EXHIBIT 1
CONFIDENTIAL
AGREEMENT AND PLAN OF MERGER
Dated as of August 3, ▇▇▇▇
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇, INC.
and
PHYSICIAN HEALTH CORPORATION
CONFIDENTIAL
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated as of the 3rd day of August,
1998, is by and between Medical Industries of America, Inc., a Florida
corporation ("MIOA"), and Physician Health Corporation, a Delaware corporation
("PHC").
In consideration of the mutual covenants and agreements contained in this
Agreement, and intending to be legally bound hereby, MIOA and PHC hereby agree
as follows:
ARTICLE 1
DEFINITIONS
1.1. DEFINED TERMS. As used in this Agreement:
"ACQUISITION PROPOSAL" shall have the meaning ascribed to it in Section
7.2 hereof.
"ADVERSE CONSEQUENCES" shall have the meaning ascribed to it in Section
5.13 hereof.
"AFFILIATE" shall have the meaning ascribed to it in Section 7.6 hereof.
"AFFILIATED GROUP" shall have the meaning ascribed to it in Section 5.13
hereof.
"AGREEMENT" means this Agreement and Plan of Merger, and all Schedules and
Exhibits hereto.
"ASSETS" means all of the assets of MIOA and its Subsidiaries, or PHC and
its Subsidiaries, as the case may be, of every kind and nature. Any
representations and warranties made by a party hereto with respect to the Assets
shall pertain only to those Assets which are owned, leased or otherwise
controlled by such party.
"AUDITED FINANCIAL STATEMENT" shall have the meaning ascribed to it in
Section 6.8(a) hereof.
"AUTOMATIC TERMINATION DATE" shall have the meaning ascribed to it in
Section 10.1 hereof.
"BOARD APPROVAL" shall mean MIOA Board Approval or PHC Board Approval, as
applicable.
"BUSINESS DAY" shall mean any weekday, excluding any legal holiday
observed pursuant to United States federal law or the laws of the States of
Delaware, Florida or Georgia.
"CERTIFICATE(S)" shall have the meaning ascribed to it in Section 3.4
hereof.
"CLOSING" and "CLOSING DATE" shall have the meanings ascribed to such
terms in Section 3.6 hereof.
"CLOSING DOCUMENTS" means this Agreement and all other documents to be
executed and delivered either simultaneously herewith or at Closing in
connection with the Transactions.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONFIDENTIALITY AGREEMENT" means that certain Nondisclosure and
Confidentiality Agreement, dated January 22, 1998, between PHC and MIOA.
"DELAWARE ACT" shall mean the General Corporation Law of the State of
Delaware.
"DOL" shall mean the United States Department of Labor.
"EFFECTIVE TIME" shall have the meaning ascribed to it in Section 2.2
hereof.
"EMPLOYMENT AGREEMENTS" shall have the meaning ascribed to it in Section
4.1 hereof.
"ENVIRONMENTAL LAWS" shall have the meaning ascribed to it in Section
5.6(c) hereof.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"EXCHANGE ACT" shall mean the Securities and Exchange Act of 1934, as
amended, and all regulations promulgated pursuant thereto.
"EXCHANGE AGENT" shall have the meaning set forth in Section 3.4 hereof.
"EXCHANGE RATIO" shall have the meaning ascribed to it in Section 3.1(a)
hereof.
"FAIR MARKET VALUE" shall mean the average closing trading price per share
for MIOA Common Stock for the twenty (20) trading days immediately preceding the
date of this Agreement first above written.
"FAIRNESS OPINION" shall mean an opinion (or opinions) from one or more
nationally recognized investment banking firm(s) addressed to MIOA (and to PHC
separately if PHC determines that such opinion is needed) to the effect that,
based upon and subject to the
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assumptions, limitations and qualifications set forth therein, the Exchange
Ratio (which for purposes of the Fairness Opinion only is separately defined
therein) is fair to MIOA (and to the stockholders of PHC if PHC receives such an
opinion) from a financial point of view.
"FINANCIAL STATEMENTS" shall have the meaning ascribed to it in Section
6.8(a) hereof.
"FLORIDA ACT" shall mean the Florida Business Corporation Act.
"FLORIDA DISSENTER'S STATUTES" means Sections 607.1301 ET SEQ. of the
Florida Act.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"GOVERNMENTAL AUTHORITY" shall include any and all governmental or
quasi-governmental bodies, agencies, bureaus, departments, boards, commissions,
instrumentalities or other entities having or asserting jurisdiction over PHC,
MIOA, or any Subsidiary of either, as applicable.
"HAZARDOUS SUBSTANCE" shall have the meaning ascribed to it in Section
5.6(c) hereof.
"HISTORICAL FINANCIALS" shall have the meaning ascribed to it in Section
5.8(a) hereof.
"INTERIM FINANCIALS" shall have the meaning ascribed to it in Section
6.8(a) hereof.
"IRS" shall mean the Internal Revenue Service.
"JOINT PROXY STATEMENT/PROSPECTUS" shall have the meaning ascribed to it
in Section 5.21 hereof.
"LIABILITY" shall have the meaning ascribed to it in Section 5.13 hereof.
"MATERIAL ADVERSE EFFECT" means a material adverse effect upon, or in, or
circumstances likely to result in, a material adverse change in (i) the
business, assets, liabilities, prospects, operations, results of operations,
properties (including intangible properties), regulatory status or condition
(financial or otherwise) of MIOA or PHC, as the case may be, or any of such
party's respective Subsidiaries taken as a whole, (ii) the legality, validity,
binding effect or enforceability of this Agreement, or (iii) the ability of MIOA
or PHC, as the case may be, or any of such party's respective Subsidiaries to
perform their obligations under this Agreement.
"MERGER" shall mean the merger of PHC with and into MIOA upon the terms
and subject to the conditions set forth in this Agreement.
"MERGER SHARES" shall have the meaning ascribed to it in Section 3.1(a)
hereof.
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"MIOA" shall mean Medical Industries of America, Inc., a Florida
corporation.
"MIOA BOARD APPROVAL" shall mean that the Board of Directors of MIOA, at a
meeting duly called and held, has (i) determined that the Merger is advisable
and in the best interest of MIOA and its stockholders and approved it, (ii) duly
approved, authorized and ratified the execution and delivery of this Agreement
and the consummation of the Transactions, (iii) recommended the approval of this
Agreement, the Merger, the Articles of Merger, each of the Closing Documents to
which it is or will be a party by the holders of MIOA Capital Stock (and any
other class of stock of MIOA entitled to vote on the Merger) and directed that
this Agreement, the Merger, Articles of Merger, each of the Closing Documents to
which it is or will be a party be submitted for consideration by the holders of
MIOA Capital Stock at a meeting to be held for that purpose, and (iv) adopted a
resolution to elect not to be subject, to the extent permitted by applicable
law, to any state takeover law that may purport to be applicable to this
Agreement, the Merger, and the other Transactions.
"MIOA BREACH SETTLEMENT" shall have the meaning ascribed to it in Section
7.11 hereof.
"MIOA CAPITAL STOCK" shall mean, collectively, the MIOA Common Stock and
the MIOA Preferred Stock.
"MIOA CLASS A EQUIVALENT STOCK" shall have the meaning ascribed to it in
Section 3.3 hereof.
"MIOA COMMON STOCK" shall mean the Common Stock, no par value, of MIOA.
"MIOA DISSENTING SHARES" shall have the meaning ascribed to it in Section
3.5(a) hereof.
"MIOA EMPLOYEES" shall have the meaning ascribed to it in Section 5.19(a)
hereof.
"MIOA EMPLOYEE BENEFIT PLAN" shall have the meaning ascribed to it in
Section 5.19(a) hereof.
"MIOA EQUITY INTERESTS" shall mean all capital stock of MIOA and
securities convertible into capital stock of MIOA.
