-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
HEALTH CENTER PURCHASE AGREEMENT
AMONG
PHP HEALTHCARE CORPORATION,
PINNACLE HEALTH ENTERPRISES, L.L.C.,
PINNACLE MEDICAL GROUP, P.A.,
BLUE CROSS AND BLUE SHIELD OF NEW JERSEY, INC.,
MEDIGROUP OF NEW JERSEY, INC.,
AND
PHYSICIAN GROUP PRACTICE ASSOCIATES, P.A.
Dated as of December 16, 1996
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
----
ARTICLE I -- DEFINITIONS
1.01. Definitions......................................................2
1.02. Construction....................................................10
ARTICLE II -- TRANSFER OF ASSETS
2.01. Sale and Purchase of Health Center Assets.......................10
2.02. Sale and Purchase of PGPA Assets................................12
2.03. Assets of Affiliates............................................13
2.04. Assignment of Contracts, Rights and Obligations.................13
2.05. Limited Assumption of Liabilities...............................13
2.06. Purchase Price and Payment......................................14
2.07. Interim Operating Payment.......................................15
2.08. Allocation of Purchase Price Among the Purchased Assets.........17
2.09. Assignment of Right to Purchase Health Center Assets............17
2.10. Apportionment...................................................18
ARTICLE III -- THE CLOSING
3.01. Time and Place..................................................18
3.02. Deliveries by Sellers...........................................18
3.03. Deliveries by Purchasers........................................19
3.04. Transfer Taxes/Real Estate Taxes................................19
3.05. Notices of Sale.................................................20
ARTICLE IV -- REPRESENTATIONS AND WARRANTIES OF PURCHASERS
4.01. Organization....................................................20
4.02. Due Authorization...............................................20
4.03. Consents........................................................21
4.04. No Conflicts....................................................21
4.05. Brokers and Finders.............................................21
4.06. No Plans to Acquire HMO.........................................21
4.07. Disclosure......................................................21
ARTICLE V -- REPRESENTATIONS AND WARRANTIES OF SELLERS
5.01. Organization....................................................21
5.02. Due Authorization...............................................22
5.03. Consents........................................................22
5.04. No Conflicts....................................................22
5.05. Financial Statements............................................23
5.06. Condition and Sufficiency of Assets.............................23
5.07. No Undisclosed Liabilities......................................25
5.08. Compliance with Legal Requirements..............................25
5.09. Permits.........................................................25
5.10. Legal Proceedings; Orders.......................................26
5.11. Title to Properties.............................................27
5.12. Commitments.....................................................27
5.13. Books and Records...............................................28
5.14. Insurance.......................................................28
5.15. PGPA Physicians, Employees and Employee Benefit Plans...........28
5.16. Taxes...........................................................28
5.17. Environmental Matters...........................................29
5.18. Disclosure......................................................30
ARTICLE VI -- COVENANTS
6.01. No Solicitation of Transactions.................................30
6.02. Interim Operations..............................................31
6.03. Access to Information...........................................32
6.04. Certain Filings, Consents and Arrangements......................32
6.05. Notice..........................................................32
6.06. Operating Agreement Payments....................................33
6.07. Termination of Certain Agreements...............................33
6.08. Regulatory Approvals............................................33
6.09. Lockbox Accounts................................................34
6.10. Agreements with Respect to PHP Shares...........................34
ARTICLE VII -- POST-CLOSING AGREEMENTS
7.01. Further Assurances..............................................35
7.02. Mail; Payments..................................................36
7.03. Right of First Offer............................................36
7.04. Use of Names....................................................37
7.05. Lease Deposits..................................................37
7.06. Management Information Systems..................................38
7.07. Bonus Payments to PGPA Physicians...............................38
7.08. Physician Benefit Plans.........................................38
7.09. Access and Information..........................................38
ARTICLE VIII -- CONDITIONS TO THE OBLIGATIONS OF PURCHASERS
8.01. Accuracy of Sellers' Representations............................40
8.02. Performance of Sellers' Agreements..............................40
-ii-
8.03. Deliveries by Sellers...........................................40
8.04. Officer's Certificates..........................................40
8.05. HSR Act.........................................................40
8.06. Consents........................................................40
8.07. No Prohibition..................................................40
8.08. No Proceedings..................................................40
8.09. Related Agreements..............................................41
8.10. Title Insurance; Surveys........................................41
8.11. Estoppel Certificates...........................................41
8.12. No Material Adverse Change......................................41
8.13. Regulatory Approvals............................................41
8.14. Mutual Release..................................................41
8.15 Schedules.......................................................41
ARTICLE IX -- CONDITIONS TO THE OBLIGATIONS OF SELLERS
9.01. Accuracy of Purchasers' Representations.........................41
9.02. Performance of Purchasers' Agreements...........................42
9.03. Deliveries by Purchasers........................................42
9.04. Officer's Certificates..........................................42
9.05. HSR Act.........................................................42
9.06. Consents........................................................42
9.07. No Prohibition..................................................42
9.08. No Proceedings..................................................42
9.09. Related Agreements..............................................42
9.10. Mutual Release..................................................42
ARTICLE X -- TERMINATION PRIOR TO THE CLOSING
10.01. Termination.....................................................42
10.02 Effect on Obligations...........................................43
ARTICLE XI -- INDEMNIFICATION
11.01 Survival........................................................43
11.02 Indemnification by Sellers......................................44
11.03. Indemnification by Purchasers...................................44
11.04. Claims..........................................................44
11.05. Computation of Losses...........................................46
ARTICLE XII -- MISCELLANEOUS
12.01. Entire Agreement................................................46
12.02. Assignment......................................................46
12.03. Counterparts....................................................46
-iii-
12.04. Acknowledgment..................................................46
12.05. Modification and Waiver.........................................46
12.06. Severability....................................................47
12.07. Specific Performance............................................47
12.08. Expenses........................................................47
12.09. Notices.........................................................47
12.10. Governing Law...................................................49
12.11. No Third Party Beneficiaries....................................49
12.12. Guarantees......................................................49
12.13. No Inducement...................................................49
-iv-
LIST OF EXHIBITS
Exhibit A List of Health Centers
Exhibit B Form of Network Agreement
Exhibit C Form of Mutual Release
LIST OF SCHEDULES
Schedule 2.01(a) Owned Real Property
Schedule 2.01(b) Real Property Leases
Schedule 2.01(c) Owned Personal Property
Schedule 2.01(d) Personal Property Leases
Schedule 2.01(e) Health Center Contracts
Schedule 2.01(n) Health Center Information Systems
Schedule 2.02(a) PGPA Contracts
Schedule 2.02(h) PGPA Information Systems
Schedule 2.07 Estimated Receipts and Expenditures
Schedule 3.04(a) Bond Premiums and Landlord Assignment Fees
Schedule 4.03 Purchasers' Required Third-Party Consents
Schedule 4.04 Purchasers' Conflicts
Schedule 5.03 Sellers' Required Third-Party Consents and Notices
Schedule 5.04 Sellers' Conflicts
Schedule 5.06 Condition and Sufficiency of Assets (exceptions)
Schedule 5.07 Undisclosed PGPA Liabilities
Schedule 5.08 Sellers' Noncompliance with any Legal Requirements
Schedule 5.09 Sellers' Permits for the Operation of the Health Centers or
Ownership or Use of the Purchased Assets
Schedule 5.10 Legal Proceedings Relating to the Health Centers or any
Purchased Assets
Schedule 5.11(a) Permitted Encumbrances
Schedule 5.12 Commitments (invalidity, noncompliance or breach)
Schedule 5.15 List of all PGPA Physicians and Other Employees (including
job title, salary, bonus and benefits)
Schedule 5.17(a) Environmental Matters
Schedule 5.17(b) Disposal Sites for Hazardous Substances
Schedule 5.17(c) Environmental Reports
-v-
HEALTH CENTER PURCHASE AGREEMENT
HEALTH CENTER PURCHASE AGREEMENT, dated as of December 16, 1996, by and
among PHP Healthcare Corporation, a Delaware corporation ("PHP"), Pinnacle
Health Enterprises, L.L.C., a Delaware limited liability company ("PHE"),
Pinnacle Medical Group, P.A., a New Jersey professional services corporation
("PMG" and, together with PHP and PHE, sometimes hereinafter referred to
collectively as the "Purchasers"), Blue Cross and Blue Shield of New Jersey,
Inc., a New Jersey non-profit health service corporation ("BCBSNJ"),
Medigroup of New Jersey, Inc., a New Jersey corporation and wholly owned
subsidiary of BCBSNJ ("MGI"), and Physician Group Practice Associates, P.A.,
a New Jersey professional services corporation ("PGPA" and, together with
BCBSNJ and MGI, sometimes hereinafter referred to collectively as the
"Sellers").
W I T N E S S E T H :
WHEREAS, pursuant to an Agreement, dated March 30, 1994 (as amended or
supplemented to date, the "Operating Agreement"), by and between Medigroup,
Inc. and PHP, PHP is currently providing certain management services to
Medigroup, Inc. in connection with the operation of those ten (10)
self-contained, multi-physician offices listed on Exhibit A attached hereto
(the "Health Centers");
WHEREAS, PGPA was formed by BCBSNJ and MGI to provide certain
professional medical services to the Health Centers;
WHEREAS, the parties desire to enter into this Agreement, pursuant to
which, among other things: (i) BCBSNJ and MGI will sell to PHE (and/or its
designee), and PHE (and/or its designee) will purchase from BCBSNJ and MGI,
all of BCBSNJ's and MGI's right, title and interest in and to the Health
Center Assets (as such term is hereinafter defined) and (ii) PGPA will assign
to PMG, and PMG will acquire from PGPA, the PGPA Assets (as such term is
hereinafter defined); and
WHEREAS, the parties desire to enter into a Network Agreement, in the
form attached as Exhibit B, pursuant to which PHE will arrange for the
provision of certain medical and health services (including, but not limited
to, the medical and health services provided at the Health Centers) to BCBSNJ
subscribers and MGI members, accessing health care through Health Center
primary care physicians and on an administrative services only basis, or
otherwise, as the parties may agree;
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and undertakings hereinafter set forth, and for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I
DEFINITIONS
1.01. DEFINITIONS. For purposes of this Agreement, the following terms
shall have the meanings set forth or referred to below:
"Acceptance Notice" -- as defined in Section 7.04(b).
"Actual Expenditures" shall mean the expenses incurred
for the Interim Period, whether paid or accrued, in
connection with the operation of the Health Centers
during the Interim Period (including, without limitation,
payments made by PGPA), calculated on a pro forma basis
as if PHE owned and operated the Health Centers
throughout the Interim Period in accordance with the
terms of the Network Agreement. Subject to the
foregoing, Actual Expenditures shall be calculated
consistent with the accounting practices used in
calculating the Estimated Expenditures and described on
Schedule 2.07.
"Actual Receipts" shall mean the income and/or cash
receipts received or accrued in connection with the
operation of the Health Centers during the Interim Period,
calculated on a pro forma basis as if PHE owned and
operated the Health Centers throughout the Interim Period
in accordance with the terms of the Network Agreement.
Subject to the foregoing, Actual Receipts shall be
calculated consistent with the accounting practices used
in calculating the Estimated Receipts and described on
Schedule 2.07.
"Additional Assets" - as defined in Section 2.06(a).
"Affiliate" -- with respect to a specified Person, any
other Person, controlling, controlled by or under common
control with said Person. For purposes of this Agreement,
"control" shall mean: (i) in the case of a corporation,
the ownership, directly or indirectly, of fifty percent
(50%) or greater of the capital stock or membership
interests in said corporation and the ability to elect
fifty percent (50%) or greater of said corporation's
board of directors; and (ii) in the case of a Person
other than a corporation, the possession, directly or
indirectly, of the power to independently direct or cause
the direction of the management and policies of said
person, whether through the ownership of voting equity
interests, by contract or otherwise.
"Agreement" -- this Agreement, as the same may be amended or
supplemented from time to time in accordance with the terms
hereof.
-2-
"Ancillary Documents" -- the Related Agreements and all
other agreements, instruments, certificates, and
documents delivered or to be delivered on or prior to the
Closing Date in connection with the Contemplated
Transactions.
"Association" -- as defined in Section 7.05(a).
"Assumed Health Center Liabilities" -- as defined in
Section 2.05(a).
"Assumed Liabilities" -- as defined in Section 2.05(c).
"Assumed PGPA Liabilities" -- as defined in Section 2.05(b).
"BCBSNJ" -- as defined in the first paragraph of this Agreement.
"Business Day" -- any day other than a Saturday, Sunday, or a
day on which banks in the State of New Jersey are authorized or
obligated by law or executive order to close.
"Closing" -- as defined in Section 3.01.
"Closing Date" -- as defined in Section 3.01.
"Closing Statement" -- as defined in Section 2.07(b).
"Code" -- the Internal Revenue Code of 1986, as amended.
"Commitments" -- as defined in Section 2.04.
"Competing Payor" -- as defined in Section 7.04(a).
"Consent" -- any approval, consent, ratification, waiver or
other authorization (including any Permit).
"Contemplated Transactions" -- the transactions contemplated by
this Agreement, including (i) the sale of the Health Center
Assets by BCBSNJ and MGI to PHE; (ii) the sale of the PGPA Assets
by PGPA to PMG; (iii) the performance by each of the Parties
hereto of their respective obligations under this Agreement; and
(iv) the execution, delivery and performance of the Related
Agreements.
"Contract" -- any agreement, contract, obligation, promise
arrangement, understanding or commitment (whether written or
oral) that is legally binding.
"CPA Firm" -- as defined in Section 2.07(e).
"Dispute Notice" -- as defined in Section 2.07(c).
-3-
"Encumbrance" -- any charge, claim, equitable interest,
lien, option, pledge, security interest, right of
refusal, restriction, covenant, easement, license, lease,
mortgage, obligation, title defect or imperfection or
other encumbrance or right or claim of others of any kind
whatsoever.
"Environmental Cost" -- without limitation, any cleanup costs,
remediation, removal, or other response costs (which without
limitation shall include costs to cause the Health Centers or
the Real Property come into compliance with Environmental Laws),
investigation costs (including, without limitation, the
reasonable fees and expenses of consultants, counsel, and other
experts in connection with any environmental investigation,
testing, audits or studies), losses, liabilities or obligations
(including without limitation liabilities or obligations under
any lease or other contract), payments, damages, civil or
criminal fines or penalties, judgments, and amounts paid in
settlement arising out of or resulting from any Environmental
Matter.
