EXHIBIT 10.12
ASSET PURCHASE AGREEMENT
BY AND AMONG
PHYSICIAN HEALTH CORPORATION
A DELAWARE CORPORATION,
PHC REGIONAL ONCOLOGY CARE, INC.
A GEORGIA CORPORATION,
SOUTHERN DEPENDACARE, INC.
AN ALABAMA CORPORATION,
AND
XXXX X. XXXXXX, M.D.
EFFECTIVE AS OF SEPTEMBER 1, 1997
TABLE OF CONTENTS
ARTICLE I...................................................................................... 1
DEFINITIONS................................................................................ 1
ARTICLE II..................................................................................... 4
ASSETS..................................................................................... 5
2.1 Purchase of the Practice Group Assets........................................ 5
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2.2 Excluded Practice Group Assets............................................... 7
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2.3 Closing Date................................................................. 8
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2.4 Assumption of Practice Group Liabilities..................................... 8
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2.5 Closing Date Actions and Deliveries.......................................... 10
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2.6 Further Assurances........................................................... 10
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2.7 Referrals.................................................................... 11
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2.8 Employees.................................................................... 11
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ARTICLE III.................................................................................... 11
PURCHASE PRICE, OTHER AGREEMENTS........................................................... 11
3.1 Purchase Price............................................................... 11
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3.2 Government Receivables Advance............................................... 13
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3.3 Allocation of Purchase Price................................................. 14
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ARTICLE IV..................................................................................... 14
REPRESENTATIONS AND WARRANTIES OF PHYSICIAN
AND PRACTICE GROUP................................................................. 14
4.1 Organization, Standing and Authority of Practice Group....................... 14
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4.2 Absence of Conflicting Agreements or Required Consents Relating to
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Physician and Practice Group's Respective Obligations........................ 14
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4.3 Licenses and Authorizations.................................................. 15
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4.4 Lease Agreements............................................................. 15
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4.5 Financial Statements......................................................... 15
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4.6 Absence of Changes........................................................... 16
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4.7 Litigation and Claims........................................................ 17
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4.8 No Undisclosed Liabilities................................................... 17
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4.9 No Violation of Law, Generally............................................... 17
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4.10 Properties................................................................... 19
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4.11 Indebtedness................................................................. 20
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4.12 Employee Contracts........................................................... 20
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4.13 Labor Relations.............................................................. 21
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4.14 Contracts and Commitments.................................................... 21
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4.15 Environmental Protection..................................................... 22
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4.16 Filing of Reports............................................................ 23
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4.17 Insurance Policies........................................................... 23
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4.18 Accounts Receivable.......................................................... 23
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4.19 Accounts Payable............................................................. 24
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4.20 Inventory.................................................................... 24
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4.21 Inspections and Investigations............................................... 24
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4.22 Ownership of Medical Service Practice(s)..................................... 24
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4.23 Agreements in Full Force and Effect.......................................... 25
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4.24 Taxes........................................................................ 25
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4.25 Corporate Documents.......................................................... 27
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4.26 Statements True and Correct.................................................. 27
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ARTICLE V...................................................................................... 28
REPRESENTATIONS AND WARRANTIES OF PHC AND PHC-SUB.......................................... 28
5.1 Organization, Standing and Authority of PHC and PHC-SUB...................... 28
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5.2 Absence of Conflicting Agreement or Required Consents Relating to PHC's
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Obligations.................................................................. 28
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5.3 Capital Stock of PHC......................................................... 29
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5.4 Representations Regarding Disclosure Documents............................... 29
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5.5 No Violation of Law.......................................................... 30
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5.6 Litigation and Claims........................................................ 30
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5.7 Financial Statements of PHC.................................................. 30
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5.8 No Violation of Law, Generally............................................... 30
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5.9 Filing of Reports............................................................ 31
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5.10 Taxes........................................................................ 31
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5.11 Statements True and Correct.................................................. 32
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ARTICLE VI..................................................................................... 33
ADDITIONAL AGREEMENTS...................................................................... 33
6.1 Access and Inspection........................................................ 33
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6.2 Cooperation in Meeting Filing Requirements................................... 33
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6.3 Post Closing Audit of Practice Group......................................... 33
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6.4 Audit of PHC-SUB............................................................. 33
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6.5 Further Assurances........................................................... 34
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6.6 Benefit Plans................................................................ 34
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6.7 Best Efforts to Close........................................................ 34
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ARTICLE VII.................................................................................... 34
CONDUCT OF BUSINESS OF PRACTICE GROUP AND PHYSICIAN
PENDING CLOSING.................................................................... 34
7.1 Disposition of Assets........................................................ 34
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7.2 Sale of Shares............................................................... 34
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7.3 Contracts.................................................................... 34
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7.4 Condition of Assets.......................................................... 34
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7.5 Liens; Encumbrances.......................................................... 35
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ARTICLE VIII................................................................................... 35
CONDITIONS TO OBLIGATIONS OF PHC AND PHC-SUB............................................... 35
8.1 Necessary Approvals.......................................................... 35
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8.2 Representations and Warranties............................................... 35
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8.3 Performance; Covenants....................................................... 35
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8.4 Closing Deliveries........................................................... 35
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8.5 PHC Due Diligence............................................................ 37
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ARTICLE IX..................................................................................... 37
CONDITIONS TO OBLIGATIONS OF PHYSICIAN AND PRACTICE GROUP.................................. 37
9.1 Representations and Warranties............................................... 37
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9.2 Performance; Covenants....................................................... 37
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9.3 Closing Deliveries........................................................... 37
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ARTICLE X...................................................................................... 39
INDEMNIFICATION............................................................................ 39
10.1 Indemnification by Physician................................................. 39
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10.2 Indemnification by PHC and PHC-SUB........................................... 39
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10.3 Definition of Losses......................................................... 40
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10.4 Notice and Opportunity to Defend............................................. 40
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10.5 Effect of Investigation by PHC............................................... 41
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ARTICLE XI..................................................................................... 42
MISCELLANEOUS PROVISIONS................................................................... 42
11.1 Notices...................................................................... 42
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11.2 Successors and Assigns....................................................... 43
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11.3 Entire Agreement............................................................. 43
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11.4 Governing Law; Severability.................................................. 44
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11.5 No Brokers................................................................... 44
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11.6 Schedules and Exhibits....................................................... 44
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11.7 Waivers...................................................................... 44
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11.8 Headings..................................................................... 44
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11.9 Counterparts................................................................. 44
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11.10 Confidentiality.............................................................. 44
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11.12 Expenses..................................................................... 46
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11.13 No Third Party Beneficiaries................................................. 46
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11.14 Survival..................................................................... 46
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11.15 Post Closing Covenants of Physician.......................................... 46
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11.16 Post Closing Covenants of PHC and PHC-SUB.................................... 47
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LIST OF EXHIBITS
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EXHIBIT A Assignment and Assumption Agreement
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EXHIBIT B-1 Physician Owner Employment Agreement
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EXHIBIT B-2 Physician Employment Agreements
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EXHIBIT B-3 Termination of Professional Employment and General Release
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EXHIBIT C Acquisition Restrictive Covenant Agreement
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EXHIBIT D Practice Management Agreement
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EXHIBIT E-1 Opinion of Counsel of Practice Group
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EXHIBIT E-2 Opinion of Alabama Counsel of Practice Group
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EXHIBIT F Investment Agreement
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EXHIBIT G Registration Rights Agreement
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EXHIBIT H-1 Opinion of Counsel of PHC and PHC-SUB
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EXHIBIT H-2 Opinion of Georgia Counsel of PHC-SUB
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EXHIBIT I-1 First Promissory Note
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EXHIBIT I-2 Second Promissory Note
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EXHIBIT J Receivables Promissory Note
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EXHIBIT K Government Receivables Security Agreement
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LIST OF SCHEDULES
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SCHEDULE 2.1(h) Fixtures, Furniture, Equipment, Supplies and Inventory
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SCHEDULE 2.2(e) Contracts Not Assumed
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SCHEDULE 2.2(h) Excluded Assets - Equipment and Personal Property
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SCHEDULE 2.4(a)(i) Liabilities Assumed
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SCHEDULE 2.8 Offers of Employment
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SCHEDULE 4.2 Required Consents Relating to Seller's Obligations
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SCHEDULE 4.3 Licenses and Authorizations
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SCHEDULE 4.4 Lease and License Agreements
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SCHEDULE 4.5 Financial Statements of Practice Group
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SCHEDULE 4.6 Absence of Changes
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SCHEDULE 4.7 Litigation and Claims
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SCHEDULE 4.8 Undisclosed Liabilities
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SCHEDULE 4.9(a) Violations of Law
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SCHEDULE 4.9(b)(i) Exceptions to Billing Practices
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SCHEDULE 4.9(b)(ii) Exceptions to Regulatory Compliance
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SCHEDULE 4.9(c) Transactions with Referral Sources
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SCHEDULE 4.10(a) Owned Assets
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SCHEDULE 4.10(b) Leased Equipment
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SCHEDULE 4.10(c) Equipment, Utility and Other Deposits
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SCHEDULE 4.10(d) Exceptions to Title to Assets
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SCHEDULE 4.11 Indebtedness
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SCHEDULE 4.12 Employment Contracts, Union Agreements and Benefit Plans
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SCHEDULE 4.13 Exceptions to Labor Relations
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SCHEDULE 4.14 Contracts and Agreements of Practice Group
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SCHEDULE 4.15 Environmental Protection
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SCHEDULE 4.17 Insurance Policies
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SCHEDULE 4.18.1 Private Accounts Receivable
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SCHEDULE 4.18.2 Government Accounts Receivable
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SCHEDULE 4.19 Accounts Payable
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SCHEDULE 4.21 Inspections and Investigations
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SCHEDULE 4.22 Ownership of Medical Service Practice(s)
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SCHEDULE 4.24 Taxes
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SCHEDULE 5.2 Absence of Conflicting Agreement or Retired Consents
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SCHEDULE 5.3 PHC Capital Stock
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SCHEDULE 5.6 Litigation and Claims of PHC and PHC-SUB
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SCHEDULE 5.7 Financial Statements of PHC
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SCHEDULE 5.9 Taxes
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SCHEDULE 7.1 Disposition of Assets
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered into to
be effective as of September 1, 1997, by and between Physician Health
Corporation, a Delaware corporation ("PHC"), PHC Regional Oncology Care, Inc., a
Georgia corporation ("PHC-SUB"), Southern Dependacare, Inc., an Alabama
corporation ("Practice Group"), and Xxxx X. Xxxxxx, M.D. ("Physician").
R E C I T A L S:
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WHEREAS, Practice Group is currently engaged in the practice of medicine
specializing in oncology in the areas of Carbondale, Illinois; Marion, Illinois;
Abingdon, Virginia; and Natchez, Mississippi, (collectively, the "Practice Group
Business"); and
WHEREAS, PHC-SUB wishes to acquire, and Practice Group wishes to sell,
substantially all of the tangible and intangible assets associated with the
Practice Group Business as more specifically set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, it is hereby agreed between Practice Group, Physician,
PHC and PHC-SUB:
ARTICLE I
DEFINITIONS
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Definitions. As used in this Agreement, the following terms shall have the
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meanings set forth below:
"Agreement" shall have the meaning set forth in the preamble.
"Allocation Schedule" shall have the meaning set forth in Section 3.3.
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"Assumed Contract" shall have the meaning set forth in Section 2.4(a)(ii).
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"Cap Amount" shall have the meaning set forth in Section 10.4(b).
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"Cash Payment" shall have the meaning set forth in Section 3.1(a).
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"CHAMPUS" shall have the meaning set forth in Section 10.4(b).
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"CHAMPVA" shall have the meaning set forth in Section 10.4(b).
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"Closing" shall have the meaning set forth in Section 2.3.
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"Closing Date" shall have the meaning set forth in Section 2.3.
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"Code" shall be defined as the Internal Revenue Code of 1986, as amended,
and any successor statute thereto.
"Contract Not Assumed" shall have the meaning as set forth in Section
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2.2(e).
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"Due Diligence Inspection" shall have the meaning as set forth in Section
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6.1.
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"Effective Date" shall mean September 1, 1997.
"ERISA" shall be defined as the Employee Retirement Income Security Act of
1974, as amended.
"Excluded Government Receivables" shall have the meaning set forth in
Section 4.9(b)(i).
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"Excluded Practice Group Assets" shall have the meaning set forth in
Section 2.2.
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"First Promissory Note" shall have the meaning set forth in Section
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3.1(b)(i).
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"Former SDC Workforce" shall have the meaning set forth in Section 2.8.
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"Fraud and Abuse Statute" shall have the meaning set forth in Section
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4.9(b)(ii).
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"Government Accounts Receivable" shall have the meaning set forth in
Section 4.18.
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"Government Receivables Advance" shall have the meaning set forth in
Section 3.2(a).
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"Government Receivables Security Agreement" shall have the meaning set
forth in Section 3.2(b).
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"Indemnified Party" shall have the meaning as set forth in Section 10.4(a).
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"Indemnifying Party" shall have the meaning as set forth in Section
10.4(a).
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"Interim Financial Date" shall have the meaning set forth in Section 4.5.
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"Interim Financial Statements" shall have the meaning set forth in Section
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4.5.
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"Investment Agreement" shall mean that certain Investment Agreement,
attached hereto as Exhibit F, dated as of the 12/th/ day of September, 1997
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by and between PHC and Physician.
"Lease Agreements" shall have the meaning set forth in Section 4.4.
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"Leased Equipment" shall have the meaning set forth in Section 4.10(b).
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"Losses" shall have the meaning set forth in Section 10.3.
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"Material Adverse Effect" shall have the meaning set forth in Section
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4.6(a).
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"Medicare Withheld Amount" shall have the meaning set forth in Section
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2.2(i).
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"Payment Account" shall have the meaning set forth in Section 3.2(c).
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"PHC Financial Statements" shall have the meaning set forth in Section 5.7.
