22; 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
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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 any
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 (whether now or after the Effective Time) to
be materially adverse to the medical practice conducted by the Stockholders (the
"Practice"), the financial condition or results of operation of the Company,
Flagship or PQC, the financial arrangements contemplated by the Employment
Agreements (as defined in Section 5.8(a)), the value to Flagship or PQC of their
affiliation with the Company and the Stockholders 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
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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 any
Stockholder of this Agreement or the other agreements, documents and instruments
to be executed and delivered by Company or any Stockholder pursuant hereto or
the consummation by the Company or the Stockholders of the transactions
contemplated hereby or thereby.
2.7 Financial Statements. The Company has delivered to Flagship and
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PQC the balance sheets and statements of income of the Company for and as at the
fiscal years ended December 31, 1993, 1994 and 1995 (the "Financial Statements")
and the fiscal period ended June 30, 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.
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2.8 Undisclosed Liabilities. To the best knowledge of the Company,
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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 June 30, 1996 (the "Most Recent Balance
Sheet") or otherwise listed on Schedule 2.8(a) as being assumed by Flagship as
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part of the Merger, 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. Except as set forth in Schedule 2.9
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hereto, to the best knowledge of the Company, 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
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Practice has been conducted in compliance with, all applicable laws, regulations
and other requirements of all national governmental authorities, of all states,
municipalities and other political subdivisions and agencies thereof, having
jurisdiction over the Company or the Stockholders, 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 the Company
nor any Stockholder has received any notification of any asserted present or
past failure to comply with such laws, rules or regulations.
2.11 Tax Matters.
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(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 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.
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(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 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)(1)(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
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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
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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) mechanics', 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) (the "Ordinary Course of
Business").
2.13 Leases.
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(a) Schedule 2.13 contains a complete and accurate listing of all
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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,
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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
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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 Flagship 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.
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(a) Schedule 2.14 sets forth a complete and accurate list of all
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contracts known to the Company and the Stockholders after reasonable
investigation which have been entered into by the Company or any Stockholder
relating 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
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2.13) relating to the Company or the Practice which are not cancelable without
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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;
(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
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(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
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supplements thereto.
(b) Absence of Breaches or Defaults. To the knowledge of the
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Company or any Stockholder, all of the Contracts are valid and in full force and
effect. The Company and the Stockholders have duly performed all of its or their
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 any
Stockholder's knowledge after due inquiry, has repudiated any provisions
thereof.
2.15 Permits. The Company, the Stockholders and any other physicians
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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, each
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
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Schedule 2.15, no notice to, declaration, filing or registration with, or Permit
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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 any
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. No Stockholder has suffered any loss,
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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
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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
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Flagship 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.
2.17 Litigation. Except as set forth on Schedule 2.17, there is not,
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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 any
Stockholder's knowledge threatened (a) against, related to or affecting (i) the
Company, any of the Stockholders, 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 involves the risk of criminal liability (other than
minor traffic violations); or (d) in which the Company is
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a plaintiff. Neither the Company nor any 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 Stockholders, 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
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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
set forth on Schedule 2.18.
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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 Stockholders, 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 any 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 an 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, and 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 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. Except as set forth in
Schedule 2.21, the Company does not have any obligations to provide to its
-------------
active employees
-11-
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 Flagship.
(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, (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, and neither PQC
nor Flagship 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 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) Each employee benefit plan of the Company intended to be
qualified under Section 401(a) of the Code has received a favorable
determination letter and the Company or any entity which, within the last five
(5) years, has been under common control or affiliated with Company (an "ERISA
Affiliate") within the meaning of Section 414(b), (c) or (m) of the Code, and
each employee benefit plan of the Company 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; Xxxxx Law. Except as set forth in Schedule 2.22
-------------------------- -------------
hereto, neither the Company nor any of the Stockholders, nor, to the knowledge
of the Company or
-12-
any Stockholders, any other persons or entities providing professional services
for the Practice, have engaged in any activities which are prohibited under 42
U.S.C. (S)1320a-7b or 42 U.S.C. (S)1395nn et seq., 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;
(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; and (v) referring a patient for Designated Health
Services (within the meaning of 42 U.S.C. (S)1395nn) when the referring
physician has a financial relationship with the entity to which the referral is
made in the absence of an applicable exception under 42 U.S.C. (S)1395nn.
