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EXHIBIT 10.12
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
BIRMAN MANAGED CARE, INC.,
CANTON MANAGEMENT GROUP, INC.
AND
WESLEY PRATER, M.D., LARRY COOPER, M.D., CALVIN
RAMSEY, M.D., L.C. TENNIN, M.D., LOUIS SADDLER, M.D.,
JAMES GOODMAN, PH.D., VIC CARACCI, MICHAEL T.
CARACCI, ROBERT TEAGUE, M.S.W., VINCENT CARACCI,
CHARLIE HILLS, HAROLD WHEELER, M.D., STEPHANIE
TUCKER, WINIFRED FULGHAM AND JOYCE JOHNSON
AND
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
BIRMAN MANAGED CARE, INC.
AND
MEDSOUTH, INC.
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TABLE OF CONTENTS
SECTION PAGE
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I. REDEMPTION, PURCHASE AND SALE OF SHARES ............................... 4
A. Agreement to Purchase and Sell Between Birman, Canton
and the Shareholders............................................. 4
B. Agreement to Purchase and Sell between Birman and MedSouth.......... 4
C. Closing............................................................. 4
II. PAYMENT TERMS.......................................................... 5
A. Issuance of Preferred Stock......................................... 5
B. Payment of Preferred Stock.......................................... 5
C. Birman/Canton Note.................................................. 5
D. Redemption of Common Stock.......................................... 5
E. Payment for Redeemed Shares......................................... 5
F. Canton/Shareholder Note............................................. 5
G. Guaranty of Canton/Shareholder Note................................. 6
H. Purchase and Sale of Common Stock................................... 6
I. Payment for Common Stock............................................ 6
J. Birman/Shareholder Note............................................. 6
K. Purchase and Sale of Common Stock between Birman and MedSouth....... 6
III. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS AND CANTON.......... 7
A. Organization, Standing and Corporate Authority of Canton............ 7
B. Qualification....................................................... 7
C. Capital Structure of Canton......................................... 7
D. Title to Shares..................................................... 8
E. Subsidiaries........................................................ 8
F. Financial Statements................................................ 8
G. Events Subsequent to the Closing.................................... 8
H. Liabilities......................................................... 9
I. Accounts and Notes Receivable....................................... 9
J. Real Property....................................................... 9
K. Compliance with Law................................................. 9
L. Inventory and Tangible Personal Property............................ 10
M. Litigation.......................................................... 11
N. Consents............................................................ 11
O. Taxes............................................................... 11
P. Contracts........................................................... 11
Q. Intellectual Property............................................... 13
R. Employees........................................................... 13
S. Insurance........................................................... 13
T. Accounts............................................................ 14
U. Brokers, Finders and Investment Advisors............................ 14
V. No Restrictions Upon the Shareholders............................... 14
W. Computer Software................................................... 14
IV. REPRESENTATIONS AND WARRANTIES OF MEDSOUTH............................. 14
A. Organization, Standing and Corporate Authority of MedSouth.......... 14
B. Brokers, Finders and Investment Advisors............................ 14
C. No Restrictions on MedSouth......................................... 14
D. Investment.......................................................... 15
E. Familiarity......................................................... 15
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SECTION PAGE
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F. Compliance with Law............................................... 15
G. Litigation........................................................ 15
H. Consents.......................................................... 15
I. Taxes............................................................. 15
J. Acknowledgement................................................... 15
V. REPRESENTATIONS AND WARRANTIES OF BIRMAN............................. 15
A. Organization, Standing and Corporate Authority of Birman.......... 15
B. No Restrictions Upon Birman....................................... 15
C. Brokers, Finders and Investment Advisors.......................... 15
D. MedSouth's Purchase of Common Stock............................... 16
VI. COVENANTS OF CANTON AND THE SHAREHOLDERS............................. 16
A. Redemption of Shares.............................................. 16
B. MedSouth Services Agreement....................................... 16
C. Conduct of Canton Pending Closing................................. 16
D. Access Pending Closing............................................ 16
E. Consents of Third Parties......................................... 16
F. Shareholders Agreement............................................ 17
G. Closing........................................................... 17
H. Form A Order...................................................... 17
I. Books and Records................................................. 17
VII. COVENANTS OF BIRMAN.................................................. 17
A. Closing........................................................... 17
B. Sale to Physicians................................................ 17
C. Name Change....................................................... 17
VIII. RESTRICTIVE COVENANTS................................................ 17
A. Restrictive Covenant.............................................. 17
B. Confidentiality................................................... 18
IX. DELIVERY OF CLOSING DOCUMENTS........................................ 19
A. Officer's Certificate............................................. 19
B. Shareholders' Consents............................................ 19
C. Books and Records................................................. 19
D. Certificates...................................................... 19
E. Officer's Certificate............................................. 19
F. Preferred Stock Certificates...................................... 19
G. Redeemed Shares Certificates...................................... 19
H. Common Stock Certificates......................................... 20
I. Preferred Stock Consideration..................................... 20
J. Redeemed Shares Consideration..................................... 20
K. Birman/Canton Note................................................ 20
L. Canton/Shareholder Note........................................... 20
M. Birman/Shareholder Note........................................... 20
N. Common Stock Consideration........................................ 20
O. MedSouth Services Agreement....................................... 20
P. Officer's Certificate............................................. 20
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SECTION PAGE
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Q. Directors' Consents..................................................... 20
R. Certificates............................................................ 20
S. Shareholders Agreement.................................................. 20
T. List of Shareholders.................................................... 20
U. Resignations............................................................ 20
V. Additional Documents.................................................... 20
X. CONDITIONS TO OBLIGATION OF BIRMAN TO CLOSE................................ 20
A. Representations and Warranties.......................................... 20
B. Form A Order............................................................ 20
C. Performance............................................................. 20
D. Redemption of Common Stock.............................................. 20
E. Issuance of Preferred Stock............................................. 20
F. Corporate Books......................................................... 20
G. Resignations............................................................ 22
H. Proof of Good Standing.................................................. 22
I. Certificates of Canton and the Shareholders............................. 22
J. Schedules............................................................... 22
K. Exhibits................................................................ 22
L. MedSouth Services Agreement............................................. 22
M. Proof of Good Standing.................................................. 22
O. Shareholders Agreement.................................................. 22
P. Receipt of Documents.................................................... 22
XI. CONDITIONS TO OBLIGATION OF CANTON AND THE SHAREHOLDERS TO CLOSE........... 23
A. Representations and Warranties.......................................... 23
B. Performance............................................................. 23
C. Certificate of Birman................................................... 23
XII. TERMINATION................................................................ 23
A. Termination due to Legislation.......................................... 23
B. Termination by the Parties.............................................. 23
XIII. INDEMNIFICATION AND SURVIVAL............................................... 24
A. Indemnification of Canton............................................... 24
B. Indemnification of the Shareholders..................................... 35
C. Procedure for Indemnification........................................... 35
D. Survival................................................................ 26
XIV. MISCELLANEOUS.............................................................. 27
A. Written Agreement to Govern............................................. 27
B. Severability............................................................ 27
C. Notices................................................................. 27
D. Survival................................................................ 28
E. Assignment.............................................................. 28
F. Counterparts............................................................ 28
G. Law to Govern........................................................... 28
H. Successors and Assigns.................................................. 28
I. Further Assurances...................................................... 28
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SECTION PAGE
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J. Gender, Number and Headings.............................................. 28
K. Schedules and Exhibits................................................... 28
L. Waiver of Provisions..................................................... 29
M. Expenses................................................................. 29
N. Recitals................................................................. 29
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LIST OF SCHEDULES AND EXHIBITS
I. Schedules
Schedule III.A. Canton's Articles of Incorporation,
Bylaws, Shareholders and Officers and Directors
Schedule III.B. Foreign Jurisdiction
Schedule III.F. Financial Statements
Schedule III.H. Liabilities
Schedule III.I. Accounts and Notes Receivable
Schedule III.J. Real Property
Schedule III.K. Compliance with Law
Schedule III.L. Inventory and Tangible Personal Property
Schedule III.M. Litigation
Schedule III.P. Contracts and Offers
Schedule III.Q. Intellectual Property
Schedule III.R. List of Employees and Contractors
Schedule III.R.1. Data Bank Reports
Schedule III.S. Insurance
Schedule III.T. Accounts
Schedule III.W. Computer Software
Schedule IV.A. MedSouth's Articles of Incorporation
II. Exhibits
Exhibit II.C. Birman/Canton Note
Exhibit II.F. Canton/Shareholder Note
Exhibit II.J. Birman/Shareholder Note
Exhibit VI.B. MedSouth Services Agreement
Exhibit VI.F. Shareholders Agreement
Exhibit XIV.C. List of Shareholders' Addresses
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is entered into this
____ day of ______________ 1996, by and among BIRMAN MANAGED CARE, INC., a
Tennessee corporation ("Birman"), CANTON MANAGEMENT GROUP, INC., a Mississippi
health maintenance organization ("Canton"); and WESLEY PRATER, M.D. ("Prater"),
LARRY COOPER, M.D. ("Cooper"), CALVIN RAMSEY, M.D. ("Ramsey"), L.C. TENNIN, M.D.
("Tennin"), LOUIS SADDLER, M.D. ("Saddler"), JAMES GOODMAN, PH.D. ("Goodman"),
VIC CARACCI ("Caracci"), MICHAEL T. CARACCI ("M. Caracci"), ROBERT TEAGUE,
M.S.W. ("Teague"), VINCENT CARACCI ("V. Caracci"), CHARLIE HILLS ("Hills"),
HAROLD WHEELER, M.D. ("Wheeler"), STEPHANIE TUCKER ("Tucker"), WINIFRED FULGHAM
("Fulgham") and JOYCE JOHNSON ("Johnson"), (Prater, Cooper, Ramsey, Tennin,
Saddler, Goodman, Caracci, M. Caracci, Teague, V. Caracci, Hills, Wheeler,
Tucker, Fulgham and Johnson are sometimes collectively referred to herein as the
"Shareholders" and individually referred to as a "Shareholder").