"Environmental Law" -- without limitation, the
Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. Sections 9601 et seq., the
Emergency Planning and Community Right-to-Know Act of
1986, 42 U.S.C. Sections 11001 et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. Sections 6901
et seq., the Toxic Substances Control Act, 15 U.S.C.
Sections 2601 et seq., the Federal Insecticide,
Fungicide, and Rodenticide Act, 7 U.S.C. Sections 136 et
seq., the Clean Air Act, 42 U.S.C. Sections 7401 et
seq., the Clean Water Act (Federal Water Pollution
Control Act), 33 U.S.C. Sections 1251 et seq., the Safe
Drinking Water Act, 42 U.S.C. Sections 300f et seq., the
Hazardous Materials Transportation Act, 49 U.S.C.
Sections 1801, et seq., the New Jersey Environmental
Cleanup Responsibility Act (N.J.S.A. 13:1k-6 et seq., as
any of the above statutes have been or may be amended
from time to time through the Closing Date, all rules and
regulations promulgated through the Closing Date pursuant
to any of the above statutes, and any other federal,
state or local law, statute, ordinance, rule or
regulation governing Environmental Matters, as the same
have been or may be amended from time to time through the
Closing Date, including any common law cause of action
providing any right or remedy with respect to
Environmental Matters, and all applicable judicial and
administrative decisions, orders, and decrees made
through the Closing Date relating to Environmental
Matters.
"Environmental Matter" - any matter (i) arising out of,
relating to, or resulting from pollution or
contamination, (ii) relating to emissions, discharges,
disseminations, releases or threatened releases, of
Hazardous Substances into the air, surface water,
groundwater, soil, land surface or subsurface, buildings,
facilities, real or personal property or fixtures, (iii)
otherwise arising out of, relating to, or resulting from
the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, handling,
release or threatened release of Hazardous Substances or
(iv) affecting human health and related to the foregoing.
-4-
"Environmental Permits" -- as defined in Section
5.17(a)(vii).
"Estimated Expenditures" -- the estimate of
Actual Expenditures set forth on Schedule 2.07.
"Estimated Receipts" -- the estimate of Actual Receipts set forth
on Schedule 2.07.
"Final Closing Statement" -- as defined in Section 2.07(g).
"GAAP" -- United States generally accepted accounting principles,
as in effect from time to time.
"Governmental Body" -- any federal, state, local, municipal,
foreign or other governmental or quasi-governmental entity or
authority of any nature.
"Guarantee" -- that certain guarantee dated as of the date hereof
made by PHP in favor of MGI and BCBSNJ, whereby PHP has
guaranteed all of the obligations of PHE under the Network
Agreement.
"Hazardous Substances" -- any substance that is now or
heretofore regulated by, defined or listed in, or
otherwise classified pursuant to, or forms the basis for
liability under, any applicable Environmental Law or
Legal Requirement or Order, as a "pollutant,"
"contaminant," "hazardous substance," "hazardous
material," "hazardous air pollutant," "extremely
hazardous substance," or "hazardous waste," "toxic
substance," "toxic pollutant," or any other formulation
intended to define, list or classify substances by reason
of their potentially deleterious properties such as
ignitability, flammability, corrosivity, reactivity,
combustibility, dispersability, volatility,
carcinogenicity, or toxicity including, without
limitation, asbestos, polychlorinated biphenyls and also
including petroleum products, byproducts and wastes or
byproducts associated with the extraction, refining or
use of petroleum, petroleum products or other
hydrocarbons, whether or not any such petroleum products,
byproducts, wastes or other hydrocarbons are listed or
classified in such laws or regulations.
"Health Center Assets" -- as defined in Section 2.01.
"Health Center Books and Records" -- as defined in
Section 2.01(i).
"Health Center Contracts" -- as defined in Section 2.01(e).
"Health Center Expense Schedule" -- as defined in
Section 5.05(a).
"Health Center Permits" -- as defined in Section 2.01(g).
-5-
"Health Center Receivables" -- as defined in Section 2.01(h).
"Health Centers" -- as defined in the Recitals of this Agreement.
"HSR Act" -- the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976, as amended.
"Incentive and Reconciliation Payment" -- as defined in
Section 6.06(b).
"Income Tax" or "Income Taxes" -- any federal, state or local
income, franchise or similar Tax and, in each instance, any
interest, penalties or additions to tax attributable to such Tax.
"Indemnified Party" -- as defined in Section 11.04(a).
"Indemnifying Party" -- as defined in Section 11.04(a).
"Instruments of Assignment" -- as defined in Section 3.02(a).
"Instruments of Assumption" -- as defined in Section 3.03(a).
"Interim Period" means the period from and including
July 1, 1996, through and including the Closing Date.
"Interim Operating Payment" -- as defined in Section 2.07(a).
"Inventory" -- as defined in Section 2.01(f).
"Leased Equipment" -- as defined in Section 2.01(d).
"Leased Real Property" -- the real property leased by
BCBSNJ in connection with the operation of the Health
Centers and described on Schedule 2.01(b), together with
(i) any buildings, facilities and other structures and
improvements thereon, (ii) any rights, privileges,
hereditaments and appurtenances appertaining thereto or
to any of such buildings, facilities or other structures
or improvements, and (iii) any fixtures, installations,
machinery, equipment and other property attached thereto
or located thereon.
"Legal Requirement" -- any federal, state, local, municipal or
other administrative order, constitution, law, ordinance,
principal of common law, regulation, statute or treaty.
"Losses" -- claims, losses, liabilities, actions or causes of
action, assessments, damages, fines, penalties, costs and
expenses (including, without limitation, reasonable fees and
disbursements of counsel).
-6-
"Material Adverse Effect" -- a material adverse effect on
the business, assets, properties, condition (financial or
otherwise), operations, or results of operations of the
Health Centers or the business of PGPA or on the ability
of Sellers to consummate the Contemplated Transactions.
"MGI" -- as defined in the first paragraph of this Agreement.
"Mutual Release" -- the Mutual Release to be executed and
delivered at the Closing by and among the Purchasers, the Sellers
and Medigroup, Inc., in the form attached hereto as Exhibit C.
"Network Agreement" -- the Network Services Agreement
dated of even date herewith by and among PHE, BCBSNJ and
MGI, which provides for, among other things, PHE's
provision of access to MGI and BCBSNJ for Health Care
Services and Administrative Services (as such terms are
defined therein).
"Offer Notice" -- as defined in Section 7.04(a).
"Offer Period" -- as defined in Section 7.04(b).
"Offered Interest" -- as defined in Section 7.04(a).
"Operating Agreement" -- as defined in the Recitals of this
Agreement.
"Order" -- any award, decision, injunction, judgment,
order, ruling, subpoena, or verdict entered, issued, made
or rendered by any court, administrative agency or other
Governmental Body.
"Ordinary Course of Business" -- the ordinary course of
business consistent with past custom and practice
(including with respect to quantity and frequency).
"Organizational Documents"-- (a) the articles or
certificate of incorporation and the bylaws of a
corporation; (b) the partnership agreement and any
statement of partnership of a general partnership; (c)
the limited partnership agreement and the certificate of
limited partnership of a limited partnership; (d) any
articles or certificate of formation and the operating
agreement or limited liability company agreement of a
limited liability company; (e) any charter or similar
document adopted or filed in connection with the
creation, formation, or organization of a Person; and (f)
any amendment to any of the foregoing.
"Owned Personal Property" -- as defined in Section 2.01(c).
"Owned Real Property" -- as defined in Section 2.01(a).
-7-
"Permit" -- any Consent, license, permit or franchise
issued, granted or given by or under the authority of any
Governmental Body or pursuant to any Legal Requirement.
"Permitted Encumbrances" -- as defined in Section 5.11(a).
"Person" -- any individual, corporation (including any
non-profit corporation), general or limited partnership,
limited liability company, joint venture, estate, trust,
association, organization or other entity or Governmental
Body.
"Personal Property" -- all fixtures, installations,
machinery and equipment, to the extent not constituting
real property under applicable law, and all vehicles,
furniture, furnishings, tools, spare parts, supplies,
items historically expensed, office and laboratory
equipment, materials and other personal property of every
kind and nature, tangible or intangible.
"Personal Property Leases" -- as defined in Section
2.01(d).
"PGPA" -- as defined in the first paragraph of this
Agreement.
"PGPA Assets" -- as defined in Section 2.02.
"PGPA Books and Records" -- as defined in Section 2.02(d).
"PGPA Contracts" -- as defined in Section 2.02(a).
"PGPA Financial Statements" -- as defined in Section
5.05(b).
"PGPA Permits" -- as defined in Section 2.02(b).
"PGPA Physician" -- a physician who is an employee of
PGPA, has a written employment agreement with PGPA, and
is credentialed by MGI to provide health services at the
Health Centers.
"PGPA Receivables" -- the accounts receivable related to
PGPA as of the Closing Date.
"PHE" -- as defined in the first paragraph of this
Agreement.
"PHP" -- as defined in the first paragraph of this
Agreement.
"PHP Shares" -- as defined in Section 2.06(d).
"PMG" -- as defined in the first paragraph of this
Agreement.
-8-
"Proceeding" -- any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil,
criminal, administrative, investigative, or informal)
commenced, brought, conducted or heard by or before, or
otherwise involving any Governmental Body.
"Purchase Price" -- as defined in Section 2.06(a).
"Purchased Assets" -- as defined in Section 2.02.
"Purchasers" -- as defined in the first paragraph of this
Agreement.
"Real Property" -- the Owned Real Property and the Leased
Real Property.
"Real Property Leases" -- as defined in Section 2.01(b).
"Regulatory Approvals" -- as defined in Section 6.08.
"Related Agreements" -- the Network Agreement, the
Guarantee, the Mutual Release and any other agreements
entered into on or prior to the Closing Date between or
among any of the parties hereto or thereto in connection
with the Contemplated Transactions.
"Release" -- any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, ejecting, escaping,
dumping or other dissemination.
"Response" -- as defined in Section 2.07(d).
"Return" -- any report, return, statement, estimate,
declaration, notice, form or other information required
to be supplied to a taxing authority in connection with
Taxes.
"Securities Act" -- as defined in Section 6.10.
"Sellers" -- as defined in the first paragraph of this
Agreement.
"Shelf Registration Period" -- as defined in Section 6.10.
"Shelf Registration Statement" -- as defined in Section
6.10.
"Subsidiary" -- with respect to a specified Person, any
corporation or other entity of which shares of stock or
other ownership interests having ordinary voting power
(other than stock ownership interests having such power
only by reason of the happening of a contingency) to
elect a majority of the directors of such corporation, or
other persons performing similar functions for such
entity, are owned directly or indirectly, by such Person.
-9-
"Tax" or "Taxes" -- taxes of any kind, levies or other
like assessments, customs, duties, imposts, charges or
fees, including, without limitation, income, gross
receipts, ad valorem, value added, excise, real or
personal property, asset, sales, use, license, payroll,
transaction, capital, net worth and franchise taxes,
estimated taxes, withholding, employment, social
security, workers compensation, utility, severance,
production, unemployment compensation, occupation,
premium, windfall profits, transfer and gains taxes or
other governmental taxes imposed or payable to the United
States, or any state, county or local government or
subdivision or agency thereof, and, in each instance,
such term shall include any interest, penalties or
additions to tax attributable to any such Tax.
"Third Party Claim" -- as defined in Section 11.04(a).
1.02. CONSTRUCTION. The headings of the Articles, Sections and paragraphs
of this Agreement are inserted for convenience only and shall not
be deemed to constitute part of this Agreement or to affect the
construction hereof. All section and article references are to this
Agreement, unless otherwise expressly provided. As used in this
Agreement, (a) "hereof," "hereunder," "herein" and words of like
import shall be deemed to refer to this Agreement in its entirety
and not just a particular section of this Agreement, and (b) unless
the context otherwise requires, words in the singular number or in
the plural number shall each include the singular number or the
plural number, words of the masculine gender shall include the
feminine and neuter, and, when the sense so indicates, words of the
neuter gender shall refer to any gender.
ARTICLE II
TRANSFER OF ASSETS
2.01. SALE AND PURCHASE OF HEALTH CENTER ASSETS. At the Closing (as
hereinafter defined), on the terms and subject to the conditions
set forth in this Agreement, BCBSNJ and MGI shall sell, transfer,
assign, convey and deliver to PHE, and PHE shall purchase and
acquire from BCBSNJ and MGI, all right, title and interest in and
to the following assets used in the operation of the Health Centers
(each and all of the foregoing items being herein referred to as
the "Health Center Assets"), including, without limitation:
(a) All the real property owned by BCBSNJ in connection
with the operation of the Health Centers and described on
Schedule 2.01(a), together with (i) any buildings, facilities
and other structures and improvements thereon, (ii) any rights,
privileges, hereditaments and appurtenances appertaining thereto
or to any of such buildings, facilities or other structures or
improvements, and (iii) to the extent constituting real property
under applicable law, any fixtures, installations, machinery,
equipment and other property attached thereto or located thereon
(the "Owned Real Property");
-10-
(b) All rights and benefits of BCBSNJ under the real property leases
identified on Schedule 2.01(b) (the "Real Property Leases");
(c) All Personal Property owned by BCBSNJ or MGI and used or held
for use in connection with the operation of the Health Centers,
including, without limitation, the Personal Property described
on Schedule 2.01(c) ("Owned Personal Property");
(d) All rights and benefits of BCBSNJ or MGI under the Personal
Property leases identified on Schedule 2.01(d) (the "Personal
Property Leases") and all Personal Property described on
Schedule 2.01(d) (the "Leased Equipment") currently leased by
BCBSNJ or MGI under such leases;
(e) All rights and benefits of BCBSNJ or MGI under the Contracts
identified on Schedule 2.01(e) (the "Health Center Contracts");
(f) All those inventory and supplies of BCBSNJ or MGI used or held
for use in connection with the on-site operation of the Health
Centers (the "Inventory");
(g) All rights and benefits of BCBSNJ or MGI under all Permits used
or held for use in connection with the operation of the Health
Centers to the extent assignable (the "Health Center Permits");
(h) All of the accounts receivable of BCBSNJ or MGI attributable to
the operation of the Health Centers (the "Health Center
Receivables");
(i) Originals (where available) or copies of all books, records,
files, plans, studies, surveys and reports of, or maintained by,
BCBSNJ or MGI (or by PHP on behalf of BCBSNJ or MGI) and
primarily used or held for use in connection with or relating to
the operation of the Health Centers, including, without
limitation, all billing files, histories, records and other
information relating to any current or former patients of the
Health Centers ("Health Center Books and Records");
(j) All goodwill associated with or attributable to the operation of
the Health Centers;
(k) All prepaid charges, expenses and security deposits, including
such charges, expenses and security deposits, with respect to
insurance premiums, salaries, leases and rentals and utilities;
(l) All rights, claims, credits, causes of action or rights of
set-off against third parties, whether known or unknown,
liquidated or unliquidated, fixed or contingent, and all rights
pursuant to all warranties, representations, and guarantees made
by suppliers, contractors or other third parties in connection
with products or services purchased by or furnished to BCBSNJ or
MGI for use in the operation of the Health Centers or the Health
Center Assets;
-11-
(m) All other personal properties and assets of every kind and
nature, tangible or intangible (including warranties and
performance guaranties with respect to any of the Health Center
Assets), owned by BCBSNJ or MGI and used or held for use in
connection with the operation of the Health Centers; and
(n) All computer software and other data, and all information
systems identified on Schedule 2.01(n) and used or licensed
(subject to existing fees charged by the licensors thereof to
the extent set forth on Schedule 2.01(n)) in connection with the
operation of the Health Centers, including, without limitation,
all hardware, software and connectivity.
