EXHIBIT 10.26
GENERAL UNDERTAKINGS AGREEMENT
This Agreement ("Agreement"), dated as of October , 1996, is entered
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into by and among Physician Health Corporation, a Delaware corporation ("PHC"),
PHC St Louis Acquisition Subsidiary I, Inc., a Georgia corporation
("Subsidiary"), Metropolitan Plastic and Reconstructive Surgery, Ltd., a
Missouri corporation ("MPRS") and J. Xxxxxxx Xxxxxxx, M.D.,an individual
resident of the State of Missouri ("Xxxxxxx").
PHC and the Subsidiary are hereinafter collectively referred to as PHC
entities. MPRS and Xxxxxxx are hereinafter collectively referred to as the
Xxxxxxx entities.
WHEREAS, Xxxxxxx is sole shareholder of MPRS;
WHEREAS, the parties to this Agreement, simultaneously with execution of
this Agreement have entered into that certain Asset Purchase Agreement
("Purchase Agreement") pursuant to which MPRS shall become a subsidiary of PHC
and certain additional agreements with respect to the provision of services by
and among the parties hereto have been entered into by including but not limited
to that certain Practice Management Agreement, of even date herewith, and other
documents;
NOW, THEREFORE, in consideration of the mutual promises and covenants set
out in the Purchase Agreement, and the Agreements delivered pursuant to it, One
Dollar ($1.00), and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by the parties hereto, the parties
agree as follows:
1. Xxxxxxx: ISO Shares At Closing. PHC agrees that upon closing it shall
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grant to Xxxxxxx stock options to purchase 300,000 shares of PHC common stock
which options shall vest over four (4) years and which options shall be issued
in accordance with the terms and conditions of the PHC Incentive Stock Option
Plan; provided that such vesting shall be accelerated to 100% vesting at such
time as PHC completes a single sale of securities resulting in a change in
control in PHC. The strike price of such options shall be $4.00 per share.
2. Xxxxxxx: ISO Shares Upon Meeting Earnings Target. PHC agrees to grant
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Xxxxxxx stock options immediately to purchase 150,000 shares of PHC common
stock, which shall begin to vest (the "Vesting Start Date") upon achievement of
$1.5 Million in projected annual practice management revenue from the Missouri
and central and southern Illinois markets by PHC for the period commencing on
the date hereof and ending on June 1, 1997. Such stock options shall be issued
in accordance with the terms and conditions of the PHC Stock Option Plan. Of
such options, 25,000 vest on the Vesting Start Date, and 31,250 shall vest on
each of the next four anniversaries of the Vesting Start Date; provided, that if
the Vesting Start Date conditions are met, all such stock options shall fully
vest at such time as PHC completes an initial public offering of its stock or
upon a single sale of securities resulting in a change in control of PHC. The
strike price for such options shall be $4.00 per share. Should Xxxxxxx not
exercise such options until immediately
prior to the initial public offering or a change in control of PHC, PHC will pay
Xxxxxxx $600,000 at such time (and Xxxxxxx shall retain the right to also
exercise such options).
3. Xxxxxxx: Additional Stock Purchase At Closing. At closing, PHC agrees
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to sell and Xxxxxxx agrees to purchase an additional 100,000 shares of PHC
common stock at a purchase price of $4.00 per share for an aggregate purchase
price of $400,000.00 paid in cash. Such purchase and sale shall be achieved in
compliance with and subject to obtaining appropriate state and federal
securities laws exemptions, along with all other stock transactions contemplated
in the Purchase Agreement and this Agreement.
4. Xxxxxxx: Standard Compensation. PHC agrees to employ Xxxxxxx, on an at-
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will basis, with standard compensation from the date of Closing of the Asset
Purchase Agreement and calculated at an annual rate of $100,000.00. Such amount
shall be adjusted from time to time as deemed appropriate by the Board of
Directors of PHC. In addition, PHC agrees that if Xxxxxxx continues to be
employed by the Company after the completion of an initial public offering of
the shares of PHC, then Xxxxxxx'x compensation shall be increased to an annual
rate of $250,000.00.