"MIOA ERISA AFFILIATE" shall have the meaning ascribed to it in Section
5.19(a) hereof.
"MIOA FINAL REVISED SCHEDULES" shall have the meaning ascribed to it in
Section 8.10 hereof.
"MIOA GROUP" shall have the meaning ascribed to it in Section 5.13(b)
hereof.
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"MIOA INTELLECTUAL PROPERTY" shall have the meaning ascribed to it in
Section 5.10(a) hereof.
"MIOA PREFERRED STOCK" shall mean the Series B Preferred Stock, no par
value, of MIOA.
"MIOA RECEIVABLES" shall have the meaning ascribed to it in Section 5.25
hereof.
"MIOA STOCKHOLDER APPROVAL" means with respect to MIOA the requisite
approval by holders of MIOA Capital Stock of this Agreement, the Merger and the
Articles of Merger.
"MONTHLY FINANCIALS" shall have the meaning ascribed to it in Section 4.10
hereof.
"MOST RECENT FISCAL QUARTER END" shall have the meaning ascribed to it in
Section 5.8 hereof.
"NONDISCLOSURE/NONCOMPETE AGREEMENTS" shall have the meaning ascribed to
it in Section 4.1 hereof.
"OPTION/WARRANT SHARES" shall have the meaning ascribed to it in Section
3.3(b) hereof.
"OUT-OF-POCKET COSTS" shall mean, with respect to MIOA or PHC, as the case
may be, all fees, expenses, and other costs which are directly related to the
Transactions which such party has incurred through the date of termination of
this Agreement, other than those costs directly related to the Fairness
Opinion(s) (if incurred) which costs (and related fees and expenses) shall be
shared between the parties pursuant to Section 4.3 hereof.
"PERMITTED EQUITY FINANCING" shall have the meaning ascribed to it in
Section 3.1(e) hereof.
"PERSON" means an individual, corporation, limited liability company,
limited liability partnership, limited partnership, trust, joint venture,
association or unincorporated organization or a Governmental Authority.
"PHC" shall mean Physician Health Corporation, a Delaware corporation.
"PHC BOARD APPROVAL" shall mean that the Board of Directors of PHC, at a
meeting duly called and held, has in the exercise of its sole discretion (i)
determined that the Merger is advisable and in the best interest of PHC and its
stockholders and approved it, (ii) duly approved, authorized and ratified the
execution and delivery of this Agreement and the consummation of the
Transactions, (iii) recommended the approval of this Agreement, the Merger, the
Certificate of Merger, and each of the Closing Documents to which it is or will
be
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a party, by the holders of PHC Capital Stock (and any other class of stock of
PHC entitled to vote on the Merger) and directed that this Agreement, the
Merger, Certificate of Merger, and each of the Closing Documents to which it is
or will be a party, be submitted for consideration by the holders of PHC Capital
Stock at a meeting to be held for that purpose, and (iv) adopted a resolution to
elect not to be subject, to the extent permitted by applicable law, to any state
takeover law that may purport to be applicable to this Agreement, the Merger,
and the other Transactions.
"PHC BREACH SETTLEMENT" shall have the meaning ascribed to it in Section
7.11 hereof.
"PHC CAPITAL STOCK" shall mean, collectively, the PHC Common Stock, the
PHC Class A Preferred Stock, the PHC Series B Preferred Stock and the PHC Series
C Preferred Stock (if any).
"PHC CLASS A PREFERRED STOCK" shall mean, collectively, the Series 1 Class
A Stock, $.01 par value and the Series 2 Class A Stock, $.01 par value, of PHC.
"PHC COMMON STOCK" shall mean, collectively, the Voting Common Stock,
$.0025 par value, the Non-Voting Common Stock, $.0025 par value, and the Prime
Common Stock, $.0025 par value, of PHC.
"PHC DISSENTING SHARES" shall have the meaning ascribed to it in Section
3.5(b) hereof.
"PHC EMPLOYEES" shall have the meaning ascribed to it in Section 6.19(b)
hereof.
"PHC EMPLOYEE BENEFIT PLAN" shall have the meaning ascribed to it in
Section 6.19(b) hereof.
"PHC EQUITY INTERESTS" shall mean all capital stock of PHC and securities
convertible into capital stock of PHC.
"PHC ERISA AFFILIATE" shall have the meaning ascribed to it in Section
6.19(b) hereof.
"PHC FINAL REVISED SCHEDULES" shall have the meaning ascribed to it in
Section 9.9 hereof.
"PHC GROUP" shall have the meaning ascribed to it in Section 6.13(a)
hereof.
"PHC INTELLECTUAL PROPERTY" shall have the meaning ascribed to it in
Section 6.10(a) hereof.
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"PHC MERGER STOCKHOLDERS" shall have the meaning ascribed to it in Section
7.11(a) hereof.
"PHC PREFERRED STOCK" shall mean, collectively, the PHC Class A Preferred
Stock, the PHC Series B Preferred Stock and the PHC Series C Preferred Stock (if
any).
"PHC RECEIVABLES" shall have the meaning ascribed to it in Section 6.23
hereof.
"PHC SERIES B PREFERRED STOCK" shall mean, collectively, the Series B
Redeemable Convertible Preferred Stock, $.01 par value, and the Series B
Non-Voting Redeemable Convertible Preferred Stock, $.01 par value, of PHC.
"PHC SERIES C PREFERRED STOCK" shall mean the Series C Preferred Stock,
$.01 par value, of PHC, which has been or is anticipated to be created after
execution of this Agreement by the parties hereto.
"PHC STOCK OPTION PLANS" shall have the meaning ascribed to it in Section
3.3(a) hereof.
"PHC STOCKHOLDER APPROVAL" means with respect to PHC, the requisite
approval by holders of PHC Capital Stock of this Agreement, the Merger and the
Certificate of Merger.
"PROSPECTUS" means the final prospectus relating to the registration of
the Merger Shares under the Securities Act.
"PUBLIC REPORTS" shall have the meaning set forth in Section 5.6(d)
hereof.
"SCHEDULE DELIVERY DATE" shall mean the date upon which each of MIOA and
PHC has delivered each and all of their respective Schedules and Exhibits to the
other, and, in the exercise of their respective sole discretion, each has
acknowledged in writing their satisfaction with the results of their respective
due diligence investigations of the other party hereto and their mutual consent
as to the contents of the Schedules and Exhibits to be attached hereto and the
incorporation of such Schedules and Exhibits into this Agreement, which date in
no event shall be later than August 3, 1998, unless otherwise agreed to in
writing by PHC and MIOA.
"SEC" shall mean the U.S. Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, and
all regulations promulgated thereunder.
"SECURITIES FILINGS" shall mean the most recent Form 10-KSB filed by MIOA
with the SEC, as well as any and all filings made by MIOA thereafter pursuant to
the Exchange Act.
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"SECURITY INTEREST" shall have the meaning ascribed to it in Section 5.13
hereof.
"SETTLEMENT CUT-OFF DATE" shall have the meaning ascribed to it in Section
7.11 hereof.
"SPECIAL MEETING" shall have the meaning ascribed to it in Section 7.1
hereof.
"SUBSIDIARY" shall mean one of the business entities identified as such as
on SCHEDULE 5.1 hereto, as to MIOA, and on SCHEDULE 6.1, as to PHC.
"SURVIVING CORPORATION" shall have the meaning ascribed to it in Section
2.1 hereof.
"TAX" shall have the meaning ascribed to it in Section 5.13 hereof.
"TAX RETURN" shall have the meaning ascribed to it in Section 5.13 hereof.
"TRANSACTIONS" means the transactions contemplated by this Agreement,
including but not limited to the Merger.