2.02. SALE AND PURCHASE OF PGPA ASSETS. At the Closing (as hereinafter
defined), on the terms and subject to the conditions set forth in this
Agreement, PGPA shall sell, transfer, assign, convey and deliver to
PMG, and PMG shall purchase and acquire from PGPA, all right, title
and interest in and to the following assets (each and all of the
foregoing items being herein referred to as the "PGPA Assets" and,
together with the Health Center Assets, the "Purchased Assets"),
including, without limitation:
(a) All rights and benefits of PGPA under the Contracts set forth on
Schedule 2.02(a) (the "PGPA Contracts");
(b) All rights and benefits of PGPA under all Permits used or held
for use by PGPA in connection with its business, to the extent
assignable (the "PGPA Permits");
(c) All of the accounts receivable of PGPA (the "PGPA Receivables");
(d) Originals (where available) or copies of all medical records,
charts, lists, billing files, histories, records and other
information relating to any current or former patients of the
Health Centers, and all personnel records and files relating to
persons employed by PGPA at any time between July 1, 1996 and
the Closing (the "PGPA Books and Records");
(e) All prepaid charges, expenses and security deposits, including
such charges, expenses and security deposits, with respect to
insurance premiums, salaries, leases and rentals and utilities;
(f) All rights, claims, credits, causes of action or rights of
set-off against third parties to the extent related to the PGPA
Assets, whether known or unknown, liquidated or unliquidated,
fixed or contingent, and all rights pursuant to all warranties,
representations, and guarantees made by suppliers, contractors
or other third parties in connection with products or services
purchased by or furnished to PGPA;
(g) All goodwill associated with or attributable to the business of
PGPA;
-12-
(h) All computer software and other data, and all information
systems identified on Schedule 2.02(h) and used or licensed
(subject to existing fees charged by the licensors thereof to
the extent set forth on Schedule 2.02(h)) by PGPA, including,
without limitation, all hardware, software and connectivity; and
(i) All other assets of PGPA of every kind and nature, tangible or
intangible (including warranties and performance guaranties with
respect to any of the PGPA Assets) to the extent related to the
PGPA Assets.
2.03. ASSETS OF AFFILIATES. To the extent any asset primarily related to
the ownership or operation of the Health Centers is owned, used or
held for use by any Affiliate of BCBSNJ other than MGI, such asset
shall be included within the term "Health Center Assets" or "PGPA
Assets" as the case may be, and BCBSNJ shall cause such Affiliate,
at the Closing, to convey such asset to PHE in accordance with the
provisions of this Agreement.
2.04. ASSIGNMENT OF CONTRACTS, RIGHTS AND OBLIGATIONS. Anything in this
Agreement to the contrary notwithstanding, this Agreement shall not
constitute an agreement to assign any of the Real Property Leases,
the Personal Property Leases, the Health Center Contracts, the PGPA
Contracts (collectively, the "Commitments") or the Health Center
Permits or the PGPA Permits if an attempted assignment thereof,
without the consent of a third party thereto, would constitute a
breach or default thereof, cause or permit the acceleration or
termination thereof or in any way adversely affect the rights of
Purchasers or Sellers thereunder or the right of Purchasers to
conduct all or any part of the businesses of the Health Centers or
PGPA in the manner and on the terms presently enjoyed by Sellers.
If such third party consent is not obtained, Sellers shall, at
their expense, cooperate with Purchasers in any reasonable
arrangement designed to provide Purchasers the benefits under any
such Purchased Asset, including, without limitation, (i) compliance
by Sellers on Purchasers' behalf and at Purchasers' expense with
any such Purchased Asset and (ii) enforcement for the benefit of
Purchasers of any and all rights of Sellers against a third party
thereto arising out of the breach or cancellation by such third
party or otherwise. Purchasers shall not be required to accept or
enter into, as a substitute for performance by Sellers under this
Agreement, any arrangement which would impose any additional cost,
expense or liability on Purchasers or would deprive Purchasers of
any benefits or profits contemplated by this Agreement. Nothing
contained in this Section 2.04 shall be deemed to limit or impair
Purchasers' rights under any other provision of this Agreement.
2.05. LIMITED ASSUMPTION OF LIABILITIES.
(a) PHE shall assume on the Closing Date, and shall thereafter pay,
perform and discharge when due (or cause to be paid, performed
and discharged when due), only those obligations accruing after
-13-
the Closing Date under the Real Property Leases, the Personal
Property Leases and the Health Center Contracts (the "Assumed
Health Center Liabilities").
(b) PMG shall assume on the Closing Date, and shall thereafter pay,
perform and discharge when due (or cause to be paid, performed
and discharged when due), only those obligations accruing after
the Closing Date under the PGPA Contracts (the "Assumed PGPA
Liabilities").
(c) The assumption by PHE or PMG, as the case may be, of the Assumed
Health Center Liabilities or the Assumed PGPA Liabilities
(collectively, the "Assumed Liabilities") shall not enlarge any
rights of any Person under any Contracts with any of the
Sellers. Nothing contained herein shall prevent Purchasers from
contesting any of the Assumed Liabilities with any third party
obligee.
(d) Other than the Assumed Liabilities to be assumed
by Purchasers, Purchasers shall not assume, agree to pay,
perform or discharge or otherwise have any responsibility for
any of, and Sellers shall be responsible for the payment,
performance and discharge of all of, the liabilities and
obligations of Sellers, whether known or unknown, fixed or
contingent, asserted or unasserted, whether due or to become
due, and whether arising or to be performed prior to, on or
after the Closing Date (the "Retained Liabilities"). Such
Retained Liabilities shall mean and include all claims, actions,
litigations and proceedings relating to any or all of the
foregoing and all costs and expenses in connection therewith.
2.06. PURCHASE PRICE AND PAYMENT.
(a) In consideration of the sale, transfer, assignment, delivery
and conveyance of all the Health Center Assets (other than the
Leased Equipment and the Additional Assets), and subject to
the terms and conditions of this Agreement, PHE shall on the
Closing Date (i) assume the Assumed Health Center Liabilities
and (ii) pay or cause to be paid to MGI by wire transfer in
same day funds to a bank account designated by MGI an amount
in cash equal to Twenty-Seven Million Fifty Thousand Dollars
(U.S. $27,050,000) (the "Purchase Price"). Prior to the
Closing, BCBSNJ shall prepare and deliver to PHE a detailed
schedule of tangible assets included in the Health Center
Assets (other than Real Property, leasehold improvements,
Leased Equipment and Inventory) (the "Additional Assets"). In
consideration of the sale, transfer, assignment, delivery and
conveyance of the Additional Assets, PHE shall pay to BCBSNJ
an amount in cash equal to the book value of the Additional
Assets (determined as of the Closing Date in accordance with
GAAP) but not more than One Million One Hundred Thousand
Dollars (U.S. $1,100,000).
(b) In consideration of the sale, transfer, assignment and delivery
of the Leased Equipment, and subject to the terms and conditions
-14-
of this Agreement, on the Closing Date, PHE shall pay or cause
to be paid to BCBSNJ (or, at BCBSNJ's direction, to the lessor
of the Leased Equipment) by wire transfer in same day funds an
amount in cash equal to the payoff amounts for such equipment
provided by the lessor under the terms of the lease. In
addition, at the Closing, PHE shall pay to BCBSNJ an amount in
cash equal to the excess of (i) the payoff amount that would
have been required to purchase the Leased Equipment on July 1,
1996, and (ii) the amount paid pursuant to the preceding
sentence.
(c) In consideration of the sale, transfer, assignment, delivery
and conveyance of all the PGPA Assets, and subject to the
terms and conditions of this Agreement, PMG shall on the
Closing Date assume the Assumed PGPA Liabilities and pay to
PGPA by wire transfer in same day funds to a bank account
designated by PGPA an amount in cash equal to One Million
Dollars (U.S. $1,000,000).
(d) In consideration of MGI's providing PHE with access to MGI's
network and providing claims payment services under the
Network Agreement, within three business days after the
execution of this Agreement, PHP shall issue to MGI ninety
thousand (90,000) shares of common stock, par value $0.01 per
share, of PHP (the "PHP Shares"), subject to the agreements
contained in Section 6.10 hereof.
2.07. INTERIM OPERATING PAYMENT.
(a) At the Closing, BCBSNJ shall pay to PHE by wire transfer in
same day funds to a bank account designated by PHE an amount
in cash equal to the excess of the Estimated Receipts over the
Estimated Expenditures as set forth on Schedule 2.07 (the
"Interim Operating Payment").
(b) Within 90 days after the Closing Date, BCBSNJ will prepare and
deliver to PHP a pro forma operating statement (the "Closing
Statement") setting forth BCBSNJ's calculation of Actual
Receipts and Actual Expenditures.
(c) Within 30 days after the delivery by BCBSNJ of the Closing
Statement, PHP and its representatives and accountants shall
have the right to review the Closing Statement and the
calculations of Actual Receipts and Actual Expenditures
included therein. If PHP objects to the manner in which the
Closing Statement has been prepared, or to the calculation of
Actual Receipts or Actual Expenditures, PHP shall deliver
written notice (the "Dispute Notice") to BCBSNJ setting forth
in reasonable detail a description of the basis of PHP's
objection and the adjustments to the Closing Statement that
PHP believes should be made.
(d) Within 30 days after BCBSNJ's receipt of the Dispute Notice,
BCBSNJ and its representatives and accountants shall review
the Dispute Notice and deliver a written response
-15-
to PHP (the "Response") indicating whether and the extent to
which BCBSNJ agrees or disagrees with the objections set forth
in the Dispute Notice.
(e) During a period of 30 days after PHP's receipt of the
Response, PHP and BCBSNJ shall attempt in good faith to
resolve in writing any such disputed items, and any such
resolution will be conclusive and binding upon the parties.
If the parties are unable to reach an agreement with respect
to any disputed item during such 30-day period, the parties
shall, promptly after the expiration of such period, submit
all unresolved disputes to a nationally recognized independent
accounting firm mutually agreeable to the parties (the "CPA
Firm"). If the parties cannot agree on the selection of the
independent accounting firm to act as the CPA Firm, either
party may request the American Arbitration Association to
appoint such a firm, and such appointment shall be conclusive
and binding on the parties. Promptly, but no later than 30
days after its acceptance of its appointment, the CPA Firm
shall determine, only with respect to the remaining items in
dispute so submitted, whether and to what extent, if any, the
Closing Statement and the calculations of Actual Receipts and
Actual Expenditures derived therefrom require adjustment. The
parties shall instruct the CPA Firm to deliver its written
report as to the resolution of all disputes no later than 30
days after the disputes are submitted to the CPA Firm. PHP
and BCBSNJ shall make available to the CPA Firm all relevant
books and records and any work papers (including those of the
parties' respective accountants) relating to the Closing
Statement and all other items reasonably requested by the CPA
Firm. The CPA Firm shall have exclusive jurisdiction over,
and resort to the CPA Firm as provided in this paragraph (e)
shall be the sole recourse and remedy of the parties against
one another or any other person with respect to, any disputes
arising out of or relating to the Closing Statement; and the
CPA Firm's determination shall be conclusive and binding on
the parties and shall be enforceable in a court of law.
(f) PHP and BCBSNJ shall bear the fees and expenses of their
respective accountants and other representatives. The fees
and expenses of the CPA Firm shall be borne equally by PHP and
BCBSNJ.
(g) The "Final Closing Statement" shall be (i) the Closing
Statement, if (x) no Dispute Notice is delivered to BCBSNJ in
the 30-day period referred to in paragraph (c) above, or (y)
PHP and BCBSNJ so agree; (ii) the Closing Statement, as
adjusted in accordance with the Dispute Notice, if BCBSNJ
agrees with the Dispute Notice or fails to respond to the
Dispute Notice within the 30-day period referred to in
paragraph (d) above; or (iii) the Closing Statement, as
adjusted by either (x) the mutual agreement of PHP and BCBSNJ
or (y) the CPA Firm.
(h) The Interim Operating Payment shall be adjusted, based upon the
Final Closing Statement, as follows:
-16-
(1) If the Actual Receipts exceed the Estimated Receipts, the
Interim Period Payment shall be increased by the amount of
such excess. If the Estimated Receipts exceed the Actual
Receipts, the Interim Period Payment shall be decreased by
the amount of such excess;
(2) If the Actual Expenditures exceed the Estimated
Expenditures, the Interim Period Payment shall be decreased
by the amount of such excess. If the Estimated Expenditures
exceed the Actual Expenditures, the Interim Period Payment
shall be increased by the amount of such excess.
(i) After giving effect to the adjustments set forth in subparagraphs
(h)(1) and (h)(2) above, the net increase in the Interim
Operating Payment shall be paid by BCBSNJ to PHP, or the net
decrease in the Interim Operating Payment shall be paid by PHP
to BCBSNJ, as the case may be, in the manner provided in
paragraph (i) below.
(j) Any payment required to be made under paragraph (i) above shall
be paid within five (5) Business Days after the date on which the
Closing Statement is finally determined in accordance with this
Section 2.07, and such payment shall be made in cash by wire
transfer of immediately available funds to the account designated
by the recipient thereof.