5. Xxxxxxx: Additional Compensation. PHC agrees to provide Xxxxxxx with a
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quarterly draw in the amount of $87,500, to be paid in monthly installments, one
month in arrears, commencing with the closing of Subsidiary's purchase of MPRS's
assets, until PHC has completed an initial public offering of its common stock
("Quarterly Draw"). At the end of each applicable quarter, the then-outstanding
Quarterly Draw shall be compared with new earnings from new physician practices
acquired by PHC (other than Xxxxxxx'x practice) for which Xxxxxxx had a
substantial role (as determined in good faith by PHC) so that Xxxxxxx receives
credit as specified below for the specified percent of the annualized earnings
amounts used by PHC in determining the purchase price for such new practices
acquired in such quarter, provided that Xxxxxxx'x Earned Quarterly Draw shall
not exceed $87,500:
a. (2.5%) (Annualized new practice management earnings acquired from
practices in transactions during the applicable quarter for which
Xxxxxxx was the procuring party for the transaction), plus
b. For the first 12-month period only, (0.5%) (Annualized new practice
management earnings acquired from practices in transactions during the
applicable quarter for which Xxxxxxx had a substantial role but was not
the procuring party for the transaction) = Earned Quarterly Draw.
Should the Earned Quarterly Draw, calculated according to the formula set out
above, be less than the Quarterly Draw actually received by Xxxxxxx, PHC shall
offset such deficiency first against all
payments owed to Xxxxxxx by PHC under that certain $500,000 promissory note
issued by PHC to Xxxxxxx in connection with the sale of his practice to PHC, and
second, against all other amounts owed or due to Xxxxxxx from PHC until such
deficit is satisfied. Once the actual Quarterly Draw received by Xxxxxxx for
such quarter has been offset to the extent provided above, Xxxxxxx shall receive
an Earned Quarterly Draw for the next quarter in the same amount of $87,500 and
subject to the same quarterly reconciliation. Notwithstanding anything to the
contrary, the Earned Quarterly Draw can only he drawn upon by Xxxxxxx in each
month to the extent necessary to allow Xxxxxxx to receive, together with all
revenue received by Xxxxxxx from his medical practice, $29,166.66. Upon any
public offering of PHC common stock, Xxxxxxx'x additional compensation hereunder
shall cease, and Xxxxxxx'x Earned Quarterly Draw for any partial quarter up to
that date shall be determined and compared with the actual Earned Quarterly Draw
taken during such partial quarter by Xxxxxxx and any deficiency in the amount of
the Earned Quarterly Draw may be offset by PHC against any amounts owed or due
to Xxxxxxx from PHC.
6. Xxxxxxx: Board Seat. PHC agrees that shortly after closing it
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shall cause Xxxxxxx to be named as a member of the Board of Directors of PHC.
Xxxxxxx shall serve in such capacity in accordance with the Articles of
Incorporation and Bylaws of PHC.
7. Xxxxxxx: Profit Representation. Xxxxxxx hereby represents and
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covenants to PHC that MPRS shall have a profit for the twelve (12) month period
commencing with the closing of Subsidiary's purchase of MPRS's assets, before
payment of the Practice Management Fee otherwise agreed between the parties, in
excess of $100,000.00. To the extent that such profit is not achieved, PHC may
offset any deficiency against any payment or other compensation owed or due to
Xxxxxxx by PHC.
8. [Reserved.]
9. MPRS: Adjustment for Tax Effect. PHC shall loan MPRS such funds
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as necessary to manage the taxable effect incurred in connection with the
Purchase Agreement (as compared to a merger transaction) taking into account the
time value of money and the increase in basis of MPRS as calculated by Xxxxxx
Xxxxxxxx or other accountants suitable to the parties ("Tax Loan"). Such Tax
Loan shall be secured by common stock received in connection with the Purchase
Agreement, paid at the time of any public offering of PHC stock.