W I T N E S E T H:
WHEREAS, Progressive Health Management, Inc. ("Progressive") was
incorporated in Mississippi on October 3, 1993, for the purpose of providing
health services to Mississippi Medicaid enrollees and, on February 15, 1994,
obtained a certificate of authority (the "Certificate of Authority") to transact
the business of a health maintenance organization in Mississippi;
WHEREAS, pursuant to the Certificate of Authority, on April 17, 1995,
the Mississippi State Department of Health allowed Progressive to provide health
care services in Madison, Attala, Carroll, Grenada, Holmes, Humphreys, Leake,
Leflore, Montgomery and Yazoo Counties in Mississippi;
WHEREAS, on May 6, 1994, Progressive was merged with and into Canton;
WHEREAS, Canton has authorized One Hundred Thousand (100,000) shares of
Class A voting capital stock (the "Common Stock"), all of which Class A Common
Stock is issued and outstanding;
WHEREAS, Canton has authorized One Hundred Thousand (100,000) shares of
Class B non-voting capital stock, none of which are issued or outstanding;
WHEREAS, Canton has authorized One Million (1,000,000) shares of
non-voting Preferred Stock (the "Preferred Stock"), none of which are issued or
outstanding;
WHEREAS, as of the date first written above, the Shareholders are the
record and beneficial owners of all of the issued and outstanding shares of
Common Stock as follows:
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SHAREHOLDERS SHARES OF COMMON STOCK
Prater 10,000
Cooper 10,000
Ramsey 10,000
Tennin 10,000
Saddler 10,000
Goodman 10,000
Caracci 10,000
M. Caracci 10,000
Teague 5,500
V. Caracci 4,500
Hills 4,000
Wheeler 2,000
Tucker 2,000
Fulgham 1,000
Johnson 1,000
WHEREAS, Canton does not have any contracts with the State of
Mississippi, any payor or any consumer of health care services to provide any
services for any patients or enrollees;
WHEREAS, Canton meets the State of Mississippi minimum cash insolvency
reserve requirements of Two Hundred Fifty Thousand Dollars ($250,000.00) as of
December 31, 1995, and Five Hundred Thousand Dollars ($500,000.00) as of June
30, 1996;
WHEREAS, Canton has obtained, maintains and intends to maintain a valid
license to operate a health maintenance organization in Mississippi;
WHEREAS, Birman has submitted or intends to submit to the Mississippi
State Department of Insurance (the "MSDI") all forms and documents required in
connection with MSDI's approval of Birman's proposed acquisition of ninety-five
percent (95%) of the Common Stock that remain outstanding subsequent to the
redemption of certain shares of Common Stock as described in Section I. below
and one hundred percent (100%) of the Preferred Stock of Canton and Birman's
subsequent sale of Common Stock to MedSouth, Inc., a Mississippi corporation
("MedSouth") representing twenty-six percent (26%) of the then outstanding
Common Stock (the "Form A Order"), such that MSDI:
A. Allows Birman to acquire Thirty-Two Thousand Seven Hundred
Fifty-Eight and Sixty-Two One-Hundredths (32,758.62) shares of Common
Stock from the Shareholders and One Million (1,000,000) shares of
Preferred Stock from Canton;
B. States that Canton's right to transact the business of
insurance pursuant to the Certificate of Authority will continue to be
in compliance with the requirements to operate a health maintenance
organization in Mississippi immediately after the Closing (as defined
below); and
C. Approves a name change of Canton to Care3, Inc. ("Care3").
WHEREAS, at or prior to the Closing, Canton will redeem from the
Shareholders Sixty-Five Thousand Five Hundred Seventeen and Twenty-Four
One-Hundredths (65,517.24) shares of Common Stock
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free and clear of any and all liens, claims, equities, restrictions or
limitations on voting rights or encumbrances of any nature whatsoever;
WHEREAS, at the Closing, Canton shall issue to Birman and Birman shall
purchase from Canton One Million (1,000,000) shares of Preferred Stock, which
shall constitute all of the issued and outstanding Preferred Stock;
WHEREAS, at the Closing, the Shareholders shall sell to Birman, in the
aggregate, and Birman shall purchase from the Shareholders, Thirty-Two Thousand
Seven Hundred Fifty-Eight and Sixty-Two One-Hundredths (32,758.62) shares of
Common Stock;
WHEREAS, immediately following the Closing, Birman shall sell to
MedSouth and MedSouth shall purchase from Birman Eight Thousand Nine Hundred
Sixty-Five and Fifty-One-Hundredths (8,965.51) shares of Common Stock;
WHEREAS, after the Closing and subject to the approval of the Board of
Directors of Care3 and the terms and conditions of the Shareholders Agreement
attached hereto as Exhibit VI.F., Birman agrees to sell up to Three Thousand One
Hundred Three and Forty-Five One-Hundredths (3,103.45) shares of Common Stock
owned by Birman to one or more physicians or an entity formed by such physicians
to hold the Common Stock, who enter into agreements to provide medical services
to Care3 (the "Physicians");
WHEREAS, after the consummation of all of the transactions contemplated
under this Agreement, and assuming the consummation of the sale of up to Three
Thousand One Hundred Three and Forty-Five One-Hundredths (3,103.45) shares of
Common Stock owned by Birman to the Physicians, the parties anticipate that the
shares of outstanding Common Stock will be owned as follows:
SHAREHOLDERS SHARES PERCENTAGE
------------ ------ ----------
Birman 20,689.66 60%
MedSouth 8,965.51 26%
Physicians 3,103.45 9%
Shareholders 1,724.14 5%
Total 34,482.76 100%
NOW, THEREFORE, in consideration of the mutual agreements set forth
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto do hereby agree as follows:
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SECTION I.
REDEMPTION, PURCHASE AND SALE OF SHARES
A. AGREEMENT TO PURCHASE AND SELL BETWEEN BIRMAN, CANTON AND THE
SHAREHOLDERS. At the Closing (as defined below), in reliance upon the
representations, warranties, covenants and agreements contained herein and
subject to all of the terms and conditions hereof:
1. Canton shall sell, assign, transfer and deliver to Birman
and Birman shall purchase One Million (1,000,000) shares of Preferred
Stock from Canton for an aggregate purchase price of One Million
Dollars ($1,000,000.00), payable as set forth in Section II.
2. The Shareholders shall sell, assign, transfer and deliver
to Canton and Canton shall redeem Sixty-Five Thousand Five Hundred
Seventeen and Twenty-Four One-Hundredths (65,517.24) shares of Common
Stock from the Shareholders for an aggregate purchase price of One
Million Dollars ($1,000,000.00), payable as set forth in Section II.
3. The Shareholders shall sell, assign, transfer and deliver
to Birman and Birman shall purchase Thirty-Two Thousand Seven Hundred
Fifty Eight and Sixty-Two One-Hundredths (32,758.62) shares of Common
Stock from the Shareholders for a purchase price of Five Hundred
Thousand Dollars ($500,000.00), payable as set forth in Section II.
The transaction contemplated in this Paragraph A. of Section I. shall
result in Birman's purchase from the Shareholders consisting of ninety-five
percent (95%) of the then outstanding Common Stock and Birman's purchase of one
hundred percent (100%) of the Preferred Stock. In consideration for Birman's
purchase of Common Stock and Preferred Stock herein, Birman shall pay an
aggregate purchase price equal to One Million Five Hundred Thousand Dollars
($1,500,000.00), payable as set forth in Section II.
B. AGREEMENT TO PURCHASE AND SELL BETWEEN BIRMAN AND MEDSOUTH. At the
Closing, and after consummation of the transaction contemplated in Paragraph A.
of this Section I., in reliance upon the representations, warranties, covenants
and agreements contained herein and subject to all of the terms and conditions
hereof, MedSouth shall purchase from Birman and Birman shall sell to MedSouth,
Eight Thousand Nine Hundred Sixty-Five and Fifty-One-Hundredths (8,965.51)
shares of Common Stock then issued and outstanding for a purchase price equal to
Eight Hundred Ninety-Six and Fifty-Five One-Hundredths Dollars ($896.55) and
other valuable consideration.
C. CLOSING. The consummation of all of the transactions described in
this Section I. shall commence at 10:00 a.m. on __________, 1996 at the offices
of ____________________, or at such other time, date and place as the parties
hereto shall mutually agree (the "Closing").
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SECTION II.
PAYMENT TERMS
A. ISSUANCE OF PREFERRED STOCK. At the Closing, Canton shall issue to
Birman, and Birman shall purchase from Canton, One Million (1,000,000) shares of
Preferred Stock having the terms set forth below, which shall constitute all of
the issued and outstanding Preferred Stock. Each share of the Preferred Stock
shall have a par value of One Dollar ($1.00). Upon a liquidation of Canton, no
distributions shall be made in respect of Common Stock until the holder of each
share of the Preferred Stock has received the par value thereof. Canton shall
have the right at any time to redeem all or any portion of the Preferred Stock
in exchange for the sum of the par value of the shares of Preferred Stock being
redeemed. Canton shall not pay any dividends or make any other distributions of
any kind in respect of the Common Stock of Canton unless and until all of the
outstanding shares of Preferred Stock have been redeemed as provided above.
B. PAYMENT OF PREFERRED STOCK. In exchange for the Preferred Stock, at
Closing, Birman shall deliver to Canton: (1) cash or other immediately available
funds in the aggregate amount of Seven Hundred Thousand Dollars ($700,000.00);
and (2) a promissory note in the initial principal amount of Three Hundred
Thousand Dollars ($300,000.00) and having the terms described in Paragraph C. of
this Section II. (the "Birman/Canton Note").
C. BIRMAN/CANTON NOTE. The Birman/Canton Note shall: (1) provide that
the principal amount thereof shall be payable in two installments, the first
installment in the amount of Two Hundred Thousand Dollars ($200,000.00) payable
upon the first anniversary of the Closing and the second installment in the
amount of One Hundred Thousand Dollars ($100,000.00) payable upon the second
anniversary of the Closing; (2) shall provide for the payment of simple interest
at the rate of two percent (2%) per annum on the outstanding principal balance
from time to time, such interest, to the extent accrued, to be paid concurrently
with the payments of principal as described above; and (iii) shall otherwise be
in the form attached hereto as Exhibit II.C. and incorporated herein by this
reference. Upon the issuance of the Preferred Stock and the delivery of the
payment provided above in Paragraph B. of this Section II., the Preferred Stock
shall be fully paid and non-assessable for all purposes, and Birman shall not be
obligated to make any additional payment or transfer any further consideration
in exchange for the Preferred Stock.
D. REDEMPTION OF COMMON STOCK. At or prior to the Closing, the
Shareholders shall sell, assign, transfer and deliver to Canton, an aggregate of
Sixty-Five Thousand Five Hundred Seventeen and Twenty-Four One-Hundredths
(65,517.24) shares of Common Stock of Canton (the "Redeemed Shares"), free and
clear of any and all liens, claims, equities, restrictions or limitations on
voting rights or encumbrances of any nature whatsoever.
E. PAYMENT FOR REDEEMED SHARES. In exchange for the Redeemed Shares, at
or prior to Closing, Canton shall deliver to the Shareholders: (1) cash or other
immediately available funds in the aggregate amount of Seven Hundred Thousand
Dollars ($700,000.00); and (2) one or more promissory notes having an aggregate
initial principal amount of Three Hundred Thousand Dollars ($300,000.00) and
having the terms described below (individually and collectively referred to as
the "Canton/Shareholder Note").