2.08. ALLOCATION OF PURCHASE PRICE AMONG THE PURCHASED ASSETS.
The Purchase Price, together with the Assumed Health Center
Liabilities and other relevant items, shall be allocated among
the Health Center Assets in accordance with section 1060 of the
Code; provided that, with respect to the Owned Real Property, the
allocated value shall be no less than the value determined in
connection with the previous conveyancing of such Owned Real
Property. Such allocations shall be set forth on a schedule
which shall be prepared by Purchasers and agreed to by the
Sellers within 180 days following the Closing Date. The
allocations set forth on such schedule shall be as reasonably and
jointly determined by Purchasers and Sellers. Each party and its
Affiliates shall prepare all relevant income and franchise
Returns (including Internal Revenue Service Form 8594 or any
equivalent statements), consistent with the allocations set forth
in such schedule, subject to adjustment to reflect (x) Sellers'
selling expenses as a reduction in sales proceeds, and (y)
Purchasers' acquisition expenses as an addition to purchase
price. If any party or its Affiliates shall fail to prepare and
file Returns in accordance with this Section 2.08, such party
shall indemnify and hold harmless the other party against any
Loss that results directly or indirectly from such failure.
2.09. ASSIGNMENT OF RIGHT TO PURCHASE HEALTH CENTER ASSETS.
At or before the Closing, Purchasers may, at their option, assign
their right to purchase the Owned Real Property under Section
2.01(a) of this Agreement to a real estate investment trust or
other entity designated by Purchasers, on the terms and subject
-17-
to the conditions set forth in this Agreement. The assignee
shall succeed to all of PHP's rights and obligations hereunder in
respect of the Owned Real Property; provided, however, that no
Seller shall be deemed to have made any representation or
warranty to any assignee of Purchasers as a result of such
assignment.
2.10. APPORTIONMENT. Except to the extent otherwise provided
in Section 2.07, if applicable, the following items shall be
apportioned as of 11:59 p.m. on the day preceding the Closing
Date: (a) rents and other charges payable under any of the
Commitments, (b) real estate and personal property taxes, and
other state, county and municipal taxes, charges and assessments
affecting any of the Purchased Assets; and (c) charges for water,
electricity, gas, oil, steam, telephone and all other utilities.
As soon as practicable after the Closing, Sellers or Purchasers,
as the case may be, shall deliver to the other a check for the
net amount owing under this Section 2.10.
ARTICLE III
THE CLOSING
3.01. TIME AND PLACE. The closing of the transactions
contemplated hereby (the "Closing") shall take place at the
offices of BCBSNJ at Three ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ at
10 A.M., local time, on the fifth Business Day following the
satisfaction or waiver of all conditions to the obligations of
the Parties to consummate the transactions contemplated hereby
(other than conditions with respect to actions to be taken at the
Closing itself), or at such other place, time and date as the
parties hereto may agree (the "Closing Date").
3.02. DELIVERIES BY SELLERS. At the Closing, Sellers shall make (or cause
to be made) the following deliveries:
(a) Sellers shall execute and deliver to Purchasers, such general
warranty deeds, bills of sale, endorsements, assignments and
other instruments and documents (collectively, "Instruments of
Assignment"), in each case reasonably satisfactory in form and
substance to Purchasers and their counsel, as shall (i) vest in
PHE on the Closing Date good and marketable title to the Health
Center Assets and (ii) vest in PMG good and marketable title to
the PGPA Assets, in each case, subject to no Encumbrances other
than Permitted Encumbrances. Simultaneously with such delivery,
Sellers shall take all additional steps as may be necessary to
put Purchasers in possession and operating control of the
Purchased Assets and the operation of the Health Centers.
(b) Sellers shall deliver to Purchasers the Related Agreements
executed by each Seller a party thereof.
(c) Sellers shall execute and deliver to Purchasers the certificates
described in Section 8.04, and such other documents, instruments
and writings as may be reasonably requested by Purchasers at
least three Business Days prior to the Closing.
-18-
3.03. DELIVERIES BY PURCHASERS. At the Closing, Purchasers shall make (or
cause to be made) the following deliveries:
(a) PHE shall execute and deliver to BCBSNJ and MGI, and PMG shall
execute and deliver to PGPA, an instrument or instruments
consistent with the terms hereof and reasonably satisfactory in
form and substance to Sellers and their counsel (the "Instruments
of Assumption") as shall evidence (i) PHE's assumption of the
Assumed Health Center Liabilities and (ii) PMG's assumption of
the PGPA Liabilities.
(b) PHE shall pay the Purchase Price to BCBSNJ, and PMG shall pay the
purchase price for the PGPA Receivables to PGPA.
(c) Purchasers shall execute and deliver to Sellers the Related
Agreements executed by each Purchaser a party thereto.
(d) Purchasers shall execute and deliver to Sellers the certificates
described in Section 9.04 and such other documents, instruments
and writings as may be reasonably requested by the Sellers at
least three Business Days prior to the Closing.
3.04. TRANSFER TAXES/REAL ESTATE TAXES.
(a) Sellers shall pay all sales, use, transfer, stamp, conveyance,
value added or other similar taxes, duties, excise or
governmental charges (including any income taxes or any real
property gains tax imposed with respect to the transfer of the
Health Centers) imposed by any federal or state taxing
jurisdiction and other similar costs of Closing with respect to
the transfer of the Purchased Assets or otherwise resulting from
the Contemplated Transactions; provided, however, that the
Purchasers shall be responsible for and pay, when due, any and
all recording fees with respect to the Health Centers as well as
any bond premiums and landlord assignment fees (to the extent
such bond premiums and landlord assignment fees are set forth on
Schedule 3.04(a)) with respect to the Real Property.
(b) As of the Closing Date, any real and personal property taxes
in respect of the Purchased Assets shall be apportioned (on a
pro rata basis based on the number of days in the relevant
taxable period) between Purchasers and Sellers. Except to the
extent otherwise provided in Section 2.07, if applicable,
Sellers shall be responsible for all such Taxes on or prior to
the Closing Date (as determined under applicable state law)
and Purchasers shall be responsible for all such Taxes after
the Closing Date. Any payments or reimbursements of such
Taxes required to be made by Sellers or Purchasers pursuant to
this provision shall be paid within the later of five days of
Purchasers' or Sellers' request therefor or five days prior to
-19-
the date on which Purchasers or Sellers are required to pay or
cause to be paid the related Tax liability.
3.05. NOTICES OF SALE. Sellers (as reasonably requested by either
Purchaser) shall from time to time, prepare and mail notices to any
other party under each of the Purchased Assets sold, transferred,
assigned, delivered and conveyed to such Purchaser pursuant to this
Agreement advising such other party that such Purchased Asset has been
sold to such Purchaser and directing such other party to send to such
Purchaser all future payments on account, notices and correspondence
relating to the foregoing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASERS
Purchasers jointly and severally represent and warrant to each of the
Sellers as of the date hereof and as of the Closing as follows:
4.01. ORGANIZATION. Each Purchaser is a corporation or a limited liability
company, duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation and has the requisite
corporate power and authority to carry on its business as it is now
being conducted.
4.02. DUE AUTHORIZATION. Each Purchaser has the requisite
power to enter into, execute and deliver this Agreement and the
Related Agreements to which it is or will be a party and to carry
out its obligations hereunder and thereunder. The execution and
delivery by each Purchaser of this Agreement and the Related
Agreements to which such Purchaser is or will be a party and the
consummation by such Purchaser of the transactions contemplated
hereby and thereby have been duly authorized by the Board of
Directors of such Purchaser, and no other proceedings on the part
of such Purchaser are necessary to authorize this Agreement, such
Related Agreements and the Contemplated Transactions. This
Agreement has been duly and validly executed and delivered by
each Purchaser and, constitutes a valid and binding obligation of
such Purchaser, enforceable against such Purchaser in accordance
with its terms, except to the extent that any applicable
bankruptcy, insolvency, reorganization, moratorium or other
similar laws or general equitable principles may affect the
enforceability thereof. Upon the execution and delivery by each
Purchaser of each Related Agreement to which such Purchaser is a
party, such Related Agreement will constitute a valid and binding
obligation of such Purchaser, enforceable against such Purchaser
in accordance with its terms, except to the extent that any
applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws or general equitable principles may affect the
enforceability thereof.
4.03. CONSENTS. Except as set forth in Schedule 4.03 and except as required
by the PGPA Contracts, the Real Property Leases and the Personal
Property Leases, no Purchaser is, and no Purchaser will be, required
-20-
to obtain any Consent from any Person in connection with the
execution and delivery of this Agreement or the consummation or
performance of any of the Contemplated Transactions.
4.04. NO CONFLICTS. Except as set forth in Schedule 4.04, neither the
execution and delivery of this Agreement by Purchasers nor the
consummation or performance of any of the Contemplated Transactions
by Purchasers will, directly or indirectly, conflict with or result in
a violation of:
(i) any provision of any Purchaser's Organizational Documents;
(ii) any resolution adopted by the board of directors or the
stockholders of any Purchaser;
(iii) any Legal Requirement or Order to which any Purchaser may be
subject; or
(iv) any Contract to which any Purchaser is a party or by which any
Purchaser may be bound.
4.05. BROKERS AND FINDERS. No Purchaser has employed any broker or finder
or incurred any liability for any brokerage fees, commissions or
finders' fees in connection with the Contemplated Transactions.
4.06. NO PLANS TO ACQUIRE HMO. As of the date of this Agreement, no
Purchaser has any current plans to engage in the business of, or
provision of, health care benefits plans or administrative services on
an insured or non-insured basis, or to acquire a certificate of
authority or become licensed to operate a health maintenance
organization, preferred provider organization or other deliverer of
health benefits plans or file to offer or operate a comprehensive
health plan in the State of New Jersey.
4.07. DISCLOSURE. No representation or warranty of Purchasers contained in
this Agreement or in any Schedule hereto or in any certificate or
related document delivered to Sellers or any of their Affiliates
pursuant hereto or in connection herewith contains a false, misleading
or untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements
made, in the light of the circumstances in which they were made, not
misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers jointly and severally represent and warrant to each of the
Purchasers as of the date hereof and as of the Closing as follows:
5.01. ORGANIZATION. Each Seller is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of
-21-
its incorporation and has the requisite corporate power and authority
to carry on its business as it is now being conducted. None of the
Sellers is a "foreign person" as defined in Section 1445 of the Code.
5.02. DUE AUTHORIZATION. Each Seller has the requisite corporate power to
enter into, execute and deliver this Agreement and the Related
Agreements to which it is or will be a party and to carry out its
obligations hereunder and thereunder. The execution and delivery by
each Seller of this Agreement and the Related Agreements to which such
Seller is or will be a party and the consummation by such Seller of
the transactions contemplated hereby and thereby have been duly
authorized by the Board of Directors of such Seller, and no other
corporate proceedings on the part of such Seller are necessary to
authorize this Agreement, such Related Agreements and the Contemplated
Transactions. This Agreement has been duly and validly executed and
delivered by each Seller and, constitutes a valid and binding
obligation of such Seller, enforceable against such Seller in
accordance with its terms, except to the extent that any applicable
bankruptcy, insolvency, reorganization, moratorium or other similar
laws or general equitable principles may affect the enforceability
thereof. Upon the execution and delivery by each Seller of each
Related Agreement to which such Seller is a party, such Related
Agreement will constitute a valid and binding obligation of such
Seller, enforceable against such Seller in accordance with its terms,
except to the extent that any applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws or general equitable
principles may affect the enforceability thereof.
5.03. CONSENTS. Except as set forth in Schedule 5.03, no Seller is or will
be required to give any notice to or obtain any Consent from any
Person inconnection with the execution and delivery of this Agreement
or the consummation or performance of any of the Contemplated
Transactions.
5.04. NO CONFLICTS. Except as set forth in Schedule 5.04, neither the
execution and delivery of this Agreement by Sellers nor the
consummation or performance of any of the Contemplated Transactions by
Sellers will, directly or indirectly (with or without notice or lapse
of time):
(i) contravene, conflict with, or result in a violation of (A) any
provision of the Organizational Documents of any Seller, or (B)
any resolution adopted by the board of directors or the
stockholders of any Seller;
(ii) contravene, conflict with, or result in a violation of, or, to
the knowledge of Sellers, give any Governmental Body or other
Person the right to challenge any of the Contemplated
Transactions or to exercise any remedy or obtain any relief
under, any Legal Requirement or any Order to which any Seller,
or any of the Purchased Assets, may be subject;
(iii) contravene, conflict with, or result in a violation of any of
the terms or requirements of, or give any Governmental Body the
-22-
right to revoke, withdraw, suspend, cancel or terminate any
Permit that relates to the operation of the Health Centers or
any of the Purchased Assets;
(iv) contravene, conflict with, or result in a violation or breach
of any provision of, or give any Person the right to declare a
default or exercise any remedy under, or to accelerate the
maturity or performance of, or to cancel, terminate, or modify,
any Contract included in the Purchased Assets; or
(v) result in the imposition or creation of any Encumbrance upon or
with respect to any of the Purchased Assets.
5.05. FINANCIAL STATEMENTS.
(a) Prior to the Closing Date, BCBSNJ and MGI will have delivered
to PHP schedules identifying all payments in an amount of
$5,000 or more in any month, made or incurred on behalf of the
Health Centers during the six months ended June 30, 1996
(excluding payments made to PHP and allocations of general
overhead) (the "Health Center Expense Schedule").
(b) PGPA has delivered to PMG an unaudited balance sheet as of
June 30, 1996, and an unaudited income and expense statement
for the six months ended June 30, 1996 (the "PGPA Financial
Statements"). The PGPA Financial Statements have been prepared
in accordance with GAAP, and, in management's opinion, present
fairly the financial position of PGPA as of the dates thereof,
and the results of operations for the period then ended.
(c) Since the date of the most recent schedule or balance sheet
included in the Health Center Expense Schedule and the PGPA
Financial Statements (i) the business of PGPA has been
conducted only in the Ordinary Course of Business, and (ii)
there have been no changes in the assets or liabilities of the
Health Centers or the business of PGPA which individually or in
the aggregate have had, or could reasonably be expected to
have, a Material Adverse Effect.
