INTERIM OPERATIONS AGREEMENT
SUMMARY
1. PacifiCare Holding would cause FHP to make a final contribution of
$67 million to Talbert at the time of the closing of the FHP Merger.
2. FHP and Talbert would close the Stock Purchase Agreement (FHP has
waived the condition that the Talbert S-1 be effective at such closing).
3. Talbert would on the next business day pay FHP the amount of the
incorporate receivable at January 31, 1997 it owes FHP (currently estimated
to be approximately $20 million).
4. Two PacifiCare Holding Nominees would immediately be placed on the
Talbert Board, to remain there until the closing of the Talbert Rights
offering.
5. If the Talbert Rights Offering has not commenced prior to the
earlier of (i) May 15, 1997 or (ii) the date Talbert's cumulative operating
losses since 1/1/97 exceed $14 million, the Talbert Board shall take such
actions as are necessary to cause FHP nominees to represent a majority of the
Talbert Board.
6. Until completion of the Rights Offering, Talbert will covenant not
to take actions as set out on the attached Exhibit A.
7. Talbert and FHP will monthly pay any current or past amounts owed to
the other.
8. Within two weeks after signing, Talbert will provide a reasonable
explanation for the differences between the leased property FF&E schedule
provided PacifiCare and the higher amount previously indicated as being the
total for such schedule as well as the location of the assets shown on such
schedule. The last sentence of Section 3.1 to the Stock Purchase Agreement
(relating to the 338(h)(10) election) would be amended to read "The Parent's
consent may not be withheld if Talbert pays FHP the amount mutually agreed as
reflecting the negative economic impact of the election."
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9. Should FHP nominees represent a majority of the Board pursuant to
paragraph 5 above, PacifiCare Holding acknowledges the position of the
holders who would receive Talbert Rights pursuant to the Reorganization
Agreement and will consider their rights and expectations in any subsequent
actions taken with respect to Talbert.
FHP INTERNATIONAL CORPORATION
By: /s/ WESTCOTT W. PRICE III
---------------------------
Westcott W. Price III
President and Chief Executive Officer
TALBERT MEDICAL MANAGEMENT
HOLDINGS CORPORATION
By: /s/ JACK D. MASSIMINO
-------------------------
Jack D. Massimino
President and Chief Executive Officer
N-T HOLDINGS, INC.
By: /s/ ALAN R. HOOPS
-------------------------
Alan R. Hoops
President and Chief Executive Officer
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EXHIBIT A.
During the period from the date of this Agreement through completion of the
Rights Offering, the Company shall not do, and shall not permit any of its
subsidiaries to do, any of the following, except as disclosed in Amendment
Number 1 to the Talbert Registration Statement, without PacifiCare's written
consent:
(i) declare, set aside or pay any dividend or make any other
distribution in respect of any capital stock;
(ii) split, combine or reclassify any capital stock of the Company or
repurchase, redeem or otherwise acquire any capital stock of the Company or
any of its subsidiaries;
(iii) except for (a) the issuance of up to 900,000 stock options to be
granted to employees or managed physicians; (b) the issuance of options
previously promised or conditionally granted to Kenneth Ord; or (c) previously
authorized automatic grants of options to the Company's or its subsidiaries'
directors, issue, deliver, pledge, encumber, sell or transfer, or authorize
or propose the issuance, delivery, pledge, encumbrance, sale or transfer of,
any shares of capital stock of the Company or any of its subsidiaries or any
securities convertible into, or rights, warrants or options to acquire, any
such shares of capital stock or other convertible securities (except that the
Company may issue common stock upon the exercise of options issued and
outstanding) or, except as expressly contemplated herein, make any change in
its equity capitalization or to the terms of any option, warrant or other
equity security of the Company or any of its subsidiaries that is currently
outstanding;
(iv) amend the Certificate of Incorporation, Bylaws or other
organizational or charter documents of the Company or any of its subsidiaries,
or amend the Restated Rights Plan;
(v) acquire (by merging or consolidating with, by purchasing any
material portion of the capital stock or assets of or by any other means) any
business or any corporation, partnership, association or other business
organization or division thereof;
(vi) sell, lease, pledge or otherwise dispose of or encumber any of its
material assets, except in the ordinary course of business consistent with
past practice;
(vii) except pursuant to lines of credit and subject to credit limits
in effect prior to the date of the Original Agreement, incur any indebtedness
for borrowed money, or issue or sell any debt securities or guarantee,
endorse or otherwise become responsible for any obligation of any other
person;
(viii) adopt or amend in any material respect any employee benefit
plan, or enter into
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or amend any employment agreement, severance agreement, special pay
arrangement with respect to termination of employment or other similar
arrangement or agreement with any director or officer, or enter into or
amend any severance or termination arrangement with any director or officer;
(ix) change in any material respect the accounting methods or practices
followed by the Company (including any material change in any assumption
underlying, or any method of calculating, any bad debt, contingency or other
reserve), except as may be required by changes in GAAP;
(x) except in the ordinary course of business consistent with past
practice enter into any material contract or agreement involving payments in
except of market rates;
(xi) change any compensation payable or to become payable to any of its
officers or directors;
(xii) make any capital expenditures in excess of $500,000 in the
aggregate;
(xiii) make any loan to or engage in any transaction with any director
or officer;
(xiv) settle or compromise any lawsuit or other Proceeding against the
Company or any of its subsidiaries for an amount in excess of $500,000; or
(xv) enter into any contract, agreement, commitment or arrangement
contemplating any of the foregoing.
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