ARTICLE 2
THE MERGER
2.1. THE MERGER. At the Effective Time and subject to and upon the terms
and conditions of this Agreement, the Florida Act and the Delaware Act, PHC
shall be merged with and into MIOA, the separate corporate existence of PHC
shall cease, and MIOA shall continue as the surviving corporation. MIOA as the
surviving corporation after the Merger shall be governed by the Florida Act, and
is hereinafter sometimes referred to as the "Surviving Corporation".
2.2. EFFECTIVE TIME. As promptly as practicable after the satisfaction or
waiver of the conditions set forth in Articles 8 and 9, the parties hereto shall
cause the Merger to be consummated by filing Articles of Merger or a Certificate
of Merger, as applicable, with the Secretary of State of each of the States of
Florida and Delaware in such form as required by, and executed in accordance
with, the relevant provisions of the Florida Act and the Delaware Act, copies of
which are attached hereto as EXHIBIT 2.2(A) and EXHIBIT 2.2(B), respectively
(the time of the last such filing being the "Effective Time"). At the Effective
Time, MIOA will irrevocably instruct its stock transfer agent to issue and
deliver in the manner provided in Articles 2 and 3 hereof the certificates
evidencing the Merger Shares to be issued in the Merger.
2.3. EFFECT OF THE MERGER. At the Effective Time, the effect of the Merger
shall be as provided in the applicable provisions of the Florida Act and
Delaware Act. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time all property,
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rights, privileges, powers and franchises of MIOA and PHC shall vest in the
Surviving Corporation, and all debts, liabilities and duties of MIOA and PHC
shall become the debts, liabilities and duties of the Surviving Corporation.
2.4. SUBSEQUENT ACTIONS. If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable to (i) vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of either of MIOA or PHC acquired or to be acquired
by the Surviving Corporation as a result of, or in connection with, the Merger
or (ii) otherwise to carry out this Agreement, then the officers and directors
of the Surviving Corporation shall be authorized to (x) execute and deliver, in
the name and on behalf of either PHC or MIOA, as the case may be, all such
deeds, bills of sale, assignments and assurances and (y) to take and do, in the
name of and on behalf of each such corporation or otherwise, all such other
actions and things as may be necessary or desirable, to vest, perfect or confirm
any and all right, title and interest in, to and under such rights, properties
or assets in the Surviving Corporation or otherwise to carry out this Agreement.
2.5. ARTICLES OF INCORPORATION; BY-LAWS; DIRECTORS AND OFFICERS.
(a) At the Effective Time and as part of the Merger, the Articles
of Incorporation of the Surviving Corporation shall be in the form attached
hereto as EXHIBIT 2.5(A), until thereafter amended as provided by law, the
By-Laws of the Surviving Corporation and such Articles of Incorporation.
(b) At the Effective Time and as part of the Merger, the By-Laws
of the Surviving Corporation shall be in the form attached hereto as EXHIBIT
2.5(B), until thereafter amended as provided by law, the Certificate of
Incorporation and such By-Laws.
(c) After the Effective Time, the Board of Directors of the
Surviving Corporation will consist of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇
▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, M.D., ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, M.D.,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ and those other individuals specified on
EXHIBIT 2.5(C), if any.
2.6. BOARD AND STOCKHOLDER APPROVAL. This Agreement is subject to, and it
is a condition to the consummation of the Merger, that MIOA Board Approval, MIOA
Stockholder Approval, PHC Board Approval and PHC Stockholder Approval be
obtained.
2.7. TAX CONSEQUENCES. It is intended that the Merger shall constitute a
reorganization within the meaning of Section 368 of the Code, and that this
Agreement shall constitute a "plan of reorganization" for purposes of Section
368 of the Code.
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ARTICLE 3
MERGER CONSIDERATION
3.1. EXCHANGE OF CAPITAL STOCK. The manner and basis of exchanging shares
of PHC Capital Stock and MIOA Capital Stock into stock of the Surviving
Corporation shall be as follows:
(a) Except as provided in Section 3.2, each share of PHC Capital
Stock which shall be outstanding immediately prior to the Effective Time shall
at the Effective Time, by virtue of the Merger and without any action on the
part of the holder thereof, be exchanged into only the right to receive the
number and type of shares of MIOA capital stock computed as set forth on EXHIBIT
3.1(A) (the "Exchange Ratio"). The shares to be issued by MIOA with respect to
such PHC Capital Stock are collectively hereinafter referred to as "Merger
Shares". The Exchange Ratio shall be subject to equitable adjustment in the
event of any stock split, stock dividend or other recapitalization of PHC
Capital Stock or MIOA Capital Stock after the date hereof but prior to Closing.
After the Effective Time, no PHC Capital Stock shall be recognized or deemed to
be outstanding, and the holders thereof shall not have any rights other than
those set forth in this Article 3.
(b) Each share of PHC Capital Stock, if any, held in the treasury
of PHC shall automatically be canceled, shall not be converted into the right to
receive Merger Shares, and shall be extinguished without any exchange thereof
and no payment will be made with respect thereto.
(c) Each share of MIOA Common Stock which shall be outstanding
immediately prior to the Effective Time shall at the Effective Time remain
outstanding.
(d) Each share of MIOA Preferred Stock which shall be outstanding
immediately prior to the Effective Time (if any) shall at the Effective Time, by
virtue of the Merger and without any action on the part of the holder thereof,
be exchanged into only the right to receive the number and type of shares of
MIOA Capital Stock computed as set forth on EXHIBIT 3.1(A). In no event shall
the outstanding MIOA Preferred Stock outstanding at the Effective Time exceed
1,550 shares of the MIOA Preferred Stock Having a value of $310,000.00).
(e) The parties hereto acknowledge that the other party may,
prior to the Closing and without the consent of the other party hereto, issue
additional shares of its capital stock (and/or securities convertible into
shares of its capital stock) in connection with (i) those offerings specifically
identified on EXHIBIT 3.1(E) so long as the conditions with respect to each such
offering contained in such Exhibit are satisfied, including but not limited to
the condition that any such offering is closed no later than the date which is
ten days prior to the earlier of
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the Special Meetings, or (ii) any offering of such issuer's securities issued as
consideration for the acquisition of assets or equity interests of another
entity if the securities issued in such offering have an aggregate fair market
value of less than $1 million (each, a "Permitted Equity Financing"), provided,
that in either case, such offering must be made in compliance with all
applicable securities laws and structured so that it will not be integrated with
the offering of Merger Shares and/or Option/Warrant Shares as contemplated
herein, and if any such offering (or offerings taken as a whole) would be deemed
material so as to require amendment of the registration statement on Form S-4
described in subsection (f) below, such offering(s) shall be closed no later
than the day immediately prior to the filing of such registration statement. In
the event that either MIOA or PHC desires to issue additional shares of its
capital stock (and/or securities convertible into shares of its capital stock)
in an offering that does not constitute a Permitted Equity Financing, then MIOA
and PHC shall attempt in good faith to agree upon the terms and conditions of
the proposed offering and how the resulting percentage ownership of the
Surviving Corporation will be allocated on a fully diluted basis (using the
treasury stock method) among the holders of PHC Equity Interests, the holders of
MIOA Equity Interests and the holders of PHC Equity Interests or MIOA Equity
Interests, as the case may be, issued in connection with such offering.
(f) MIOA shall use its reasonable best efforts to register on
Form S-4 the Merger Shares to be issued to the PHC stockholders in connection
with the Merger. MIOA shall pay the fees and expenses incurred by it that are
associated with the registration on Form S-4; PROVIDED, HOWEVER, that in the
event that the Merger is not consummated solely because PHC fails to obtain the
PHC Stockholder Approval, PHC shall be responsible, subject to Section 7.5(c)
hereof, to pay the fees and expenses incurred by MIOA that are directly related
to such registration.