2.23 Hospital Privileges. Schedule 2.23 hereto lists all of the
------------------- -------------
hospitals at which each Stockholder is a member of the medical staff.
2.24 Employment Agreements. No event permitting termination under the
---------------------
Employment Agreements, if they were in effect at such time of such event, shall
have occurred at any time prior to the Closing Date. Except as set forth on
Schedule 2.24, no Stockholder has any current intention of terminating an
-------------
Employment Agreement with Flagship prior to the termination of its initial five
(5) year 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 or market. The quantities of each type of inventory are not
excessive in the present circumstances of the Company.
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, other than the Stockholders, along with the position and the rate of
compensation of each such person. To the knowledge of the Company or any of the
Stockholders, 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 it experienced any strikes,
grievances, claims of unfair labor practices or other collective bargaining
disputes.
-13-
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 any
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) underground and other storage tanks or vessels, abandoned,
disposed or discarded barrels, containers and other closed receptacles; (vi)
health and safety of employees and other persons; and (vii) 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 in its due diligence process). 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 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 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
----------
contained in this Agreement or in any other document delivered to Flagship 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,
-14-
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
Stockholders have disclosed to PQC all material information relating to the
Practice, the Company, the Stockholders and the transactions contemplated by
this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PQC
AND FLAGSHIP
Each of Flagship and PQC jointly and severally represents and warrants to
the Company and the Stockholders as of the date hereof and as of the Effective
Time as follows:
3.1 Organization. Each of Flagship 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 Flagship 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 Certificate of
Incorporation and bylaws of PQC and the Articles of Incorporation and bylaws of
Flagship. Flagship and PQC each is duly qualified and is in good standing as a
foreign corporation in each jurisdiction where the nature of its business,
properties or other activities requires it to be qualified.
3.2 Capitalization of Flagship and PQC. Schedule 3.2 accurately sets
----------------------------------
forth the authorized and outstanding capital stock of each of Flagship and PQC
and sets forth a complete and accurate list of all stockholders of each of those
companies indicating the number and class of shares held by each stockholder.
The authorized capital stock of PQC consists of 75,000,000 shares of Class A
Common Stock, par value $0.01 per share, of which 11,979,447 shares are
outstanding, 15,267,915 shares of Class B-1 Common Stock, par value $0.01 per
share of which 1,587,863 shares are outstanding, 9,732,085 shares of Class B-2
Common Stock, par value $0.01 per share, of which 1,012,137 shares are
outstanding, and 10,000,000 shares of Preferred Stock, par value $0.01 per
share, of which no shares are outstanding. 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. On the Closing Date,
Flagship's authorized capital stock will consist of 1,000 shares of common
stock, $5.00 par value per share, of which 1,000 shares will be outstanding.
Except as set forth in Schedule 3.2, 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 Flagship; (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 Flagship. Except as disclosed on
Schedule 3.2, there are no agreements, voting trusts, proxies or understandings
------------
with respect to the voting, or registration under the Securities Act of any
shares of PQC or Flagship except for the Shareholder Designation and Stock
Transfer Agreement by and among PQC, Flagship and the sole shareholder of
Flagship dated as of the date hereof (the "Designation Agreement"). All of the
issued and outstanding shares of PQC or Flagship were issued in compliance with
applicable federal and state securities laws.
-15-
3.3 Authorization. The Board of Directors of each of Flagship 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
Flagship and PQC pursuant hereto and the consummation by Flagship and PQC of the
transactions contemplated hereby and thereby. No further corporate or other
proceedings on the part of PQC or Flagship 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 Flagship 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 Flagship
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
Flagship and PQC pursuant hereto will constitute valid and binding agreements of
Flagship and PQC, enforceable against them in accordance with their terms,
except to the extent that enforceability is limited pursuant to bankruptcy or
similar laws or by general principles of equity.