F. CANTON/SHAREHOLDER NOTE. The Canton/Shareholder Note shall: (1)
shall provide that the principal amount thereof shall be payable in two
installments, the first installment in the aggregate amount of Two Hundred
Thousand Dollars ($200,000.00) payable upon the first anniversary of the Closing
and the second installment in the aggregate amount of One Hundred Thousand
Dollars ($100,000.00) payable upon the second anniversary of the Closing; (2)
shall provide for the payment of simple interest at the rate of two (2) percent
(2%) per annum on the outstanding principal balance from time to time, such
interest, to the extent
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accrued, to be paid concurrently with the payments of principal as described
above; and (3) shall otherwise be in the form attached hereto as Exhibit II.F.
and incorporated herein by this reference. Canton shall deliver and allocate the
payment for the Redeemed Shares described above among the Shareholders in such
proportion as the Shareholders may direct in a written notice signed by each
Shareholder and delivered to Canton not less than fifteen (15) days prior to the
Closing. Upon the redemption of the Redeemed Shares and the delivery of the
payment provided above in Paragraph E. of this Section II., the consideration
for the Redeemed Shares shall be fully paid and non-assessable for all purposes,
and Canton shall not be obligated to make any additional payment or transfer any
further consideration in exchange for the Redeemed Shares.
G. GUARANTY OF CANTON/SHAREHOLDER NOTE. The payment of the
Canton/Shareholder Note shall be secured by a guaranty by Birman, pursuant to
which Birman shall guaranty the performance of Canton's obligations under each
Canton/Shareholder Note, for so long as the Birman/Canton Note shall remain due
and payable.
H. PURCHASE AND SALE OF COMMON STOCK. The Shareholders shall sell,
assign, transfer and deliver to Birman an aggregate of Thirty-Two Thousand Seven
Hundred Fifty-Eight and Sixty-Two One-Hundredths (32,758.62) shares of Common
Stock, free and clear of any and all liens, claims, equities, restrictions or
limitations on voting rights or encumbrances of any nature whatsoever.
I. PAYMENT FOR COMMON STOCK. As consideration for the Common Stock, at
Closing, Birman shall deliver to the Shareholders one or more promissory notes
having an aggregate initial principal amount of Five Hundred Thousand Dollars
($500,000.00) and having the terms described in Paragraph J. of this Section II.
(individually or collectively referred to as the "Birman/Shareholder Note").
J. BIRMAN/SHAREHOLDER NOTE. The Birman/Shareholder Note shall: (1)
provide for the payment of principal in three installments, the first
installment in the aggregate amount of One Hundred Thousand Dollars
($100,000.00) payable on the second anniversary of the date of Closing, and the
second and third installments in the aggregate amounts of Two Hundred Thousand
Dollars ($200,000.00) payable on each of the third and fourth anniversaries of
the Closing; (2) shall provide for the payment of simple interest on the
principal balance outstanding from time to time at the rate of two percent (2%)
per annum, payable, to the extent accrued, concurrently with the payments of
principal as described above; and (3) shall otherwise be in the form attached
hereto as Exhibit II.J. and incorporated herein by this reference. Birman shall
deliver and allocate the payment for the Common Stock described above in
Paragraph I. of this Section II. among the Shareholders in such proportion as
the Shareholders may direct in a written notice signed by each Shareholder and
delivered to Birman not less than fifteen (15) days prior to the Closing. Upon
the purchase of the Common Stock and the satisfaction of the Birman/Shareholder
Note, the Common Stock shall be fully paid and non-assessable for all purposes
and Birman shall not be obligated to make any additional payment or transfer any
further consideration in exchange for the Common Stock.
K. PURCHASE AND SALE OF COMMON STOCK BETWEEN BIRMAN AND MEDSOUTH. At
Closing and after completion of the transactions contemplated in Paragraphs A.
through K. of this Section II., subject to the representations and warranties
contained in Section III and Section IV hereto, Birman shall sell to MedSouth,
and MedSouth shall purchase from Birman, Eight Thousand Nine Hundred Sixty-Five
and Fifty-One One-Hundredths (8,965.51) shares of Common Stock, free and clear
of any and all liens, claims, equities, restrictions or limitations on voting
rights or encumbrances of any nature whatsoever. As consideration for the shares
of Common Stock, at Closing, MedSouth shall deliver to Birman Eight Hundred
Ninety-Six and
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Fifty-Five One-Hundredths Dollars ($896.55). Upon the purchase of Common Stock
and MedSouth's delivery of the payment provided for in this Paragraph K., the
Common Stock shall be fully paid and non-assessable for all purposes and
MedSouth shall not be obligated to make any additional payment or transfer any
further consideration in exchange for the Common Stock.
SECTION III.
REPRESENTATIONS AND WARRANTIES OF
THE SHAREHOLDERS AND CANTON
The Shareholders and Canton hereby jointly and severally represent and
warrant to Birman, as of the date hereof and as of the Closing, as follows:
A. ORGANIZATION, STANDING AND CORPORATE AUTHORITY OF CANTON. The
Shareholders and Canton represent and warrant that Canton is a corporation which
is duly organized, validly existing and in good standing under the laws of the
State of Mississippi. Schedule III.A. hereto contains a complete and correct
copy of Canton's Articles of Incorporation, as amended, and By-Laws, as amended.
Canton's execution and delivery of this Agreement, and Canton's performance of
its obligations hereunder, have been duly authorized by all necessary corporate
action. Pursuant to the requirements of Section 79-4-7.28 of the Mississippi
Business Corporation Act, Canton's Articles of Incorporation shall deny
cumulative voting for the election of directors of Canton. This Agreement is a
valid and binding agreement of Canton enforceable against Canton in accordance
with its terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws and except as may be limited by the
unavailability of equitable remedies. Canton has all necessary corporate power
and authority to engage in the business in which it is presently engaged, to
enter into any contractual arrangement to which it is presently subject, to own
any and all property now owned by it, and to lease any and all of the property
used by it under any lease. In addition, Canton is not subject to any
restriction, agreement, law, judgment or decree which would prohibit or be
violated by the execution and delivery hereof or the consummation of the
transactions contemplated hereby, or which could result in the acceleration of
any indebtedness of Canton. Fifteen (15) days prior to the Closing, Canton shall
have made Canton's corporate minutes and stock transfer records available to
Birman, which shall contain minutes and consents for all actions taken by the
Shareholders and directors for which such consent or approval is required.
Schedule III.A. hereto also contains a complete and accurate list of the
officers and directors of Canton.
B. QUALIFICATION. Except as described on Schedule III.B., Canton is not
qualified to do business as a foreign corporation in any jurisdiction. Any
ownership and leasing of property and maintenance of offices and conduct of
business activities by Canton does not require Canton to qualify to do business
as a foreign corporation in any jurisdiction in which the failure to so qualify
could have a material adverse effect on the properties, assets, results of
operations or financial condition of Canton taken as a whole.
C. CAPITAL STRUCTURE OF CANTON. Canton has authorized and issued One
Hundred Thousand (100,000) issued and outstanding shares of Class A voting
Common Stock, all of which is owned by the Shareholders, and One Hundred
Thousand (100,000) shares of Class B non-voting common stock, none of which is
issued or outstanding. Upon the Shareholders redemption of the Redeemed Shares
as set forth in Paragraph D of Section II, Thirty-Four Thousand Four Hundred
Eighty-Two and Seventy-Six Hundredths (34,482.76) shares of Common Stock shall
be issued and outstanding. Prior to the Closing, Canton shall have
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authorized One Million (1,000,000) shares of Preferred Stock. Except as
otherwise specifically provided herein, there is no obligation, option or
warrant which is or may be binding upon Canton to issue, sell, redeem, purchase
or exchange any of its capital stock or any right relating thereto, and no
obligation, debt or liability of Canton is convertible into capital stock of
Canton.
D. TITLE TO SHARES. Except for the Shareholders, no other person or
entity owns any shares of stock in Canton. Each Shareholder is the legal and
beneficial owner and holder of the number of shares of Common Stock owned by
such Shareholder as set forth in the recitals hereto, and has good title to such
shares of Common Stock. Each Shareholder has full voting power over such shares
of Common Stock without restriction by any proxy, shareholders agreement, voting
agreement or voting trust, and, has full right, power and authority to sell such
shares of Common Stock and to deliver such shares of Common Stock in the manner
provided for in this Agreement free and clear of any and all liens, claims,
inequities, security interests or encumbrances whatsoever. The Shareholders are
not subject to any restriction, law, judgment, order of court or decree which
could prohibit or be violated by the execution and delivery of this Agreement or
by the consummation of the transactions contemplated herein.
E. SUBSIDIARIES. Canton does not have any subsidiaries and does not own
stock in any other corporation.
F. FINANCIAL STATEMENTS. Schedule III.F. hereto contains a complete
copy of each of Canton's balance sheets, statements of operations and retained
earnings, statements of operating expenses, and statements of changes in
financial position of Canton as of the Closing and for the fiscal years ending
in 1994 and 1995, including the notes thereto and the accountant's reports
thereon. The financial statements identified above, together with any interim
financial statements delivered to Birman are collectively referred to herein as
the "Financial Statements." Except as otherwise disclosed in Schedule III.F.,
each of the Financial Statements has been prepared in accordance with generally
accepted accounting principles consistently applied, and fairly presents the
financial condition of Canton as at the dates thereof and for the periods then
ended, subject, in the case of such interim Financial Statements, to normal
year end adjustments. All Financial Statements have been or will be prepared by
certified public accountants.
G. EVENTS SUBSEQUENT TO THE CLOSING. Except as expressly contemplated
by the terms hereof, or agreed to by Birman in writing, there has not been:
1. Any damage, destruction, loss or forfeiture (whether or not
covered by insurance) which has or which Canton reasonably expects to
have a material adverse effect on the assets, results of operations or
financial condition of Canton;
2. Any direct or indirect redemption, purchase or other
acquisition by Canton of any capital stock of Canton or any
declaration, setting aside or payment of any dividend or distribution
on any capital stock of Canton;
3. Any increase in the compensation or benefits payable or to
become payable by Canton to any of its directors, officers or
employees, other than increases in the ordinary course of Canton's
business;
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4. Any assumption by Canton of any indebtedness for borrowed
money or of any other indebtedness or of any liability in respect
thereof, or any commitment by Canton for such assumption;
5. Any contractual commitment by Canton to any third party,
other than as provided in this Agreement relating to the provision of
health care services;
6. Any transaction, other than in the ordinary course of
business, involving payments between or among: (a) Canton, (b) the
Shareholders, (c) any officer or director of Canton, (d) any relative
of any Shareholder, officer or director of Canton, or (d) any person,
firm, trust, partnership or corporation controlling, controlled by, or
under common control with any Shareholder, officer or director of
Canton;
7. Any waiver or surrender by Canton of any valuable right or
property;
8. Any change in any accounting procedures or practices by
Canton;
9. Any oral or written notice received by Canton from any of
its providers, enrollees, contracted payors, suppliers or customers
indicating their intention to curtail or terminate, to allow to expire
or not to renew its relationship with Canton, which curtailment or
termination has or may reasonably be expected to have a material
adverse effect on the properties, assets, results of operations or
financial condition of Canton; or
10. Any material or potentially material adverse change
occurring with respect to the properties, assets, results of
operations, financial condition or prospects of Canton.