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"PHC Common Shares" shall mean PHC's Voting Common Stock, $.0025 par value,
20,000,000 shares authorized, of which 4,463,964 shares are issued and
outstanding as of September 2, 1997.
"PHC Prime Shares" shall mean PHC's Prime Common Stock, $.0025 par value,
20,000,000 shares authorized, of which 3,112,166 shares are issued and
outstanding as of September 2, 1997.
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"PHC-SUB" shall have the meaning set forth in the preamble to this
Agreement.
"Physician Employment Agreement" shall mean each Employment Agreement,
attached hereto as Exhibit B-2, by and between each Practice and the
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physician to be employed by the Practice.
"Physician Owner Employment Agreement" shall mean that certain Employment
Agreement, attached hereto as Exhibit B-1, dated as of the 12/th/ day of
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September, 1997, by and between Physician and PHC-SUB.
"Practice" shall mean each of PHC-Illinois 1, S.C., an Illinois medical
corporation, ("IL-SC"), SDC's Virginia Operations ("SDC-VA"), and PHC-
Mississippi, P.L.L.C., a Mississippi professional liability company ("MS-
PLLC"). IL-SC,SDC-VA and MS-PLLC shall be collectively referred to herein
as the "Practices".
"Practice Group" shall have the meaning set forth in the preamble to this
Agreement.
"Practice Group Assets" shall have the meaning set forth in Section 2.1.
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"Practice Group Assumed Liabilities" shall have the meaning set forth in
Section 2.4.
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"Practice Group Business" shall have the meaning set forth in the recitals
to this Agreement.
"Practice Group's Financial Statements" shall have the meaning set forth in
Section 4.5.
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"Practice Management Agreement" shall mean that certain Practice Management
Agreement, attached hereto as Exhibit D, effective as of the 12/th/ day of
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September, 1997, by and among PHC, PHC-SUB, and the Practices.
"Private Accounts Receivable" shall have the meaning set forth in Section
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4.18.
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"Professional Agreements" shall be defined collectively as the Physician
Owner Employment Agreement and the Physician Employment Agreement.
"Promissory Notes" shall be defined collectively as the First Promissory
Note and the Second Promissory Note.
"Purchase Price" shall have the meaning set forth in Section 3.1.
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"Receivables Promissory Note" shall have the meaning set forth in Section
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3.2(a).
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"Required Consents" shall have the meaning set forth in Section 2.4(a).
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"SDC's Virginia Operations" shall mean the offices rendering medical
services and qualified to do business in the State of Virginia as a
division of Practice Group.
"Second Promissory Note" shall have the meaning set forth in Section
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3.1(b)(i).
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"Tax(es)" shall have the meaning set forth in Section 4.24(a).
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"Tax Returns" shall have the meaning set forth in Section 4.24(b).
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"Transaction Documents" shall have the meaning set forth in Section 4.1.
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ARTICLE II
ASSETS
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2.1 Purchase of the Practice Group Assets. Upon the terms and subject to
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the conditions of this Agreement, PHC-SUB hereby purchases, and Practice Group
hereby sells, transfers, assigns, conveys and delivers to PHC-SUB, free and
clear of all encumbrances, liens and obligations (excepting only the Practice
Group Assumed Liabilities, as defined herein), a 100% undivided interest in all
of the assets and properties (excepting only the Excluded Practice Group Assets,
as defined herein) of every kind and description, wherever located, real,
personal or mixed, tangible or intangible, owned or held by Practice Group
relating to the Practice Group Business as the same shall exist on the Closing
Date (collectively, the "Practice Group Assets"), including, without limitation,
all right, title and interest of Practice Group in, to and under:
(a) The real property leases, leasehold improvements and personal property
leases listed or described in SCHEDULE 4.4;
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(b) All trademarks, trade names, service marks and copyrights (and all
goodwill associated with such trademarks, trade names, service marks and
copyrights), registered or unregistered, owned by Practice Group relating to the
Practice Group Business, with the exception of the Practice Group's name of
"Southern Dependacare, Inc.", and the applications for registration thereof and
all patents and applications therefor owned by Practice Group and the licenses
relating to any of the foregoing including, without limitation, the items listed
in SCHEDULE 4.4;
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(c) All of Practice Group's rights, claims or causes of action against
third parties arising under warranties from manufacturers, vendors and others in
connection with the Practice Group Assets;
(d) All prepaid expenses arising from payments made by Practice Group in
the ordinary course of the operation of the Practice Group Business prior to the
Closing Date for goods or services where such goods or services have not been
received at the Closing Date;
(e) Excluding patient records, all books and records (including all
computer programs and personnel records of current employees of Practice Group
who are hired by PHC on or following the Closing Date) of Practice Group
relating to the assets, business and operations of the Practice Group Business;
it being understood by all of the parties to this Agreement that Practice Group
and Physician shall have access to such books and records at all reasonable
times, provided, any duplicating or non-employee expense incurred therewith
shall be borne solely by Practice Group;
(f) All telephone and telecopy numbers used by Practice Group in connection
with the Practice Group Business including, without limitation, the following
numbers:
(i) Carbondale, Illinois: (000) 000-0000
(ii) Herrin, Illinois: (000) 000-0000 x000
(iii) Marion, Illinois: (000) 000-0000
(iv) Abingdon, Virginia: (000) 000-0000
(v) Xxxxxx, Virginia: (000) 000-0000
(vi) Richlands, Virginia: (000) 000-0000
(vii) Lebanon, Virginia: (000) 000-0000
(viii) Natchez, Mississippi: (000) 000-0000
(g) All goodwill associated with the Practice Group Business and all
intangible assets associated with the conduct of the Practice Group Business,
including Practice Group's workforce in place, with the exception of the
physician employees, business know-how, and information base;
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(h) All machinery, equipment (including computers and office equipment),
supplies, inventory, advertising and promotional materials, all collection and
credit records, medical literature, engineering plans, records and data
(excluding patient records as required under applicable law), vehicles,
furniture, office supplies and other personal property of Practice Group used in
or relating to the Practice Group Business including, but not limited to, those
items listed or referred to in SCHEDULE 2.1(h);
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(i) All rights, titles or any property interests, if any, in any inventions
and/or patents developed by Practice Group or any such rights, titles or
property interests subsequently acquired by Practice Group; and
(j) All other assets or properties not referred to above which are
reflected on the Practice Group Financial Statements, except (i) any such assets
or properties disposed of in the ordinary course of business consistent with
past practice since the date of the Interim Financial Statements (as defined
herein) and (ii) the Excluded Practice Group Assets.
The parties acknowledge that the management of the non-medical aspects of
the Practice Group Business will change simultaneously with the closing of the
transactions contemplated hereby. Accordingly, under applicable law and
professional ethical standards appropriate arrangements need to be made for the
custody and maintenance of patient records. Each of the Practices has agreed to
take and retain custody of its respective patient medical records to assure that
the records are properly handled and readily available to patients and their
treating physicians. Practice Group, Physician and each Practice shall
cooperate with and assist in copying any patients' records, to the extent
permitted by applicable law, as necessary to assist PHC-SUB in performing and
enforcing its rights under the power of attorney granted to PHC-SUB by the
Practice Management Agreement. The parties agree and acknowledge that the
patient medical records are subject to legal and ethical principles governing
their confidentiality. Accordingly, to the extent reasonably required, patients
may be requested to sign appropriate record transfer forms.
2.2 Excluded Practice Group Assets. Notwithstanding the foregoing, the
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Practice Group Assets shall not include the following (herein referred to as the
"Excluded Practice Group Assets"):
(a) Any of Practice Group's cash and cash equivalents (including any
marketable securities or certificates of deposit) as of the close of business on
the Effective Date;
(b) All claims, rights and interests of Practice Group in and to any
refunds for federal, state or local franchise, income or other taxes or fees of
any nature whatsoever for periods prior to the Effective Date;
(c) Any of Practice Group's rights, claims or causes of action against
third parties relating to the assets, properties, business or operations of the
Practice Group Business arising out of transactions occurring prior to the
Effective Date, except to the extent any such claims relate to the Practice
Group Assets;
(d) Practice Group's corporate records relating to its formation, corporate
tax returns and related documents, and supporting work papers and any other
records and returns relating to taxes, assessments and similar governmental
levies (other than real and personal property taxes, assessments and levies
imposed on the Practice Group Assets), except tax-related records, documents and
work papers relating to the Practice Group Assets, access to which shall be
provided to PHC-SUB during normal business hours;
(e) The contracts, agreements or understandings of Practice Group listed in
SCHEDULE 2.2(e) and designated on such SCHEDULE 2.2(e) as a "Contract Not
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Assumed" and any other contract, agreement or understanding of Practice Group
(i) in existence on the date hereof which is not listed in SCHEDULE 2.2(e) but
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is required to be so listed or (ii) entered into by Practice Group after the
date hereof in violation of ARTICLE VI of this Agreement (each, a "Contract Not
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Assumed");
(f) The Government Accounts Receivable;
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(g) Any of Practice Group's rights under or pursuant to this Agreement
(including any interests in PHC acquired pursuant to this Agreement) or the
other agreements with PHC contemplated hereby;
(h) Any asset the use of which by PHC or PHC-SUB would be in violation of
Illinois, Virginia, Mississippi or other applicable law, including, but not
limited to, the Practice Group's medical records;
(i) The amount being withheld by the Mississippi Medicare Carrier as of the
Closing Date ("Medicare Withheld Amount"); and
(j) The use of the Practice Group's name of "Southern Dependacare, Inc.".
2.3 Closing Date. The consummation of the transactions contemplated
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herein (the "Closing") shall be consummated at 10 a.m. on September 12, 1997
(such date and time being hereinafter called the "Closing Date"), which shall be
effective as of the 1/st/ day of September, 1997, the Effective Date.
2.4 Assumption of Practice Group Liabilities. (a) On the Closing Date,
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PHC-SUB shall deliver to Practice Group an assignment and assumption agreement,
substantially in the form attached hereto as EXHIBIT A, pursuant to which PHC-
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SUB shall assume and be obligated for, and shall agree to pay, perform, defend
and discharge in accordance with their terms:
(i) all liabilities listed in SCHEDULE 2.4(a)(i); and
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(ii) all liabilities of Practice Group arising after the Effective
Date (other than any liability or obligation for breach or default which
occurred prior to the Closing) under the leases, contracts and other
agreements entered into by Practice Group with respect to the Practice
Group Business prior to the date hereof consistent with the terms of
ARTICLE VI of this Agreement (each an "Assumed Contract").
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Notwithstanding the foregoing, PHC-SUB shall assume no liability or
obligation arising as a result of the transfer or assignment to PHC-SUB of any
Assumed Contract or agreement contemplated in SECTION 2.4(a)(ii) above without
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any consent required by the terms thereof if PHC, not more than 30 days
following the Closing Date, has indicated to Practice Group, in writing, that
PHC-SUB will not assume such liability or obligation without the consent
required pursuant to the Assumed Contract (such consents being collectively
referred to herein as the "Required Consents"). Such liabilities or obligations
for which consent to transfer is required and not obtained shall be considered a
Practice Expense, as that term is defined in the Practice Management Agreement.
All of the foregoing to be assumed by PHC-SUB under this SECTION 2.4(a)
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are referred to herein as the "Practice Group Assumed Liabilities."
(b) Neither PHC nor PHC-SUB shall assume or be obligated for any, and
Practice Group shall solely retain, pay, perform, defend and discharge all of,
Practice Group's liabilities or obligations of any and every kind whatsoever,
direct or indirect, disclosed or undisclosed, liquidated or unliquidated,
absolute or contingent, not expressly assumed by PHC-SUB under SECTION 2.4(a)
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and, notwithstanding anything to the contrary in SECTION 2.4(a), none of the
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following shall be "Practice Group Assumed Liabilities" for purposes of this
Agreement and Practice Group shall remain responsible for all such matters and
shall indemnify PHC-SUB and PHC with respect thereto:
(i) any liabilities of Practice Group in respect of accounts
payable, accrued equipment rentals, accrued salary, payroll and wages,
accrued sick or vacation pay or accounting and legal fees or expenses, in
each case which arise from the operation of the Practice Group Business or
the ownership of the Practice Group Assets prior to the Effective Date;
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(ii) any foreign, federal, state, county or local income,
excise, withholding, property, sales, use, franchise and other taxes which
arise from the operation of the Practice Group Business or the ownership of
the Practice Group Assets prior to the Effective Date;
(iii) except as listed in SCHEDULE 2.4(a)(i), any liability or
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obligation of Practice Group in respect of indebtedness for borrowed money,
including, without limitation, any liability or obligation of Practice
Group owing to any partner or affiliate of Practice Group;
(iv) any costs and expenses incurred by Practice Group
incident to its negotiation and preparation of this Agreement or the other
documents contemplated hereby and its performance and compliance with the
agreements and conditions contained herein or therein;
(v) except to the extent the parties hereto shall otherwise
specifically agree in writing, any liabilities or obligations, whenever
arising, related to, associated with or arising out of the employee benefit
agreements, plans or arrangements listed in SCHEDULE 4.12;
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(vi) any liability or obligation of Practice Group to make or
provide severance pay or benefits to any employee of the Practice Group
Business prior to the Closing Date who is not extending his or her
employment with PHC or PHC-SUB after the Closing Date (it being understood
that nothing contained herein is intended to create any obligation of
Practice Group, PHC-SUB, or PHC to make or provide severance pay or
benefits to any employee);
(vii) any liabilities or obligations arising as a result of the
transfer or assignment of any Practice Group lease, contract or other
agreement entered into by Practice Group with respect to the Practice Group
Business after the date hereof consistent with the terms of ARTICLE V of
---------
this Agreement, in each case without any consent required by the terms
thereof;
(viii) any liabilities in respect of the claims, suits,
proceedings or investigations described in SCHEDULE 4.7 or SECTION 4.9;
------------ -----------
(ix) any of Practice Group's liabilities or obligations under
this Agreement or the other agreements contemplated hereby including,
without limitation, the liabilities and obligations of Practice Group under
the Physician Owner Employment Agreement, as defined herein; and
(x) any of Practice Group's liabilities or obligations in
respect of claims, suits, proceedings or investigations in relation to the
treatment or diagnosis of patients or the failure to treat or diagnose
patients or otherwise in relation to health care services rendered by or on
behalf of Practice Group.