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 Flagship and PQC pursuant hereto nor the consummation by Flagship
and PQC of the transactions contemplated hereby or thereby (a) will violate any
provision of the Certificate of Incorporation or bylaws of PQC or the Articles
of Incorporation or bylaws of Flagship, each as currently in effect, (b) will
violate or conflict with any applicable statute, law, ordinance, rule,
regulation, order, judgment or decree, except that no representation or warranty
is made under this Section with regard to the laws referred to in Section 3.9,
or (c) will violate any contract or commitment which violation would have the
effect of preventing PQC or Flagship from performing its obligations hereunder
or preventing PQC or Flagship or any of their respective affiliates from
consummating the transactions contemplated herein and in the agreements and
instruments to be executed and delivered by Flagship 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 Flagship or PQC in connection with the
execution and delivery by Flagship and PQC of this Agreement or the other
agreements, documents and instruments to be executed and delivered by Flagship
and PQC pursuant hereto or the consummation by Flagship and PQC of the
transactions contemplated hereby or thereby.
3.7 Capital Stock. All shares of Common Stock issued to any
-------------
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 bylaws, or any agreement (other than the Stockholders
Agreement) to which PQC is a party or by which PQC is bound.
-16-
3.8 Brokers. Neither PQC nor Flagship is obligated to pay, nor has
-------
PQC or Flagship retained any broker or finder or other person who is entitled
to, any broker's or finder's fee or any other commission or financial advisory
fee based on any agreement or understanding made by PQC or Flagship in
connection with the transactions contemplated hereby.
3.9 Fraud and Abuse; Xxxxx Law. Neither Flagship nor PQC has engaged
--------------------------
in any activities which are prohibited under 42 U.S.C. (S)1320a-7b or 42 U.S.C.
(S)1395nn et seq., 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; (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; and (v)
referring a patient for Designated Health Services (within the meaning of 42
U.S.C. (S)1395nn) when the referring physician has a financial relationship with
the entity to which the referral is made in the absence of an applicable
exception under 42 U.S.C. (S)1395nn.
3.10 Litigation. Except as set forth on Schedule 3.10, there is not,
---------- -------------
and during the past five (5) years there have not been any Actions pending or,
to the best of Flagship and PQC's knowledge: (a) threatened against, related to
or affecting (i) PQC or Flagship, (ii) any officers, directors or employees of
Flagship or PQC as such, or (iii) any shareholder of Flagship or PQC in such
shareholder's capacity as a shareholder of Flagship or PQC; (b) seeking to
delay, limit or enjoin the transactions contemplated by this Agreement; (c) that
involves the risk of criminal liability; or (d) in which Flagship or PQC is a
plaintiff. Neither Flagship nor PQC 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 Flagship or PQC.
3.12 Disclosure. No representation or warranty by Flagship or PQC
----------
contained in this Agreement or in any other document delivered to the Company in
connection with its due diligence investigation of Flagship or PQC, 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. Flagship and PQC have disclosed to the Company all
material information relating to Flagship and PQC.
-17-
ARTICLE IV
COVENANTS
4.1 Reasonable Efforts to Close. Each of Company, the Stockholders,
---------------------------
Flagship 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 each Stockholder shall use
--------------------
its best efforts to obtain, at its 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 any 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 Stockholders shall not permit the Company to:
(a) take any action to amend the Company's Articles of Incorporation or
bylaws or other organizational documents;
(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 stock;
(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;
-18-
(h) take any action or fail to take any action within their respective
control and 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 Stockholders 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;
(1) 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;
(n) take any act or permit to occur any 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 except in the Ordinary Course of Business;
(s) materially alter the terms, status or funding condition of any
Employee Benefit Plan; or
(t) commit or agree to do any of the foregoing in the future.
-19-
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 Stockholders will, on a timely basis,
-----
file all Tax Returns for and pay any and all taxes which shall become due on or
prior to the Closing Date.