H. LIABILITIES. Except as disclosed in Schedule III.H. hereto, or
otherwise expressly disclosed herein or in the Financial Statements, including
any notes thereto, Canton has no material or potentially material liabilities of
any kind whatsoever, whether absolute or contingent and whether or not currently
determinable.
I. ACCOUNTS AND NOTES RECEIVABLE. Other than as provided for in
Exhibits II.C, II.F. and II.J., all accounts receivable and notes receivable of
Canton are set forth on Schedule III.I. hereto and arose in the ordinary course
of Canton's business. The accounts receivable comply with all applicable
federal, state and local laws and no assignment of such accounts receivable has
been made in violation of the Social Security Act.
J. REAL PROPERTY. Schedule III.J. hereto lists any and all real
property owned or leased by Canton or any of its Shareholders, and used in the
conduct of Canton's business, including copies of any and all leases, deeds,
title insurance policies, survey, mortgage documents, environmental reports or
investigations, zoning defects, building code violations or any other matter
relating to any real property.
K. COMPLIANCE WITH LAW. Except as disclosed on Schedule III.K. hereto,
Canton is not in violation or potential violation of any applicable statute,
law, ordinance, decree, order, rule, regulation, franchise, permit,
qualification, certification, authorization or license of any governmental body
which may result in a material adverse effect on the business properties,
assets, results of operations or financial condition of Canton. Without limiting
the generality of the foregoing, except as disclosed on Schedule III.K. hereto:
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1. There is no pending or threatened claim, action,
proceeding, hearing, lawsuit or investigation concerning Canton arising
out of or based upon any statute, ordinance or regulation which could
have a material adverse effect on the properties, assets, results of
operations or financial condition of Canton and which relates to: (a)
the provision of medical or health care related services, (b) the
referral of medical or health care related services, (c)
anti-competitive behavior, including but not limited to price fixing,
group boycotts or tying arrangements, (d) fee splitting, (e) physician
incentive plans, (f) submission of claims for reimbursement, (g)
accounts receivable, (h) the Medicaid or Medicare programs, (i)
utilization review, (j) credentialing, (k) medical records, (l)
discrimination in employment, (m) employment practices, (n)
occupational safety, (o) health standards, or (p) energy or
environmental matters;
2. There are no permits, licenses, authorizations,
certifications, qualifications or notices which have not been obtained
and/or filed and which are required to be obtained and/or filed for the
operation of the business of Canton under federal, state or local laws
relating to insurance or the provision of medical care, the failure of
which to obtain and/or file could have a material adverse effect on the
properties, assets, results of operations or financial condition of
Canton taken as a whole, and Canton is in compliance with all terms and
conditions of such required permits, licenses and authorizations,
certifications, qualifications or notices;
3. There is no pending or, to Canton's knowledge, proposed
change in any law, regulation, code, ordinance or industry standard
specifically regulating the health care insurance industry of which
Canton is a part which could have a material adverse effect on the
properties, assets, results of operation or financial condition of
Canton taken as a whole;
4. There is no contract or agreement with the State of
Mississippi, the Health Care Financing Administration or other
governmental payor or consumer of health care services to provide any
services for any enrollees nor is there any participant enrolled in a
health plan offered by Canton for the provision of health services;
5. Canton has met the State of Mississippi minimum cash
insolvency reserve requirements of Two Hundred Fifty Thousand Dollars
($250,000.00) as of December 31, 1995, and Five Hundred Thousand
Dollars ($500,000.00) as of June 30, 1996, and Canton has obtained and
maintained a valid license to operate a health maintenance organization
in Mississippi effective as of the Closing and to Canton's knowledge
there is no reason for any subsequent non-renewal, suspension or
termination of such license; and
6. Canton agrees to cooperate with all necessary steps to
cause MSDI to issue a Form A Order approving the transactions
contemplated pursuant to this Agreement.
L. INVENTORY AND TANGIBLE PERSONAL PROPERTY. Canton has good and
marketable title to any inventory and tangible personal property including any
equipment, fixtures or furniture, as listed on Schedule III.L. hereto, used by
Canton in the ordinary conduct of its business and in good and usable condition,
all of which is, except as set forth on Schedule III.L. hereto, free and clear
at the Closing of any liens, claims, security interests, options, leases,
restrictions or encumbrances which adversely affect the marketability of title
thereto. Canton does not hold any property to which any third party has title,
nor does Canton hold title to any property in the possession of others (other
than as contemplated by this Agreement and other than goods in
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transit from suppliers or to customers in the ordinary course of business, and
other than machinery and equipment in the possession of others for repair or
modification).
M. LITIGATION. Except as disclosed on Schedule III.M. hereto, there is
no suit, arbitration, claim, action, investigation or proceeding now pending or
threatened, against Canton before any court, arbitrator, administrative or
regulatory body or governmental agency, which could result in a judgment, award,
order, decree, liability or other determination which could have a material
adverse effect on the business, properties, assets, results of operations or
financial condition of Canton or which would prevent or interfere with the
consummation of any transaction contemplated hereby or declare the same to be
unlawful or cause the rescission thereof. No judgment, award, order, decree or
other determination has been made or entered by any court, arbitrator,
administrative or regulatory body or governmental agency which remains
unsatisfied and which could have a material adverse effect on the properties,
assets, results of operations or financial condition of Canton or which could
prevent or interfere with the consummation of any transaction contemplated
hereby. The provisions of this Paragraph M. of this Section III. shall include
any claim of malpractice or professional liability, stop order, audit, inquiry,
professional review action, claim of breach of contract, consent decree,
administrative action, quality assurance review, licensure denial, licensure
suspension or licensure non-renewal or otherwise related to the provision of
medical services, operation as a health maintenance organization, or
reimbursement by the Medicare or Medicaid programs. Schedule III.M. shall
include a detailed description of the factual context, status and extent of any
actual or potential liability, action or proceeding.
N. CONSENTS. Other than the Form A Order, Canton is not required to
obtain any consent, certification, authorization, consent, license, clearance or
order of, declaration or notification to, or filing or registration with, any
governmental or regulatory authority or body, court or other person (including
any lessor, customer, supplier or lender) to permit the consummation of the
transactions contemplated hereby. In addition, Canton has obtained each
governmental license, certification, qualification and permit required for the
conduct of the business of Canton, the failure of which to obtain could have a
material adverse effect on the properties, assets, results of operations or
financial condition of Canton. Such licenses and permits are valid and in full
force and effect, and none of such licenses or permits will be terminated or
impaired or become terminable as a result of the transactions contemplated
hereby, which termination or impairment could have a material adverse effect on
the properties, assets, results of operations or financial condition of Canton.
O. TAXES. Canton has properly and accurately filed all required
federal, state and local tax returns or reports relating to its businesses, and
have paid all taxes due with respect thereto other than for taxes not yet due
and duly accrued on the Financial Statements. Canton does not have any federal,
state or local tax liabilities other than those reflected on the aforesaid tax
returns with respect to the periods covered by said tax returns. Canton has not,
directly or indirectly, received any notice that any audit of any federal, state
or local tax return of Canton is in progress or pending, and no waiver of any
statute of limitations has been given and is in effect with respect to the
assessment of any taxes against Canton, or any of its properties or assets.
True, correct and complete copies of the federal and state income tax returns
for Canton for the years 1993, 1994 and 1995, along with proof of the payments
of the taxes due as reflected therein, have been delivered to Birman.
P. CONTRACTS. Except as set forth in Schedule III.P. hereto, there is
no contract, agreement, commitment or arrangement ("Contract"), or any
outstanding unaccepted offer which provides for a term of one (1) year or
longer, has a value of Five Thousand Dollars ($5000.00) or more, and is not
cancellable within
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sixty (60) days ("Offer"), whether written or oral, express or implied, fixed or
contingent, to which Canton is a party or by which it or any property or asset
of Canton is bound:
1. which pertains to the provision of any medical services for
or on behalf of any person or entity, including, but not limited to any
group enrollment agreement, individual enrollment agreement, evidence
of coverage or enrollee handbooks;
2. which pertains to any governmental entity, including but
not limited to any entity which oversees the Medicare or Medicaid
programs;
3. which pertains to agreement to provide any medical service
by any provider, supplier or vendor of medical or health care related
services, including the method of compensation;
4. which pertains to any indebtedness for borrowed money of
Canton or indebtedness of any other person which is guaranteed by
Canton or secured by the assets of Canton (including, but not limited
to loan agreements, financing agreements, lease-purchase arrangements,
security agreements, guarantees, agreements to purchase goods or
services on terms other than customary payment terms of the vendor
thereof, and agreements to loan funds to, or make investments in, any
other party);
5. which is a conditional sales contract, chattel mortgage,
equipment lease agreement, or other security or lease arrangement with
respect to personal property owned or used by Canton;
6. which is an agreement with or for the benefit of Canton,
exclusive of any such agreements which were concluded on an arms-length
basis in the ordinary course of business;
7. which contains covenants or other provisions limiting the
right of Canton to compete in any line of business or with any person
or in any area;
8. which is a license agreement, either as licensor or
licensee;
9. which is between Canton and the Shareholders, including but
not limited to a shareholders agreement;
10. which provides for the lease of any property used in or
related to Canton's business, included, but not limited to, leases of
computer systems and telephone systems;
11. which provides for the sale of any assets of Canton other
than in connection with the ordinary course of business; or
12. which is a purchase commitment for equipment, capital
improvements, repairs, materials, supplies or inventory in magnitude or
quantities in excess of the reasonable requirements of the Canton's
business, or at a price in excess of the current reasonable market
price.
The Shareholders and Canton have delivered to Birman true, correct and
complete copies of all written Contracts and Offers required to be disclosed in
Schedule III.P. hereto, presently in effect or containing any
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continuing obligations. All Contracts to which Canton is a party or by which it
or any of its property or assets is bound are valid and binding obligations of
Canton and are enforceable against Canton in accordance with their terms and are
enforceable against the other parties thereto in accordance with their terms and
are in full force and effect. Neither Canton nor any other party is in default
in the payment of any obligation under, or in the performance of any covenant or
obligation to be performed by it pursuant to, any Contract, which default could
have a material adverse effect on the properties, assets, results of operations
or financial condition of Canton. The execution, delivery and performance of
this Agreement by the parties hereto will not cause Canton to be in default
under any Contract, which default could have a material adverse effect on the
properties, assets, results of operations or financial condition of Canton.
Q. INTELLECTUAL PROPERTY. Schedule III.Q. hereto correctly identifies
any and all issued domestic and foreign patents, patent applications pending,
patent applications in process, written or oral employee invention disclosures,
trademarks, trademark registrations, trademark registration applications,
copyright registrations, inventions, know-how, trade secrets, copyright
registration applications, service marks, service mark registrations, service
mark registration applications, logos, tradenames, and slogans used in the
conduct of the business of Canton, as presently conducted or as presently
planned to be conducted ("Intellectual Property") and all Intellectual Property
currently owned by Canton or licensed to Canton. Canton has not granted any
license to any person with respect to any Intellectual Property, and any
agreements and/or arrangements licensing the Intellectual Property to Canton are
in full force and effect, and the rights of Canton thereunder are free and clear
of all adverse claims, options, liens, charges, security interests, covenants,
conditions, agreements, restrictions, encumbrances and defenses and no default
exists thereunder.