5.06. CONDITION AND SUFFICIENCY OF ASSETS.
(a) To the knowledge of Sellers, except as set forth in
Schedule 5.06:
(i) the buildings, plant, structures, equipment and
mechanical systems (including heating, ventilation and
air conditioning systems) included in the Purchased
Assets are structurally sound, are in good operating
condition and repair, and are adequate for the uses to
which they are being put, and none of such buildings,
plant, structures, equipment or mechanical systems is
in need of maintenance or repairs except for ordinary,
routine maintenance and repairs that are not material
in nature or cost;
-23-
(ii) the building, plant, structures, equipment and
mechanical systems included in the Purchased Assets are
sufficient for the continued operation of the Health
Centers and conduct of PGPA's business after the
Closing in substantially the same manner as conducted
prior to the Closing;
(iii) the copies of the real property tax bills for the Real
Property which have been furnished by Sellers to
Purchasers are true and correct copies of all of the
tax bills for the Real Property, and the other
documents, plans, and reports relating to the Real
Property delivered by Sellers to Purchasers are true
and correct copies thereof;
(iv) the Real Property complies with all building, fire,
zoning and other laws, ordinances and
regulations applicable thereto and the present
condition of the Real Property does not violate any
applicable deed restrictions or other covenants,
restrictions or agreements, site plans approvals,
zoning or subdivision regulations or urban
redevelopment plans applicable to the Real Property, as
modified by any duly issued variances;
(v) no part of the Real Property is in violation of law or
municipal ordinances or of federal, state, county or
municipal or other governmental agency regulations,
orders, requirements, restrictions, agreements, site
plan conditions, zoning or subdivision regulations or
urban development plans relating to the Real Property,
and Seller has no reason to believe that any notice of
any such violation has been, may or will be entered;
(vi) all water, sewer, gas, electricity, telephone and
drainage utilities serving the Real Property are
supplied directly to the Real Property by facilities of
public utilities and the cost of installation of such
utilities has been fully paid;
(vii) there is no action or proceeding (zoning or otherwise)
pending, threatened, against or relating to the Real
Property or the transactions contemplated by this
Agreement, nor is there any basis for such action;
(viii) there are no federal, state, county or municipal plans
to change the highway or road system in the vicinity
off and directly affecting the Real Property or to
restrict or change access from any such highway or road
to the Real Property; and
(ix) there is no pending or threatened condemnation of the
Real Property or any part thereof and, there are no
plans for improvements which might result in a special
assessment against the Real Property.
-24-
(b) The Purchased Assets constitute all of the assets that are
necessary for and primarily used in the continued operation
of the Health Centers and the PGPA business in substantially
the same manner as conducted prior to the Closing.
5.07. NO UNDISCLOSED LIABILITIES. To the knowledge of Sellers, except as
set forth in Schedule 5.07, PGPA has no liabilities or obligations
of any nature (whether known or unknown and whether absolute,
accrued, contingent, or otherwise) except for liabilities or
obligations reflected or reserved against in the most recent balance
sheets included in the PGPA Financial Statements and current
liabilities incurred in the Ordinary Course of Business since the
date thereof.
5.08. COMPLIANCE WITH LEGAL REQUIREMENTS. Except as set forth in Schedule
5.08:
(i) to the knowledge of Sellers, each Seller is, and at all times
has been, in full compliance with each Legal Requirement that
is or was applicable to the conduct or operation of the
Health Centers or the ownership or use of any of the
Purchased Assets;
(ii) to the knowledge of Sellers, with respect to the Purchased
Assets, no event has occurred or circumstance exists that
(with or without notice or lapse of time) (A) may constitute
or result in a violation by any Seller of, or a failure on
the part of any Seller to comply with, any legal Requirement,
or (B) may give rise to any obligation on the part of any
Seller to undertake, or to bear all or any portion of the
cost of, any remedial action of any nature; and
(iii) with respect to the Purchased Assets, no Seller has received
any notice or other communication (whether oral or written)
from any Governmental Body or, to the knowledge of Sellers,
any other Person regarding (A) any actual or alleged
violation of, or failure to comply with, any Legal
Requirement, or (B) any actual or alleged obligation on the
part of any Seller to undertake, or to bear all or any
portion of the cost of, any remedial action of any nature,
nor does any Seller have knowledge of any such violation,
failure or obligation.
5.09. PERMITS.
(a) To the knowledge of Sellers, Schedule 5.09 contains a
complete and accurate list of each Permit that is held by any
Seller that relates to the operation of the Health Centers or
the ownership or use of the Purchased Assets. To the
knowledge of Sellers, each Permit listed or required to be
listed in Schedule 5.09 is valid and in full force and
effect. Except as set forth in Schedule 5.09:
(i) to the knowledge of Sellers, each Seller is and at all
times has been, in material compliance with all of the
terms and requirements of each Permit identified or
required to be identified in Schedule 5.09;
-25-
(ii) to the knowledge of Sellers, no event has occurred or
circumstance exists that may (with or without notice
or lapse of time) (A) constitute or result directly or
indirectly in a violation of, or default or deficiency
with respect to, or a failure to comply with any term
or requirement of any Permit listed or required to be
listed in Schedule 5.09, the violation, default,
deficiency or failure of which would have a Material
Adverse Effect, or (B) result directly or indirectly
in the revocation, withdrawal, suspension,
cancellation, or termination of any Permit listed or
required to be listed in Schedule 5.09;
(iii) no Seller has received any notice or other
communication (whether oral or written) from any
Governmental Body or, to the Knowledge of Sellers, any
other Person, regarding (A) any actual or alleged
violation of, default or deficiency with respect to,
or failure to comply with any term or requirement of
any Permit listed or required to be listed on Schedule
5.09, the violation, default, deficiency or failure of
which would have a Material Adverse Effect, or (B) any
actual or proposed revocation, withdrawal, suspension,
cancellation, termination of any Permit listed or
required to be listed on Schedule 5.09, nor does any
Seller have knowledge of any such violation, default,
deficiency or failure to comply; and
(iv) to the knowledge of Sellers, all applications required
to have been filed for the renewal of the Permits
listed or required to be listed in Schedule 5.09 have
been duly filed on a timely basis with the appropriate
Governmental Bodies, and all other filings required to
have been made with respect to such Permits have been
duly made on a timely basis with the appropriate
Governmental Bodies.
(b) To the knowledge of Sellers, the Permits listed in Schedule
5.09 collectively constitute all of the Permits necessary to
permit the Sellers to lawfully conduct and operate the Health
Centers (or to permit PHE to lawfully conduct and operate the
Health Centers on the Sellers' behalf) in the manner that the
Health Centers are currently conducted and operated and to
permit the Purchasers to own and use the Purchased Assets in
the manner in which the Sellers currently own and use such
assets. To the knowledge of Sellers, the validity,
continuation and effectiveness of these Permits will not be
adversely affected by the transfer of these Permits to
Purchasers.
5.10. LEGAL PROCEEDINGS; ORDERS.
(a) Except as set forth in Schedule 5.10, there is no pending
Proceeding: (i) that has been commenced by or against any
Seller or any PGPA physician that relates to or may affect
the operation of the Health Centers or any of the Purchased
Assets; or (ii) that challenges, or that may have the effect
of preventing, delaying, making
-26-
illegal, or otherwise interfering with, any of the
Contemplated Transactions. To the knowledge of Sellers, (1)
no such Proceeding has been threatened, and (2) no event has
occurred or circumstance exists that may give rise to or
serve as a basis for the commencement of any such Proceeding.
Sellers have delivered to Purchasers copies of all pleadings,
correspondence, and other documents relating to each
Proceeding listed in Schedule 5.10. The Proceedings listed in
Schedule 5.10 will not have a Material Adverse Effect.
(b) (i) There is no Order to which any of the Health Centers or
the Purchased Assets is subject; and (ii) no Seller is
subject to any Order that relates to the operation of the
Health Centers or the Purchased Assets.
(c) (i) Each Seller is in full compliance with all of the terms
and requirements of each Order to which the Health Centers or
any of the Purchased Assets is or has been subject; (ii) to
the knowledge of Sellers, no event has occurred or
circumstance exists that may constitute or result in (with or
without notice or lapse of time) a violation of or failure to
comply with any term or requirement of any Order to which any
of the Health Centers, or any of the Purchased Assets, is
subject; and (iii) no Seller has received any notice or other
communication (whether oral or written) from any Governmental
Body or any other Person regarding any actual or alleged
violation of, or failure to comply with, any term or
requirement of any Order to which any of the Health Centers,
or any of the Purchased Assets, is or has been subject.
5.11. TITLE TO PROPERTIES.
(a) BCBSNJ or MGI has good and marketable title to all the Owned
Real Property and Owned Personal Property, and valid and
enforceable leasehold interests in all Leased Real Property
and all Personal Property leased pursuant to the Personal
Property Leases, in each case free and clear of all
Encumbrances other than those described in Schedule 5.11(a)
("Permitted Encumbrances").
(b) PGPA does not own or lease any real or personal property
(including, but not limited to, inventory, medical supplies,
medical equipment or other tangible property) used or held
for use in connection with the operation of the Health
Centers or the conduct of PGPA's business.
5.12. COMMITMENTS. Correct and complete copies of all Commitments have
been delivered by Sellers to Purchasers prior to the date hereof.
Except as set forth on Schedule 5.12, (i) each of the Commitments is
in full force and effect and is valid and enforceable in accordance
with its terms, (ii) each of the Sellers that is a party to or has
any obligation under any of the Commitments has complied in all
material respects with all applicable terms and requirements of such
Commitments; and (iii) no event has occurred and no circumstances
exist that (with the giving of notice or the passage of time or
both) would
-27-
contravene, conflict with, or result in a violation or breach of, or
give any other Person the right to declare a default or exercise a
remedy under, or to accelerate the maturity or performance of, or to
cancel or terminate, any Commitment.
5.13. BOOKS AND RECORDS. To the knowledge of Sellers, all the Health
Center Books and Records and the PGPA Books and Records are in all
material respects true and complete, are maintained in accordance
with good business practice and all applicable Legal Requirements,
and accurately present and reflect in all material respects all of
the transactions therein described.
5.14. INSURANCE. To the knowledge of Sellers, the operation of the Health
Centers and all the Purchased Assets are covered by effective
insurance policies with responsible companies against casualty and
other losses and liabilities customarily obtained to cover
comparable businesses and assets in amounts, scope and coverage
which are reasonable in light of existing conditions. All such
policies and other instruments are in full force and effect and all
premiums with respect to thereto up to the Closing Date have been
paid. The execution and delivery of this Agreement and the
consummation of the Contemplated Transactions will not result in any
violation of or default or loss of any benefit (including the right
to receive any claim) under, or permit the termination of, any of
such insurance policies. No Seller has failed to give any notice or
present any claim under any insurance policy in due and timely
fashion or as required by any of such insurance policies or has
otherwise, through any act, omission or nondisclosure, jeopardized
or impaired full recovery under such policies, and there are no
claims by any Seller under any of such policies as to which any
insurance company is denying liability or defending under a
reservation of rights or similar clause. No Seller has received
notice of any pending or threatened termination of any of such
policies or any premium increases for the current policy period with
respect to any of such policies.
5.15. PGPA PHYSICIANS, EMPLOYEES AND EMPLOYEE BENEFIT PLANS. Schedule
5.15 contains a list of all PGPA Physicians and any other current
employees, consultants and personnel who provide services in
connection with the operation of the Health Centers and the business
of PGPA, together with the current job title and remuneration
(salary, bonus and benefits) for each person. Except as set forth
on Schedule 5.15, there are no benefit plans, including incentive,
health, life, welfare or pension plans, relating to the Health
Centers or the personal employed by Sellers in connection with the
operation of the Health Centers. Purchasers shall be under no
obligation to offer employment or other engagement to any PGPA
Physician or other person currently employed or engaged by Sellers
in connection with the Health Centers.
5.16. TAXES. Sellers have timely filed or will timely file with the
appropriate Governmental Bodies all Returns required to be filed
before the Closing Date, and will timely file all Returns required
to be filed after the Closing Date, in respect of periods ending on
or prior to the Closing Date and have maintained, or caused to be
maintained, and will maintain all required records with respect to
Taxes, and have timely paid, or caused to be
-28-
paid, or will timely pay in full all Taxes, if any, shown to be due
on such Returns, or otherwise due from Sellers for all periods up to
and including the Closing Date. Sellers will pay when due all Taxes
arising out of the Contemplated Transactions.
5.17. ENVIRONMENTAL MATTERS.
(a) Except as set forth in Schedule 5.17(a), to the knowledge of
Sellers:
(i) no Real Property is currently being used to, nor has
the Real Property ever been used to make, store,
handle, treat, dispose of, generate, or transport
Hazardous Substances in violation of any applicable
Environmental Law;
(ii) there has never been a Release, or threatened Release,
of Hazardous Substances at, on, under, from, or within
any of the Real Property;
(iii) Sellers and the Real Property comply and have complied
in all material respects with all applicable
Environmental Laws and Environmental Permits (as
hereinafter defined);
(iv) no Proceeding arising under or relating to any
Environmental Laws is pending, or is threatened,
against Sellers or any of the Real Property;
(v) no Seller has ever received any written notification,
citation, complaint, violation, notice or Order of any
kind from any Governmental Body or any other Person
relating or pertaining to any Environmental Laws or
any Environmental Costs or the making, storing,
handling, treating, disposing, generating,
transporting or Release of any Hazardous Substances;
at, on, under, from or within any of the Real Property
(vi) no above or below ground storage tanks have ever been
used by Sellers or the Business or by any other Person
for the storage of any Hazardous Substances on or
under any of the Real Property;
(vii) Sellers have obtained all permits, licenses,
registrations, consents and other authorizations
required through the date hereof with respect to the
Real Property or the operation of the Health Centers
under any Environmental Law (the "Environmental
Permits"), and all such Environmental Permits are in
full force and effect;
(viii) neither of Sellers, nor any of their respective
Affiliates, employees and agents, have transported or
permitted any person to transport, any Hazardous
Substances used, produced, Released or generated by
the Health Centers at any of the Real Property, to any
site or location listed or proposed for listing on the
National Priorities List, the Comprehensive
-29-
Environmental Response, Compensation and Liability
Information System (CERCLIS) or any other similar
state or federal list; and
(ix) there are no conditions, events, circumstances, facts,
activities, practices, incidents, actions or omissions
that (1) may interfere with or prevent compliance by
the Health Centers or the Real Property with any
Environmental Laws or Environmental Permits, or (2)
may give rise to any liability or other obligation or
form the basis for a claim under any Environmental Law
that arises from the operations of the Health Centers
or otherwise relates to the Real Property;
(b) To the knowledge of Sellers, Schedule 5.17(b) contains a list
of all sites or locations used by any Person for the disposal
of any wastes containing Hazardous Substances used in the
Health Centers; and
(c) Schedule 5.17(c) sets forth a complete and accurate list of,
and Sellers have made available to Purchasers for their
review true and complete copies and results of, any reports,
studies, analyses, tests, or monitorings that it possesses
pertaining to Hazardous Substances or hazardous activities
in, on, or under any of the Real Property, or concerning
compliance by Sellers with any applicable Environmental Laws.