4.6 Compliance with Laws. The Company and the Stockholders will
--------------------
comply in all material respects with all laws and regulations which are
applicable to it or each of them and the Practice 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.
4.7 Exclusive Dealing. The Company and the Stockholders 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 Stockholders
and any health care 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.
4.8 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 Flagship 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 Flagship in this Agreement inaccurate or incomplete in any
material respect, or (ii) constitute or result in a breach by PQC or Flagship
of, or a failure by PQC or Flagship 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.
4.9 Severance Obligations. The Company shall satisfy all severance
---------------------
obligations
-20-
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 any
Stockholder.
4.10 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 or as required by law or
legal process. 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 or their own benefit, any such
information, written or oral, about the business of the other Party hereto.
4.11 Provision of Certain Closing Date Financial Information. Two
-------------------------------------------------------
(2) days prior to the Closing Date, the Company shall deliver to Flagship and
PQC a certificate setting forth in detail to the best of the Company's
knowledge; (i) all liabilities of the Company, including liabilities for accrued
vacation and any Employee Benefit Plan (as defined in Section 2.21) that shall
accrue on or before the Closing Date but shall remain unpaid on the Closing
Date; (ii) all prepaid expenses of the Company that relate to a period
subsequent to the Closing Date; and (iii) all cash, cash equivalents and
accounts receivables expected to be reflected in accordance with generally
accepted accounting principals on the Company's records on the Closing Date.
4.12 Continuing Obligation to Inform. From time to time prior to the
-------------------------------
Closing, the Parties shall deliver or cause to be delivered to the other Parties
supplemental information concerning events subsequent to the date hereof which
would render any statement, representation or warranty in this Agreement or any
information contained in any Schedule inaccurate or incomplete in any material
respect at any time after the date hereof until the Closing Date.
ARTICLE V
CONDITIONS TO FLAGSHIP'S AND PQC'S OBLIGATIONS
The obligation of each of Flagship 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 Flagship 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
Stockholders and no Stockholder shall be entitled to exercise appraisal rights.
-21-
5.2 Continued Truth of Representations and Warranties of The Company;
-----------------------------------------------------------------
Compliance with Covenants and Obligations. The representations and warranties
-----------------------------------------
of the Company and the Stockholders 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 Flagship and PQC. The Company and the Stockholders 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.
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. Between the date of the Interim 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.
5.5 Stockholders Agreement. The Stockholders shall have become
----------------------
parties to and be in compliance with the Stockholders Agreement.
5.6 Other Transactions. Each of the practices listed on Schedule 5.6
------------------ ------------
shall have entered into or delivered (i) an agreement among PQC, Flagship and
such practice to merge such practice into Flagship or for Flagship to purchase
substantially all the assets of such practice, and (ii) employment agreements
with Flagship signed by each physician currently a stockholder, partner or
employee of such Practice.
5.7 Financing. There shall have been no material modification to the
---------
Class B Common Stock and Warrant Purchase Agreement, by and among PQC and Xxxx
Capital Fund V, L.P., Xxxx Capital Fund V-B, L.P., BCIP Associates, and BCIP
Trust Associates, L.P. dated as of August 30, 1996 (the "Xxxx Agreement"), to
furnish capital to PQC and the Xxxx Agreement shall still be in full force and
effect.
5.8 Closing Deliveries. Simultaneously with the Closing, the Company
------------------
and the Stockholders shall deliver or cause to be delivered to PQC the
following:
(a) employment agreements (the "Employment Agreements") between
Flagship and each of the Stockholders and any other physician employed by the
Practice, in the form attached hereto as Exhibit B;
----------
(b) an Instrument of Joinder to Stockholders Agreement executed by
each of the Stockholders in a form reasonably acceptable to PQC;
(c) [Reserved];
(d) certificates of duly authorized officers of the Company, dated the
Closing Date, setting forth the resolutions of the Board of Directors and
Stockholders of the
-22-
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) [Reserved.]