R. EMPLOYEES.
1. Schedule III.R. hereto lists all employees and independent
contractors directly or indirectly retained by Canton and includes
copies of any and all employment agreements and independent contractor
agreements entered into, directly or indirectly, between Canton and any
employee or contractor; any employee manuals, handbooks or similar
materials distributed by Canton; and any licenses and certifications of
any employees or contractors. Canton has properly credentialed all
employed and contracted health care providers, including but not
limited to querying the National Practitioner Data Bank (the "Data
Bank"). Any reports on any employees or contractors are included in
Schedule III.R.1. hereto.
2. Canton does not maintain or otherwise contribute to, and
within the preceding five (5) taxable years Canton has not maintained
or contributed to, any "employee benefit plan" as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), which covers or covered any employee of Canton. Canton
therefore has no liability under ERISA, the Internal Revenue Code or
any other applicable law with respect to any employee benefit plan.
S. INSURANCE. Schedule III.S. hereto correctly identifies all insurance
programs, insurance policies and bonds owned or maintained by Canton and
covering Canton, its business or any assets, properties, operations or personnel
of Canton including, but not limited to all professional liability, casualty,
business interruption, life, disability, managed care liability, health and
workers compensation and fidelity bonds. Such programs, policies and bonds are
in full force and effect. Canton has not received any written notice of
cancellation, termination or non-renewal or denial of liability with respect to
any program, policy or bond. Schedule III.S. shall also include copies of all
claims in respect to such programs or policies.
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T. ACCOUNTS. Schedule III.T. hereto correctly identifies each bank,
securities, commodities or other brokerage or similar account and safe deposit
box or other depository maintained by, or on behalf of, or for the benefit of
Canton, and the name of each person with any power or authority to act with
respect thereto.
U. BROKERS, FINDERS AND INVESTMENT ADVISORS. Canton has not engaged or
authorized any investment advisor, broker, finder or other third party to act on
its behalf, either directly or indirectly, in connection with the transactions
contemplated herein.
V. NO RESTRICTIONS UPON THE SHAREHOLDERS. None of the Shareholders is
subject to any restriction, agreement, law, judgment or decree which would
prohibit or be violated by the execution and delivery hereof or the consummation
of the transactions contemplated hereby, or which could result in the
acceleration of any indebtedness of Canton. This Agreement has been duly
executed and delivered by each Shareholder and constitutes a legal, valid and
binding obligation, enforceable against each Shareholder in accordance with its
terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws, and except as may be limited by the
unavailability of equitable remedies.
W. COMPUTER SOFTWARE. Schedule III.W. hereto lists all computer
software used in connection with Canton's business or licensed by Canton, and
includes such software function, maintenance, support, upgrades and any software
license agreement.
SECTION IV.
REPRESENTATIONS AND WARRANTIES OF MEDSOUTH
In connection with MedSouth's purchase of Eight Thousand Nine Hundred
Sixty-Five and Fifty-One One-Hundredths (8,965.51) shares of Common Stock from
Birman, MedSouth and Richard L. Peden, D.O. ("Peden"), the sole shareholder of
MedSouth, hereby represent and warrant to Birman, as of the date hereof and as
of the Closing, as follows:
A. ORGANIZATION, STANDING AND CORPORATE AUTHORITY OF MEDSOUTH. MedSouth
is a corporation which is duly organized, validly existing and in good standing
under the laws of the State of Mississippi. Schedule IV.A. hereto contains a
complete and correct copy of MedSouth's Articles of Incorporation. Peden is the
sole shareholder of MedSouth. MedSouth's execution and delivery of this
Agreement, and MedSouth's performance of its obligations hereunder, have been
duly authorized by all necessary corporate action. This Agreement is a valid and
binding agreement of MedSouth enforceable against MedSouth in accordance with
its terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws and except as may be limited by the
unavailability of equitable remedies.
B. BROKERS, FINDERS AND INVESTMENT ADVISORS. MedSouth has not engaged
or authorized any other investment advisor, broker, finder or other third party
to act on its behalf, either directly or indirectly, in connection with the
transactions contemplated herein.
C. NO RESTRICTIONS ON MEDSOUTH. MedSouth is not subject to any
restriction, agreement, law, judgment or decree which would prohibit or be
violated by the execution and delivery hereof or the con-
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summation of the transactions contemplated hereby, or which could result in the
acceleration of any indebtedness of MedSouth.
D. INVESTMENT. MedSouth is purchasing shares of Common Stock solely for
investment and for its own account, and not with a view toward resale,
fractionalization or distribution thereof.
E. FAMILIARITY. MedSouth is fully familiar with the financial
condition, operation, capitalization and prospects of Canton.
F. CONSENTS. MedSouth is not required to obtain any consent,
certification, authorization, consent, license, clearance or order of,
declaration or notification to, or filing or registration with, any governmental
or regulatory authority or body, court or other person (including any lessor,
customer, supplier or lender) to permit the consummation of the transactions
contemplated hereby.
G. ACKNOWLEDGEMENT. MedSouth understands and acknowledges that because
the shares of Common Stock have not been registered under the Securities and
Exchange Act of 1934, as amended (the "Securities Act"), for certain applicable
state security laws, the economic risk of the investment must be borne
indefinitely by MedSouth and the shares of Common Stock cannot be sold unless
subsequently registered under the Securities Act and such state laws or an
exemption from such registration is available; such registration under the
Securities Act and such state laws is unlikely at any time in the future; and it
is not anticipated that there will be any market for resale of the Common Stock.
SECTION V.
REPRESENTATIONS AND WARRANTIES OF BIRMAN
Birman hereby represents and warrants to the Shareholders, Canton and
MedSouth, as of the date hereof, as follows:
A. ORGANIZATION, STANDING AND CORPORATE AUTHORITY OF BIRMAN. Birman is
a corporation which is duly organized, validly existing and in good standing
under the laws of the State of Tennessee. Birman's execution and delivery of
this Agreement, and Birman's performance of its obligations hereunder, has been
duly authorized by all necessary corporate action. This Agreement is a valid and
binding agreement of Birman enforceable against Birman in accordance with its
terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws and except as may be limited by the
unavailability of equitable remedies.
B. NO RESTRICTIONS UPON BIRMAN. Birman is not subject to any
restriction, agreement, law, judgment or decree which would prohibit or be
violated by the execution and delivery hereof or the consummation of the
transactions contemplated hereby.
C. BROKERS, FINDERS AND INVESTMENT ADVISORS. Birman has not engaged or
authorized any other investment advisor, broker, finder or other third party to
act on its behalf, either directly or indirectly, in connection with the
transactions contemplated herein.
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D. MEDSOUTH'S PURCHASE OF COMMON STOCK. In respect to MedSouth's
purchase of Eight Thousand Nine Hundred Sixty-Five and Fifty-One One-Hundredths
(8,965.51) shares of Common Stock pursuant to Section II. herein, Birman has
relied on the representations and warranties contained in Section III. of this
Agreement. MedSouth acknowledges that Birman has relied on representations and
warranties made by the Shareholders and Canton to Birman set forth in Section
III.
SECTION VI.
COVENANTS OF CANTON AND THE SHAREHOLDERS
A. REDEMPTION OF SHARES. At or prior to the Closing, Canton shall
redeem Sixty-Five Thousand Five Hundred Seventeen and Twenty-Four One-Hundredths
(65,517.24) shares of Common Stock from the Shareholders and the validly issued
and outstanding shares of Common Stock shall consist solely of Thirty-Four
Thousand Four Hundred Eighty-Two and Seventy-Six One-Hundredths (34,482.76)
shares of Common Stock. As of the Closing, no other class or series of capital
stock of Canton, besides the Common Stock and the Preferred Stock or otherwise
authorized under Canton's Articles of Incorporation attached hereto as Schedule
III.A., is or has been authorized or issued.
B. MEDSOUTH SERVICES AGREEMENT. Canton agrees to enter into or, if an
agreement is currently in effect, maintain its agreement for the provision of
medical services or the arrangement for the provision of medical services by
MedSouth to Canton in the form attached hereto as Exhibit VI.B. (the "MedSouth
Services Agreement").
C. CONDUCT OF CANTON PENDING CLOSING. From the date hereof to and
including the Closing, Canton shall operate its business only in the usual and
ordinary course, consistent with past practice, and shall not (1) mortgage,
pledge or assume any lien, charge or encumbrance, or agree to do so, with
respect to any of its assets; (2) make capital expenditures or enter into
commitments for capital expenditures; (3) purchase or commit to purchase goods
or services other than in the ordinary course of business; (4) agree to render
any services; (5) pay or discharge any long-term liability other than in
accordance with its terms; (6) pay any bonus compensation to any director,
officer or employee; (7) pay any dividend or other distribution with respect to
the Common Stock and shall not declare any such dividend; or (8) take or omit to
take any action the effect of which could render inaccurate any of Canton's
representations and warranties set forth herein as of the Closing.
D. ACCESS PENDING CLOSING. From the date hereof to and including the
Closing, Canton shall provide Birman and its accountants, shareholders,
officers, directors and other representatives the right of full and complete
access to the books, records, offices and other facilities of Canton, during
normal business hours, for the purpose of making such investigation of the
financial condition and operations of Canton as Birman may reasonably deem
necessary.
E. CONSENTS OF THIRD PARTIES. Prior to the Closing, Canton, at its
expense, shall obtain all consents and other approvals required to be obtained
by Canton as a result of the transactions contemplated by this Agreement.
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F. SHAREHOLDERS AGREEMENT. At the Closing, Canton and the Shareholders,
or a corporation formed by such Shareholders, shall execute the form of
Shareholders Agreement attached hereto as Exhibit VI.F. hereto.
G. CLOSING. The Shareholders and Canton shall use their best efforts to
cause the conditions specified in Section X. hereof which requires satisfaction
by Canton to be satisfied at or as soon as practical after the date hereof.
H. FORM A ORDER. Canton covenants and agrees that it will take such
action as is required under applicable law to ensure compliance with the Form A
Order.
I. BOOKS AND RECORDS. In connection with (1) any tax audit of Canton,
(2) the preparation of any tax return of Canton, or (3) any other proper
purpose, Canton shall make available to Birman for inspection or copying at any
reasonable time within five (5) years after the Closing, at Birman's request and
expense, all books and records relating to Canton's business which existed as of
the Closing or relate to any period prior to the Closing.
SECTION VII.
COVENANTS OF BIRMAN
A. CLOSING. Birman shall use all reasonable efforts to cause the
conditions specified in Sections IX. and XI. hereof which require satisfaction
by Birman to be satisfied at or as soon as practical after the date hereof.