5.18. DISCLOSURE. No representation or warranty of Sellers contained in
this Agreement or in any Schedule hereto or in any certificate or
related document delivered to Purchasers or any of their Affiliates
pursuant hereto or in connection herewith contains a false,
misleading or untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary to make
the statements made, in the light of the circumstances in which they
were made, not misleading.
ARTICLE VI
COVENANTS
6.01. NO SOLICITATION OF TRANSACTIONS. Sellers will not, and will cause
their employees, representatives, investment bankers, consultants,
advisors, agents and affiliates not to, directly or indirectly, (a)
initiate contact with, solicit or encourage submission of any
inquiries, proposals or offers by, or (b) participate in any
discussions or negotiations with, or disclose any information
concerning Health Centers or PGPA to, or afford any access to the
properties, books or records of the Health Centers or PGPA to, or
otherwise assist, facilitate or encourage, any Person (other than
Purchaser, its affiliates, agents and representatives) in connection
with any possible proposal (an "Acquisition Proposal") regarding a
sale or acquisition of any interest in the Health Centers or PGPA,
or a merger, consolidation or business combination involving Health
Centers or PGPA, or a sale of all or (other than in the ordinary
course of business consistent with past practice) any portion of the
assets of Health Centers or PGPA or any similar transaction.
-30-
Sellers represent that as of the date hereof they have ceased any
and all existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any of the foregoing.
Sellers will (i) notify Purchasers immediately if any inquiry or
proposal is made or any such information or access is requested in
connection with an Acquisition Proposal or potential Acquisition
Proposal and (ii) immediately communicate to Purchasers the terms
and conditions of any such Acquisition Proposal or Potential
Acquisition Proposal or inquiry and the identity of the offeror or
potential offeror.
6.02. INTERIM OPERATIONS. During the period from the date of this
Agreement to the Closing, except as specifically contemplated by
this Agreement or as otherwise approved in writing by Purchasers,
Sellers shall:
(a) operate (or permit PHP to operate) the Health Centers and
conduct the business of PGPA only in, and not take any action
except in, the Ordinary Course of Business;
(b) perform in all material respects their obligations under all
Commitments;
(c) use their reasonable best efforts to preserve intact their
corporate existence, goodwill and business organization, to
keep available the services of its present officers and
employees and to preserve their relationships with patients,
physicians, hospitals, landlords, suppliers, customers,
subcontractors and others having business relations with
them;
(d) in connection with the continuing operation of the Health
Centers between the date of this Agreement and the Closing,
use all reasonable best efforts to consult in good faith on a
regular and frequent basis with representatives of Purchasers
to report material operational developments and the general
status of ongoing operations. Sellers acknowledge that any
such consultation shall not constitute a waiver by Purchaser
of any rights it may have under this Agreement and that
Purchasers shall have no liability or responsibility for any
actions of Sellers or any of their officers or directors with
respect to matters which are the subject of such
consultations;
(e) maintain (or permit PHP to maintain) all of the Purchased
Assets in good operating condition and repair in order to
enable them to be operated after the Closing in the manner in
which they are currently operated (ordinary wear and tear
excepted);
(f) maintain (or permit PHP to maintain) the Health Center Books
and Records and the PGPA Books and Records in the usual,
regular and ordinary manner, on a basis consistent with prior
years;
(g) not vary or amend the terms of any Assumed Liability except
in the Ordinary Course of Business;
-31-
(h) not enter into, modify, terminate, amend or grant any waiver
in respect of any Commitment, except in the Ordinary Course
of Business;
(i) duly comply with all Legal Requirements applicable to the
Health Centers and the Purchased Assets;
(j) not take, or agree to take, any of the actions prohibited in
this Section 6.02 or, except for entering into Commitments in
the Ordinary Course of Business, any action which would make
any representation or warranty of the Sellers contained in
this Agreement untrue or incorrect in any material respect as
of the date when made or as of any future date on or prior to
the Closing; and
(k) inform Purchasers promptly of any development which may
interfere with the consummation of the transactions
contemplated hereby or may interfere with the operation of
the Health Centers or the conduct of the business of PGPA.
6.03. ACCESS TO INFORMATION. From the date hereof until the Closing,
Sellers shall, and shall cause their officers, directors, employees
and agents to, afford to Purchasers and their officers, directors,
employees, counsel, accountants, advisors, representatives and
agents access (during regular business hours with reasonable notice)
to the officers, employees, agents, properties, offices and other
facilities, and to the books, records (including, without
limitation, tax returns and work papers of Sellers' independent
auditors) and Commitments of Sellers, and shall furnish Purchasers
and such others all financial, operating, technical and other data
and information which Purchasers, through its officers, employees or
agents, may from time to time reasonably request (in each case, to
the extent available to Sellers and related to the Health Centers
and the business of PGPA).
6.04. CERTAIN FILINGS, CONSENTS AND ARRANGEMENTS. Purchasers and Sellers
shall (a) use their best efforts to (i) make promptly any
submissions, notifications or filings, and (ii) if necessary,
prepare and file all applicable forms under the HSR Act which
Purchasers determine should be made, in each case, with respect to
the Contemplated Transactions and (b) cooperate with each other (i)
in promptly determining whether any other submissions, notifications
or filings are required to be or should be made or whether any
Consents are required to be or should be obtained under any other
Legal Requirement or from other parties to Commitments material to
the operation of the Health Centers or the conduct of PGPA's
business and (ii) in promptly making any such submissions,
notifications or filings, furnishing information required in
connection therewith and seeking timely to obtain any such Consents.
Each of the parties hereto shall provide all reasonable assistance
to, and shall cooperate with, each other to bring about the
consummation of this Agreement in accordance with the terms and
conditions herein.
6.05. NOTICE. Each party shall give prompt written notice to the other of
(a) the occurrence, or failure to occur, of any event which
occurrence or failure would be likely to cause any
-32-
representation or warranty of Sellers or Purchasers, as the case may
be, contained in this Agreement to be untrue or inaccurate in any
material respect at any time from the date hereof to the Closing or
that will or may result in the failure to satisfy any of the
conditions specified in Articles VIII or IX, and (b) any failure of
Sellers or Purchaser, as the case may be, to comply with or satisfy
any covenant, condition or agreement to be complied with or
satisfied by them hereunder. No notice given pursuant to this
Section 6.05 will contain any false, misleading or untrue statement
of a material fact or omit to state a material fact necessary to
make the statements therein or in this Agreement, in the light of
the circumstances in which they were made, not misleading.
6.06. OPERATING AGREEMENT PAYMENTS.
(a) Simultaneous with the execution of this Agreement, MGI shall
pay to PHP, by wire transfer of same day funds to a bank
account designated by PHP, an amount in cash equal to
$7,140,218, which represents certain payments due under the
Operating Agreement as set forth on the invoice dated
December 1, 1996 (excluding incentive payments). Neither the
payment made by MGI pursuant to the immediately preceding
sentence, nor the acceptance of such payment by PHP, shall
constitute a waiver by either party of any claims that such
party has or may have, it being understood that such payment
and acceptance are being made with a full reservation of
rights.
(b) At the Closing, MGI shall pay to PHP, by wire transfer of
same day funds to a bank account designated by PHP, a payment
in the amount of $2,500,000 (the "Incentive and
Reconciliation Payment"), representing the incentive fee due
under the Operating Agreement for the year ended December 31,
1995 and for the six months ended June 30, 1996 in respect of
its obligations under Section 6 of the Operating Agreement.
The Incentive and Reconciliation Payment shall discharge all
of MGI's obligations to make payment to PHP under the Section
6 of the Operating Agreement in respect of the years ended
December 31, 1995 and December 31, 1996.
(c) Billing for services rendered to MGI members prior to July 1,
1996, and not included in the Health Center billing schedule
will not be reimbursed by MGI.
6.07. TERMINATION OF CERTAIN AGREEMENTS. Effective at the Closing, each
of (i) the Operating Agreement, and (ii) any other agreement (other
than any Related Agreement) by and between any Seller or Affiliate
thereof, on the one hand, and any Purchaser or Affiliate thereof, on
the other hand, shall terminate and be of no further force or
effect.
6.08. REGULATORY APPROVALS. Sellers and Purchasers shall use their
reasonable best efforts to obtain all regulatory consents or
approvals required to be obtained from any Governmental Body in
connection with the transactions contemplated by this Agreement and
the Related Agreements (the "Regulatory Approvals"), including,
without limitation,
-33-
approvals of the New Jersey Department of Health and Senior Services
and Department of Banking and Insurance.
6.09. LOCKBOX ACCOUNTS. At Closing, PGPA shall cause all of its rights in
and to the lockbox account at First Union National Bank to be
assigned to PMG.
6.10 AGREEMENTS WITH RESPECT TO PHP SHARES.
(a) The stock certificate representing the PHP Shares shall
include an appropriate legend referring to applicable
restrictions, including the restrictions contained in this
Section 6.10.
(b) MGI shall not, directly or indirectly, sell, transfer or
otherwise dispose of the PHP Shares, except (i) pursuant to
the Shelf Registration Statement (as defined below) or (ii)
with the prior written consent of PHP.
(c) Within 30 days after the Closing, PHP shall prepare and file
with the Securities and Exchange Commission a shelf
registration statement (the "Shelf Registration Statement")
on an appropriate form under Rule 415 under the Securities
Act of 1933 (the "Securities Act"), relating to the offer and
sale by MGI of the PHP Shares from time to time as set forth
in the Shelf Registration Statement, and thereafter shall use
its reasonable best efforts to cause such Shelf Registration
Statement (i) to be declared effective under the Securities
Act as soon as practicable and (ii) to be continuously
effective during the period (the "Shelf Registration Period")
from the date on which the Shelf Registration Statement is
declared effective until June 30, 1997. MGI may sell all or
any portion of the PHP Shares in brokers' transactions at
prevailing market prices during the Shelf Registration
Period; provided however, that MGI shall not sell more than
10,000 PHP Shares in any one trading day without the prior
consent of PHP.
(d) If the net proceeds from the sale of all of the PHP Shares
sold during the Shelf Registration Period is less than
$2,400,000 (or a pro rata portion thereof, if less than all
of the PHP Shares are sold), PHP shall pay to MGI an amount
in cash equal to the difference, which amount shall be paid
within five (5) days after the end of the Shelf Registration
Period. If the net proceeds from the sale of all of the PHP
Shares sold during the Shelf Registration Period is greater
than $2,400,000 (or a pro rata portion thereof, if less than
all of the PHP Shares are sold), MGI shall pay PHP an amount
equal to the difference, which amount shall be paid within
five (5) days after the end of the Shelf Registration Period.
Neither PHP nor MGI shall have any obligation to make any
payment to the other in respect of PHP Shares sold after the
end of the Shelf Registration Period.
(e) Within ten (10) days after the end of the Shelf Registration
Period:
-34-
(i) MGI shall have the option to sell to PHP, and PHP
shall be obligated to purchase from MGI, all of the
PHP Shares for an aggregate price equal to $2,400,000
in cash (or any portion thereof for a pro rata portion
of such aggregate price); and
(ii) PHP shall have the option to purchase from MGI, and
MGI shall be obligated to sell to PHP, all of the PHP
Shares for an aggregate price equal to $2,400,000 in
cash (or any portion thereof for a pro rata portion of
such aggregate price).
Either MGI or PHP may exercise its option by written notice to
the other. The closing of the purchase and sale of PHP Shares
upon the exercise by MGI or PHP of the options referred to in
this Section 6.10(e) above shall take place at the offices of
PHP as soon as practicable after written notice by either party
that it has exercised such option.
(f) If this Agreement is terminated prior to the Closing, then MGI
shall deliver the PHP Shares to PHP and such PHP Shares shall
be cancelled. MGI shall have no obligation to return the PHP
Shares or any proceeds from the sale thereof, except pursuant
to this Section 6.10.
ARTICLE VII
POST-CLOSING AGREEMENTS
Sellers hereby covenant and agree with Purchasers as follows:
7.01. FURTHER ASSURANCES.
(a) Subject to the terms and conditions provided in this
Agreement, each of the parties hereto shall use its best
efforts in good faith to take promptly, or cause to be taken,
all actions and to do promptly, or cause to be done, all
things necessary, proper or advisable and within their
control under applicable laws and regulations to consummate
and make effective the transactions contemplated hereby, to
obtain all necessary waivers, consents and approvals and to
effect all necessary registrations and filings and to remove
any injunctions or other impediments or delays, legal or
otherwise, in order to consummate and make effective the
Contemplated Transactions for the purpose of securing to the
parties hereto the benefits contemplated by this Agreement.
(b) At any time or from time to time after the Closing, the
parties agree to cooperate with each other to execute and
deliver such other documents, instruments of transfer or
assignment, files, books and records and do all such further
acts and
-35-
things as may reasonably be required or desirable to carry
out the intent of the parties hereunder and to effectuate the
transactions contemplated hereby.
7.02. MAIL; PAYMENTS.
(a) Sellers authorize and empower Purchasers on and after the
Closing Date to receive and open all mail and other
communications received by Purchasers relating to the
operation of the Health Centers and the business of PGPA and
to deal with the contents of such communications in any
proper manner. Sellers shall promptly deliver to Purchasers
any mail or other communication received by them after the
Closing Date pertaining to the operation of the Health
Centers or the business of PGPA.
(b) Each of the parties hereto agrees promptly (but, in any
event, not more than two business days after receipt thereof)
to pay or deliver to the other parties any monies or checks
which have been mistakenly sent by customers to it and which
should properly have been sent to such other party.
7.03. RIGHT OF FIRST OFFER.
(a) If, prior to the expiration of the Initial Term of the
Network Agreement (as defined therein), PHE proposes to sell,
transfer or assign all or any part of its interest in any
Health Center or Health Centers to a Competing Payor pursuant
to a signed letter of intent with a Competing Payor, then PHE
shall deliver to BCBSNJ a written notice (the "Offer
Notice"), which sets forth the proposed purchase price (the
"Offer Price"), the interest proposed to be transferred and
other material terms of such offer (the "Offered Interest").
For purposes of this Agreement, the term "Competing Payor"
means any insurance company or PPO licensed to do business in
the State of New Jersey or a New Jersey domestic health
maintenance organization.
(b) For a period of thirty (30) Business Days after the Offer
Notice is given (the "Offer Period"), BCBSNJ shall have the
right, by written notice to PHP (the "Acceptance Notice") to
purchase all but not less than all of the Offered Interest on
the same terms and conditions as set forth in the Offer
Notice on or prior to the date (the "Acceptance Date")
specified in the Acceptance Notice (which date shall be no
more than 90 days after the date the Offer Notice is given).