(f) 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 liens which
are (i) acceptable to Flagship and PQC in their sole discretion or (ii) arising
under equipment leases listed on Schedule 5.8(f));
-----------------
(g) the consent of the landlord to the assignment of each Lease,
together with any non-disturbance and recognition agreements required by PQC
from the lessor;
(h) a release from any party with a mortgage or lien on any of the
assets of the Company, except for liens which, pursuant to subsection (f) of
this Section 5.8, are acceptable to Flagship and PQC;
(i) the consents of all parties necessary for the consummation of the
Merger and to consummate the other transactions contemplated by this Agreement;
(j) a tax lien waiver, if required, from the Comptroller of the
Treasury of the State of Maryland; and
(k) such other agreements, consents and documents as PQC and Flagship
shall reasonably request in connection with (i) their due diligence
investigation of the Company, (ii) the affiliation of the Stockholders with
Flagship and PQC, (iii) the transactions contemplated by this Agreement and the
Employment Agreements.
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF THE COMPANY AND THE STOCKHOLDERS
The obligations of Company and the Stockholders 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 and
------------------------------------------------------------
Flagship; Compliance with Covenants and Obligations. The representations and
---------------------------------------------------
warranties of Flagship 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. Flagship and PQC 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.
6.2 No Proceedings or Litigation. No action by any Governmental
----------------------------
Entity or other person shall have occurred or shall have been instituted or
threatened which questions the validity or legality of the transactions
contemplated hereby and which could reasonably be
-23-
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.
6.3 Offers of Employment. Flagship shall have extended offers of
--------------------
employment upon the same financial terms as the employee received from the
Company on the date of execution hereof, subject to any subsequent changes
acceptable to the Company and PQC, to the persons listed on Schedule 6.3.
------------
6.4 Financing. There shall have been no material modification to the
---------
Xxxx Agreement, and the Xxxx Agreement shall still be in full force and effect.
6.5 Deliveries by PQC. Simultaneously with the Closing, PQC shall
-----------------
deliver or cause to be delivered to the Stockholders the following:
(a) the Merger Consideration.
(b) certificates of duly authorized officers of Flagship and PQC,
dated the Closing Date, setting forth the resolutions of the Board of Directors
of Flagship and PQC authorizing the execution and delivery by Flagship 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;
(c) such other instruments, consents and documents as the Company
shall reasonably request in connection with (i) its due diligence investigation
of PQC and (ii) the transactions contemplated by this Agreement.
6.6 Material Changes. Between June 1, 1996 and the Closing, there
----------------
shall not have been any Material Adverse Change in the business, prospects,
operations or conditions of Flagship or PQC.
6.7 Other Transactions. Each of the practices listed on Schedule 5.6
------------------ ------------
shall have entered into or delivered (i) an agreement among PQC, Flagship and
such practice to merge such practice into Flagship or for Flagship to purchase
substantially all the assets of such practice, and (ii) employment agreements
with Flagship signed by each physician currently a stockholder, partner or
employee of such Practice.
6.8 Services Agreement. PQC and Flagship shall have mutually
------------------
executed and delivered to each other the Services Agreement in the form and
substance attached hereto as Exhibit C.
---------
6.9 PQC and Flagship Closing Conditions. Each of the conditions
-----------------------------------
precedent set forth in Article V above shall have been satisfied or waived in
writing by PQC and Flagship.