B. SALE TO PHYSICIANS. At any time after the Closing, subject to
applicable state and federal laws, including but not limited to securities laws,
insurance laws, and laws governing the operation of the Company, as well as the
terms and conditions of the Shareholders Agreement attached hereto as Exhibit
VI.F., Birman agrees to offer to sell up to Three Thousand One Hundred Three and
Forty-Five One-Hundredths (3,103.45) shares of Common Stock to one or more
Physicians.
C. NAME CHANGE. Canton covenants and agrees that, immediately following
the Closing, it take all necessary steps to cause Canton to change its name to
"Care3, Inc." and that such successor entity shall utilize Canton's federal
employer identification number.
SECTION VIII.
RESTRICTIVE COVENANTS
A. RESTRICTIVE COVENANT. Each of the Shareholders and MedSouth
acknowledges and agrees that, through association with Canton and Birman, each
has and will gain access and introduction to hospitals, health care providers,
payors, managed care companies, insurers, preferred provider organizations,
medical groups and other persons with whom Canton or Birman has contracts and
agreements, with whom Canton and Birman in part depend upon for the continued
maintenance of such contracts and agreements. The Shareholders acknowledge and
agree that Birman has agreed to purchase shares of the Common Stock and the
Preferred Stock from Canton and the Shareholders in part based upon the
Shareholders agreement to abide by
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the restrictive covenants set forth in this Section VIII. In addition, MedSouth
acknowledges and agrees that Birman has agreed to sell shares of Common Stock
representing a twenty-six percent (26%) interest in the then issued and
outstanding Common Stock based in part upon MedSouth's agreement to abide by the
restrictive covenants set forth in this Section VIII. As such, each of the
Shareholders and MedSouth covenants and agrees that, neither MedSouth nor any
Shareholder, while an owner of shares of Common Stock and for a five (5) year
period thereafter, shall, within a ten (10) mile radius of any office or
facility of Canton or Birman (the "Territory"), either directly or indirectly,
on MedSouth's or any Shareholder's own account or as an employee, contractor,
consultant, partner, sole proprietor, officer, director or shareholder of any
other person, or in any other capacity, procure a license to operate or
otherwise actively engage in the operation of a health maintenance organization
in the State of Mississippi (the "Territory").
Each of the Shareholders and MedSouth acknowledges and agrees that the
periods of time, geographical area and business activities described in this
Paragraph A. of Section VIII. are reasonably necessary to protect the legitimate
business interests of Canton, Birman and their successors and assigns. Each of
the Shareholders and MedSouth acknowledges and agrees that neither the public in
general nor individual patients will be adversely affected by the enforcement of
the restrictive covenants contained herein because other similar providers of
professional medical services are readily available within the Territory. Each
of the Shareholders and MedSouth further acknowledges and agrees that damages
could not adequately compensate Canton, Birman and their successors and assigns
if a Shareholder or MedSouth breaches any restrictive covenant. Accordingly,
each of the Shareholders and MedSouth agrees that if a Shareholder or MedSouth
breaches any restrictive covenant, then Canton, Birman and their successors and
assigns shall be entitled to obtain injunctive relief, without bond but upon due
notice, in addition to any other applicable relief at law or in equity.
Obtainment of any such injunction shall not be deemed an election of remedies or
a waiver of any right to assert any other available remedy at law or in equity
against a party who breaches this Paragraph A. of Section VIII. The time period
for which any Shareholder or MedSouth is to be restricted will abate during the
time that such Shareholder or MedSouth violates the terms hereof, and the
remaining period of time for which the restriction applies will thereafter
recommence on the date that MedSouth is no longer in violation.
If the aforesaid restrictive covenant shall be deemed unenforceable
because of its scope in terms of time, geographical area or business activities,
then each of the Shareholders and MedSouth agrees that such restrictive covenant
shall be made enforceable by reductions thereof or limitations thereon so as to
be enforceable to the fullest extent permissible under the laws and public
policies of the jurisdiction in which such enforcement is sought. The
restrictive covenant set forth herein shall be construed as an agreement which
is independent of all other provisions of this Agreement or of any other
understanding or agreement among the parties hereto, and the existence of any
claim or cause of action of any party hereto against Canton, Birman or their
successors or assigns, of whatever nature, shall not constitute a defense to the
enforcement of such restrictive covenant.
B. CONFIDENTIALITY. During the time prior to and including the Closing,
each party to this Agreement shall maintain in confidence, and shall cause its
directors, officers, employees, agents, representatives and advisors to maintain
in confidence any information obtained in confidence from another party to this
Agreement in connection with the transactions contemplated hereby, unless (1)
the use of such information is necessary or appropriate in obtaining any consent
or approval required for the consummation of the transactions contemplated
hereby; (2) such information is already known to such party or to others not
bound by a duty of confidentiality or such information becomes publicly
available through no fault of such
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party; or (3) the furnishing or use of such information is required by
applicable law or regulation or by judicial or regulatory process.
SECTION IX.
DELIVERY OF CLOSING DOCUMENTS
The following documents shall be delivered at the Closing:
A. OFFICER'S CERTIFICATE. Delivery by Birman of a Certificate
signed by an officer of Birman, dated as of the Closing,
certifying without qualification or exception to the effect
that the representations and warranties of Birman contained
herein and in any certificate delivered by Birman pursuant
hereto are true and correct in all material respects on and as
of the Closing and Birman shall have duly performed or
complied in all material respects with the covenants, acts and
obligations to be performed or complied with by Birman
hereunder at or prior to the Closing;
B. SHAREHOLDERS' CONSENTS. Delivery by Canton of certified copies
of minutes of unanimous written consents of the Shareholders
and of Canton's board of directors approving the execution of
this Agreement and the consummation of the transaction
contemplated hereby;
C. BOOKS AND RECORDS. Delivery by Canton to Birman of Canton's
corporate seal, corporate minute books and stock transfer
records;
D. CERTIFICATES. Delivery by Canton of (1) a certified copy of
the Articles of Incorporation, and all amendments thereto, of
Canton; (2) a Certificate of Good Standing with respect to
Canton, dated within fifteen (15) days of the Closing, for
Mississippi; and (3) a letter from the MSDI certifying
Canton's authority to operate a health maintenance
organization in the State of Mississippi and the subsequent
renewal of such authority after January 1, 1997;
E. OFFICER'S CERTIFICATE. Delivery by Canton of a certificate,
signed by an officer of Canton, dated as of the Closing,
certifying without qualification or exception to the effect
that the representations and warranties of Canton and the
Shareholders contained herein and in any certificate delivered
by Canton or the Shareholders pursuant hereto are true and
correct in all material or potentially material respects on
and as of the Closing and that Canton and the Shareholders
have duly performed or complied in all material respects with
the covenants, acts and obligations to be performed or
complied with by Canton and the Shareholders hereunder at or
prior to the Closing;
F. PREFERRED STOCK CERTIFICATES. Delivery by Canton of
certificates for One Million (1,000,000) shares of Preferred
Stock to Birman;
G. REDEEMED SHARES CERTIFICATES. Delivery by Canton of
certificates representing the Redeemed Shares, which shall
have been duly endorsed for transfer or accompanied by an
assignment document with respect thereto which has been duly
endorsed for transfer;
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H. COMMON STOCK CERTIFICATES. Delivery by the Shareholders of
certificates representing Thirty-Two Thousand Seven Hundred
Fifty-Eight and Sixty-Two One-Hundredths (32,758.62) shares of
Common Stock, together with executed stock powers therefor;
I. PREFERRED STOCK CONSIDERATION. Delivery by Birman of a
certified or cashier's check in the amount of Seven Hundred
Thousand Dollars ($700,000.00) to Canton representing partial
consideration for Birman's purchase of Preferred Stock from
Canton;
J. REDEEMED SHARES CONSIDERATION. Delivery by Canton of a
certified or cashier's check in the amount of Seven Hundred
Thousand Dollars ($700,000.00) representing partial
consideration for the Shareholders redemption of the Redeemed
Shares;
K. BIRMAN/CANTON NOTE. Delivery by Birman of the Birman/Canton
Note in favor of Canton in the principal amount of Three
Hundred Thousand Dollars ($300,000.00) representing partial
consideration for Birman's purchase of Preferred Stock from
Canton;
L. CANTON/SHAREHOLDER NOTE. Delivery by Canton of the
Canton/Shareholder Note in favor of the Shareholders in the
principal amount of Three Hundred Thousand Dollars
($300,000.00) representing partial consideration of the
Shareholders' redemption of the Redeemed Shares;
M. BIRMAN/SHAREHOLDER NOTE. Delivery by Birman of the
Birman/Shareholder Note in favor of the Shareholders in the
principal amount of Five Hundred Thousand Dollars
($500,000.00) representing consideration of Birman's purchase
of Thirty-Two Thousand Seven Hundred Fifty-Eight and Sixty-Two
One-Hundredths (32,758.62) shares of Common Stock from the
Shareholders;
N. COMMON STOCK CONSIDERATION. Delivery by MedSouth of a
certified or cashier's check in the amount of Eight Hundred
Ninety-Six and Fifty-Five One-Hundredths Dollars ($896.55)
representing partial consideration of MedSouth's purchase of
Eight Thousand Sixty-Five and Fifty-One One- Hundredths
(8,965.51) shares of Common Stock from Birman;
O. MEDSOUTH SERVICES AGREEMENT. Delivery by MedSouth of the
MedSouth Services Agreement executed by MedSouth and Canton
for MedSouth's provision of medical services to Canton, in the
form attached hereto as Exhibit VI.B.;
P. OFFICER'S CERTIFICATE. Delivery by MedSouth of a certificate,
signed by an officer of MedSouth, dated as of the Closing,
certifying without qualification or exception to the effect
that the representations and warranties of MedSouth contained
herein and in any certificate delivered by MedSouth pursuant
hereto are true and correct in all material or potentially
material respects on and as of the Closing and that MedSouth
has duly performed or complied in all material respects with
the covenants, acts and obligations to be performed or
complied with by MedSouth hereunder at or prior to the
Closing;
Q. DIRECTORS' CONSENTS. Delivery by MedSouth of certified copies
of minutes of unanimous written consents of the Board of
Directors of MedSouth approving the execution of this
Agreement and the consummation of the transaction contemplated
hereby;
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R. CERTIFICATES. Delivery by MedSouth of (1) a certified copy of
the Articles of Incorporation, and all amendments thereto, of
MedSouth; and (2) a Certificate of Good Standing of MedSouth,
current within ten (10) days of the Closing;
S. SHAREHOLDERS AGREEMENT. Delivery of the Shareholders Agreement
executed by Canton, the Shareholders, MedSouth and Birman,
substantially in the form attached hereto as Exhibit VI.F.;
T. LIST OF SHAREHOLDERS. Delivery by the Shareholders of a list
of the Shareholders' addresses, to be attached hereto as
Exhibit XIV.C.;
U. RESIGNATIONS. Delivery by Canton of the written resignations,
effective as of the Closing of all of the officers, directors
and executive employees of Canton; and
V. ADDITIONAL DOCUMENTS. Such other documents as Birman, its
counsel or any lender to Birman may reasonably request in
order to effectuate the transactions contemplated under this
Agreement.