(c) If BCBSNJ fails to deliver the Acceptance Notice prior to the
expiration of the Offer Period, then for a period of six
months after the expiration of the Offer Period, PHP shall be
permitted to transfer the Offered Interest to any Transferee
at a purchase price equal to or greater than the Offer Price
and upon terms equal to or better than those terms set forth
in the Offer Notice.
-36-
(d) The closing of the purchase of any Offered Interest pursuant
to Section 7.03(b) hereof shall take place at the principal
office of PHP on the date specified in the Acceptance Notice.
At such closing, BCBSNJ shall deliver to PHP the Offer Price
according to the terms set forth in the Offer Notice and PHP
shall deliver to BCBSNJ instruments of assignment sufficient
to vest in BCBSNJ title to the Offered Interest.
(e) If BCBSNJ shall deliver the Acceptance Notice and shall fail
to complete the purchase of the Offered Interest on or before
the Acceptance Date in accordance with Section 7.03(d), then
BCBSNJ shall not thereafter be entitled to exercise any
rights under this Section 7.03.
7.04. USE OF NAMES.
(a) Each of the Purchasers hereby expressly acknowledges its
understanding that this Agreement constitutes an agreement
between the Purchasers and the Sellers, that MGI is a
subsidiary of BCBSNJ which is an independent corporation
under a license with the Blue Cross and Blue Shield Plans
(the "Association") permitting the Sellers to use the Blue
Cross and/or Blue Shield Service ▇▇▇▇ in the State of New
Jersey, and that the Sellers are not contracting as an agent
of the Association. Each of the Purchasers further
acknowledges and agrees that the Purchasers have not entered
into this Agreement based upon the representations by any
other person other than the Sellers and that no Person other
than the Sellers shall be held accountable or liable to the
Purchasers for any of the Sellers' obligations to the
Purchasers hereunder. This Section 7.04 shall not create any
additional obligations whatsoever on the Sellers' part other
than those obligations created under this Agreement.
(b) On and after the Closing Date, each of the Purchasers (and
their permitted successors and assigns) shall not, nor shall
any of the Health Centers or PGPA Physicians be allowed to,
maintain advertising, signage, logos or other evidence of
affiliation with the Sellers or the Association except as
expressly permitted in writing by BCBSNJ.
(c) From and after the Closing, BCBSNJ and its Affiliates shall
revise trademarks and product literature, change signage and
stationery, and otherwise discontinue use within a
twenty-mile radius of any of the Health Centers of the name
"Blue Cross/Blue Shield Health Center" and any variation
thereof, except in connection with the health centers
currently operated by Sellers in Trenton and Quakerbridge.
7.05. LEASE DEPOSITS. Sellers shall instruct the landlord of each Leased
Real Property to remit any existing lease deposit to Sellers;
provided, however, that if a landlord does not agree to remit such
lease deposit to Sellers with respect to any Leased Real Property,
Purchasers shall pay to Sellers an amount equal to the lease deposit
currently in place
-37-
with respect to such Leased Real Property, subject to reduction by
any amounts claimed or withheld by any landlord for any reason.
7.06. MANAGEMENT INFORMATION SYSTEMS. Promptly after the execution of
this Agreement, BCBSNJ will provide to PHP true and correct copies
of all licenses, contracts and agreements relating to the provision
of management information systems ("MIS") services to the Health
Centers. To the extent that any hardware or software used by BCBSNJ
in connection with the operation of the Health Centers is not
assigned to PHP at the Closing, the Purchase Price shall be reduced
by an amount equal to the portion thereof allocable to such hardware
or software. Promptly after the execution of this Agreement, BCBSNJ
shall prepare and deliver to PHP a reasonably detailed estimate of
the cost of replicating the wide area network ("WAN") and data
center currently used in connection with the operation of the Health
Centers, and a reasonably detailed transition plan which addresses,
among other things, the relocation of hardware and software with no
interruption in service. After the Closing and until the earlier of
(i) 180 days after the Closing Date or (ii) the date PHP has
replicated at its headquarters in Reston, Virginia the WAN and the
data center currently used to provide MIS services to the Health
Centers, BCBSNJ shall continue to provide to each of the Health
Centers the MIS services currently being provided to such Health
Centers (including, without limitation, the WAN currently provided
by Atlantis) and PHP shall reimburse BCBSNJ for the cost (exclusive
of facility and overhead costs) related to the continuing provision
of MIS services.
7.07. BONUS PAYMENTS TO PGPA PHYSICIANS. As soon as practicable after the
determination by PMG of the aggregate amount of bonus payments due
to PGPA Physicians in respect of calendar year 1996, Sellers shall
pay to PMG 50% of the aggregate amount of such payments. All such
calculations shall be made using the methodology used to calculate
the bonus payments to PGPA Physicians in respect of calendar year
1995. BCBSNJ shall have ten business (10) days to review PMG's
calculations and notify PMG of any disagreement with such
calculations. If BCBSNJ does not notify PMG of any disagreement
with PMG's calculations within such 10 business days, BCBSNJ shall
be deemed to have accepted and agreed to PMG's calculations of bonus
payments due to PGPA Physicians in respect of calendar year 1996.
7.08. PHYSICIAN BENEFIT PLANS. At PMG's request, Sellers will assist
Purchasers in obtaining, at Purchasers' expense, retirement, health
and welfare benefits for PGPA Physicians for up to six months after
the Closing.
7.09 ACCESS AND INFORMATION
(a) From and after the Closing Date for a period of three (3)
years and thereafter with Sellers' consent, which consent
shall not be unreasonably withheld, Sellers shall, and shall
cause their officers, directors, employees and agents to,
afford to Purchasers and their officers, directors,
employees, counsel, accountants, advisors, representatives
and agents reasonable access, during regular business hours
and
-38-
upon reasonable advance notice, to the officers, employees,
agents, properties, offices and other facilities, and to the
books and records (including, without limitation, tax returns
and work papers of Sellers' independent auditors) and
Commitments of Sellers, and shall furnish Purchasers and such
others all financial, operating, technical and other data and
information which Purchasers, through its officers, employees
or agents, may from time to time reasonably request (in each
case, to the extent available to Sellers and related to the
Health Centers and the business of PGPA); provided, that (x)
the foregoing shall be done in a manner so as not to
unreasonably interfere with the normal conduct of the
Sellers' business, and (y) at Sellers' request, Purchasers
and such representatives shall execute a reasonable
confidentiality agreement relating to non-public information
received in connection therewith.
(b) From and after the Closing Date for a period of three (3)
years and thereafter with Purchasers' consent, which consent
shall not be unreasonably withheld, Purchasers shall, and
shall cause their officers, directors, employees and agents
to, afford to Sellers and their officers, directors,
employees, counsel, accountants, advisors, representatives
and agents reasonable access, during regular business hours
and upon reasonable advance notice, to the officers,
employees, agents, properties, offices and other facilities,
and to the books and records (including, without limitation,
tax returns and work papers of Purchasers' independent
auditors) and Commitments of Purchasers, and shall furnish
Sellers and such others all financial, operating, technical
and other data and information which Sellers, through its
officers, employees or agents, may from time to time
reasonably request, in each case, to the extent available to
Purchasers and related to the Health Centers and the business
of PGPA, and in each case solely to the extent relevant and
reasonably necessary to the (i) preparation of tax returns
and responses to tax audits, (ii) defense or prosecution of
any litigation, tax or other claim, (iii) inquiries from any
Governmental Body, or (iv) any other reasonable purpose
related to the matters referred to it clauses (i), (ii) and
(iii) above; provided, that (x) the foregoing shall be done
in a manner so as not to unreasonably interfere with the
normal conduct of the Purchasers' business, and (y) at
Purchasers' request, Sellers and such representatives shall
execute a reasonable confidentiality agreement relating to
non-public information received in connection therewith.
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF PURCHASERS
The obligations of Purchasers to purchase the Purchased Assets and to take
the other actions required to be taken by Purchasers at the Closing shall be
subject to the satisfaction, at or
-39-
prior to the Closing, of each of the following conditions (any of which may be
waived by Purchasers in whole or in part):
8.01. ACCURACY OF SELLERS' REPRESENTATIONS. Each of the representations
and warranties of the Sellers set forth in this Agreement or any
Related Agreement shall have been accurate in all material respects
as of the date of this Agreement, and shall be accurate in all
material respects as of the Closing Date as if made on the Closing
Date.
8.02. PERFORMANCE OF SELLERS' AGREEMENTS. Each of the covenants and
obligations that Sellers are obligated to perform or comply with
pursuant to this Agreement or any Related Agreement at or prior to
the Closing Date shall have been duly performed and complied with in
all material respects.
8.03. DELIVERIES BY SELLERS. Purchasers shall have received from Sellers
(i) the Incentive and Reconciliation Payment, (ii) the Instruments
of Assignment and (iii) the other documents and instruments
contemplated by Section 3.02.
8.04. OFFICER'S CERTIFICATES. Purchasers shall have received a
certificate from the Senior Vice President-Administration,
Chief Financial Officer and Treasurer of BCBSNJ and the chief
executive or chief financial officer of MGI, dated as of the
Closing Date, reasonably satisfactory in form and substance to
Purchasers and their counsel, certifying as to the satisfaction
of the conditions set forth in Sections 8.01 and 8.02.
8.05. HSR ACT. Any applicable waiting period (and any extension
thereof) under the HSR Act relating to the Contemplated
Transactions shall have expired or been terminated.
8.06. CONSENTS. Each of the Consents identified or referred to in
Schedule 5.03 shall have been obtained in form and substance
reasonably satisfactory to Purchasers and must be in full force
and effect, and Purchasers shall have obtained all Consents or
Permits (including, without limitation, any required approvals
from the New Jersey Department of Health and Senior Services
and/or the New Jersey Department of Banking and Insurance)
necessary to operate after the Closing as contemplated in the
Related Agreements.
8.07. NO PROHIBITION. No Legal Requirement or Order shall be in
effect (or enacted, promulgated, passed, announced or proposed)
that (a) prohibits, restricts or gives rise to a cause of
action with respect to any of the Contemplated Transactions or
(b) is not in effect on the date hereof, and materially
restricts or interferes with the operation of the Health Centers
or the conduct of PGPA's business as proposed to be conducted
by Purchasers after the Closing or could reasonably be expected
to have a Material Adverse Effect.
8.08. NO PROCEEDINGS. Since the date of this Agreement, no
Proceeding shall have been commenced or threatened,
(a) involving any challenge to, or seeking damages or other
relief in connection with, any of the Contemplated
Transactions, (b) that could reasonably be expected to have
the effect of preventing, materially delaying or restricting,
making
-40-
illegal, or otherwise materially interfering with any of
the Contemplated Transactions, or (c) that could reasonably be
expected to have the effect, if adversely decided, of
restricting or interfering with the operation of the Health
Centers or the business of PGPA as proposed to be conducted
by Purchasers after the Closing or could reasonably be expected
to have a Material Adverse Effect.
8.09. RELATED AGREEMENTS. Each of the Related Agreements shall have
been executed and delivered by each party thereto other than
Purchasers.
8.10. TITLE INSURANCE; SURVEYS. Purchasers shall have received title
insurance commitments, policies and riders and surveys with
respect to each of the Owned Real Properties, in each case in
form and substance reasonably satisfactory to Purchasers.
8.11. ESTOPPEL CERTIFICATES. Purchasers shall have received estoppel
certificates executed on behalf of the landlord under each of
the Real Property Leases, dated as of a date no more than ten
days prior to the Closing Date, each in form and substance
reasonably satisfactory to Purchasers.
8.12. NO MATERIAL ADVERSE CHANGE. Since the date of this Agreement,
there shall not have occurred any event which has had or could
reasonably be expected to have a Material Adverse Effect.
8.13. REGULATORY APPROVALS. Purchasers shall have received all
Regulatory Approvals, in form and substance reasonably
satisfactory to Purchasers and their counsel.
8.14. MUTUAL RELEASE. Purchasers shall have received from each of the
Sellers an executed counterpart of the Mutual Release,
substantially in the form attached hereto as Exhibit C.
8.15 SCHEDULES. Purchasers shall have received from the Sellers
updated copies of the schedules to this Agreement, in form and
substance reasonably satisfactory to Purchasers and their
counsel.
ARTICLE IX
CONDITIONS TO THE OBLIGATIONS OF SELLERS
The obligations of Sellers to sell the Purchased Assets and to take the
other actions required to be taken by Sellers at the Closing is subject to
the satisfaction, at or prior to the Closing, of each of the following
conditions (any of which may be waived by Sellers in whole or in part):
9.01. ACCURACY OF PURCHASERS' REPRESENTATIONS. Each of the
representations and warranties of the Purchasers set forth in this
Agreement or any Related Agreement shall have been accurate in all
material respects as of the date of this Agreement, and shall be
accurate in all material respects as of the Closing Date as if made
on the Closing Date.
-41-
9.02. PERFORMANCE OF PURCHASERS' AGREEMENTS. Each of the covenants
and obligations that Purchasers are obligated to perform or
comply with pursuant to this Agreement or any Related Agreement
at or prior to the Closing Date shall have been duly performed
and complied with in all material respects.
9.03. DELIVERIES BY PURCHASERS. Sellers shall have received from
Purchasers, (i) the Purchase Price, (ii) the Instruments of
Assumption and (iii) the other documents and instruments
contemplated by Section 3.03.
9.04. OFFICER'S CERTIFICATES. Sellers shall have received a
certificate from the president, chief executive officer or
chief financial officer of each Purchaser, dated as of the
Closing Date, reasonably satisfactory in form and substance
to Sellers and their counsel, certifying as to the satisfaction
of the conditions set forth in Sections 9.01 and 9.02.
9.05. HSR ACT. Any applicable waiting period (and any extension
thereof) under the HSR Act relating to the Contemplated
Transactions shall have expired or been terminated.
9.06. CONSENTS. Each of the Consents identified or referred to in
Schedule 4.03 shall have been obtained in form and substance
reasonably satisfactory to Sellers and must be in full force
and effect.
9.07. NO PROHIBITION. No Legal Requirement or Order shall be in
effect (or enacted, promulgated, passed, announced or proposed)
that (a) prohibits, restricts or gives rise to a cause of
action with respect to any of the Contemplated Transactions and
(b) has been adopted or issued, or otherwise become effective
since the date hereof.