3.2. FRACTIONAL SHARES. No scrip or fractional shares of the capital stock
of the Surviving Corporation shall be issued in the Merger, nor will any
outstanding fractional share interest entitle the owner thereof to vote, to
receive dividends or to exercise any other right as a stockholder of MIOA or the
Surviving Corporation. All fractional shares of the common stock of the
Surviving Corporation to which a holder of multiple certificates of PHC Common
Stock immediately prior to the Effective Time would otherwise be entitled at the
Effective Time shall be aggregated. If a fractional share results from such
aggregation, the number of shares of the Merger Shares to which such stockholder
shall be entitled, after the later of (a) the Effective Time or (b) the
surrender of the certificates (or notes) which previously represented such
stockholder's PHC Common Stock, shall be rounded to the nearest whole number of
Merger Shares. All fractional shares of the preferred stock of the Surviving
Corporation to which a holder of multiple certificates of the same class of PHC
Preferred Stock immediately prior to the Effective Time would otherwise be
entitled at the Effective Time shall be aggregated. If a fractional share
results from such aggregation, the number of shares of the Merger Shares to
which such stockholder shall be entitled, after the later of (a) the Effective
Time or (b) the surrender of the certificates (or notes) which previously
represented such class of such
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stockholder's PHC Preferred Stock, shall be rounded to the nearest whole number
of Merger Shares.
3.3. STOCK OPTIONS AND WARRANTS.
(a) All options for PHC Common Stock outstanding at the Effective
Time under PHC's option plans (the "PHC Stock Option Plans") shall be exchanged
at the Effective Time into options for the common stock of the Surviving
Corporation (all of the common stock of the Surviving Corporation, at the
Effective Time, will be voting common stock). All warrants for PHC Common Stock
outstanding at the Effective Time shall be exchanged for warrants for common
stock of the Surviving Corporation. All warrants for PHC Class A Preferred Stock
outstanding at the Effective Time shall be exchanged for warrants for the class
of preferred stock of the Surviving Corporation into which the PHC Class A
Preferred Stock shall be converted as provided in Section 3.1(a) (the "MIOA
Class A Equivalent Stock"). At the Effective Time, such options and warrants
shall, by virtue of the Merger and without any further action on the part of PHC
or the holder of any such option or warrant, be assumed by the Surviving
Corporation and be substituted for options and warrants of the Surviving
Corporation on the same terms and conditions as in effect at the Effective Time
(and the terms and conditions of PHC Stock Option Plans as applicable to the
options, if any), except that:
(i) each such option or warrant for PHC Common Stock shall be
exercisable:
(A) for that number of shares of the common stock (to the
nearest whole share) of the Surviving Corporation equal to (x) the number
of shares of PHC Common Stock subject to such option or warrant
immediately prior to the Effective Time multiplied by (y) the applicable
Exchange Ratio as described in EXHIBIT 3.1 (provided that in the event of
an increase or reduction in Merger Shares as provided in Section 7.11,
such Exchange Ratio as applied to such options and warrants will be
adjusted as described in EXHIBIT 3.1); and
(B) at an exercise price per share of common stock of the
Surviving Corporation (rounded to the nearest whole cent) equal to (x) the
exercise price per share of PHC Common Stock subject to such option or
warrant in effect immediately prior to the Effective Time divided by (y)
the applicable Exchange Ratio (subject to adjustment as provided in
Section 7.11 as described above); and
(ii) each such warrant for PHC Class A Preferred Stock shall be
exercisable:
(A) for that number of shares of the MIOA Class A Equivalent
Stock (to the nearest whole share) equal to (x) the number of shares of
PHC Class A Preferred Stock subject to such option or warrant immediately
prior to the Effective Time
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multiplied by (y) the Exchange Ratio (subject to adjustment as provided in
Section 7.11 as described above) applicable to the PHC Class A Preferred
Stock; and
(B) at an exercise price per share (rounded to the nearest
whole cent) of the MIOA Class A Equivalent Stock equal to (x) the exercise
price per share of PHC Class A Preferred Stock subject to such option or
warrant in effect immediately prior to the Effective Time divided by (y)
the applicable Exchange Ratio (subject to adjustment as provided in
Section 7.11 as described above); and
(iii) all actions to be taken under the PHC Stock Option Plans by
the Board of Directors of PHC or a committee thereof shall be taken by the
Board of Directors of the Surviving Corporation or a committee thereof.
From and after the Schedule Delivery Date, no additional options or warrants
shall be granted by PHC under PHC Stock Option Plans or otherwise, except as set
forth in EXHIBIT 3.3(A). All incentive stock options (as defined in Section 422
of the Code) shall be converted in a manner consistent with the regulations
promulgated under Section 422 of the Code.
(b) The assumed options and warrants of PHC, as set forth in this
Agreement, shall not give to any holder thereof any benefits in addition to
those which such holder had prior to the assumption of the option or warrant.
The Surviving Corporation shall take all corporate action necessary to reserve
for issuance a sufficient number of shares of its common stock and Class A
Preferred Stock for delivery upon exercise of such options and warrants after
the Effective Time. As soon as practicable after the Effective Time, the
Surviving Corporation shall file a registration statement, or an amendment to an
existing registration statement, under the Securities Act, with respect to the
shares of the Surviving Corporation subject to such options and warrants (the
"Option/Warrant Shares") and shall use its best efforts to maintain the
effectiveness of such registration statement for so long as the Surviving
Corporation shall be obligated to file reports under the Exchange Act. In
addition, the Surviving Corporation will cause the Merger Shares and the
Option/Warrant Shares to be listed on the Nasdaq SmallCap Market, if not
previously listed.
(c) Approval by the stockholders of PHC of this Agreement shall
constitute, without limitation, authorization and approval of any and all of the
actions described in Section 3.3(a) and (b).
(d) If any holders of such options or warrants exercise such
options or warrants and acquire shares of PHC Capital Stock prior to the
Closing, and pay in full the aggregate exercise price for such shares, then the
Surviving Corporation shall issue and deliver to such stockholders Merger Shares
in exchange for such shares of PHC Capital Stock in accordance with this Article
3.
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(e) All options outstanding at the Effective Time under MIOA's
stock option plans shall remain outstanding following the Effective Time and no
change to their terms shall be made in connection with the Merger. All warrants
for MIOA Capital Stock outstanding at the Effective Time shall remain
outstanding following the Effective Time and no change to their terms shall be
made in connection with the Merger. From and after the date of this Agreement,
no additional options or warrants shall be granted by MIOA under its stock
option plans or otherwise, except as set forth in EXHIBIT 3.3(E).
3.4. DELIVERY OF MERGER SHARES.
(a) Except as set forth in this Agreement, from and after the
Effective Time, each holder of a certificate or certificates that immediately
prior to the Effective Time represented outstanding shares of PHC Capital Stock
("Certificate(s)") shall be entitled to receive in exchange therefor, upon
surrender thereof to the Exchange Agent, the appropriate number and type of
Merger Shares for each share of PHC Capital Stock so represented by the
Certificate(s) surrendered by such holder.
(b) At or simultaneous with the Closing, (1) MIOA will furnish to
Corporate Stock Transfer, Inc., MIOA's current transfer agent (the "Exchange
Agent") irrevocable instructions to issue certificates to holders of PHC Capital
Stock which represent that number and type of Merger Shares to which each such
holder of PHC Capital Stock is entitled hereunder, and (2) MIOA will cause the
Exchange Agent to mail a letter of transmittal (with instructions for its use)
to each record holder of outstanding PHC Capital Stock for the holder to use in
surrendering the Certificate(s) that represented such holder's PHC Capital Stock
in exchange for a stock certificate representing the number and type of Merger
Shares to which the holder is entitled. Such letter of transmittal shall specify
that delivery shall be effected, and risk of loss and title to the
Certificate(s) shall pass, only upon proper delivery of the Certificate(s) to
the Exchange Agent, and the Exchange Agent shall advise such holder of the
effectiveness of the Merger and the procedures to be used in effecting the
surrender of the Certificate(s) for exchange therefor. Upon surrender to the
Exchange Agent of Certificate(s), together with such letter of transmittal duly
executed and completed in accordance with the instructions thereon, and such
other documents as may be reasonably requested by the Exchange Agent, the
Exchange Agent shall, pursuant to the Merger, but subject to Section 3.5 hereof,
promptly deliver the appropriate number and type of Merger Shares to the person
entitled to such Merger Shares for each share of PHC Capital Stock so
represented by the Certificate(s) surrendered by such holder thereof, and such
Certificate(s) shall forthwith be cancelled.