SECTION X.
CONDITIONS TO OBLIGATION OF BIRMAN TO CLOSE
The obligations of Birman hereunder to proceed with the Closing are
subject to the satisfaction on or before the Closing of each of the following
conditions, unless otherwise waived, in writing, by Birman:
A. REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Canton, the Shareholders and MedSouth contained herein, and in any
certificate delivered pursuant hereto, shall be true and correct in all material
respects on and as of the Closing.
B. FORM A ORDER. At or prior to the Closing, the MSDI shall have
issued, and Birman shall have received from the MSDI, the Form A Order.
C. PERFORMANCE. Canton, the Shareholders and MedSouth shall have duly
performed or complied with all of the covenants, acts and obligations to be
performed or complied with by them hereunder at or prior to the Closing.
D. REDEMPTION OF COMMON STOCK. Canton shall have redeemed the Redeemed
Shares.
E. ISSUANCE OF PREFERRED STOCK. Canton shall have authorized and issued
One Million (1,000,000) shares of Preferred Stock.
F. CORPORATE BOOKS. Canton shall have delivered to Birman possession of
the corporate seal, corporate minute books and stock transfer records of Canton.
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G. RESIGNATIONS. Canton shall have delivered to Birman the written
resignations, effective as of the Closing, of all of the officers and directors
of Canton.
H. PROOF OF GOOD STANDING. Canton shall have delivered to Birman: (1) a
certified copy of the Articles of Incorporation, and all amendments thereto, of
Canton; (2) a Certificate of Good Standing with respect to Canton, dated within
fifteen (15) days of the Closing, for Mississippi; and (3) a letter from the
MSDI certifying Canton's authority to operate a health maintenance organization
in the State of Mississippi and the subsequent renewal of such authority after
January 1, 1997.
I. CERTIFICATES OF CANTON AND THE SHAREHOLDERS. Birman shall have
received any and all certificates as set forth in Paragraph A. of Section IX.
Each such certificate shall be deemed a representation and warranty to Birman
and MedSouth hereunder by Canton, the Shareholders and any other party whose
signature appears thereon.
J. SCHEDULES. Any Schedules referred to herein which are not attached
hereto as of the date hereof shall have been delivered to Birman by Canton prior
to the Closing. Birman shall have a reasonable period of time in which to review
all such Schedules and to conduct any follow-up investigation which Birman shall
deem necessary or appropriate, and such Schedules shall be satisfactory to
Birman.
K. EXHIBITS. Any Exhibits referred to herein which are not attached
hereto as of the date hereof shall have been negotiated, agreed upon, executed
and delivered to Birman by Canton prior to Closing. Birman shall have a
reasonable period of time in which to review all such Exhibits which Birman
shall deem necessary or appropriate and such Exhibits shall be satisfactory to
Birman.
L. MEDSOUTH SERVICES AGREEMENT. Canton, or Birman on behalf of Canton,
shall have entered into the MedSouth Services Agreement.
M. PROOF OF GOOD STANDING. MedSouth shall have delivered to Birman: (1)
a certified copy of the Articles of Incorporation, and any amendments thereto,
of MedSouth; and (2) a Certificate of Good Standing with respect to MedSouth,
dated within ten (10) days of the Closing, for Mississippi.
N. CERTIFICATES OF MEDSOUTH. Birman shall have received any and all
certificates as set forth in Paragraphs F. and R. of Section IX. Any certificate
shall be deemed a representation and warranty to Birman hereunder by MedSouth
and any other person whose signature appears thereon.
O. SHAREHOLDERS AGREEMENT. Canton, MedSouth and the Shareholders shall
have entered into the form of Shareholders Agreement attached hereto as Exhibit
VI.F.
P. RECEIPT OF DOCUMENTS. Birman shall have received all of the
documents set forth in Section IX. of this Agreement.
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SECTION XI.
CONDITIONS TO OBLIGATION OF CANTON AND
THE SHAREHOLDERS TO CLOSE
The obligations of Canton and the Shareholders to proceed with the
Closing are subject to the satisfaction on or before the Closing of each of the
following conditions, unless otherwise waived, in writing, by Canton and the
Shareholders:
A. REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Birman contained herein and in any certificate delivered pursuant hereto,
shall be true and correct in all material respects on and as of the Closing.
B. PERFORMANCE. Birman shall have duly performed or complied with all
of the covenants, acts and obligations to be performed or complied with
hereunder at or prior to the Closing.
C. CERTIFICATE OF BIRMAN. Canton and the Shareholders shall have
received a certificate signed by Birman, dated as of the Closing, certifying
without qualification or exception to the effect that the representations and
warranties of Birman contained herein and in any certificate delivered by Birman
pursuant hereto are true and correct in all material respects on and as of the
Closing and Birman shall have duly performed or complied in all material
respects with the covenants, acts and obligations to be performed or complied
with by Birman hereunder at or prior to the Closing. Such certificate shall be
deemed to be a representation and warranty to Canton by Birman hereunder.
SECTION XII.
TERMINATION
A. TERMINATION DUE TO LEGISLATION. In the event that federal or state
legislation is enacted, or there is a change in the interpretation or
enforcement of existing federal or state laws or regulations, which Birman
determines, in its sole discretion, materially and adversely affects the
economic benefits directly or indirectly enjoyed or contemplated by Birman under
this Agreement, the parties hereto shall renegotiate, in good faith, the terms
of this Agreement. If the Agreement cannot be renegotiated to the satisfaction
of both parties within thirty (30) days of the initiation of such good faith
negotiations by Birman, then, prior to the Closing, this Agreement may be
terminated upon the delivery to Canton by Birman of thirty (30) days' prior
written notice of termination.
B. TERMINATION BY THE PARTIES. This Agreement may be terminated and
abandoned, without limiting or waiving any other rights and remedies any party
may have at law or in equity, at any time prior to the consummation of the
Closing under the following described circumstances:
1. Upon the mutual written consent of all parties hereto.
2. By Birman, if the conditions set forth in Section X hereof
shall not be fully satisfied or waived by Birman or if the
Closing shall not have occurred within thirty (30) days after
the issuance of the Form A Order.
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3. By Canton, if the conditions set forth in Section XI hereof
shall not be fully satisfied or waived by Canton or if the
Closing shall not have occurred within thirty (30) days after
the issuance of the Form A Order.
4. By the Shareholders, if the conditions set forth in Section XI
hereof shall not be fully satisfied or waived by the
Shareholders or if the Closing shall not have occurred within
thirty (30) days after the issuance of the Form A Order.
SECTION XIII.
INDEMNIFICATION AND SURVIVAL
A. INDEMNIFICATION OF CANTON. The Shareholders shall jointly and
severally, indemnify, defend and hold Canton and Birman, their respective
successors and assigns, harmless from and against any and all costs, expenses,
losses, damages, fines, penalties or liabilities (including, without limitation,
interest which may be imposed by any third party in connection therewith, court
costs, litigation expenses, reasonable attorneys' fees and expenses relating to
proof of claims) incurred by any of such parties with respect to, in connection
with, arising from, or resulting from:
1. A breach of any representation or warranty made by the
Shareholders or Canton and contained in this Agreement or in
any certificate delivered by a Shareholder or Canton pursuant
hereto; and
2. A breach of any covenant, restriction or agreement made by or
applicable to the Shareholders or Canton and contained in this
Agreement or in any certificate delivered by the Shareholders
or Canton pursuant hereto.
3. Any suit, arbitration, claim, investigation, action or
proceeding of any kind now pending or threatened, against
Canton before any court, arbitrator, administrative or
regulatory body or governmental agency, which relates to,
arises from, or occurs in connection with facts or
circumstances relating to the conduct of Canton's business on
or prior to the Closing.
4. Any taxes owed by Canton or the Shareholders with respect to
the period on or prior to the Closing, including any taxes
resulting from any inquiry, adjustment or assessment of a
deficiency by a governmental agency or authority pertaining to
Canton's or a Shareholder's tax returns for any periods ending
on or prior to the Closing.
5. Any other liability arising out of or in connection with the
operations of Canton on or prior to the Closing.
6. Any claim for brokerage or finder's fees or commissions or
similar payments based upon any agreement or understanding
alleged to have been made with any of the Shareholders or
Canton in connection with the transactions contemplated
hereby.
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In addition to any other remedies which may be available at law or in
equity, to the extent Canton and Birman are entitled to indemnification from the
Shareholders hereunder, Canton and Birman may each give such Shareholders
written notice of its intention to exercise a right of direct set-off against
any amount then due such Shareholders from Canton, and Canton shall not be
deemed to be in default for nonpayment of any amount not paid as a result of any
such set-off. In addition, the set-off or failure to set-off or the giving or
failure to give a notice of a claim under this Section XIII. shall not
constitute an election of remedies or limit Birman in any manner in the
enforcement of any other available remedies. Notwithstanding anything in this
Section XIII. to the contrary, for the purposes of determining the Shareholders'
liability hereunder, liability shall be calculated by subtracting all insurance
benefits paid to Canton, Birman or their successors or assigns with respect to
the matter that forms the basis for such indemnification claim. The Shareholders
shall not have any liability hereunder to the extent that an indemnification
claim is fully covered by an applicable insurance policy held by Canton or
Birman and proceeds thereof are collected by Canton or Birman.
The foregoing limitations on liability shall not apply to any breach of
any representation or warranty by the Shareholders which was not true when made
and which was made fraudulently or with intent to defraud or mislead.
B. INDEMNIFICATION OF THE SHAREHOLDERS. Birman shall indemnify, defend
and hold the Shareholders and their respective heirs, executors, personal
representatives and assigns, harmless from and against any and all costs,
expenses, losses, damages, fines, penalties or liabilities (including, without
limitation, interest that may be imposed in connection therewith, court costs,
litigation expenses, reasonable attorneys' fees and accounting fees) incurred by
any of such parties with respect to, in connection with, arising from, resulting
from:
1. A material breach of any representation or warranty made by
Birman and contained in this Agreement or in any certificate
delivered by Birman hereunder.
2. A material breach of any covenant, restriction or agreement
made by Birman and contained in this Agreement or in any
certificate delivered by Birman hereunder.
3. Any other claim, suit, cause of action, investigation or
proceeding of any kind whatsoever which relates to, arises
from, or occurs in connection with facts or circumstances
relating to the conduct of Canton's business after the Closing
due to Birman's negligence or misconduct.
4. Any claim for brokerage or finder's fees or commissions or
similar payments based upon any agreement or understanding
alleged to have been made with Birman in connection with the
transactions contemplated hereby.