10. Block: ISO Shares. Provided that Xxxxx Block becomes a full-
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time employee of PHC, PHC agrees to xxxxx Xxxxx Block stock options to purchase
75,000 shares of PHC common stock, which shall begin to vest (the "Vesting Start
Date") upon achievement of $1.5 Million in projected annual practice management
revenue from the Missouri and central and southern Illinois markets by PHC for
the period commencing on the date hereof and ending on June 1, 1997. Such stock
options shall be issued in accordance with the terms and conditions of the PHC
Stock Option Plan. Of such options, 12,500 shall vest on the Vesting Start
Date, and 15,625 shall vest on each of the next four anniversaries of the
Vesting Start Date; provided, that if the Vesting Start Date
conditions are met, all such stock options shall fully vest at such time as PHC
completes an initial public offering of its stock or upon a single sale of
securities resulting in a change in control of PHC. The strike price for such
options shall be $4.00 per share. Xxxxx Block shall be permitted to work, on her
own time, not more than five (5) hours per month in supervising the financial
aspects of the personal business interest of Xxxxxxx and MPRS without being
considered other than a full-time employee of PHC.
11. Block: Additional Performance Shares. Provided that Xxxxx Block
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becomes a full-time employee of PHC, PHC agrees to xxxxx Xxxxx Block an
additional 25,000 shares under its Incentive Stock Option Plan provided that PHC
achieves $1.5 million of projected annual practice management revenue from the
Missouri-central and southern Illinois markets in the twelve (12) month period
commencing with the Closing of Subsidiary's purchase of MPRS's assets, in
accordance with the terms and conditions of PHC Incentive Stock Option Plan.
The strike price for such shares shall be $4.00 per share.
12. Block: Title and Compensation. PHC agrees to employ Xxxxx
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Block, on an at-will basis, under title of "Vice President of Operations" or
similar title at Closing. Such title shall be adjusted at the discretion of the
President and the Board of Directors of PHC from time to time. PHC agrees to
provide her with standard compensation of $75,000 per year, payable in equal
monthly installments.
13. "B" Stock. MPRS agrees to negotiate with PHC prior to the
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closing of Subsidiary's purchase or MPRS's shares for the substitution of a "B"
common stock as the share consideration under the Purchase Agreement; provided
(i) such "B" common stock shall convert fully into "A" common stock as of the
earlier of the date of PHC's initial public offering or the date of PHC's
otherwise accessing the public securities market; and (ii) such "B" common stock
shall reduce the tax effects of the transactions contemplated in the Asset
Purchase Agreement and all related agreements, or otherwise provide a direct
benefit to both parties.
14. The obligations of both parties under this Agreement shall not be
enforceable until this Agreement has been approved by the Board of Directors of
PHC.
15. Xxxxxxx (for himself and on behalf of Xxxxx Block) and PHC agree that if
the Board of Directors of PHC, based upon the advice of legal counsel and/or
investment bankers engaged for the purpose of assisting in a public offering or
extraordinary private placement of PHC stock, determines in good faith that any
one or more terms of this Agreement will or could have a significant adverse
affect on PHC's ability to complete a registration of its shares or otherwise to
complete such proposed public offering or private placement in the manner and on
the terms proposed by such counsel or bankers, then Xxxxxxx and Block will
negotiate in good faith with PHC with the purpose of amending this Agreement and
any other applicable agreements entered into in connection herewith to the
extent necessary to eliminate such adverse affect, so long as any such
amendments do not materially reduce the total economic benefits to Xxxxxxx and
Block provided under this Agreement.
IN WITNESS WHEREOF, the parties hereto have affixed their signatures
effective as of the date first written above.
PHYSICIAN HEALTH CORPORATION
By:
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Title:
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PHC-St. LOUIS ACQUISITION
SUBSIDIARY I, INC.
By:
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Title:
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METROPOLITAN PLASTIC AND
RECONSTRUCTIVE SURGERY, LTD.
By:
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Title:
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J. XXXXXXX XXXXXXX , M.D.
, both individually and
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as sole shareholder of MPRS