-24-
ARTICLE VII
INDEMNIFICATION
7.1 Indemnification.
---------------
(a) The Stockholders, severally and not jointly, shall indemnify,
defend, and hold harmless PQC, Flagship and their respective subsidiaries and
affiliates and their directors, officers, employees and agents or the successor
of any of the foregoing (collectively, the "PQC Indemnified Parties"), and
reimburse the PQC Indemnified Parties 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 any PQC Indemnified Party which relate to or arise out of:
(i) breach of any representation and warranty of, or covenant
or agreement to be performed by, the Company or any Stockholder, in each case
contained in this Agreement or the Stockholders Agreement;
(ii) failure of any Stockholder to have good, valid and
marketable title to the issued and outstanding Shares held by such 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 options, preemptive
rights or rights to notice or to vote; (C) any rights under the Articles of
Incorporation or bylaws 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 Stockholders,
provided however, that with respect to any Stockholder, there is excluded from
Section 7.1 (a)(iv) any amounts actually deducted as a Deductible Expense of
such Stockholder under Section 10.4 of Appendix A of the Services Agreement;
(v) the conduct of the Practice prior to the Closing Date,
except for liabilities described in Section 2.8(a) or reflected in the
Settlement Date Financial Certificate required by Schedule 1.14;
-------------
(vi) any liability of the Company incurred prior to the Closing
Date that is not described in Schedule 2.8(a);
----------------
(vii) any liability incurred by PQC or Flagship relating to
agreements or obligations of the Company or any Stockholder, whether written or
oral, that are not specifically identified on the Disclosure Schedule; and
(viii) to the extent, if any, that on the Closing Date the accrued
but unpaid liabilities of the Company exceeds the sum of (i) the amount actually
collected from
-25-
accounts receivable that arose out of services prior to the Closing Date and
which were uncollected on the Closing Date, (ii) cash and cash equivalents held
by the Company on the Closing Date and (iii) prepaid expenses reflected on the
records of the Company on 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 each Stockholder under this Section 7.1(a)(i) - (viii) shall be
limited, in the aggregate, to the dollar value on the Closing Date of the Merger
Consideration paid to such Stockholder reduced by any amount deducted as a
Deductible Expense of such Stockholder under Section 10.4 of Appendix A of the
Services Agreement resulting from any Tax Liabilities of the Company, if, but
only if, the Company has filed all tax returns based on the good faith
determination of its accountants and paid all taxes shown to be due thereon
through the taxable year ending on the date of the Merger.
(b) PQC and Flagship shall indemnify and hold harmless the Company and
the Stockholders and their respective agents or the successors of any of the
foregoing (collectively, the "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 Parties which relate to or arise out of any
breach of any representation or warranty of, or covenant or agreement to be
performed by, PQC or Flagship, 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 Third-
-26-
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.
(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 Party
shall be free to pursue such remedies as may be available to the Indemnified
Party under applicable law.
7.3 Survival. All representations, warranties, covenants and agreements
--------
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 Stockholders' obligations pursuant to Sections 7.1(a)(i) and
(viii) and the obligations of PQC and Flagship 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
satisfied in full or otherwise finally resolved. The obligation of the
Stockholders pursuant to Section 7-1(a)(ii), (iii), (iv), (v), (vi) and (vii)
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 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, Flagship 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, PQC and Flagship;
-27-
(b) by the Company, upon a material breach of any representation,
warranty, covenant or agreement on the part of PQC or Flagship set forth in this
Agreement, or if any representation or warranty of PQC or Flagship has become
materially untrue, in either case such that any of the conditions set forth in
Article VI would be incapable of being satisfied by December 20, 1996; 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). Any breach on
the part of PQC or Flagship of the representations and warranties contained in
Article III or the covenants contained in Article IV, which permits termination
of this Agreement shall permit the Company and the Stockholders to immediately
terminate any other agreement between PQC or Flagship and the Company or any of
the Stockholders;
(c) by PQC and Flagship upon a material breach of any representation,
warranty, covenant or agreement on the part of the Company or the Stockholders
set forth in this Agreement, or if any representation or warranty of the Company
has become materially untrue, in either case such that any of the conditions set
forth in Article V would be incapable of being satisfied by December 20, 1996;
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
(c). Any breach on the part of the Company or the Stockholders 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 and Flagship to immediately terminate any other agreement between the
Company or the Stockholder and PQC or Flagship; or
(d) by either Party if the Closing shall not have occurred by December
20, 1996, 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, Flagship, the Stockholders and the Company
shall, upon another Party's request, deliver to such other Party all documents
previously delivered (and copies thereof in its possession) concerning one
another and the transactions contemplated hereby as required by Section 4.10
above, and (b) 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 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 another 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
-28-
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).