2.5 Closing Date Actions and Deliveries. Upon the terms and subject to
-----------------------------------
the conditions set forth in this Agreement, on the Closing Date:
(a) Practice Group or Physician, as appropriate, shall execute and deliver
(i) a xxxx of sale and any other appropriate documents evidencing transfer of
the Practice Group Assets, (ii) all of the documents, instruments and opinions
required to be delivered by Practice Group or Physician, as appropriate,
pursuant to this Agreement and (iii) all such other instruments of assignment,
transfer or conveyance as PHC or PHC-SUB may reasonably request or as may be
otherwise necessary to evidence and effect the sale, assignment, transfer and
delivery of the Practice Group Assets to PHC-SUB; and
(b) PHC shall pay the Cash Payment portion of the Purchase Price payable at
Closing. PHC or PHC-SUB, as applicable, shall deliver or execute and deliver (i)
all of the documents and instruments contemplated to be
7
delivered by PHC or PHC-SUB on the Closing Date pursuant to this Agreement and
(ii) all such other instruments of assignment, transfer or conveyance as
Practice Group may reasonably request or as may be otherwise necessary to
evidence and effect the sale, assignment, transfer and delivery to PHC or PHC-
SUB, as the case may be, of the Practice Group.
2.6 Further Assurances. On the Closing Date, Practice Group shall (a)
------------------
deliver to PHC or PHC-SUB, as the case may be, such other bills of sale, deeds,
endorsements, assignments and other good and sufficient instruments of
conveyance and transfer, in form reasonably satisfactory to PHC and its counsel,
as PHC may reasonably request or as may be otherwise reasonably necessary to
vest in PHC all the right, title and interest of Practice Group in, to or under
any or all of the Practice Group Assets, and (b) take all steps as may be
reasonably necessary to put PHC or PHC-SUB, as the case may be, in actual
possession and control of all the Practice Group Assets. From time to time
following the Closing, Practice Group shall execute and deliver, or cause to be
executed and delivered, to PHC such other instruments of conveyance and transfer
as PHC may reasonably request or as may be otherwise necessary to convey more
effectively and transfer to, and vest in, PHC and put PHC in possession of, any
part of the Practice Group Assets and, in the case of licenses, certificates,
approvals, authorizations, agreements, contracts, leases, easements and other
commitments included in the Practice Group Assets which cannot be transferred or
assigned effectively without the consent of third parties which consent has not
been obtained prior to the Closing, to cooperate with PHC and PHC-SUB at their
reasonable request in endeavoring to obtain such consent. Notwithstanding
anything in this Agreement to the contrary, this Agreement shall not constitute
an agreement to assign any license, certificate, approval, authorization,
agreement, contract, lease, easement or other commitment included in the
Practice Group Assets if (i) such assignment is prohibited by applicable law or
(ii) an attempted assignment thereof without the consent of a third party
thereto would constitute a breach thereof, unless such consent is obtained.
2.7 Referrals. The parties hereto acknowledge and agree that it is not a
---------
purpose of this Agreement or any of the transactions contemplated herein to
exert influence in any way over the reason or judgment of any party hereto with
respect to the referral of patients or business of any nature whatsoever, and
that neither Practice Group nor Physician are under any obligation whatsoever to
refer any patients or business to PHC or a parent, subsidiary or affiliate of
PHC. Likewise, neither PHC nor any of its parent, subsidiaries or affiliates
are under any obligation whatsoever to refer any patients or business to
Practice Group or its partners or any of their parents, subsidiaries or
affiliates (as applicable). It is the intent of all parties hereto that any
referrals made among them will continue to be based on the medical judgment and
discretion of individual physicians acting in the best interests of the
pertinent patient.
2.8 Employees. The parties acknowledge and agree that Practice Group
---------
intends to terminate all of its employees immediately prior to the Closing Date.
PHC-SUB shall offer "at will" employment to all personnel of Practice Group
listed on SCHEDULE 2.8 attached hereto (collectively, the "Former SDC
------------
Workforce") provided that all Former SDC Workforce: (i) are immediately able
and qualified to perform the available work and (ii) demonstrate that they are
authorized to work in compliance with the Immigration Reform and Control Act of
1986, as amended. All Former SDC Workforce so hired shall be considered "new
hires" by PHC-SUB for all purposes and PHC-SUB shall establish all terms and
conditions relating to their employment. Notwithstanding the foregoing, the
date each employee was hired by the Practice Group Business will be used by PHC-
SUB for purposes of determination of eligibility and vesting under all employee
benefit plans of PHC-SUB for which such employees are eligible, and such
employees shall be initially compensated at the same or greater salary or hourly
wage as they received from Practice Group immediately prior to the Closing Date.
PHC-SUB shall not, unless it specifically agrees to do so in writing, assume any
past or future obligations of Practice Group to such employees, including
specifically by way of example, and not limitation, any obligations to pay
severance pay to such employees or to provide COBRA continuation benefits, and
such obligations shall be and remain obligations of Practice Group. Nothing
contained in this SECTION 2.8 or elsewhere in this Agreement shall obligate PHC-
-----------
SUB to continue to employ any such former employees for any length of time, and
the employment of any such former employees by PHC-SUB, if any, shall be
terminable at will for any or no reason at any time after the Closing Date.
8
ARTICLE III
PURCHASE PRICE, OTHER AGREEMENTS
--------------------------------
3.1 Purchase Price. The purchase price for the Purchased Assets (the
--------------
"Purchase Price") shall be payable as follows:
(a) Three Million Seven Hundred Seven Thousand Two Hundred and No/100
Dollars ($3,707,200) paid by PHC to Practice Group at the Closing in cash or
other immediately available funds (the "Cash Payment");
(b) The product of 19.6% multiplied by the sum of the Private Accounts
Receivable and the Government Accounts Receivable, as of the Effective Date, not
to exceed One Hundred Seventy Five Thousand and No/100 Dollars ($175,000)
payable by PHC on April 15, 1998;
(c) An aggregate of $1,440,000 paid pursuant to the terms of two promissory
notes, which shall be executed and delivered by PHC-SUB at Closing,
substantially in the forms attached hereto as EXHIBIT I-1 (the "First Promissory
-----------
Note") and EXHIBIT I-2 (the "Second Promissory Note") (collectively, the
-----------
"Promissory Notes"), which shall bear interest at the rate of 7% per annum. In
addition:
(i) the First Promissory Note in the amount of $720,000 to Practice
Group shall be payable in full 24 months after the Closing Date; and
(ii) the Second Promissory Note in the amount of $720,000 to Practice
Group shall be payable in full 36 months after the Closing Date;
(d) 432,000 of the PHC Prime Shares;
(e) Within 120 days after the fourth anniversary of the Effective Date,
based upon the General Management Fees (as defined in the Practice Management
Agreement) as determined by the Atlanta, Georgia office of Xxxxxx Xxxxxxxx, LLP,
and under the following terms and conditions:
(i) $1,600,000 shall be paid to SDC, or its designee, upon the
receipt by PHC-SUB of General Management Fees from the first through the
fourth year of operations of the Practices in the cumulative amount of at
least $12,000,000; or
(ii) If PHC-SUB has not received a cumulative amount of at least
$12,000,000 in General Management Fees from the first through the fourth
years of operations of the Practices, but it has received no less than
$7,200,000 and no more than $9,600,000 in cumulative General Management
Fees from the first through the fourth years of operations of the
Practices, then SDC, or its designee, shall receive eight percent (8%) of
the difference between the cumulative General Management Fees received by
PHC-SUB during the first four (4) years of operations of the Practices and
$7,200,000; or
(iii) If PHC-SUB has received more than $9,600,000 but less than
$12,000,000 in cumulative General Management Fees from the first through
the fourth years of operations of the Practices, then SDC, or its designee,
shall receive $192,000 plus sixteen percent (16%) of the difference between
the cumulative General Management Fees received by PHC-SUB during the
first four (4) years of operations of the Practices and $9,600,000.
(f) Within 120 days after the fifth anniversary of the Effective Date,
based upon the General Management Fees as determined by the Atlanta, Georgia
office of Xxxxxx Xxxxxxxx, LLP, and under the following terms and conditions:
9
(i) $1,600,000 shall be paid to SDC, or its designee, upon the
receipt by PHC-SUB of General Management Fees from the first through the
fifth year of operations of the Practices in the cumulative amount of at
least $15,000,000; or
(ii) If PHC-SUB has not received a cumulative amount of at least
$15,000,000 in General Management Fees from the first through the fifth
years of operations of the Practices, but it has received no less than
$9,000,000 and no more than $12,000,000 in cumulative General Management
Fees from the first through the fifth years of operations of the Practices,
then SDC, or its designee, shall receive eight percent (8%) of the
difference between the cumulative General Management Fees received by PHC-
SUB during the first five (5) years of operations of the Practices and
$9,000,000; or
(iii) If PHC-SUB has received no more than $12,000,000 but less than
$15,000,000 in cumulative General Management Fees from the first through
the fifth years of operations of the Practices, then SDC, or its designee,
shall receive $240,000 plus sixteen percent (16%) of the difference between
the cumulative General Management Fees received by PHC-SUB during the first
five (5) years of operations of the Practices and $12,000,000.
3.2 Government Receivables Advance.
------------------------------
(a) In addition to the Purchase Price, PHC shall advance $800,000 to the
Practice Group in immediately available funds (the "Government Receivables
Advance"). The Government Receivables Advance shall be evidenced by a
promissory note executed by the Practice Group, payable to the order of PHC-SUB
in the form as attached hereto as EXHIBIT J (the "Receivables Promissory Note").
---------
(b) Repayment of the indebtedness evidenced by the Receivables Promissory
Note shall be secured by a security agreement in the form as attached hereto as
EXHIBIT K executed by the Practice Group to PHC-SUB, covering the Government
---------
Accounts Receivables (the "Government Receivables Security Agreement").
(c) The Practice Group shall, until repayment of the Receivables Promissory
Note, deposit all proceeds of the Government Accounts Receivables into Account
No. 00000000, maintained at First National Bank and Trust of Carbondale,
Illinois, in the name of Southern Dependacare - Note Payment Account, in the
name of the Practice Group (the "Payment Account"). The depository agreement
---------------
for the Payment Account shall provide that the account balance in such account
shall be "swept" daily into Account No. 00000000, maintained at First National
Bank and Trust of Carbondale, Illinois by PHC-SUB. Amounts so swept shall be
applied by PHC-SUB first to accrued but unpaid interest and then to outstanding
principal evidenced by the Receivables Promissory Note in the inverse order of
maturity.
3.3 Allocation of Purchase Price. Within 30 days following the Closing
----------------------------
Date, PHC, PHC-SUB and Practice Group shall agree to an Allocation Schedule (the
"Allocation Schedule") allocating the Purchase Price among the Purchased Assets
for accounting and other purposes. PHC, PHC-SUB and Practice Group further
agree that the Allocation Schedule shall be prepared in accordance with Section
1060 of the Code and any tax returns or other tax information they may file or
cause to be filed with any governmental agency shall be prepared and filed
consistently with the Allocation Schedule. In this regard, PHC and Practice
Group agree that, to the extent required, they will each properly prepare and
file Form 8594 in accordance with Section 1060 of the Code and applicable state
law.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PHYSICIAN
-------------------------------------------
AND PRACTICE GROUP
------------------
As a material inducement to PHC to enter into this Agreement, Physician and
Practice Group hereby, jointly, severally and unconditionally, represent and
warrant to PHC as follows:
10
4.1 Organization, Standing and Authority of Practice Group. Practice
------------------------------------------------------
Group is a corporation duly organized and validly existing under the laws of the
State of Alabama. Practice Group has the full requisite corporate power and
authority to (a) own all its assets and properties on the date hereof and (b)
execute and deliver this Agreement and each other document or instrument
contemplated hereby (collectively, the "Transaction Documents") and perform its
obligations hereunder and thereunder according to their respective terms.
Practice Group is not a participant in any joint venture, partnership,
association or similar business arrangement with any other person or party.
4.2 Absence of Conflicting Agreements or Required Consents Relating to
------------------------------------------------------------------
Physician and Practice Group's Respective Obligations. The execution, delivery
-----------------------------------------------------
and performance by Physician and Practice Group, respectively, of the
Transaction Documents (with or without the giving of notice, the lapse of time,
or both): (a) except as expressly set forth on SCHEDULE 4.2, do not require the
------------
consent of any governmental or regulatory authority or any other third party;
(b) will not conflict with any provision of Practice Group's articles of
incorporation, regulations or other organizational documents; (c) will not
conflict with, result in a breach of, or constitute a default under any law,
ordinance, regulation, ruling, judgment, order or injunction of any court or
governmental instrumentality to which Physician or Practice Group is a party or
by which Physician or Practice Group or their respective properties are bound;
(d) will not conflict with, constitute grounds for termination of, result in a
breach of, constitute a default under, or accelerate or permit the acceleration
of any performance required by the terms of any agreement, instrument, license
or permit, material to this transaction, to which Physician or Practice Group is
a party or by which Physician, Practice Group or their respective properties are
bound; and (e) will not create any claim, lien, charge or encumbrance upon any
of the assets or properties of Practice Group.
4.3 Licenses and Authorizations. Each physician member of Practice Group
---------------------------
holds all valid licenses, permits and other rights and authorizations required
by any federal law, ordinance, regulation or ruling of any governmental
regulatory authority necessary to practice medicine in the jurisdictions in
which each physician practices medicine. A correct and complete list of all such
licenses, permits and other authorizations is set forth in SCHEDULE 4.3 hereto.