(c) If delivery of all or part of the Merger Shares is to be made
to a person other than the person in whose name a surrendered Certificate is
registered, it shall be a condition of such delivery or exchange that the
Certificate so surrendered shall be properly endorsed or shall be otherwise in
proper form for transfer and that the person requesting such delivery or
exchange shall have paid any transfer and other taxes required by reason of such
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delivery or exchange in a name other than that of the registered holder of the
Certificate surrendered or shall have established to the reasonable satisfaction
of PHC that such tax either has been paid or is not payable.
(d) Until surrendered and exchanged in accordance with this
Section 3.4, each such Certificate shall, after the Effective Time, represent
solely the right to receive the Merger Shares, in an amount and of the type
determined in accordance with Section 3.1 hereof, and shall have no ownership or
other rights. No interest shall accrue or be payable on any Merger Shares. None
of PHC, MIOA or the Surviving Corporation shall be liable to any holder of PHC
Capital Stock for any Merger Shares (or dividends or distributions with respect
thereto) delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law.
(e) From and after the Effective Time, no holder of
Certificate(s) shall be entitled to receive any dividend or other distribution
from the Surviving Corporation until proper surrender by such holder of such
Certificate(s) for stock certificate(s) representing Merger Shares. Upon such
surrender, the holder shall be paid the amount of any dividends or other
distributions (without interest) that theretofore became payable by the
Surviving Corporation after the Effective Time but prior to such surrender, but
were not paid by reason of the foregoing with respect to the number and type of
Merger Shares represented by the certificate(s) issued upon such surrender. From
and after the Effective Time, the Surviving Corporation shall, however, be
entitled to treat such Certificate(s) that have not yet been surrendered or
exchanged as evidencing the ownership of the type and aggregate number of Merger
Shares into which the shares of PHC Capital Stock represented by such
Certificate(s) would have been exchanged, notwithstanding any failure to
surrender such Certificate(s).
(f) The Surviving Corporation shall be responsible for the
payment of all charges and expenses of the Exchange Agent.
(g) If any Certificate shall have been lost, stolen or destroyed,
upon the receipt by the Surviving Corporation of an indemnity agreement and the
making of an affidavit by the person claiming such Certificate to be lost,
stolen or destroyed and, if required by the Surviving Corporation, the posting
by such person of a bond in such reasonable amount as the Surviving Corporation
may direct as indemnity against any claim that may be made against it with
respect to such Certificate, the Exchange Agent will issue in exchange for such
lost, stolen or destroyed Certificate the number and type of Merger Shares and
any cash in lieu of fractional shares, and unpaid dividends and distributions on
the number and type of Merger Shares deliverable in respect thereof pursuant to
this Agreement.
(h) Notwithstanding anything in this Agreement to the contrary,
Certificates surrendered for exchange by any Affiliate of PHC shall not be
exchanged until the Surviving Corporation has received an agreement (as
described in Section 7.6) from such Affiliate.
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3.5. DISSENTING SHARES. (a) Notwithstanding the provisions of this Article
3 or any other provision of this Agreement, all outstanding shares of MIOA
Capital Stock held by shareholders who have not voted in favor of the Merger and
with respect to which dissenter's rights have been properly exercised and notice
given to MIOA in accordance with the Florida Dissenter's Statutes and which
dissenter's rights have not been withdrawn or lost ("MIOA Dissenting Shares")
shall no longer be entitled to vote or to exercise any other rights as a
shareholder of MIOA and shall only be entitled to payment for its MIOA
Dissenting Shares in accordance with the Florida Dissenter's Statutes (unless
such shareholder timely withdraws its notice of election to dissent or fails to
perfect its right to dissent in accordance with the Florida Dissenter's
Statutes).
(b) Notwithstanding the provisions of this Article 3 or any other
provision of this Agreement, all outstanding shares of PHC Capital Stock held by
shareholders who have not voted in favor of the Merger and with respect to which
dissenter's rights have been properly exercised and notice given to PHC in
accordance with Section 262 of the Delaware Act and which dissenter's rights
have not been withdrawn or lost ("PHC Dissenting Shares") shall not be converted
into the right to receive Merger Shares in accordance with Article 3 hereof. No
cash or other consideration shall be delivered with respect to the PHC
Dissenting Shares under this Agreement, and as of the Effective Time, the
holders of PHC Dissenting Shares shall have only such rights in respect thereof
as are available under the Delaware Act; provided, however, that if any such
holders shall have thereafter failed to perfect or shall have effectively
withdrawn or lost such dissenter's right in accordance with the Delaware Act,
such holder's shares of PHC Capital Stock shall thereupon be deemed to have been
converted into and to have become exchangeable for the right to receive the
Merger Shares in the manner set forth in this Article 3.
3.6. CLOSING. The closing of the Transactions (the "Closing") shall take
place on or before November 13, 1998, at the offices of PHC's counsel in
Atlanta, Georgia, or another mutually agreed upon location on the Business Day
following compliance or waiver of the terms, conditions and contingencies
contained in this Agreement or such other date as is mutually agreed upon by the
parties hereto (such date to be herein referred to as the "Closing Date"). All
computations, adjustments, and transfers for the purposes hereof shall be
effective as of the close of business on the Closing Date. Each of the parties
will take all such reasonable and lawful action as may be necessary or
appropriate in order to effectuate the Merger as promptly as possible subject to
the satisfaction of the closing conditions set forth in Articles 8 and 9.
ARTICLE 4
ADDITIONAL COVENANTS
4.1. SUPPLEMENTAL AGREEMENTS. Concurrently with the Closing, each of ▇▇▇▇▇
▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, M.D. and
▇▇▇▇▇▇ ▇.
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▇▇▇▇▇▇▇ shall enter into employment agreements with the Surviving Corporation in
the form of EXHIBIT 4.1(A) hereof (the "Employment Agreements), which shall
replace each such individual's existing employment agreement with MIOA or PHC,
as applicable. Each of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, J.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, M.D. and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ shall also enter into
Nondisclosure/Noncompete Agreements in the form of EXHIBIT 4.1(B) hereof (the
"Nondisclosure/Noncompete Agreements), which shall replace each such
individual's existing nondisclosure and noncompete agreement with MIOA or PHC,
as applicable, and a Stockholders' Agreement in the form of EXHIBIT 4.1(C)(I).
On or before the Schedule Delivery Date, each of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇ ▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ will have entered into
Standstill/Voting Agreements in the form of EXHIBIT 4.1(C)(II) hereof pursuant
to which such individuals have agreed to (among other things) vote their
respective shares of capital stock in each of MIOA and PHC, as applicable, in
favor of the Merger, and after the Closing, to vote their respective shares of
capital stock of the Surviving Corporation in favor of the election of each of
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ to
the Board of Directors of the Surviving Corporation so long as such nominees
remain employed by the Surviving Corporation.
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ shall forfeit certain options
pursuant to the terms of their respective Employment Agreements.