C. PROCEDURE FOR INDEMNIFICATION.
1. Any party which is entitled to be indemnified hereunder
(the "Indemnified Party") shall give notice hereunder to each
indemnifying party ("Indemnifying Party") promptly after obtaining
written notice of any claim as to which recovery may be sought against
the Indemnifying Party because of the terms of this Section XIII. and,
if such indemnity shall arise from the claim of a third party, shall
permit the Indemnifying Party to assume the defense of any such claim
and any
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litigation resulting from such claim. The right to indemnification
hereunder shall not be affected by any failure of an Indemnified Party
to give such notice or related materials or delay by an Indemnified
Party in giving such notice or related materials unless, and then only
to the extent that, the rights and remedies of the Indemnifying Party
shall have been prejudiced as a result of the failure to give, or delay
in giving, such notice or related materials. Failure by an Indemnifying
Party to notify an Indemnified Party of an election to defend any such
claim or action by a third party within twenty-one (21) days after
notice thereof shall have been given to the Indemnifying Party shall be
deemed a waiver by such Indemnifying Party of the right to defend such
claim or action.
2. If the Indemnifying Party assumes the defense of such claim
or litigation resulting therefrom, the obligations of such Indemnifying
Party hereunder as to such claim shall include taking all steps
necessary in the defense or settlement of such claim or litigation and
holding the Indemnified Party harmless from and against any and all
damages caused by or arising out of any settlement approved by such
Indemnifying Party or any judgment in connection with such claim or
litigation. The Indemnifying Party shall not, in the defense of such
claim or any litigation resulting therefrom, consent to the entry of
any judgment (other than a judgment of dismissal on the merits without
costs) except with the written consent of the Indemnified Party (which
consent shall not be unreasonably withheld) or enter into any
settlement (except with the written consent of the Indemnified Party),
(which consent shall not be unreasonably withheld) which does not
include as an unconditional term thereof the giving by the claimant or
the plaintiff to the Indemnified Party a release from all liability in
respect of such claim or litigation. If an Indemnified Party
unreasonably withholds consent to the entry of any judgment or
settlement, the Indemnifying Party shall not have any obligation to
indemnify the Indemnified Party with respect thereto. Notwithstanding
anything in this Section XIII. to the contrary, the Indemnified Party
may, with counsel and at such Indemnified Party's expense, participate
in the defense of any such claim or litigation.
3. If the Indemnifying Party shall not assume the defense of
any such claim by a third party or litigation resulting therefrom after
receipt of notice from such Indemnified Party, the Indemnified Party
may defend against such claim or litigation in such manner as it deems
appropriate, and unless the Indemnifying Party shall, at its option,
provide a bond to, or deposit with the Indemnified Party a sum
equivalent to the total amount demanded in such claim or litigation
plus the Indemnified Party's estimate of the costs of defending the
same, the Indemnified Party, at its option, may settle such claim or
litigation on reasonable terms and the Indemnifying Party shall
promptly reimburse the Indemnified Party for the amount of such
settlement and for all damage incurred by the Indemnified Party in
connection with the defense against or settlement of such claim or
litigation. If the Indemnifying Party shall provide such bond or
deposit, the Indemnified Party shall not settle any such claim or
litigation without the written consent of the Indemnifying Party, which
consent shall not be unreasonably withheld.
4. The Indemnifying Party shall promptly reimburse the
Indemnified Party for the amount of any judgment rendered with respect
to any claim by a third party in such litigation and for all damage
incurred by the Indemnified Party in connection with the defense
against such claim or litigation, whether or not resulting from,
arising out of, or incurred with respect to, the act of a third party.
D. SURVIVAL. All covenants and agreements of any party hereto set forth
herein shall survive the Closing. All indemnification obligations,
representations and warranties in this Agreement or pursuant hereto or in any
certificate or other writing delivered pursuant hereto or in connection herewith
shall survive the Closing and shall remain in effect for a period
contemporaneous with the running of any applicable statute of limitations from
and after the Closing, provided that, (1) indemnification obligations,
representations and warranties regarding tax liabilities shall not expire until
the running of their respective statutes of limitation,
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and (2) any representation or warranty which is not true when made and which is
made fraudulently or with intent to defraud or mislead shall survive such
period.
SECTION XIV.
MISCELLANEOUS
A. WRITTEN AGREEMENT TO GOVERN. This Agreement, including the Exhibits
and Schedules attached hereto, sets forth the entire understanding of the
parties relating to the subject matter contained herein and supersedes all prior
and contemporaneous oral or written agreements among the parties hereto relating
to the subject matter contained herein, and merges all prior and contemporaneous
discussions among them. No party hereto shall be bound by any definition,
condition, representation, warranty, covenant or provision other than as
expressly stated in this Agreement or as hereafter set forth in a written
instrument executed by such party or by a duly authorized representative of such
party.
B. SEVERABILITY. The parties hereto expressly agree that it is not the
intention of any party hereto to violate any public policy, statutory or common
laws rules, regulations, treaties or decisions of any government or agency
thereof. If any provision of this Agreement is judicially or administratively
interpreted or construed as being in violation of any such provision, such
articles, sections, sentences, words, clauses or combinations thereof shall be
inoperative, and the remainder of this Agreement shall remain binding upon the
parties hereto.
C. NOTICES. Any and all notices and other communications necessary or
desirable to be served hereunder shall be either personally delivered or sent by
facsimile, a nationally recognized overnight courier or certified mail, return
receipt requested, postage prepaid, addressed as follows:
To Birman and to Canton
after the Closing: Birman Managed Care, Inc.
502 Gould Drive
Cookeville, Tennessee 38506
Attn: Robert D. Arkin, Esq.,
Chief Operating Officer and General Counsel
with a copy to: Rudnick & Wolfe
203 North LaSalle Street
Chicago, Illinois 60601
Attn: Peter B. Ross, Esq.
Deborah L. Gersh, Esq.
To Canton prior to the Closing: Canton Management Group, Inc.
406 Briarwood Dr., Bldg. 200
Jackson, Mississippi 39206
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To MedSouth: MedSouth, Inc.
P.O. Box 3104
Gulfport, Mississippi 39505
Attn: Richard Peden, D.O.
To the Shareholders: At the Shareholders' addresses set forth on
Exhibit XIV.C.attached hereto
or to such other address or addresses as any party hereto may designate from
time to time in a written notice served upon the other parties hereto in
accordance herewith. Any notice provided hereunder shall be deemed delivered as
follows: (1) any notice sent by facsimile shall be deemed delivered when
actually received; (2) any notice sent by hand delivery shall be deemed
delivered when actually received; (3) any notice sent by a nationally recognized
overnight courier shall be deemed delivered one (1) business day after deposit
with such courier; and (4) any notice sent by mail shall be deemed delivered on
the second (2nd) business day next following the postmark date which it bears.
D. SURVIVAL. The representations and warranties of the parties and the
restrictive covenants contained herein shall survive the Closing.
E. ASSIGNMENT. Neither this agreement nor the Common Stock or Preferred
Stock sold hereunder shall be assigned or transferred except as provided in the
Shareholders Agreement attached hereto as Exhibit VI.F. Any purported assignment
or transfer other than in accordance with the Shareholders Agreement shall be
void and of no effect.
F. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and each counterpart shall constitute an original instrument, but
all such separate counterparts shall constitute one and the same agreement.
G. LAW TO GOVERN. The validity, construction and enforceability of this
Agreement shall be governed in all respects by the laws of the State of
Mississippi without regard to its conflict of laws rules.
H. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, personal representatives, successors and assigns.
I. FURTHER ASSURANCES. At any time on or after the Closing, each of the
parties hereto shall perform such acts, execute and deliver such instruments,
assignments, endorsements and other documents and do all such other things
consistent with the terms of this Agreement as may be reasonably necessary to
accomplish the transactions contemplated in this Agreement or otherwise carry
out the purpose of this Agreement.
J. GENDER, NUMBER AND HEADINGS. The masculine, feminine or neuter
pronouns used herein shall be interpreted without regard to gender, and the use
of the singular or plural shall be deemed to include the other whenever the
context so requires. The headings in this Agreement are inserted for convenience
or reference only and are not a part of this Agreement.
K. SCHEDULES AND EXHIBITS. The Schedules and Exhibits referred to
herein and attached hereto are incorporated herein by such references as if
fully set forth in the text hereof.
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L. WAIVER OF PROVISIONS. The terms, covenants, representations,
warranties and conditions of this Agreement may be waived only by a written
instrument executed by the party waiving compliance. The failure of any party at
any time to require performance of any provisions hereof shall, in no manner,
affect the right at a later date to enforce the same. No waiver by any party of
any condition, or breach of any provision, term, covenant, representation or
warranty contained in this Agreement, whether by conduct or otherwise, in any
one or more instances, shall be deemed to be or construed as a further or
continuing waiver of any such condition or of the breach of any other provision,
term, covenant, representation or warranty of this Agreement.
M. EXPENSES. Except as otherwise expressly provided herein, each party
hereto shall bear its own expenses incident to this Agreement and the
transactions contemplated hereby, including without limitation, all fees of
counsel, accountants and consultants.
N. RECITALS. The recitals set forth above on the initial pages of this
Agreement are incorporated herein by this reference, and this Agreement shall be
construed in light thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above.
BIRMAN MANAGED CARE, INC., a
Tennessee corporation
By:____________________________
President
CANTON MANAGEMENT GROUP, INC.,
a Mississippi corporation
By:____________________________
Its:_______________________
SHAREHOLDERS
_______________________________
JAMES GOODMAN, PH.D.
_______________________________
WINIFRED FULGHAM
_______________________________
LOUIS SADDLER, M.D.
_______________________________
L.C. TENNIN, M.D.
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_______________________________
CALVIN RAMSEY, M.D.
_______________________________
LARRY COOPER, M.D.
_______________________________
JOYCE JOHNSON
_______________________________
WESLEY PRATER, M.D.
_______________________________
VIC CARACCI
_______________________________
STEPHANIE TUCKER
_______________________________
HAROLD WHEELER, M.D.
_______________________________
MICHAEL T. CARACCI
_______________________________
ROBERT TEAGUE, M.S.W.
_______________________________
VINCENT CARACCI
_______________________________
CHARLIE HILLS
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JOINDER
I, Richard Peden, D.O., as the president and sole shareholder of
MedSouth, Inc. ("MedSouth"), in consideration of the mutual agreements set forth
in Paragraph B. of Section I., Paragraph K. of Section II. and Sections IV.,
VIII., IX., X. and XII., as well as any additional Paragraphs or Sections
referenced therein (the "MedSouth Provisions"), and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, do
hereby join in this Agreement, as the sole shareholder of MedSouth and on behalf
of MedSouth, as its act and deed, having first been duly authorized, if
applicable, thereby binding myself and MedSouth to all of the rights and
obligations set forth in such MedSouth Provisions.
ACKNOWLEDGED AND RECEIVED, this ____ day
of _______, 1996
MEDSOUTH, INC., a Mississippi corporation
_________________________________________
BY: RICHARD L. PEDEN, D.O.
ITS: PRESIDENT AND SOLE SHAREHOLDER