------------
None of such licenses has been revoked or suspended or is the subject of any
proceeding or action for revocation or suspension.
4.4 Lease Agreements. SCHEDULE 4.4 hereto contains a current list of all
---------------- ------------
the lease agreements and license and sublicense agreements to which Practice
Group and/or Physician are parties and pursuant to which the Practice Group
and/or Physician lease (whether as lessor or lessee) or license (whether as
licensor or licensee) any real or personal property related to the operation of
the Practice Group Business (the "Lease Agreements"). Practice Group has
delivered to PHC true and complete copies of all of the Lease Agreements. Each
of the Lease Agreements is valid and effective in accordance with its terms, and
there is not under any of such Lease Agreements (a) any existing or claimed
default by Practice Group or Physician or event of default or event which with
notice or lapse of time, or both, would constitute a default by Practice Group
or Physician, or (b) any existing default by any other party under any of the
Lease Agreements or any event of default or event which with notice or lapse of
time, or both, would constitute a default by any such party.
4.5 Financial Statements. Attached hereto as SCHEDULE 4.5 are Practice
-------------------- ------------
Group's unaudited financial statements ("Interim Financial Statements")for the
twelve months ending March 31, 1997 and for the period ending June 30, 1997 (the
"Interim Financial Date"), reflecting the results of the operations and
financial condition of Practice Group Business at such dates which have been
prepared in accordance with the federal income tax basis of accounting (cash
method) consistently applied (collectively, the "Practice Group's Financial
Statements"). The Practice Group's Financial Statements: (i) present fairly in
all material respects the financial position of Practice Group and the Practice
Group Business as of the dates indicated and present fairly in all material
respects the results of Practice Group's operations for the periods then ended
in accordance with the federal income tax basis of accounting (cash method) and
(ii) are in accordance with the books and records of the Practice Group, as the
case may be, which have been properly maintained and are complete and correct in
all material respects.
11
4.6 Absence of Changes. Except as expressly set forth in SCHEDULE 4.6
------------------ ------------
hereto and as permitted or contemplated by this Agreement, since the Interim
Financial Date, Physician and Practice Group have conducted the Practice Group
Business only in the ordinary course of business consistent with past practices,
and have not:
(a) Suffered any material adverse change in its working capital,
condition (financial or otherwise), assets, liabilities, reserves,
business or operations (such change, a "Material Adverse Effect");
(b) Paid, discharged or satisfied any material liability other than
the payments, discharge or satisfaction of liabilities in the
ordinary course of business;
(c) Written off as uncollectible any receivable, except for
contractual discounts and write-offs in the ordinary course of
business, exceeding Five Thousand and No/100 Dollars ($5,000) in
the aggregate;
(d) Canceled or compromised any debts or waived or permitted to lapse
any claims or rights or sold, transferred or otherwise disposed of
any of its properties or assets, exceeding Five Thousand and
No/100 Dollars ($5,000) in the aggregate;
(e) Entered into any commitment or transaction not in the ordinary
course of business or made any capital expenditure or commitment
in excess of Five Thousand and No/100 Dollars ($5,000.00);
(f) Made any change in any method of accounting or accounting practice
for financial or income tax purposes;
(g) Incurred any liabilities or obligations (absolute, accrued or
contingent) in excess of Five Thousand and No/100 Dollars
($5,000.00), except for trade payables incurred in the ordinary
course of business;
(h) Mortgaged, pledged, subjected or agreed to subject, any of its
assets, tangible or intangible, to any lien, claim or encumbrance,
except for liens of current personal property taxes not yet due
and payable;
(i) Sold or otherwise transferred any ownership interest in Practice
Group;
(j) Increased any salaries, wages or any employee benefits for any
employee except in the ordinary course of business;
(k) Hired, committed to hire or terminated any employee except in the
ordinary course of business; or
(l) Agreed, whether in writing or otherwise, to take any action
particularly described in this SECTION 4.6.
-----------
4.7 Litigation and Claims. Except as expressly set forth in SCHEDULE 4.7
--------------------- ------------
hereto, there are no claims, lawsuits, counterclaims, proceedings, or
investigations pending, and to Physician's or Practice Group's knowledge
threatened, against or affecting Physician, Practice Group, the Practice Group
Business or any licensed professional or other individual employed by or under
contract with the Practice Group Business in any court or before any arbitrator
or governmental authority or agency, and to Physician's or Practice Group's
knowledge, there is no reasonable basis for any such action or any state of
facts or occurrence of any event which would be likely to give rise to the
foregoing which
12
has or would be likely to have a Material Adverse Effect on the Practice Group,
on Physician's or Practice Group's performance hereunder, or on the continued
operation of the Practice Group Business. There are no unsatisfied judgments
against Physician, Practice Group, the Practice Group Business, or any licensed
professional or other individual affiliated with the Practice Group, or any
consent decrees to which any of the foregoing are subject which would reasonably
be likely to have a Material Adverse Effect on the Practice Group, on Practice
Group's or Physician's performance hereunder, or on the continued operation of
the Practice Group Business.
4.8 No Undisclosed Liabilities. Except as and to the extent reflected in
--------------------------
the Practice Group's Financial Statements or as expressly shown in SCHEDULE 4.8
------------
hereto, Practice Group has no material liability or obligation whatsoever,
whether matured, unmatured, absolute, contingent or otherwise, except for
liabilities and obligations incurred in the ordinary course of its business
since the Interim Financial Date, which do not in the aggregate have a Material
Adverse Effect on the Practice Group or the Practice Group Business.
4.9 No Violation of Law, Generally.
------------------------------
(a) Except as expressly set forth in SCHEDULE 4.9(a) hereto, to the
---------------
Physician's or Practice Group's knowledge, neither Practice Group nor
Physician has been or shall be as of the Closing Date (by virtue of any
action, omission to act, contract to which it is a party or any occurrence
or state of facts whatsoever) in violation of any applicable local, state
or federal law, ordinance, regulation, order, injunction or decree, or any
other requirement of any governmental body, agency or authority or court
binding on it, or relating to its property or business or its advertising,
sales, referral or pricing practices (including, without limitation, Titles
18 and 19 of the Social Security Act and all applicable zoning and use
laws).
(b) Billing Practices/Regulatory Compliance.
---------------------------------------
(i) Billing Practices Generally. Except as expressly set forth
---------------------------
in SCHEDULE 4.9(b)(i) hereto, neither to Physician's nor
------------------
Practice Group's knowledge, all billing practices by Practice
Group to all third party payors, including, but not limited
to, the federal Medicare program, state Medicaid programs and
private insurance companies, have been true, fair and correct
and in compliance with all applicable laws, regulations and
policies of all such third party payors, and Practice Group
has not billed for or received any payment or reimbursement
in excess of amounts allowed by law. Except for the accounts
receivable expressly set forth on Schedule 4.9(b)(i) hereto
------------------
(the "Excluded Government Receivables") none of the accounts
receivable are subject to any right of offset or are being
contested by any payer, including without limitation,
Medicare or Medicaid.
(ii) Fraud and Abuse. Except as expressly set forth in SCHEDULE
--------------- --------
4.9(b)(ii) hereto, Practice Group, its officers and
----------
directors, and persons and entities providing professional
services for Practice Group, have not engaged in any
activities which are prohibited under the federal Fraud and
Abuse Statute, 42 U.S.C. (S) 1320 a-7b and Regulations
contained in 42 CFR (S) 1001 et seq. (the "Fraud and Abuse
Statute"), or related state or local statutes or regulations,
or which are prohibited by rules of professional conduct,
including, but not limited, to the following: (a) 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; (b) 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; (c) knowingly and willfully soliciting or receiving
any remuneration (including any kickback, bribe, or rebate),
directly or indirectly, overtly or covertly,
13
in cash or in kind (1) 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 (2) 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 (d) knowingly
and willfully offering or paying any remuneration (including
any kickback, bribe, or rebate), directly or indirectly,
overtly or covertly, in cash or in kind to any person to
induce such person (1) to refer 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
under Medicare or Medicaid or (2) to purchase, lease, order,
or arrange for or recommend purchasing, leasing, or ordering
any good, facility, service, or item for which payment may be
made in whole or in part under Medicare or Medicaid.
(c) Transactions with Referral Sources. Except as expressly set forth
----------------------------------
in SCHEDULE 4.9(c), neither Physician nor Practice Group nor any
---------------
affiliate of Practice Group, nor any director, officer or employee
thereof, is a party to any contract, lease, agreement or
arrangement, including, but not limited to, any joint venture or
consulting agreement with any physician, hospital, nursing
facility, home health agency or other person who is in a position
to make or influence referrals to or otherwise generate business
for Practice Group to provide services, lease space, lease
equipment or engage in any other venture or activity.
4.10 Properties.
----------
(a) SCHEDULE 4.10(a) hereto sets forth a current and complete list and
----------------
description of all of the tangible and intangible assets owned by
Practice Group as of the Interim Financial Date.
(b) SCHEDULE 4.10(b) hereto sets forth a current and complete list of
----------------
all property, equipment and other assets leased, subleased, or
licensed or sublicensed by Practice Group including, without
limitation, all computer hardware and software (collectively, the
"Leased Equipment").
(c) To the extent not expressly itemized in the Interim Financial
Statements, SCHEDULE 4.10(c) hereto sets forth a current and
----------------
complete list and description of all equipment, utility and other
deposits owned by Practice Group.
(d) Except as expressly set forth and described on SCHEDULE 4.10(d),
----------------
Practice Group: (i) has good, valid and indefeasible title to all
of the Practice Group Assets which it purports to own, including
all the personal property and assets reflected, but not shown as
leased or encumbered, in the Interim Financial Statements (except
for inventory and assets sold in the ordinary course of business
consistent with past practice and supplies consumed in the
ordinary course of business consistent with past practice since
the Interim Financial Date) and (ii) owns the Practice Group
Assets free and clear of all title defects or objections, liens,
restrictions, claims, charges, security interest, or other
encumbrances of any nature whatsoever, including any mortgages,
leases, chattel mortgages, conditional sales contracts,
collateral security arrangements and other title or interest
retention arrangements.
(e) All of the Leased Equipment and tangible assets owned by Practice
Group are in good operating condition and repair and will be in
such condition on the Closing Date.
14
(f) All of the durable and nondurable supplies owned by Practice Group
are of a quality and quantity usable in the ordinary and usual
course of the business of Practice Group.
(g) No assets, rights or interests are required in addition to those
tangible assets, Leased Equipment, rights and interests owned by
Practice Group in order to manage or operate the Practice Group
Business.
4.11 Indebtedness. SCHEDULE 4.11 sets forth a current and complete list
------------ -------------
and description of all instruments or other documents relating to any direct or
indirect indebtedness for borrowed funds of Practice Group in excess of Five
Thousand and No/100 Dollars ($5,000.00), as well as indebtedness by way of lease
purchase arrangements, guarantees, undertakings on which others rely in
extending credit and all conditional sales contracts, chattel mortgages and
other security arrangements with respect to personal property used or owned by
Practice Group. Practice Group has not loaned funds to or guaranteed a loan to
any employee or shareholder of Practice Group or other investor in Practice
Group that is in a position, directly or indirectly to make or influence
referrals of patients to, furnish items or services to, or otherwise generate
business for the Practice Group.
4.12 Employee Contracts, Union Agreements and Employee Benefits. Except as
----------------------------------------------------------
set forth on SCHEDULE 4.12 hereto, Practice Group is not a party to any
-------------
employment contract (except for oral employment agreements which are terminable
by Practice Group at will), consulting or collective bargaining contracts,
deferred compensation, pension (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended, and all rules and
regulations from time to time promulgated thereunder ("ERISA")), profit sharing,
bonus or other nonqualified benefit or compensation commitments, benefit plans,
arrangements or plans (whether written or oral), including all welfare plans, as
defined in Section 3(l) of ERISA, of or pertaining to any present or former
employee of Practice Group, or its predecessors in interest, that have been in
effect at any time within the past five (5) years.
4.13 Labor Relations. Except as expressly set forth in SCHEDULE 4.13
--------------- -------------
hereto:
(a) There is no unfair labor practice, charge or complaint or any
other matter against or involving Practice Group pending or, to
the Physician's or Practice Group's knowledge, threatened before
the National Labor Relations Board or any court of law;
(b) There are no charges, investigations, administrative proceedings
or formal complaints of discrimination (including discrimination
based upon sex, age, marital status, race, national origin, the
making of workers' compensation claims, sexual preference,
handicap or veteran status) pending or threatened before the Equal
Employment Opportunity Commission or any federal, state or local
agency or court against Practice Group. There have been no
governmental audits of the equal employment opportunity practices
of Practice Group, and to Physician's or Practice Group's
knowledge, no reasonable basis for any such audit exists; and
(c) There are no inquiries, investigations or monitoring activities of
any licensed, registered, or certified professional personnel
employed by, credentialed or privileged, or under contract with
Practice Group or the Practice Group Business pending or, to
Physician's or Practice Group's knowledge, threatened by any state
professional board or agency charged with regulating the
professional activities of health care practitioners or providers.
4.14 Contracts and Commitments. Except as expressly set forth in SCHEDULE
------------------------- --------
4.14 hereto:
----
(a) No written or oral contract or commitment to which Practice Group
is a party or is bound continues for a period of more than six (6)
months from the date hereof or requires payments
15
by Practice Group after the Closing Date, in the aggregate, in
excess of Five Thousand and No/100 Dollars ($5,000.00);
(b) There are no written or oral contracts or agreements to which
Practice Group is a party or is bound:
(i) With any of the directors, officers or shareholders of the
Practice Group, or
(ii) With any person related by blood or marriage to any
director, officer or shareholder of Practice Group or with
any company or other organization in which anyone related by
blood or marriage to Practice Group has a direct or indirect
financial interest;
(c) Neither Practice Group nor Physician is a party to or bound by
any contracts or agreements containing covenants prohibiting or
limiting the freedom of Physician and/or Practice Group to
compete in any line of business or to subject the employees or
patients of any business in any geographic area or requiring
Physician and/or Practice Group to share any profits;
(d) Neither Practice Group nor Physician is a party to any existing
agreement for the management or administration of the Practice
Group Business, and neither Practice Group nor the Physician are
obligated to become a party to any such management or
administration agreement;
(e) Neither Practice Group nor Physician is a party to or bound by
any contract, agreement or other arrangement that has had or may
in the future have a Material Adverse Effect upon the Practice
Group; and
(f) Neither Practice Group nor Physician is a party to or bound by
any contract, agreement or other arrangement, requiring the
personal services of another person or entity which would be
reasonably likely to violate any of the provisions of the Fraud
and Abuse Statute.