4.2. CONDUCT OF BUSINESS BY MIOA AND PHC PENDING MERGER. MIOA and PHC
covenant and agree that, unless the other party shall otherwise consent in
writing or except as otherwise set forth in this Agreement, between the date of
such party's Board Approval and the Closing, the business of MIOA and PHC,
respectively, and their respective Subsidiaries shall be conducted only in, and
none of said parties shall take any action except in, the ordinary course of
business and in a manner consistent with past practice; and all of said parties
will use their best efforts to preserve intact their business organizations, to
keep available the services of their present officers, employees and consultants
and to preserve their present relationships with customers, suppliers and other
persons with which they have significant business relations. Except as set forth
on EXHIBIT 4.2, but without otherwise limiting the foregoing, each of PHC and
MIOA covenants that neither of them nor any of their respective Subsidiaries
shall, between the date of such party's Board Approval and the Closing, directly
or indirectly, do any of the following without the prior written consent of the
other:
(a) (i) issue, sell (other than upon exercise of outstanding
options or warrants, whose terms shall not be changed), pledge, dispose of,
encumber, authorize, or propose the issuance, sale, pledge, disposition,
encumbrance or authorization of any shares of capital stock of any class, or any
options, warrants, convertible securities or other rights of any kind to acquire
any shares of capital stock of, or any other ownership interest in, PHC, MIOA or
any Subsidiary; PROVIDED, HOWEVER, that PHC and MIOA shall have the right to
carry out any
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Permitted Equity Financing or other offering of its securities that such parties
have agreed to pursuant to Section 3.1(e) hereof; (ii) amend or propose to amend
the Certificate of Incorporation or Articles of Incorporation, as applicable, or
By-Laws of PHC or MIOA, except as contemplated by this Agreement; (iii) split,
combine or reclassify any outstanding shares of PHC Capital Stock or MIOA
Capital Stock or any Subsidiary's capital stock, or declare, set aside or pay
any dividend or distribution payable in cash, stock, property or otherwise with
respect to such capital stock; (iv) redeem, purchase or otherwise acquire or
offer to redeem, purchase or otherwise acquire any shares of capital stock or
that of any Subsidiary; or (v) authorize or propose or enter into any contract,
agreement, commitment or arrangement with respect to any of the matters set
forth in this Section 4.2(a);
(b) (i) acquire (by merger, consolidation, or acquisition of
stock or assets) directly or indirectly, any Person or any business owned by
such Person; (ii) except in the ordinary course of business and in a manner
consistent with past practices, sell, pledge, dispose of, or encumber or
authorize or propose the sale, pledge, disposition or encumbrance of any assets
of PHC, MIOA or any Subsidiary; (iii) enter into any material contract or
agreement, except in the ordinary course of business; (iv) authorize any single
capital expenditure or commitment in excess of $500,000, except as otherwise set
forth in EXHIBIT 4.2(B)(IV); (v) authorize any capital expenditure or commitment
outside the ordinary course of business, except as otherwise set forth in
EXHIBIT 4.2(B)(IV); or (vi) enter into or amend any contract, agreement,
commitment or arrangement with respect to any of the matters prohibited by this
Section 4.2(b);
(c) take any action other than in the ordinary course of business
and in a manner consistent with past practices (none of which actions shall be
unreasonable or unusual) with respect to increasing compensation of any officer,
director, stockholder or employee or with respect to the grant of any severance
or termination pay (otherwise than pursuant to policies in effect on the date
hereof and fully disclosed to the other party prior to the date hereof) or with
respect to any increase of benefits payable under its severance or termination
pay policies in effect on the date hereof;
(d) make any payments except in the ordinary course of business
and in amounts and in a manner consistent with past practice (none of which
payments shall be unreasonable or unusual), under any employee benefit plan or
otherwise to any employee, independent contractor or consultant, enter into any
employee benefit plan, any employment or consulting agreement, grant or
establish any new awards under any such existing employee benefit plan or
agreement, or adopt or otherwise amend any of the foregoing;
(e) take any action except in the ordinary course of business and
in a manner consistent with past practice or make any change in existing methods
of management, distribution, marketing, accounting or operating (or practices
relating to payment of trade accounts or to other payments);
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(f) except in the ordinary course of business or as set forth on
EXHIBIT 4.2(F), incur or increase prior to Closing any indebtedness for borrowed
money from banks, financial institutions or other Persons or cancel, without
payment in full, any notes, loans or receivables;
(g) directly or indirectly loan or advance monies to any Person
(other than any of its own Subsidiaries) under any circumstance whatsoever
except for credit transactions with customers on terms consistent with past
practices; or
(h) do any act or omit to do any act which might reasonably be
expected to cause a breach of any material contract, commitment or obligation.
4.3. EXPENSES. Except as provided hereinabove with respect to the costs of
the Form S-4, all of the expenses incurred by PHC in connection with the
authorization, preparation, execution and performance of this Agreement and
other agreements referred to in this Agreement, including, without limitation,
all fees and expenses of agents, representatives, brokers, counsel and
accountants for PHC, shall be paid by PHC if the Merger is not consummated, and
all of the expenses incurred by MIOA in connection with the authorization,
preparation, execution and performance of this Agreement and the other
agreements referred to in this Agreement, including without limitation, all
reasonable fees and expenses of advisors, agents, representatives, brokers,
counsel and accountants, shall be paid by MIOA if the Merger is not consummated.
After the Merger, such expenses of PHC and MIOA will be paid by the Surviving
Corporation. Notwithstanding the foregoing, in the event that this Agreement is
terminated, the costs (and related fees and expenses) of the Fairness Opinion(s)
(if incurred) up to a maximum of $250,000 shall be evenly divided between MIOA
and PHC.
4.4. NOTIFICATION OF CERTAIN MATTERS.
(a) MIOA shall give prompt written notice to PHC of the
following:
(i) the occurrence or nonoccurrence of any event whose
occurrence or nonoccurrence would be likely to cause either (A) any
representation or warranty of MIOA contained in this Agreement to be untrue or
inaccurate in any material respect at any time from the Schedule Delivery Date
to the Closing (assuming that each representation and warranty was re-affirmed
as of each day between the Schedule Delivery Date and the Closing Date,
inclusive), including but not limited those resulting from the consummation of
any Permitted Equity Financings, or (B) directly or indirectly, any Material
Adverse Effect; or
(ii) any material failure of MIOA, any officer, director,
employee or agent thereof, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder.
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(b) PHC shall give prompt written notice to MIOA of the
following:
(i) the occurrence or nonoccurrence of any event whose
occurrence or nonoccurrence would be likely to cause either (A) any
representation or warranty of PHC contained in this Agreement to be untrue or
inaccurate in any material respect at any time from the Schedule Delivery Date
to the Closing (assuming that each representation and warranty was re-affirmed
as of each day between the Schedule Delivery Date and the Closing Date,
inclusive), including but not limited those resulting from the consummation of
any Permitted Equity Financings, or (B) directly or indirectly, any Material
Adverse Effect;
(ii) any material failure of PHC, or any officer, director,
employee or agent thereof, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder.
(c) In the event that either MIOA or PHC is required to deliver a
written notice pursuant to subsection (a) or (b) above, respectively, such party
shall, within three (3) days after delivery of such notice, deliver to the other
party a revised Schedule updating such representation or warranty. The receiving
party shall review the Schedule and within five (5) days after its receipt,
elect to either (i) approve the Schedule for attachment to this Agreement and
treat such Schedule as if it had been delivered and attached to this Agreement
as of the Schedule Delivery Date, or (ii) treat such Schedule and the events
giving rise to such Schedule as a breach of such related representation or
warranty in accordance with the terms of this Agreement, including but not
limited Sections 7.11, 8.1 and 9.1, as applicable; PROVIDED, however, that any
events which are permitted to occur between the date hereof and the Closing
pursuant to the terms of this Agreement (such as a Permitted Equity Financing)
shall in no event be treated as a breach of a representation or warranty
hereunder.
(d) Notwithstanding the foregoing, the delivery of any notice
pursuant to this Section shall not waive or release MIOA or PHC, as the case may
be, from its representations, warranties, covenants or agreements under this
Agreement, except as they may be modified and approved in accordance with
subsection (c)(i) above.