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 Stockholders.
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 each 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 (1) 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 Stockholders:
--------------------------------------
To the last known home address of each Stockholder as maintained in the records
of Flagship with a copy to:
Xxxxx & Xxxxxxx L.L.P.
Columbia Square
000 Xxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, XX 00000-0000
Attention: Xxxxxxx Xxxxxxxx, Esq.
-29-
If to PQC or Flagship:
----------------------
Physicians Quality Care, Inc.
000 Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxx
With a copy to:
Xxxx Xxxxxx, Esq.
Ropes & Xxxx
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, XX 00000
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 State of
Maryland.
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, 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.
-30-
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 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.
9.16 Gender. All references herein to the masculine gender shall be deemed
------
to include the feminine or neuter gender as appropriate.
9.17 Table of Cross-References. The following defined terms have the
-------------------------
meaning set forth in the respective locations within this Agreement set forth
below:
"Accredited Investor" Section 1.12(c)(vii)
"Actions" Section 2.17
"Additional Consideration" Section 1.14
"Affiliated Group" Section 2.11(d)
"Articles of Merger" Section 1.1
"Xxxx Agreement" Section 6.4
"CERCLA" Section 2.28(a)
"Claim" Section 7.2(a)
"Code" Section 1.13
"Closing" Section 1.2
"Closing Date" Section 1.2
"Closing Date Receivables" Section 1.14
"Common Stock" Preamble
"Company" Preamble
"Company Indemnified Parties" Section 7.1(b)
"Consenting Corporation" Section 2.11(c)
"Contracts" Section 2.14(a)
"Damages" Section 7.1(a)
"Disclosure Schedule" Article II
"ERISA" Section 2.21(c)
"ERISA Affiliate" Section 2.21(e)
"Effective Time" Section 1.1
"Employee Benefit Plan" Section 2.21(a)
-31-
"Employment Agreements" Section 5.8(a)
"Environment" Section 2.28(a)
"Environmental Law" Section 2.28(a)
"Excess Pre-Paid Expenses" Section 1.14
"Financial Statements" Section 2.7
"Flagship" Preamble
"Governmental Entity" Section 2.6
"Indemnified Parties" Section 7.1(b)
"Indemnifying Party" Section 7.2(a)
"Interim Financial Statements" Section 2.7
"Leases" Section 2.13(a)
"Material Adverse Effect" Section 2.5
"Material of Environmental Concern" Section 2.28(b)
"Merger" Section 1.1
"Merger Consideration" Section 1.3
"Most Recent Balance Sheet" Section 2.8
"Multi-Employer Plan" Section 2.21(e)
"Ordinary Course of Business" Section 2.12
"PQC" Preamble
"PQC Indemnified Parties" Section 7.1(a)
"Parachute Payments" Section 2.11(e)
"Parties" Preamble
"Permits" Section 2.15
"Practice" Section 2.5
"Pre-Closing Liabilities" Section 1.14
"Premises Lease" Section 5.8 (c)
"Realized Adjusted Net Value" Section 1.14
"Release" Section 2.28(a)
"Restricted Securities" Section 1.12(c)(v)
"Securities Act" Section 1.12(c)(i)
"Security Interest" Section 2.12
"Shares" Section 1.5(a)
"Stockholders" Preamble
"Surviving Corporation" Section 1.1
"Tax Returns" Section 2.11(a)
"Taxes" Section 2.11(a)
"Third Party Claim" Section 7.2(b)
[BALANCE OF THIS PAGE LEFT BLANK INTENTIONALLY]
-32-
[Merger Agreement]
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
PHYSICIANS QUALITY CARE, INC.
------------------------------
By: Xxxxxxx X. Xxxxx
Title: Chief Executive Officer
FLAGSHIP HEALTH, P.A.
------------------------------
By: Xxxxx X. Xxxxxxx, M.D.
Title: President
By:
--------------------------
Its:
Shareholders:
-----------------------------
-----------------------------