4.15 Environmental Protection. Except as would not reasonably be expected
------------------------
to have a Material Adverse Effect, Practice Group has obtained all permits,
licenses and other authorizations and filed all notices which are required to be
obtained or filed by Physician and/or Practice Group for the operation of the
Practice Group Business under federal, state and local laws relating to
pollution, protection of the environment or the generation or disposal of waste.
Except as would not reasonably be expected to have a Material Adverse Effect,
Practice Group is in compliance in all material respects with all terms and
conditions of such required permits, licenses and authorizations. Except as
would not reasonably be expected to have a Material Adverse Effect, Practice
Group is in compliance with all other applicable limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules and
timetables contained in those laws or contained in any law, regulation, code,
plan, order, decree, judgment, notice or demand letter issued, entered,
promulgated or approved thereunder. Except as expressly disclosed on SCHEDULE
--------
4.15 hereto and, except as would not reasonably be expected to have a Material
----
Adverse Effect, there are no past or present events, conditions, circumstances,
activities, practices, incidents, actions or plans which may interfere with or
prevent continued compliance, or which may give rise to any common law or
statutory liability or, to Physician's or Practice Group's knowledge, otherwise
form the basis of any claim, action, suit, proceeding, hearing or investigation,
based on or related to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling, or the emission,
discharge, release or threatened release into the environment, or any pollutant,
contaminant, or hazardous or toxic material or waste (including medical waste)
with respect to Practice Group or the Practice Group Business.
4.16 Filing of Reports. All returns, reports, plans and filings of any
-----------------
kind or nature necessary to be filed by Practice Group with any governmental
authority have been properly completed and timely filed in compliance with
16
all applicable requirements where failure to so file would have a Material
Adverse Effect on the Practice after the Closing.
4.17 Insurance Policies. SCHEDULE 4.17 hereto sets forth a complete and
------------------ -------------
accurate list and description of all insurance policies in force naming Practice
Group, the Physician or any director, officer or employee thereof, as an insured
or beneficiary or as a loss payee or for which Practice Group has paid or is
obligated to pay all or any part of the premiums including, without limitation,
all general liability, malpractice, fire, health, disability and life insurance
policies. Practice Group has not received notice of any pending or threatened
termination or premium increase (retroactive or otherwise) with respect thereto,
and Practice Group and Physician are in compliance with all conditions contained
therein. Except as expressly set forth on SCHEDULE 4.17 hereto, there are no
-------------
pending claims against such insurance by Practice Group as to which insurers are
defending under reservation of rights or have denied liability, and except as
set forth on SCHEDULE 4.17 hereto, there exists no claim under such insurance
-------------
that has not been properly filed or reported by Practice Group.
4.18 Accounts Receivable. Attached hereto as SCHEDULE 4.18.1 is a true,
------------------- ---------------
complete and accurate list and aging of all accounts receivable of Practice
Group as of the dates provided on SCHEDULE 4.18.1, which are payable by private
---------------
payors (the "Private Accounts Receivable"). Attached hereto as SCHEDULE 4.18.2
---------------
is a list and aging of accounts receivable of Practice Group as of the dates
provided on SCHEDULE 4.18.2, which are payable by Medicare or Medicaid. The
---------------
accounts set forth on SCHEDULE 4.18.2 less the Medicare Withheld Amount shall be
---------------
the "Government Accounts Receivable". All such accounts receivable arose in
the ordinary course of the business of Practice Group for the provision of
professional services, have not been previously written off as bad debts and are
properly recorded in the Interim Financial Statements.
4.19 Accounts Payable. Attached hereto as SCHEDULE 4.19 is a current and
---------------- -------------
complete list of all accounts payable of Practice Group as of the Interim
Financial Date, including each individual indebtedness of Five Hundred and
No/100 Dollars ($500.00) or more and setting forth the payee, the amount of
indebtedness and such additional information as may be material with respect to
any such account payable.
4.20 Inventory. All items of inventory of the Practice Group Business
---------
reflected on the Interim Financial Statements consisted, all such items on hand
on the date of this Agreement consist, and all such items on hand on the Closing
Date will consist, of items of a quality and a quantity usable in the ordinary
course of the Practice Group's business and conform to generally accepted
standards for physician medical practices. The purchase commitments of Practice
Group for inventory are not materially in excess of normal requirements, and
none of such purchase commitments were made at prices in excess of prevailing
market prices at the time of purchase.
4.21 Inspections and Investigations. Neither the Physician's nor Practice
------------------------------
Group's right nor the right of any licensed professional or other individual
employed by or under contract with the Practice to receive Medicare and Medicaid
reimbursements has been terminated or otherwise adversely affected as a result
of any investigation or action by any federal or state governmental regulatory
authority. Except as expressly set forth and described on SCHEDULE 4.21, to
-------------
Physician's or Practice Group's knowledge, neither Practice Group nor the
Physician nor any licensed professional or other individual affiliated with the
Practice Group Business has, during the past three (3) years, been the subject
of any inspection, investigation, survey, audit or monitoring by any
governmental regulatory entity, trade association, professional review
organization, accrediting organization or certifying agency, nor has Practice
Group, the Physician or the Practice Group Business received from any such
entity any notice of deficiency in connection with the operation of the Practice
Group Business. No physician of the Practice Group has been the subject of a
"medical malpractice action or claim" or a "professional review action" within
the last three (3) years as those terms are defined in the Health Care Quality
Improvement Act of 1986, as amended. Attached as part of SCHEDULE 4.21 hereto
-------------
are copies of all reports, correspondence, notices and other documents relating
to any such inspection, investigation, survey, audit, monitoring or other form
of review to which any of the foregoing has been subject.
17
4.22 Ownership of Medical Service Practice(s). Except as expressly set
----------------------------------------
forth in SCHEDULE 4.22 hereto, neither Physician nor any member of Physician's
-------------
family owns any interest in nor has a financial relationship with any health
care facility, practice or entity other than Practice Group (including, without
limitation, any physician or physician practice, allied professional services
related to oncology, or any physician management services organization, or any
provider of ancillary or specialty services including, but not limited to,
laboratory and radiology services).
4.23 Agreements in Full Force and Effect. Except as expressly set forth in
-----------------------------------
the Schedules to this Agreement, all contracts, agreements, plans, leases,
policies and licenses referred to, or required to be referred to, in any
Schedule delivered hereunder are valid and binding and are in full force and
effect and are enforceable in accordance with their terms, except to the extent
that the validity or enforceability thereof may be limited by bankruptcy,
insolvency, reorganization and other similar laws affecting creditors' rights
generally. There is no pending or, to Physician's or Practice Group's
knowledge, threatened bankruptcy, insolvency or similar proceeding with respect
to any party to such agreements, and no event has occurred which (whether with
or without notice, lapse of time or the happening or occurrence of any other
event) would constitute a default thereunder by Practice Group, Physician or any
other party thereto.
4.24 Taxes.
-----
(a) As used in this Agreement, "Taxes" means all taxes, fees,
assessments, levies, duties and other charges of any nature
imposed by any federal, state, local or foreign taxing authority,
together with all interest, penalties, fines and other additions
imposed in respect thereof, with the exception of any federal or
state employment or unemployment taxes, fees, assessments, levies,
duties or other charges.
(b) As used in this Agreement, "Tax Returns" means all original and
amended returns, declarations, certifications, statements,
notices, elections, estimates, reports, claims for refund and
information returns relating to or required to be filed or
maintained in connection with any Tax, together with all schedules
and attachments thereto, with the exception of any federal or
state employment or unemployment tax or information returns.
(c) All Tax Returns required to have been filed by the Practice Group
have been timely filed (taking into account duly granted
extensions) and are true, correct and complete in all material
respects. Except as disclosed in SCHEDULE 4.24, (i) the
-------------
Practice Group is not currently the beneficiary of any extension
of time within which to file any Tax Return, and (ii) no claim
has ever been made by any governmental authority in a
jurisdiction where the Practice Group does not file Tax Returns
that the Practice Group is or may be subject to taxation by that
jurisdiction.
(d) All Taxes of the Practice Group which have become due (without
regard to any extension of the time for payment and whether or not
shown on any Tax Return) have been paid. The Practice Group has
withheld and paid over to the applicable taxing authority all
Taxes required to have been withheld and paid over and has
complied with all information reporting and back-up withholding
requirements relating to Taxes. There are no liens with respect to
Taxes on any of the assets of the Practice Group, other than liens
for Taxes not yet due and payable or for Taxes disclosed in
SCHEDULE 4.24 that are being contested in good faith through
-------------
appropriate proceedings and for which adequate reserves have been
established in the Practice Group's Financial Statements.
(e) The accrued unpaid Taxes of the Practice Group at the Closing Date
will not exceed the amount of the current liability accruals for
Taxes (exclusive of reserves for deferred Taxes established to
reflect timing differences) reflected in the calculation of the
Closing Working
18
Capital Amount. For this purpose, the portion of any Tax imposed
on a periodic basis that is attributable to a taxable period
beginning before and ending after the Closing Date shall be
determined by apportioning the Tax for the entire period based
upon the number of days in the period, except that any such Tax
measured by income or receipts shall be apportioned based upon
actual results of operations through the end of the Closing Date.
(f) No deficiencies exist or have been asserted or are expected to be
asserted (verbally or in writing) with respect to Taxes of the
Practice Group and the Practice Group has not received notice nor
does it expect to receive notice (verbally or in writing) that it
has not filed a Tax Return or paid any Taxes required to be filed
or paid by it. No audit, examination, investigation, action, suit,
claim or proceeding relating to the determination, assessment or
collection of any Tax of the Practice Group is currently in
process, pending or, to Physician's or Practice Group's knowledge,
threatened (verbally or in writing). No waiver or extension of any
statute of limitations relating to the assessment or collection of
any Tax of the Practice Group is in effect. There are no
outstanding requests for rulings with any taxing authority
relating to Taxes of the Practice Group.
(g) The Practice Group is not and has never been (i) a party to any
tax sharing agreement or arrangement (formal or informal, verbal
or in writing), or (ii) a member of an affiliated group of
corporations (within the meaning of Section 1504 of the Code)
filing a consolidated federal income Tax Return, or any similar
group under analogous provisions of other law.
(h) The Practice Group has delivered to PHC true and complete copies
of all federal, state, local and foreign income Tax Returns filed
by the Practice Group for its three most recently ended taxable
years, together with all related examination reports, statements
of deficiencies and closing and other agreements. SCHEDULE 4.24
-------------
indicates which, if any, of such returns have been, or currently
are, the subject of any audit, examination or other Tax
proceeding.
(i) The Practice Group (i) has not filed a consent under Code Section
341(f) concerning collapsible corporations; (ii) is not a "foreign
person" as defined in Code Section 1445(f)(3); (iii) is not and
has not been a United States real property holding corporation
within the meaning of Code Section 897(c)(2) during the applicable
period specified in Code Section 897(c)(1)(A)(ii); (iv) does not
own and has not owned any interest in any "controlled foreign
corporation" as defined in Code Section 957 or "passive foreign
investment company" as defined in Code Section 1296; (v) is not
and has not been a party to any agreement or arrangement for which
partnership Tax Returns are required to have been filed; (vi) does
not own any asset that is subject to a "safe harbor lease" within
the meaning of Code Section 168(f)(8), as in effect prior to
amendment by the Tax Equity and Fiscal Responsibility Act of 1982;
(vii) does not own any "tax-exempt use property" within the
meaning of Code Section 168(h) or "tax exempt bond financed
property" within the meaning of Code Section 168(g)(5); and (vii)
has not agreed to and is not required to make any adjustment under
Code Section 481(a) by reason of a change in accounting method or
otherwise.
(j) As used in this SECTION 4.24 only, "Practice Group" shall be
------------
deemed to include any and all subsidiaries and predecessor
entities.
4.25 Corporate Documents. The corporate minute books of Practice Group,
-------------------
made available by Practice Group to PHC prior to the date hereof, accurately
reflect all significant corporate actions taken by the directors and shareholder
of Practice Group or any committee of the Board of Directors of Practice Group,
and contain true and accurate copies of or originals of the respective minutes
of all meetings or consent actions of the directors and shareholder of Practice
Group and any committee of the Board of Directors of Practice Group.