9.08. NO PROCEEDINGS. Since the date of this Agreement, no
Proceeding shall have been commenced or threatened,
(a) involving any challenge to, or seeking damages or other
relief in connection with, any of the Contemplated
Transactions, or (b) that could reasonably be expected to
have the effect of preventing, materially delaying or
restricting, making illegal, or otherwise materially
interfering with any of the Contemplated Transactions.
9.09. RELATED AGREEMENTS. Each of the Related Agreements shall have
been executed and delivered by each party thereto other than
Sellers.
9.10. MUTUAL RELEASE. Sellers shall have received from each of the
Purchasers an executed counterpart of the Mutual Release,
substantially in the form attached hereto as Exhibit C.
ARTICLE X
TERMINATION PRIOR TO THE CLOSING
10.01. TERMINATION. This Agreement may be terminated and abandoned
at any time prior to the Closing:
-42-
(a) By mutual written consent of Purchasers and Sellers duly
authorized by the respective Boards of Directors of
Purchasers and Sellers;
(b) By either Purchasers or Sellers in writing, without liability
to the terminating party on account of such termination
(provided the terminating party is not otherwise in default
or in breach of this Agreement), if the Contemplated
Transactions shall not have been consummated by January 15,
1997;
(c) By either Purchasers or Sellers if the consummation of the
Contemplated Transactions shall be prohibited by any Order of
any Governmental Body and such Order shall remain in effect
after the parties hereto shall have used their reasonable
best efforts to have such Order reversed or lifted;
(d) By Sellers (provided they are not otherwise in default or
breach of this Agreement), if any of the conditions specified
in Article IX have not been met or waived by Sellers at such
time as such condition can no longer be satisfied; or
(e) By Purchasers (provided they are not otherwise in default or
breach of this Agreement), if any of the conditions specified
in Article VIII have not been met or waived by Purchasers at
such time as such condition can no longer be satisfied.
10.02. EFFECT ON OBLIGATIONS. Termination of this Agreement pursuant to
this Article X shall terminate all obligations of the parties
hereunder, except for the obligations under Section 12.08; provided,
however, that termination pursuant to Section 10.01(b), (d) or (e)
shall not relieve the defaulting or breaching party from any
liability to any other party hereto. If this Agreement is terminated
pursuant to this Article X, the Operating Agreement and any other
existing agreement (other than any Related Agreement) by and between
any Seller or Affiliate thereof, on the one hand, and any Purchaser
or Affiliate thereof, on the other hand, shall continue in full
force and effect in accordance with their terms and neither party
shall be deemed to have waived any of its rights thereunder as a
result of this Agreement. In the event of such termination, MGI
and/or BCBSNJ shall immediately pay PHP all amounts (including,
without limitation, Incentive Payments) due retroactively under the
Operating Agreement from July 1, 1996.
ARTICLE XI
INDEMNIFICATION
11.01. SURVIVAL. Except as otherwise set forth in this Section 11.01, the
representations and warranties made in this Agreement or in any
Ancillary Document shall survive the Closing and remain in full
force and effect until July 1, 1999 (it being understood that in the
event notice of any claim for indemnification under Section 11.02(a)
or 11.03(a) hereof shall have been given on or prior to July 1,
1999, the representations and warranties that are the subject of
such indemnification claim shall survive until such claim is finally
resolved). The representations and
-43-
warranties contained in Sections 5.11 and 5.16 shall remain in full
force and effect indefinitely.
11.02. INDEMNIFICATION BY SELLERS. Sellers shall jointly and severally
indemnify and hold harmless Purchasers, their Affiliates, and their
respective officers, directors, employees and agents from and
against any and all Losses based upon, arising out of, or resulting
from, any of the following:
(a) any breach by Sellers of any of the representations or
warranties made by Sellers in this Agreement or in any
Ancillary Documents (it being understood that (i) for all
purposes of Section 11.02(a), such representations and
warranties shall be interpreted without giving effect to the
phrase "to the knowledge of Sellers" and (ii) no Seller shall
be liable for any loss arising out of a breach of any
representation or warranty of Sellers to the extent such Loss
is based upon, arises out of or results from (x) facts known
to Purchasers on the date of this Agreement or (y) conduct by
PHP which would otherwise have constituted a breach of its
obligations under the Operating Agreement);
(b) any failure by Sellers to perform any of their covenants or
agreements contained in this Agreement or in any Ancillary
Documents; or
(c) the failure by Sellers to pay, perform or discharge when due
any of the Retained Liabilities.
11.03. INDEMNIFICATION BY PURCHASERS. Purchasers shall indemnify and hold
harmless Sellers, their Affiliates and their respective officers,
directors, employees and agents from and against any and all Losses
based upon or resulting from any of the following:
(a) any breach by Purchasers of any of the representations or
warranties made by Purchasers in this Agreement;
(b) any failure by Purchasers to perform any of their covenants
or agreements contained in this Agreement; or
(c) the failure by Purchasers to pay, perform or discharge when
due any of the Assumed Liabilities (provided, however, that
any Losses arising out of, resulting from or relating to any
breach of any of the representations and warranties or
covenants of the Sellers set forth herein shall be excluded).
11.04. CLAIMS.
(a) When a party seeking indemnification under Section 11.02 or
11.03 (the "Indemnified Party") receives notice of any claims
made by third parties (individually, a "Third Party Claim"
and collectively, "Third Party Claims") or has any
-44-
other claim for indemnification other than a Third Party
Claim, which is to be the basis for a claim for
indemnification hereunder, the Indemnified Party shall give
prompt written notice thereof to the other party (the
"Indemnifying Party") reasonably indicating (to the extent
known) the nature of such claims and the basis thereof;
provided, however, that failure of the Indemnified Party to
give the Indemnifying Party prompt notice as provided herein
shall not relieve the Indemnifying Party of any of its
obligations hereunder. Upon notice from the Indemnified
Party, the Indemnifying Party may, but shall not be required
to, assume the defense of any such Third Party Claim,
including its compromise or settlement, and the Indemnifying
Party shall pay all reasonable costs and expenses thereof and
shall be fully responsible for the outcome thereof; provided,
however, that in such case, the Indemnifying Party shall have
no obligation to pay any further costs or expenses of legal
counsel of the Indemnified Party thereafter incurred in
connection with such defense other than reasonable costs of
investigation. No compromise or settlement in respect of any
Third Party Claims may be effected by the Indemnifying Party
without the Indemnified Party's prior written consent (which
consent shall not be unreasonably withheld), unless the sole
relief is monetary damages that are paid in full by the
Indemnifying Party. The Indemnifying Party shall give notice
to the Indemnified Party as to its intention to assume the
defense of any such Third Party Claim within thirty (30) days
after the date of receipt of the Indemnified Party's notice
in respect of such Third Party Claim. If the Indemnifying
Party does not, within thirty (30) days after the Indemnified
Party's notice is given, give notice to the Indemnified Party
of its assumption of the defense of the Third Party Claim,
the Indemnifying Party shall be deemed to have waived its
rights to control the defense thereof. If the Indemnified
Party assumes the defense of any Third Party Claim because of
the failure of the Indemnifying Party to do so in accordance
with this Section 11.04, it may do so in such reasonable
manner as it may deem appropriate, and the Indemnifying Party
shall pay all reasonable costs and expenses of such defense.
The Indemnifying Party shall have no liability with respect
to any compromise or settlement thereof effected without its
prior written consent (which consent shall not be
unreasonably withheld or delayed), unless the sole relief
granted was equitable relief for which it would have no
liability or to which it would not be subject.
(b) Notwithstanding the foregoing, with respect to any Third
Party Claim that the Indemnifying Party is defending, the
Indemnified Party shall have the right to retain separate
counsel to represent it and the Indemnifying Party shall pay
the fees and expenses of such separate counsel if the named
parties to any such Third Party Claim include both the
Indemnified Party and Indemnifying Party and it is reasonably
determined that differing defenses are available to the
Indemnified Party and the Indemnifying Party, or there are
other conflicts that in either case make it reasonable for
separate counsel to represent the Indemnified Party and the
Indemnifying Party.
-45-
11.05. COMPUTATION OF LOSSES. The amount of any Loss for which
indemnification is provided under this Article XI shall be computed
net of any net insurance proceeds received by the Indemnified Party
in connection with such Loss. For the purposes of this paragraph,
the term "net insurance proceeds" shall mean the insurance proceeds
received by the Indemnified Party less the retrospective premium
adjustments or reimbursement obligations relating thereto and less
any increase in premiums attributable thereto.
ARTICLE XII
MISCELLANEOUS
12.01. ENTIRE AGREEMENT. This Agreement (including the Exhibits and
Schedules hereto) and the Related Agreements constitute the sole
understanding of the parties with respect to the subject matter
hereof and supersede all prior agreements and understandings among
the parties with respect to the subject matter hereof.
12.02. ASSIGNMENT. This Agreement may not be assigned by either Purchasers
or Sellers without the prior written consent of the other, except
that (i) Purchasers may, at their election, assign this Agreement in
whole or in part to any Affiliate or other third party, but no such
assignment shall relieve Purchasers of their obligations hereunder;
and (ii) each of the Sellers and Purchasers may assign its
respective rights and obligations hereunder to any corporation or
other Person which acquires substantially all of its assets.
Without limiting the generality of the preceding sentence, the
parties understand that PHE may assign its right to purchase the
Owned Real Property to a real estate investment trust in accordance
with Section 2.09 of this Agreement. The terms and conditions of
this Agreement shall inure to the benefit of and be binding upon the
respective successors and permitted assigns of the parties.
12.03. COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall for all purposes be deemed to be an original and all
of which shall constitute the same instrument.
12.04. ACKNOWLEDGMENT. Sellers acknowledge that the representations and
warranties contained in this Agreement and in any certificate or
other document delivered to Purchasers shall not be deemed waived or
otherwise affected by any investigation by Purchasers, their
officers, directors, employees, counsel, accountants, advisors,
representatives and agents.
12.05. MODIFICATION AND WAIVER. No amendment, modification or alteration
of the terms or provisions of this Agreement shall be binding unless
the same shall be in writing and duly executed by Purchasers and
Sellers; provided, however, that any of the terms or provisions of
this Agreement may be waived in writing at any time by the party
which is entitled to the benefits of such waived terms or
provisions. No waiver of any of the provisions of this Agreement
shall be deemed to or shall constitute a waiver of any other
provision hereof (whether or not similar).
-46-
No delay on the part of any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof.
12.06. SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the
remaining terms and provisions of this Agreement or affecting the
validity or enforceability of any of the terms or provisions of this
Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
12.07. SPECIFIC PERFORMANCE. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms
or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and
provisions hereof in any court of the United States or any state
having jurisdiction, this being in addition to any other remedy to
which they are entitled at law or in equity.
12.08. EXPENSES. Whether or not the Closing occurs, all costs and expenses
incurred in connection with this Agreement and the Contemplated
Transactions shall be paid by the party incurring such expenses,
except as expressly provided otherwise herein and except that the
filing fee in connection with the HSR Act filing, if any, shall be
shared equally by Purchasers and Sellers.
12.09. NOTICES. Any notice, request, instruction or other document to be
given hereunder (a "Notice") by any party hereto to any other party
shall be in writing and delivered personally, sent by a recognized
nationwide overnight delivery service with charges prepaid, sent by
registered or certified mail with postage prepaid (return receipt
requested), or sent by facsimile transmission (which is confirmed):
if to Purchasers, to:
PHP Healthcare Corporation
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (703) 758- 3600
Confirmation: (703) 758- 7259
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇, President
-47-
with copies to:
PHP Healthcare Corporation
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (703) 758- 3600
Confirmation: (703) 758- 7259
ATTENTION: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Senior Vice
President and Counsel
and
Fried, Frank, Harris, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Confirmation: (▇▇▇) ▇▇▇-▇▇▇▇
ATTENTION: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
if to Sellers, to:
Blue Cross and Blue Shield of New Jersey, Inc.
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇ ▇▇▇▇
Confirmation: (▇▇▇) ▇▇▇ ▇▇▇▇
ATTENTION: ▇▇▇▇▇▇ ▇. Pures, Senior Vice President-
Administration, Chief Financial Officer and
Treasurer
with copies to:
Blue Cross and Blue Shield of New Jersey, Inc.
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇ ▇▇▇▇
Confirmation: (▇▇▇) ▇▇▇ ▇▇▇▇
ATTENTION: ▇▇▇▇▇ ▇▇▇▇▇▇▇ Connor, Esq., General
Counsel
and
-▇▇-
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & Green
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇ ▇▇▇▇
Confirmation: (▇▇▇) ▇▇▇ ▇▇▇▇
ATTENTION: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
or at such other address for a party as shall be specified by like
Notice. Any Notice which is delivered in the manner provided herein
shall be deemed to have been duly given to the party to whom it is
directed upon actual receipt by such party, except that any Notice
delivered by facsimile transmission shall be deemed to have been
given upon confirmation of transmission, provided that Notice so
delivered is promptly followed by duplicate Notice to that same
party sent by registered or certified mail, postage prepaid (return
receipt requested).
12.10. GOVERNING LAW. This Agreement shall be construed in accordance with
and governed by the laws of the State of New Jersey without regard
to any applicable principles of conflicts of law.
12.11. NO THIRD PARTY BENEFICIARIES. Nothing in this Agreement is intended
to confer on any person other than the parties hereto or their
respective successors or assigns any rights, remedies, liabilities
or obligations under or by reason of this Agreement.
12.12. GUARANTEES. BCBSNJ hereby fully and unconditionally guarantees the
obligations of MGI and PGPA under this Agreement. PHP hereby fully
and unconditionally guarantees the obligations of PMG and PHE under
this Agreement.
12.13. NO INDUCEMENT. No amount paid or advanced hereunder by any party is
intended to be, nor shall it be construed as, an inducement or
payment for a referral of patients, and any such referral of
patients is expressly prohibited.
[remainder of page intentionally blank]
-49-
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed on its behalf as of the date first above
written.
PHP HEALTHCARE CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
PINNACLE MEDICAL GROUP, P.A.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Treasurer
PINNACLE HEALTH ENTERPRISES, L.L.C.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
BLUE CROSS AND BLUE SHIELD
OF NEW JERSEY, INC.
By: /s/ ▇▇▇▇▇▇ ▇. PURES
----------------------------
Name: ▇▇▇▇▇▇ ▇. Pures
Title: Trasurer
MEDIGROUP OF NEW JERSEY, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Acting President and CEO
PHYSICIAN GROUP PRACTICE
ASSOCIATES, P.A.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, M.D.
----------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, M.D.
Title: President
-50-