4.5. PUBLIC ANNOUNCEMENTS.
(a) Except for and to the extent of any public announcement or
disclosures relating to the Transactions previously made by MIOA or PHC, as may
be required by law (as for example in the Joint Proxy Statement/Prospectus) or
as provided in this Section 4.5, MIOA and PHC agree that until the consummation
of the Transactions or the termination of this Agreement, as the case may be,
each party will not, and will direct its directors, officers, employees,
representatives and agents who have knowledge of the Transactions not to,
disclose to any Person who is not a participant in discussions concerning the
Transactions (other than
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Persons whose consent is required to be obtained hereunder), any of the terms,
conditions or other facts with respect to the Transactions.
(b) MIOA shall obtain the prior written consent of PHC, and PHC
shall obtain the prior written consent of MIOA, before issuing any press release
or otherwise making any public statements with respect to the Transactions and
shall not issue any such press release or make any such public statement prior
to receiving such consent, except in the case where such disclosure is required
by law and the party whose consent is required has unreasonably refused to give
such consent or is unable to consent prior to such disclosure because of exigent
circumstances. The disclosing party shall be responsible for the accuracy and
completeness of any such disclosure. Subject to the foregoing, the parties
acknowledge and agree that MIOA and PHC expect to issue press releases with
respect to the Transactions immediately after execution of this Agreement, as
well as after the Closing.
(c) This Section 4.5 shall not restrict either MIOA or PHC in any
actions by such parties which are necessary or appropriate to enforce their
respective rights under this Agreement.
4.6. CONFIDENTIALITY. Until the Closing, PHC and MIOA shall, and shall
cause their respective employees, agents, counsel, accountants, consultants and
other representatives to hold in strict confidence any and all information
obtained from the other party and to not disclose any such information (unless
such information is or becomes ascertainable from public sources or public
disclosure of such information which in the good faith judgment of MIOA or PHC
is required by law, as for example in the Joint Proxy Statement/Prospectus);
provided, however, that nothing contained in this Agreement shall limit the
right of any such persons to disclose any such information to PHC or MIOA or
their respective employees, agents, representatives, counsel, accountants,
financial advisors and/or underwriters for the purpose of facilitating the
consummation of the Transactions. This obligation is in furtherance, and not in
limitation, of any other confidentiality agreements between the parties,
including but not limited to the Confidentiality Agreement, which remains in
full force and effect.
4.7. ACCESS AND INSPECTION. On reasonable notice, each of MIOA and PHC and
their respective Subsidiaries shall provide the other full access during normal
business hours from and after the date hereof until the Closing to all of their
respective offices, properties, books and records as they relate to the business
of each and the Assets, and shall furnish such information concerning the
business and affairs of each as may be requested, in each case for the purpose
of making such continuing investigation of MIOA and its Subsidiaries or PHC and
its Subsidiaries, as the case may be, and their respective predecessors and the
Assets. Each of MIOA and PHC and their respective Subsidiaries shall cause
appropriate personnel to assist in such continuing investigation and shall cause
personnel, counsel, accountants and other non-employee representatives to be
reasonably available in connection with such continuing investigation.
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4.8. CERTAIN FILINGS, CONSENTS AND ARRANGEMENTS. Subject to compliance
with applicable law, PHC and MIOA will (a) cooperate with one another (i) in
promptly determining whether any filings are required to be made or consents,
approvals, permits or authorizations are required to be obtained under any
federal, state or foreign law or regulation and (ii) in promptly making any such
filings, furnishing information required in connection therewith and seeking
timely to obtain any such consents, approvals, permits or authorizations and (b)
provide one another with copies of all filings made by such party with any
governmental authority in connection with this Agreement.
4.9. STATE TAKEOVER STATUTES. MIOA will take all steps necessary to exempt
the Merger from the requirements of Florida Act Section 607.0901 ET SEQ. or any
other applicable "fair price," "moratorium" or "control acquisition" statute or
regulation, by action of MIOA's Board of Directors or otherwise.
4.10. MONTHLY FINANCIAL STATEMENTS. From and after the date hereof until
the Closing, each of PHC and MIOA shall provide to the other party its monthly
internal unaudited financial statements (the "Monthly Financials") as soon as
reasonably practicable after their preparation.
4.11. EFFORTS TO CLOSE TRANSACTIONS. After the date hereof but prior to
the Closing, MIOA hereby agrees that it shall use its reasonable efforts to
close those transactions specified on EXHIBIT 4.11 on terms and conditions
mutually agreeable to the parties hereto.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF MIOA
In order to induce PHC to enter into this Agreement and consummate the
Transactions, MIOA hereby represents and warrants the following to PHC as of the
Schedule Delivery Date (and not the date hereof), each of which representations
and warranties shall be material to and relied upon by PHC and shall be deemed
remade on and as of the date of the Closing:
5.1. ORGANIZATION AND AUTHORITY. MIOA is a corporation duly organized and
validly existing under the laws of the State of Florida and each of its
Subsidiaries is incorporated in the states identified on SCHEDULE 5.1. The
states in which MIOA and each Subsidiary are qualified to do business are set
forth on SCHEDULE 5.1. Neither MIOA nor any of its Subsidiaries is required to
be qualified as a foreign corporation in any other jurisdiction where its
failure to qualify would have a Material Adverse Effect. MIOA and its
Subsidiaries have all necessary corporate power and authority to own, lease and
operate their properties and conduct their business as it is currently being
conducted. Except for MIOA's ownership of its Subsidiaries, which is fully
described on SCHEDULE 5.1, and as otherwise set forth on SCHEDULE 5.1, neither
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MIOA nor any of its Subsidiaries owns, directly or indirectly, any equity
interest in any corporation, partnership, joint venture, or other entity. The
list of MIOA's Subsidiaries contained in SCHEDULE 5.1 is a true, correct and
complete list of all entities in which MIOA has a direct or indirect equity
interest. SCHEDULE 5.1 identifies each owner of an equity interest, or right to
acquire any such interest, in each Subsidiary of MIOA.
5.2. CORPORATE POWER AND AUTHORITY; DUE AUTHORIZATION. Subject to MIOA
Board Approval, MIOA has full corporate power and authority to execute and
deliver this Agreement and each of the Closing Documents to which MIOA is or
will be a party, to amend its Articles of Incorporation in the manner set forth
in this Agreement, and to consummate the Transactions. The shares of MIOA
Capital Stock and other securities convertible into MIOA Capital Stock owned by
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ are set forth opposite such individual's
name on SCHEDULE 5.2. No corporate proceeding is necessary to approve the
Transactions other than MIOA Board Approval and MIOA Stockholder Approval.
Assuming MIOA Board Approval and that this Agreement and each of the Closing
Documents to which PHC is a party constitutes a valid and binding agreement of
PHC, this Agreement and each of the Closing Documents to which MIOA is a party
constitutes, or will constitute when executed and delivered, a valid and binding
agreement of MIOA in each case enforceable in accordance with its terms, except
as the enforceability thereof may be limited by applicable bankruptcy,
insolvency or other similar laws relating to the enforcement of creditors'
rights generally and by the application of general principles of equity. The
duly elected officers and directors of MIOA and its Subsidiaries are set forth
on SCHEDULE 5.2. Copies of the Articles of Incorporation, the Bylaws and all
minutes of MIOA and its Subsidiaries are contained in the minute books of MIOA,
or such Subsidiaries, respectively. True, correct and complete copies of the
minute books of MIOA and its Subsidiaries have been made available to PHC.
5.3. SUFFICIENCY OF ASSETS. All material assets and rights relating to
MIOA's business and that of its Subsidiaries are held solely by, and all
agreements, obligations, expenses and transactions relating to the business of
MIOA and its Subsidiaries have been entered into, incurred and conducted solely
by, MIOA and its Subsidiaries. Except as described in SCHEDULE 5.3, the Assets
are all of the items necessary to provide all services required in connection
with the business of MIOA and its Subsidiaries, assuming competent personnel,
general office facilities, and adequate facilities are available.