19
4.26 Statements True and Correct. No representation or warranty made by
---------------------------
Physician or Practice Group herein, nor any statement, certificate or instrument
furnished or to be furnished by Physician or Practice Group to PHC pursuant to
this Agreement or any other document, agreement or instrument referred to herein
or therein, contains or will contain any untrue statement of material fact or
omits or will omit any material fact necessary to make the statements contained
therein not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PHC AND PHC-SUB
-------------------------------------------------
As an inducement to Physician and Practice Group to enter into this
Agreement, PHC and PHC-SUB hereby represent and warrant to Physician and to
Practice Group as follows:
5.1 Organization, Standing and Authority of PHC and PHC-SUB. PHC is a
-------------------------------------------------------
corporation duly organized and validly existing under the laws of the State of
Delaware and qualified to do business in all locations where the nature of its
business or the ownership of its assets or properties requires such
qualification. PHC-SUB is a corporation duly organized and validly existing
under the laws of the State of Georgia and qualified to do business in all
locations where the nature of its business or the ownership of its assets or
properties requires such qualification. PHC and PHC-SUB have the full requisite
corporate power and authority to (a) own all their respective assets and
properties and to operate their respective businesses as conducted on the date
hereof and (b) execute and deliver the Transaction Documents and perform their
respective obligations hereunder and thereunder according to their respective
terms. Neither PHC nor PHC-SUB is a participant in any joint venture,
partnership, association or similar business arrangement with any other person
or party, other than the various management services agreements and similar
agreements which it has entered into and enters into from time to time as part
of its business. This Agreement has been duly authorized, executed and
delivered by PHC and PHC-SUB and is the legal, valid and binding obligation of
PHC and PHC-SUB, as applicable, enforceable in accordance with its terms, and
each of the Transaction Documents has been duly authorized by PHC and PHC-SUB,
where applicable, and upon execution and delivery by PHC and/or PHC-SUB, as
applicable, will be a legal, valid and binding obligation of PHC and, where
applicable, PHC-SUB.
5.2 Absence of Conflicting Agreement or Required Consents Relating to
-----------------------------------------------------------------
PHC's Obligations. Except as expressly set forth on SCHEDULE 5.2, the
----------------- ------------
execution, delivery and performance by PHC and PHC-SUB of the Transaction
Documents (with or without the giving of notice, the lapse of time, or both):
(a) do not require the consent of any governmental or regulatory authority or
any other third party; (b) will not conflict with any provision of either (i)
PHC's restated certificate of incorporation, bylaws or other organizational
documents or (ii) PHC-SUB's certificate of incorporation, bylaws or other
organizational documents; (c) will not conflict with, result in a breach of, or
constitute a default under any law, ordinance, regulation, ruling, judgment,
order or injunction of any court or governmental instrumentality to which either
PHC or PHC-SUB is a party or by which either PHC or PHC-SUB is bound; (d) will
not conflict with, constitute grounds for termination of, result in a breach of,
constitute a default under, or accelerate or permit the acceleration of any
performance required by the terms of any agreement, instrument, license or
permit, material to this transaction, to which either PHC or PHC-SUB is a party
or by which either PHC or PHC-SUB is bound and (e) will not create any claim,
lien, charge or encumbrance upon any of the assets or properties of either PHC
or PHC-SUB.
5.3 Capital Stock of PHC. The PHC Prime Shares and the PHC Common Shares
--------------------
are duly authorized, and when issued to Physician by PHC, will be validly
issued, fully paid and nonassessable. As of the date of this Agreement, PHC
has: a total of 20,000,000 of the PHC Prime Shares authorized of which 3,112,166
are issued and outstanding; a total of 20,000,000 shares of the PHC Common
Shares authorized of which 4,463,964 are issued and outstanding, a total of
20,000,000 shares of its Non-Voting Common Stock authorized of which zero (0)
are issued and outstanding; a total of five hundred thousand (500,000) shares
of its Class A Stock authorized of which 200,000 are issued and outstanding; and
a total of 15,000,000 shares of Preferred Stock authorized of which 2,906,679 of
the Series B Voting Preferred Stock and 917,814 of the Series B Non-Voting
Preferred Stock are issued and outstanding. Except
20
as set forth in SCHEDULE 5.3 and except for the transactions contemplated by
------------
this Agreement, there are no agreements, arrangements, options, warrants, call,
rights or commitments of any character relating to the issuance, sale, purchase
or redemption of any of the PHC Prime Shares or the PHC Common Shares. All of
the outstanding PHC Prime Shares or the PHC Common Shares are validly issued,
fully paid and nonassessable. All of the outstanding PHC Prime Shares and the
PHC Common Shares are validly issued, fully paid and nonassessable. All of the
outstanding PHC Prime Shares and the PHC Common Shares are owned of record and,
to the best knowledge of PHC and PHC-SUB, beneficially as set forth in SCHEDULE
--------
5.3, and, to the best knowledge of PHC and PHC-SUB, are free from any
---
encumbrances, liens, security interests or pledges, except (i) for the Second
Amended and Restated Stockholders' Agreement and (ii) as set forth in SCHEDULE
--------
5.3. The name of each of the holders of record of the outstanding PHC Prime
---
Shares and the PHC Common Shares and the respective number of outstanding shares
held of record by each holder are set forth in SCHEDULE 5.3.
------------
5.4 Representations Regarding Disclosure Documents. PHC has provided to
----------------------------------------------
Physician and to Practice Group a Third Restated Certificate of Incorporation of
PHC, Bylaws of PHC, Second Amended and Restated Stockholders' Agreement, dated
June 16, 1997, Marketing Materials, Stock Analysis, and Options and Warrants
Analysis dated as of September 2, 1997. PHC-SUB has provided to Physician and
to Practice Group the Certificate of Incorporation and Bylaws of PHC-SUB. PHC
and PHC-SUB represent that none of these documents are false or misleading in
any material respect or fails to state a fact necessary to make the statement
therein not misleading in any respect. PHC and PHC-SUB acknowledge and agree
that Physician and Practice Group have relied upon representations in the
foregoing documents in connection with the execution of the Agreement and the
Transaction Documents. To the best knowledge of PHC and PHC-SUB, there is no
fact which adversely affects or in the future is likely to adversely affect the
assets or in the future is likely to adversely affect the assets or property of
PHC or PHC-SUB or their respective businesses which has not been set forth or
referred to in this Agreement or in the Schedules attached hereto.
5.5 No Violation of Law. To PHC's or PHC-SUB's knowledge, neither PHC
-------------------
nor PHC-SUB have been or shall be, as of the Closing Date (by virtue of any act,
omission to act, contract to which it is a party or any current state of facts
whatsoever) in violation of any applicable material local, state or federal law,
ordinance, regulation, order, injunction or decree, or any other requirement of
any other governmental body, agency, authority or court binding on either PHC or
PHC-SUB, or relating to PHC's or PHC-SUB's property or business which could have
a Material Adverse Effect.
5.6 Litigation and Claims. Except as expressly set forth in SCHEDULE
--------------------- --------
5.6, there are no claims, lawsuits, counterclaims, proceedings, or
---
investigations pending, or to PHC's or PHC-SUB's knowledge, threatened, against
or affecting PHC or PHC-SUB in any court or before any arbitrator or
governmental authority or agency, and, to PHC's or PHC-SUB's knowledge, there is
no basis for any such action or state of facts or occurrence of any event which
might give rise to the foregoing which has or could have a Material Adverse
Effect on PHC. There are no unsatisfied judgments against PHC or PHC-SUB or any
consent decrees to which PHC or PHC-SUB are subject which would have a Material
Adverse Effect on PHC or PHC-SUB.
5.7 Financial Statements of PHC. Attached hereto as SCHEDULE 5.7 are
--------------------------- ------------
PHC's audited financial statements for the calendar year ending December 31,
1996, and the interim financial statements for the six (6) month period ending
June 30, 1997 (collectively, the "PHC Financial Statements"), reflecting the
results of the operations and financial condition of PHC as of such date, which
have been prepared in accordance with generally accepted accounting principles
consistently applied, subject, in the case of PHC's interim financial
statements, to normal year-end adjustments. The PHC Financial Statements: (i)
present fairly in all material respects the financial position of PHC as of the
dates indicated and present fairly in all material respects the results of PHC's
operations for the periods then ended in accordance with GAAP and (ii) are in
accordance with the books and records of PHC which have been properly maintained
and are complete and correct in all material respects.
21
5.8 No Violation of Law, Generally.
------------------------------
(a) Billing Practices Generally. To PHC's and PHC-SUB's knowledge,
---------------------------
all billing practices by either PHC or PHC-SUB to all third
party payors, including, but not limited to, the federal
Medicare program, state Medicaid programs and private insurance
companies, have been true, fair and correct and in compliance
with all applicable laws, regulations and policies of all such
third party payors, and neither PHC nor PHC-SUB have billed for
or received any payment or reimbursement in excess of amounts
allowed by law.
(b) Fraud and Abuse. Neither PHC nor PHC-SUB have engaged in any
---------------
activities that are prohibited under the federal Fraud and Abuse
Statute, or related state or local statutes or regulations, or
which are prohibited by rules of professional conduct,
including, but not limited, to the following: (a) 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; (b) 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; (c) 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
(1) 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 (2) 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 (d) knowingly and willfully offering or paying any
remuneration (including any kickback, bribe, or rebate),
directly or indirectly, overtly or covertly, in cash or in kind
to any person to induce such person (1) to refer 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 under Medicare or Medicaid or (2) to purchase, lease,
order, or arrange for or recommend purchasing, leasing, or
ordering any good, facility, service, or item for which payment
may be made in whole or in part under Medicare or Medicaid.
5.9 Filing of Reports. All returns, reports, plans and filings of any
-----------------
kind or nature necessary to be filed by either PHC or PHC-SUB with any
governmental authority have been properly completed and timely filed in
compliance with all applicable requirements where failure to so file would have
a Material Adverse Effect on either PHC or PHC-SUB, as applicable.
5.10 Taxes.
-----
(a) All Tax Returns required to have been filed by PHC have been
timely filed (taking into account duly granted extensions) and
are true, correct and complete in all respects. Except as
disclosed in SCHEDULE 5.10, (i) PHC is not currently the
-------------
beneficiary of any extension of time within which to file any
Tax Return, and (ii) no claim has ever been made by any
governmental authority in a jurisdiction where PHC does not file
Tax Returns that PHC is or may be subject to taxation by that
jurisdiction.
(b) All Taxes of PHC which have become due (without regard to any
extension of the time for payment and whether or not shown on
any Tax Return) have been paid. PHC has withheld and paid over
to the applicable taxing authority all Taxes required to have
been withheld and paid over and has complied with all
information reporting and back-up withholding requirements
relating to Taxes. There are no liens with respect to Taxes on
any of the assets of PHC, other than liens for Taxes not yet due
and payable or for Taxes disclosed in
22
SCHEDULE 5.10 that are being contested in good faith through
-------------
appropriate proceedings and for which adequate reserves have
been established in the Financial Statements.
(c) No deficiencies exist or have been asserted or are expected to
be asserted (verbally or in writing) with respect to Taxes of
PHC and PHC has not received notice nor does it expect to
receive notice (verbally or in writing) that it has not filed a
Tax Return or paid any Taxes required to be filed or paid by it.
No audit, examination, investigation, action, suit, claim or
proceeding relating to the determination, assessment or
collection of any Tax of PHC is currently in process, pending or
threatened (verbally or in writing). No waiver or extension of
any statute of limitations relating to the assessment or
collection of any Tax of PHC is in effect. There are no
outstanding requests for rulings with any taxing authority
relating to Taxes of PHC.
(d) PHC has delivered to the Practice Group and the Physician true
and complete copies of all federal, state, local and foreign
income Tax Returns filed by PHC for its three (3) most recently
ended taxable years, together with all related examination
reports, statements of deficiencies and closing and other
agreements. SCHEDULE 5.10 indicates which, if any, of
-------------
such returns have been, or currently are, the subject of any
audit, examination or other Tax proceeding.
5.11 Statements True and Correct. No representation or warranty made by
---------------------------
PHC or PHC-SUB herein, nor any statement, certificate or instrument furnished or
to be furnished by PHC or PHC-SUB pursuant to this Agreement or any other
document, agreement or instrument referred to herein or therein, contains or
will contain any untrue statement of material fact or omits or will omit any
material fact necessary to make the statements contained therein not misleading.
ARTICLE VI
ADDITIONAL AGREEMENTS
---------------------
6.1 Access and Inspection. From and after the date of this Agreement,
---------------------
PHC, PHC-SUB and their representatives and agents, on the one hand, and
Practice Group and Physician and their representatives and agents, on the other
hand, shall each have the right to enter the other's premises during regular
business hours to review, inspect and copy any and all books, records, documents
or other information concerning the operation of the Practice or PHC (as the
case may be) as the other may reasonably request (the "Due Diligence
Inspection"). Following Closing, Physician, on the one hand, and PHC and PHC-
SUB, on the other hand, shall continue to provide the other with access to any
and all financial and other records of the other as the other may reasonably
request in order to operate the Practice or the business of PHC or PHC-SUB, as
the case may be, to file any reports or respond to inquiries or investigations
including, without limitation, (i) the preparation or examination of tax
returns, (ii) the preparation of documents in connection with any proposed
public offering of any class of the capital stock of PHC or of debt instruments
of PHC, or (iii) for any other reasonable business purpose in connection with
the operation of the Practice or the business of PHC.
6.2 Cooperation in Meeting Filing Requirements. Physician, Practice
------------------------------------------
Group, PHC-SUB and PHC shall cooperate in preparing, executing and filing such
requests, applications, information and other submittals as may be required by
any federal or state governmental agency or authority having jurisdiction over
the assets or properties of Practice Group or the Practice, for the purpose of
consummating the transactions contemplated herein and operation of the Practice
Group Business.
6.3 Post Closing Audit of Practice Group. Physician shall cooperate
------------------------------------
with and assist PHC and its accountants and other representatives in preparing
audited financial statements of Practice Group for any time period ending prior
to the Closing Date. Should the cost of any audit of the Practice Group exceed
Twenty-Five Thousand and
23
No/100 Dollars ($25,000.00), then such excess shall be offset against any
consideration or payment(s) owed Physician under this or any other agreement
between or among any of the parties hereto.
6.4 Audit of PHC-SUB. PHC-SUB shall cooperate with and assist Physician
----------------
and Practices, and their representatives, in an accounting or review of PHC-
SUB's activities as they relate to the Practices; provided, however, that such
accounting shall not be requested by the Physician or the Practices more than
twice during each calendar year unless otherwise reasonably necessary.
Physician and Practices shall have full access to all information during normal
business hours related to PHC-SUB's performance of its management functions
pursuant to the Practice Management Agreement.
6.5 Further Assurances. Each party covenants that it will, in
------------------
connection with the Closing and from time to time after the Closing Date,
execute such additional instruments and take such actions as may be reasonably
requested by the other party to confirm or perfect or otherwise to carry out the
intent and purposes of this Agreement.
6.6 Benefit Plans. As of the Closing Date, Physician shall cause all of
-------------
the Former SDC Workforce, during their employment with PHC-SUB, to be covered as
"leased employees" under any plans, agreements, arrangements and understandings
which each Practice maintains thereafter from time to time for its similarly
situated common law employees in accordance with the applicable provisions of
state and federal law. Notwithstanding the foregoing, the Practices shall not
maintain a self-insured group health plan after the Closing Date if such plan
would be in violation of any state or federal law.
6.7 Best Efforts to Close. Each party covenants that it will use its
---------------------
best efforts to fulfill the conditions precedent to closing as set forth in
Articles VIII and IX and to consummate the transactions contemplated hereby as
soon as is practicably possible.
ARTICLE VII
CONDUCT OF BUSINESS OF PRACTICE GROUP AND PHYSICIAN
---------------------------------------------------
PENDING CLOSING
---------------
Physician and Practice Group jointly and severally covenant and agree
that, without the prior written consent of PHC, between the date of this
Agreement and the Closing:
7.1 Disposition of Assets. The operation of the Practice Group Business
---------------------
shall be conducted only in the ordinary course, and, except for the assets and
properties set forth in SCHEDULE 7.1 hereto or inventory or supply items
------------
disposed of in the ordinary course of business, Practice Group shall not dispose
of any interest of any kind in the assets or properties of Practice Group nor
incur nor guarantee any obligations for borrowed money, except as otherwise
permitted by this Agreement.
7.2 Sale of Shares. Physician and Practice Group shall not sell or
--------------
transfer, or consent to the issuance, sale or transfer of, any shares of capital
stock in Practice Group or any option, warrant or other right to acquire an
equity interest in Practice Group.
7.3 Contracts. Practice Group will not enter into any contract or other
---------
arrangement except in the ordinary course of business and then only if such
contract or arrangement would not have a Material Adverse Effect on the
operation of the Practice Group Business.
7.4 Condition of Assets. Practice Group will maintain its assets in
-------------------
substantially the same condition as they are in on the date of this Agreement,
ordinary wear and tear excepted.
7.5 Liens; Encumbrances. Practice Group will not sell, transfer or
-------------------
otherwise dispose of, nor mortgage, pledge or subject to any lien, charge or
other encumbrance, any of the assets or any interest in the rights, except (i)
as
24
otherwise permitted by this Agreement and (ii) for inventory or supply items
disposed of in the ordinary course of business.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF PHC AND PHC-SUB
--------------------------------------------
The obligations of PHC and PHC-SUB to close the transactions contemplated
hereby are subject to the satisfaction, at or prior to Closing, of each of the
following conditions:
8.1 Necessary Approvals. PHC and PHC-SUB shall have received all (i)
-------------------
licenses, consents, permits and approvals, if any, necessary in order for PHC-
SUB to own the Practice Group Asset; (ii) consents necessary to consummate the
transactions contemplated by this Agreement, including the consents of (x)
Weston Presidio Capital II, L.P. and certain other investors under the
Securities Purchase Agreement dated as of June 16, 1997 and (y) E.G.L. Holdings,
Inc., an investor in PHC; and (iii) the approval of the Board of Directors of
PHC.
8.2 Representations and Warranties. The representations and warranties
------------------------------
of Physician and Practice Group set forth in this Agreement, or any document or
instrument delivered to PHC hereunder, that are qualified as to materiality
shall have been true and correct in all respects when initially made and shall
be true and correct in all respects as of the Closing Date and all other
representations and warranties of Physician and Practice Group set forth in this
Agreement, or any document or instrument delivered to PHC hereunder, shall have
been true and correct in all material respects when initially made and shall be
true and correct in all material respects at the Closing Date.
8.3 Performance; Covenants. All of the terms, covenants and conditions
----------------------
of this Agreement to be complied with or performed by Physician or Practice
Group at or prior to Closing shall have been complied with and performed in all
material respects.
8.4 Closing Deliveries. The following documents shall have been
------------------
delivered to PHC:
(a) An Assignment and Assumption Agreement executed by Practice
Group, PHC and PHC-SUB in substantially the form of EXHIBIT A;
---------
(b) An employment agreement executed by Physician ("Physician Owner
Employment Agreement"), employment agreements executed by all
physicians employed by the Practice Group ("Physician Employment
Agreements") and a Termination of Professional Employment and
General Release Agreement executed by the physician who will be
employed by MS-PLLC immediately prior to the Closing Date
("Termination & Release Agreement"), in substantially the forms
of EXHIBIT X-0, XXXXXXX X-0, and EXHIBIT B-3 respectively;
----------- ----------- -----------
(c) An Acquisition Restrictive Covenant Agreement executed by
Physician, PHC and PHC-SUB in substantially the form of EXHIBIT
-------
C;
-
(d) A Practice Management Agreement executed by the Physician, PHC
and PHC-SUB in substantially the form of EXHIBIT D;
---------
(e) The Receivables Promissory Note dated the Closing Date, executed
by the Practice Group, in the form as attached hereto as EXHIBIT
-------
J;
-
(f) The Government Receivables Security Agreement dated the Closing
Date, executed by the Practice Group, in the form as attached
hereto as EXHIBIT K;
---------
25
(g) A certificate dated the Closing Date signed by a duly authorized
officer of Practice Group certifying that the representations
and warranties are true and correct as of the date of such
certificate and that Physician and Practice Group have fulfilled
the conditions of this SECTION 8.4;
-----------
(h) Unanimous Consent Resolutions of the Board of Directors of
Practice Group in form and substance satisfactory to PHC approving
the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby, certified by
a duly authorized representative of Practice Group;
(i) Written consents of all third parties necessary for the
consummation of the transactions contemplated by this Agreement
and the ownership by PHC-SUB of the Practice Group Business;
provided, that the parties to this Agreement will use their best
efforts to obtain the consents required to obtain assignment of
all leases set forth on SCHEDULE 4.2 hereto and failure to obtain
------------
all of such consents by the Closing Date shall not constitute a
breach of this Agreement;
(j) An opinion of counsel of Practice Group from Sidley & Austin and
from Alabama Counsel in substantially the forms of EXHIBIT E-1 and
-----------
EXHIBIT E-2, respectively, attached hereto;
-----------
(k) The Investment Agreement in substantially the form of EXHIBIT F
---------
attached hereto executed by SDC, Physician and PHC pursuant to
this Agreement;
(l) Such other documents as counsel for PHC shall reasonably request,
including, without limitation, any documents required to be filed
with any governmental body;
(m) The Articles of Incorporation, Bylaws and Stock Certificates of
IL-SC, and the Certificate of Formation and the Operating
Agreement of MS-PLLC; and
(n) The Option Agreements that allow PHC or PHC-SUB, as the case may
be, purchase Physician's stock or membership interests in IL-SC
and MS-PLLC two (2) years after Closing.
8.5 PHC Due Diligence. Closing shall only occur upon the complete and
-----------------
sole satisfaction of PHC as to the Due Diligence Inspection pursuant to SECTION
-------
6.1; provided, however, nothing herein is intended to extend the date by which
--- -------- -------
the Closing is to occur.
ARTICLE IX
CONDITIONS TO OBLIGATIONS OF PHYSICIAN AND PRACTICE GROUP
---------------------------------------------------------
The obligations of Physician and Practice Group to close the transaction
contemplated hereby are subject to the satisfaction, at or prior to Closing, of
each of the following conditions:
9.1 Representations and Warranties. The representations and warranties of
------------------------------
PHC and PHC-SUB set forth in this Agreement, or any document or instrument
delivered to Physician and Practice Group hereunder, that are qualified as to
materiality shall have been true and correct in all respects when initially made
and shall be true and correct in all respects as of the Closing Date and all
other representations and warranties of PHC and PHC-SUB set forth in this
Agreement, or any document or instrument delivered to Physician and Practice
Group hereunder, shall have been true and correct in all material respects when
initially made and shall be true and correct in all material respects at the
Closing Date.
26
9.2 Performance; Covenants. All of the terms, covenants and conditions of
----------------------
this Agreement to be complied with or performed by PHC and PHC-SUB at or prior
to Closing shall have been complied with and performed in all material respects.
9.3 Closing Deliveries. The following documents shall have been delivered
------------------
to Physician and Practice Group:
(a) The Third Amended and Restated Articles of Incorporation and
Bylaws of PHC and the Articles of Incorporation, Bylaws and Stock
Certificates of PHC- SUB;
(b) Certificates dated the Closing Date signed by duly authorized
representatives of PHC and PHC-SUB certifying that the
representations and warranties are true and correct on the date of
such certificates and that PHC and PHC-SUB have fulfilled all of
the conditions of this SECTION 9.3;
-----------
(c) Consent Resolutions of the Board of Directors of PHC and PHC-SUB
approving the execution, delivery and performance of this
Agreement, the Promissory Notes, the other Transaction Documents
and the consummation of the transactions contemplated hereby,
certified by a duly authorized representative of PHC and PHC-SUB;
(d) Opinions of counsel of PHC and PHC-SUB in substantially the form
of EXHIBIT H-1 AND H-2 attached hereto;
-------------------
(e) The Investment Agreement in substantially the form of EXHIBIT F
---------
attached hereto executed by Physician and PHC pursuant to this
Agreement;
(f) The Cash Payment;
(g) Four Hundred Thirty Two Thousand (432,000) PHC Prime Shares;
(h) The Registration Rights Agreement in substantially the form of
EXHIBIT G attached hereto;
---------
(i) The Promissory Notes in substantially the forms of EXHIBIT I-1 and
-----------
EXHIBIT I-2, respectively, attached hereto executed by PHC-SUB;
-----------
(j) Wire transfer instructions for the payoff on the note payable by
SDC to the First National Bank and Trust of Carbondale, Illinois
("FNB of Carbondale"), an executed copy of the FNB of Carbondale
payoff letter and the State of Illinois UCC-3 terminating FNB of
Carbondale's security interest in certain SDC assets executed by
the appropriate bank officer; and
(k) Such other documents necessary for the consummation of the
transactions contemplated herein as counsel for Physician shall
reasonably request, including, without limitation, any documents
required to be filed with any governmental body.
ARTICLE X
INDEMNIFICATION
---------------
10.1 Indemnification by Physician. Subject to the terms and conditions of
----------------------------
this ARTICLE X, Physician agrees to indemnify, defend, and hold PHC harmless
---------
from, against, for, and in respect of any and all Losses (as defined below)
27
asserted against, relating to, imposed upon, or incurred by PHC by reason of,
resulting from, based upon, or arising out of:
(a) The inaccuracy, untruth, or incompleteness of any representation
or warranty of Practice Group and/or Physician contained in or
made pursuant to this Agreement;
(b) The failure of Practice Group and/or any physician to comply with
any of the covenants made by Practice Group and/or Physician in
this Agreement; and
(c) The conduct of the Practice Group Business on or prior to the
Closing Date, other than for liabilities expressly assumed under
the terms of this Agreement.
In the event that any Losses are asserted against, imposed upon, or incurred by
PHC prior to the date on which PHC is obligated to remit the Practice Group
amounts payable under the Promissory Notes to Physician pursuant to SECTION 3.1,
-----------
and for which the Physician would be required to indemnify PHC pursuant to this
Section, PHC shall have the option, but not the obligation, to subtract the
amount of the Losses from the Promissory Notes. The preceding sentence provides
for a non-exclusive remedy and shall in no way limit PHC's right to be
indemnified by the Physician for any and all Losses that may be asserted
against, imposed upon, or incurred by PHC at any time. No investigation or
inquiry made by Practice Group or Physician of PHC or PHC-SUB or its books and
records and financial condition shall, regardless of the closing of the
transactions contemplated hereby, affect or limit any representation or warranty
made by PHC or PHC-SUB in this Agreement or any Schedules delivered by any of
them pursuant hereto or any right of indemnification of Physician under Section
-------
10.2 hereof.
----
10.2 Indemnification by PHC and PHC-SUB. Subject to the terms and
----------------------------------
conditions of this ARTICLE X, PHC and PHC-SUB agree jointly and severally, to
---------
indemnify, defend and hold Physician and Practice Group harmless from, against,
for and in respect of any and all Losses (as defined below) asserted against,
relating to, imposed upon, or incurred by Practice Group and/or Physician by
reason of, resulting from, based upon, or arising out of:
(a) The inaccuracy, untruth, or incompleteness of any representation
or warranty of PHC or PHC-SUB contained in or made pursuant to
this Agreement; and
(b) The failure of PHC or PHC-SUB to comply with any of the covenants
made by PHC in this Agreement.
10.3 Definition of Losses. For the purposes of this ARTICLE X, "Losses"
-------------------- ---------
shall mean any and all demands, claims, actions or causes of action,
assessments, losses, damages, liabilities, costs, and expenses, including,
without limitation, interest, penalties, and reasonable attorneys' and other
professional fees, and expenses incurred in the investigation, preparation,
defense, and settlement of any claim, loss, damage, or liability as to which a
party is entitled to indemnification hereunder.
10.4 Notice and Opportunity to Defend.
--------------------------------
(a) The party indemnified hereunder (the "Indemnified Party") shall
notify in writing the indemnifying party (the "Indemnifying
Party") within thirty (30) days after a claim is presented to the
Indemnified Party, and the Indemnifying Party shall defend such
claim at its expense. If the Indemnifying Party does not defend or
settle such claim, the Indemnified Party may do so without the
Indemnifying Party's participation, in which case the Indemnifying
Party shall pay the reasonable expenses of such defense, and the
Indemnified Party may settle or compromise such claim without the
Indemnifying Party's consent. If the Indemnified Party fails to
notify the Indemnifying Party, and if the Indemnifying Party is
thereby materially prejudiced by such failure of notice in its
defense of the claim, the
28
Indemnifying Party's obligation of indemnity hereunder shall be
extinguished with respect to such claim to the extent that the
Indemnifying Party has been prejudiced by the failure to give such
notice.
(b) Anything herein to the contrary notwithstanding, no party shall
make any claim against any other party pursuant to this ARTICLE X
---------
unless the dollar amount of all Losses suffered or incurred by the
party seeking such indemnity hereunder shall exceed, in the
aggregate, the amount of Twenty-Five Thousand and No/100 Dollars
($25,000.00), but, if such amount is exceeded, the Indemnifying
Party shall be required to pay the full amount of such aggregate
Losses (up to nine million dollars ($9,000,000) (the "Cap Amount")
and without deduction for such Twenty-Five Thousand and No/100
Dollars ($25,000.00) threshold amount) for which indemnification
rights and obligations are provided under this ARTICLE X.
---------
The foregoing notwithstanding, the Cap Amount shall not apply to
Losses suffered or incurred in connection with (i) medical
malpractice or professional liability claims in excess of the
insured limits provided for in the professional liability
insurance policies maintained for the benefit of the Practice
Group and professional employees and/or Physician of the
Practice; (ii) violations by the Practice Group or the Physician
of any of the billing practices under Fraud and Abuse laws, rules
and regulations referred to in SECTION 4.9 hereof; (iii)
-----------
violations by the Practice Group or the Physicians of the Civilian
Health and Medical Program of the Uniformed Service ("CHAMPUS")
and all laws, rules, regulations, manuals, orders, guidelines or
requirements pertaining to such program including (a) all federal
statutes (whether set forth in 10 U.S.C. (S)(S)1071-1106 or
elsewhere) affecting such program; and (b) all rules, regulations,
(including 32 C.F.R. (S)199), manuals, orders and administrative,
reimbursement and other guidelines of all governmental authorities
promulgated in connection with such program (whether or not having
the force of law), in each case as the same may be amended,
supplemented or otherwise modified from time to time (iv) the
Civilian Health and Medical Program of the Department of Veteran
Affairs ("CHAMPVA") and all laws, rules, regulations, manuals,
orders, guidelines or requirements pertaining to such program,
including (a) all federal statutes (whether set forth in 38 U.S.C.
(S)1713 or elsewhere) affecting such program or, to the extent
applicable to CHAMPVA, CHAMPUS; and (b) all rules, regulations
(including 38 C.F.R. (S)17.54), manuals, orders and
administrative, reimbursement and other guidelines of all
governmental authorities promulgated in connection with such
program (whether or not having the force of law), in each case as
the same may be amended, supplemented or otherwise modified from
time to time and (v) violations by the Practice Groups or
Physician of the representations and warranties contained in
SECTION 4.24.
------------
(c) Anything herein to the contrary notwithstanding, no party shall
be liable to any other party under this ARTICLE X for punitive or
---------
consequential damages, including lost profits, except to the
extent contained in a final settlement, award or judgment
obtained by a third party.
10.5 Effect of Investigation by PHC. No investigation or inquiry made by
------------------------------
PHC of Physician or Practice Group or its books and records and financial
condition shall, regardless of the Closing of the transactions contemplated
hereby, affect or limit any representation or warranty made by Physician or
Practice Group to PHC in this Agreement or in any Schedule delivered by any of
them pursuant hereto or any right of indemnification of PHC under SECTION 10.1
------------
hereof.
29
ARTICLE XI
MISCELLANEOUS PROVISIONS
------------------------
11.1 Notices. Any notice required or permitted by this Agreement or any
-------
agreement or document executed and delivered in connection with this Agreement
shall be deemed to have been served properly if transmitted by certified mail,
return receipt requested, with proper postage prepaid or sent by overnight
carrier or by personal delivery, addressed to the respective party to whom such
notice relates at the following addresses:
If to PHC: Physician Health Corporation
One Lakeside Commons
000 Xxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxx X. Xxxxxx, President
Fax No.: (000) 000-0000
With a copy to: Physician Health Corporation
One Lakeside Commons
000 Xxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: General Counsel
Fax No.: (000) 000-0000
And a copy to: Xxxxxxx Xxxxxx, L.L.P.
000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Xxxxx X. Xxxx, III
Fax No.: (000) 000-0000
If to PHC-SUB PHC Regional Oncology Care, Inc.
One Lakeside Commons
000 Xxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxx X. Xxxxxx
Fax No.: (000) 000-0000
With a copy to: Xxxxxxx Xxxxxx, L.L.P.
000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Xxxxx X. Xxxx, III
Fax No.: (000) 000-0000
If to Practice Group: Southern Dependacare, Inc.
000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxxxx, M.D.
Fax No.: (000) 000-0000
30
If to the Physician: Xxxx X. Xxxxxx, M.D.
000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxxxx, M.D.
Fax No.: (000) 000-0000
With a copy to: Sidley & Austin
Xxx Xxxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx Xxxxxxxx, Esq.
Fax No.: (000) 000-0000
or such other address as shall be furnished in writing by any party to the other
party. All such notices shall be considered received: (a) if transmitted by
certified mail, return receipt requested, with proper postage prepaid, upon the
fifth (5/th/) business day after mailing; (b) if transmitted by overnight
carrier, on the next business day and (c) if transmitted by personal delivery,
upon receipt.
11.2 Successors and Assigns. PHC may assign its rights under this
----------------------
Agreement to any affiliated entity, but otherwise this Agreement shall not be
assignable, by operation of law or otherwise, without the prior written consent
of the other parties. Subject to the foregoing, this Agreement shall inure to
the benefit of, be enforceable by and be binding upon the parties, their
successors and assigns. The rights of SDC's shareholder under SDC's plan of
liquidation and its Articles of Dissolution shall not be altered by this SECTION
-------
11.2.
-----
11.3 Entire Agreement. This Agreement and the Exhibits, Schedules,
----------------
certificates and other documents delivered pursuant hereto or incorporated
herein by reference, contain and constitute the entire agreement among the
parties and supersede and cancel any prior agreements, representations,
warranties, or communications, whether oral or written, among the parties
relating to the transactions contemplated by this Agreement. Neither this
Agreement nor any provision hereof may be changed, waived, discharged or
terminated orally, but only by an agreement in writing signed by the party
against whom or which the enforcement of such change, waiver, discharge or
termination is sought.
11.4 Governing Law; Severability. This Agreement shall be governed by and
---------------------------
construed in accordance with the laws of the State of Georgia, but excluding the
conflicts laws of the State of Georgia. The parties consent to the jurisdiction
of such courts. The provisions of this Agreement are severable and the
invalidity of one or more of the provisions herein shall not have any effect
upon the validity or enforceability of any other provision.
11.5 No Brokers. Physician, Practice Group and PHC each represent to the
----------
others that no broker or finder has been employed in connection with the
transactions hereunder.
11.6 Schedules and Exhibits. All Schedules and Exhibits attached to this
----------------------
Agreement are by reference made a part hereof.
11.7 Waivers. No failure on the part of any party hereto to exercise, and
-------
no delay in exercising, any right, power or remedy created hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or remedy by any such party preclude any other or further exercise
thereof or the exercise of any other right, power or remedy. No waiver by any
party hereto of any breach of or default in any term or condition of this
Agreement shall constitute a waiver of or assent to any succeeding breach of or
default in the same or any other term or condition hereof.
11.8 Headings. The headings contained in this Agreement are for reference
--------
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
31
11.9 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.
11.10 Confidentiality. The parties agree that they will not make any
---------------
disclosure about the existence or contents of this Agreement or activities
relating to the consummation of the transactions contemplated herein without
prior approval of the other party except to the parties' regulatory advisors,
lawyers and financial advisors and as may be required by law, as may be
necessary to obtain the required consents, licenses, permits or approvals
pursuant to SECTION 8.1 herein, or as may be necessary in the ordinary course of
-----------
business of PHC.
11.11 Alternative Dispute Resolution.
------------------------------
The exclusive methods for resolution of disputes arising out of or
relating to this Agreement or its terms shall be (i) the negotiation of the
parties, (ii) mediation pursuant to the terms of SECTION 11.11(a); and/or (iii)
----------------
arbitration pursuant to the terms of SECTION 11.11(b).
----------------
(a) Mediation. If a dispute arises out of or relates to this
---------
Agreement or its terms, and the parties fail to settle the
dispute through negotiation, either party may elect to submit the
dispute to a sole mediator. The parties shall select the mediator
by mutual agreement or, if the parties fail to agree upon a
mediator within 30 days from the date of election to mediate, the
mediator shall be selected by the American Arbitration
Association. The Commercial Mediation Rules of the American
Arbitration Association shall govern the mediation, including
selection of the mediator if the parties cannot agree upon a
mediator. The parties shall bear their own costs associated with
the mediation and shall share equally the costs of the mediator.
If the parties do not resolve the dispute within 60 days from the
commencement of the mediation and do not mutually agree to extend
the 60 day period, either party may elect to submit the dispute
to binding arbitration. The parties, their representatives, other
participants and the mediator shall hold the existence, content
and result of the mediation in confidence. The mediation shall be
held in Atlanta, Georgia.
(b) Arbitration. Following mediation pursuant to the provisions of
-----------
the foregoing SECTION 11.11(a) and upon the election of either
----------------
party to submit the dispute to binding arbitration, the dispute
shall be submitted to a sole arbitrator, whose decision shall be
final and binding on the parties. The parties shall select the
arbitrator by mutual agreement or, if the parties fail to agree
upon an arbitrator within 30 days from the date of the election
to arbitrate, the arbitrator shall be selected by the American
Arbitration Association. The Commercial Arbitration Rules of the
American Arbitration Association shall govern the arbitration,
including the selection of the arbitrator if the parties cannot
agree upon the arbitrator. The parties shall bear their own costs
associated with the arbitration and shall share equally the costs
of the arbitrator. In the event that either party fails to comply
with the terms of the arbitrator's final decision within 12
months of said decision, either party may petition a court of
competent jurisdiction to enter a judgment based upon the
arbitrator's final decision. Other than petitioning a court to
enter a judgment based upon the arbitrator's final decision, the
parties, their representatives, other participants and the
arbitrator shall hold the existence, content and result of the
arbitration in confidence. The arbitration shall be held in
Atlanta, Georgia.
(c) Equitable Remedies Pending Mediation/Arbitration. Nothing in
------------------------------------------------
this SECTION 11.11 shall be construed to preclude any party
-------------
from seeking injunctive relief in order to protect its rights
pending mediation/arbitration.
32
11.12 Expenses. Each party shall bear its own expenses incurred in the
--------
preparation, negotiation and performance of this Agreement; provided, however,
that the Physician shall bear all of the expenses of the Practice Group so
incurred.
11.13 No Third Party Beneficiaries. Nothing contained in this Agreement
----------------------------
(express or implied) is intended or shall be construed to confer upon or give to
any person, corporation or other entity, other than the parties hereto and their
permitted successors or assigns, any rights or remedies under or by reason of
this Agreement.
11.14 Survival. Except for the provisions of SECTION 4.9(b), SECTION 4.24,
-------- -------------- ------------
SECTION 5.3, SECTION 5.4, SECTION 5.8, SECTION 6.1, SECTION 6.4, SECTION 6.5,
----------- ----------- ----------- ----------- ----------- -----------
SECTION 11.10, SECTION 11.11, SECTION 11.12, SECTION 11.13, SECTION 11.15, and
------------- ------------- ------------- ------------- -------------
SECTION 11.16, which shall continue in full force and effect indefinitely, the
-------------
provisions of ARTICLES IV, V , VI, VIII and XI of this Agreement shall survive
----------- -- -- -- --
the Closing and continue in full force and effect until eighteen (18) months
after the Closing Date.
11.15 Post Closing Covenants of Physician. The following documents shall be
-----------------------------------
delivered by Physician to PHC or PHC-SUB, as the case may be, at the noted and
appropriate time after the Closing:
(a) Within 90 days after Closing, an itemized statement from Sidley &
Austin detailing the legal fees incurred relating to the formation
of the Practices;
(b) The federal income tax liability payable by April 15, 1998, by
Physician with respect to the ordinary income recognition on the
accounts receivable of Practice Group and as determined under
Section 3.1(b) hereof.
--------------
(c) Copies of the United States Department of Justice Immigration and
Naturalization Services Form I-9 ("Form I-9") and copies of all
supporting documents thereto for each physician employed by the
Practices.
(d) Tail insurance policy as may be reasonably required by PHC or PHC-
SUB for Xx. Xxxxxx Xxxx; and
(e) Within three weeks after Closing, Physician shall have caused the
medical records of Practice Group to be properly transcribed.
11.16 Post Closing Covenants of PHC and PHC-SUB. The following documents
-----------------------------------------
or payments shall be delivered by PHC or PHC-SUB to Physician or the
appropriate party, as the case may be, after the Closing:
(a) Within 60 days after receiving the Sidley & Austin invoice set
forth in SECTION 11.15 above, PHC or PHC-SUB, as the case may be,
-------------
shall pay Sidley & Austin one-half of the legal fees incurred in
the formation of the Practices ;
(b) Within a reasonable time after Closing, PHC-SUB shall provide
Physician with a Unanimous Consent of the Sole Shareholder
electing Physician to the board of directors of PHC-SUB and a
Unanimous Consent of the Sole Director of PHC-SUB electing
Physician to the position of President of PHC-SUB; and
(c) Payment of amount set forth in Section 3.1(b).
--------------
33
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
day and year first written above.
PHYSICIAN HEALTH CORPORATION
By: ____________________________________
Xxxxx X. Xxxxxx, President
PHC REGIONAL ONCOLOGY CARE, INC.
By: ____________________________________
Xxxxx X. Xxxxxx, President
SOUTHERN DEPENDACARE, INC.
By: ____________________________________
Xxxx X. Xxxxxx, M.D., President
PHYSICIAN
__________________________________________
Xxxx X. Xxxxxx, M.D.
34