5.4. NO CONFLICT; REQUIRED CONSENTS. Exclusive of MIOA Board Approval and
MIOA Stockholder Approval, SCHEDULE 5.4 lists all material third party consents
or approvals required with respect to MIOA and its Subsidiaries for consummation
of the Transactions, which consents MIOA agrees to use its best reasonable
efforts to obtain. Assuming all such consents and approvals have been obtained
and assuming the appropriate filings and mailings are made by PHC and MIOA to
effectuate the Merger under the Florida Act and the Delaware Act, and under the
Securities Act and the Exchange Act, the execution and delivery by MIOA of this
Agreement and the Closing Documents and the consummation by MIOA of the
Transactions do
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not and will not, except as set forth on SCHEDULE 5.4, (a) require the consent,
approval or action of, or any filing or notice to, any corporation, firm, Person
or other entity or any public, governmental or judicial authority (except for
such consents, approvals, actions, filings or notices the failure of which to
make or obtain will not in the aggregate have a Material Adverse Effect); (b)
violate in any material respect the terms of any material instrument, document
or agreement to which MIOA or any of its Subsidiaries is a party, or by which
MIOA or any of its Subsidiaries or the property of MIOA or any of its
Subsidiaries is bound, or be in conflict in any material respect with, result in
a material breach of or constitute (upon the giving of notice or lapse of time
or both) a material default under any such instrument, document or agreement, or
result in the creation of any lien upon any of the property or assets of MIOA or
any of its Subsidiaries; (c) violate in any respect the terms of any instrument,
document or agreement to which MIOA or any of its Subsidiaries is a party, or by
which MIOA or any of its Subsidiaries or the property of MIOA or any of its
Subsidiaries is bound, or be in conflict in any respect with, result in a breach
of or constitute (upon the giving of notice or lapse of time or both) a default
under any such instrument, document or agreement, or result in the creation of
any lien upon any of the property or assets of MIOA or any of its Subsidiaries
if the aggregate effect of all such violations listed in this subsection (c)
results in a Material Adverse Effect on MIOA and its Subsidiaries taken as a
whole; (d) violate MIOA's Articles of Incorporation or Bylaws; or (e) violate
any order, writ, injunction, decree, judgment, ruling, law, rule or regulation
of any federal, state, county, municipal, or foreign court or governmental
authority applicable to MIOA or any of its Subsidiaries, or the business or
assets of MIOA or any of its Subsidiaries. Neither MIOA nor any of its
Subsidiaries is subject to, or a party to, any mortgage, lien, lease, agreement,
contract, instrument, order, judgment or decree or any other material
restriction of any kind or character which would prevent or hinder the continued
operation of the business of MIOA and its Subsidiaries after the Closing on
substantially the same basis as theretofore operated.
5.5. CAPITALIZATION. All of the authorized and outstanding MIOA capital
stock is set forth on SCHEDULE 5.5, and no shares of MIOA capital stock are held
in the treasury of MIOA. No shares of any class of capital stock or other equity
interests of MIOA, other than (i) MIOA Common Stock, (ii) options or warrants
for MIOA Common Stock, or (iii) those shares of MIOA Capital Stock identified in
SCHEDULE 5.5, shall be issued and outstanding at the Closing. All outstanding
MIOA capital stock has been duly authorized, and is validly issued, fully paid
and nonassessable. No preemptive (whether statutory or contractual) rights have
been violated. Current MIOA stock option plans, all previous forms of those
plans, and amendments, and all outstanding options and warrants, are identified
on SCHEDULE 5.5. Except as set forth on SCHEDULE 5.5, all options were granted
in accordance with the provisions of MIOA stock option plans. SCHEDULE 5.5 also
sets forth information as to options (if any) and warrants (if any) previously
granted which have terminated, expired or been exercised. Except for the
outstanding options, warrants and other commitments set forth in SCHEDULE 5.5,
MIOA has no convertible securities, options, warrants, or other contracts,
commitments, agreements, understandings, arrangements or restrictions by which
it is bound to issue any additional shares of MIOA Capital
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Stock or other securities. Except as set forth on SCHEDULE 5.2, MIOA owns,
directly or indirectly, all of the equity in its Subsidiaries and no third party
has a right to acquire any such interest. All securities of MIOA and its
Subsidiaries were offered and sold in compliance with applicable federal and
state securities laws. SCHEDULE 5.5 identifies each stock option plan and
outstanding option, warrant, or other right, if any, to acquire the capital
stock of any of its Subsidiaries, full and complete copies of which have been
provided to PHC. Each and every dividend of MIOA and each Subsidiary, if any,
whether paid in cash or other property, has been declared and paid in compliance
with applicable law, and neither MIOA nor any of its Subsidiaries has any
further obligation with respect to such payment. SCHEDULE 5.5 also summarizes in
detail all currently effective registration rights which have been granted by
MIOA to any other person or entity and all currently effective shareholder
agreements between any shareholders of MIOA.
5.6. COMPLIANCE WITH LAWS; FILINGS WITH THE SEC. Except as set forth in
SCHEDULE 5.6, (a) to the best of MIOA's knowledge, MIOA and its Subsidiaries are
in compliance with, and MIOA and its Subsidiaries have operated any Persons or
businesses previously owned or operated by them in compliance with, all
applicable laws, orders, rules and regulations of all governmental bodies and
agencies, including applicable environmental laws and regulations, but excluding
applicable laws and regulations related to Medicare, Medicaid and other
federally funded programs, except where such noncompliance has and will have, in
the aggregate, no Material Adverse Effect. Neither MIOA, nor any of its
Subsidiaries has received notice of any noncompliance with the foregoing.
(b) Without limiting the foregoing, MIOA and each of its
Subsidiaries and any other person or entity for whose conduct MIOA is legally
held responsible are in material compliance with all applicable federal, state,
regional, local or provincial laws, statutes, ordinances, judgments, rulings and
regulations relating to any matters of pollution, protection of the environment,
health or safety, or environmental regulation or control (collectively,
"Environmental Laws"). Neither MIOA nor any of its Subsidiaries, nor any other
person or entity for whose conduct MIOA is legally responsible has (i) received
any notice, demand, request for information, or administrative inquiry relating
to any violation of an Environmental Law or the institution of any suit, action,
claim, or proceeding alleging such violation or investigation by any
Governmental Authority or any third party of any such violation, (ii)
manufactured, generated, treated, stored, handled, processed, released,
transported or disposed of any Hazardous Substance on, under, from or at any of
MIOA's or any of its Subsidiaries' properties or any other properties, (iii)
become aware or received notice of the release or disposal of any Hazardous
Substances in violation of any applicable Environmental Law, on, under or at any
of MIOA's, or any of its Subsidiaries' properties or any other properties (iv)
become aware or received notice of any actual or potential material liability on
the part of MIOA for the response to or remediation of any Hazardous Substance
at or arising from any of MIOA's or any of its Subsidiaries' properties or any
other properties owned or operated by MIOA, any of its Subsidiaries or any other
Person for whose conduct MIOA is legally responsible, or (v)
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become aware of or received notice of any actual or potential liability on the
part of MIOA for the costs of response to or remediation of Hazardous Substances
at or arising from any of MIOA's or any of its Subsidiaries' properties or any
other properties owned or operated by MIOA, any of its Subsidiaries or any other
Person for whose conduct MIOA is or may be held responsible. For purposes of
this Agreement, the term "Hazardous Substance" shall mean any toxic or hazardous
materials or substances, including asbestos, buried contaminants, chemicals,
flammable explosives, radioactive materials or petroleum and petroleum products
and any substances defined as, or included in the definition of, "hazardous
substances", "hazardous wastes", "hazardous materials" or "toxic substances"
under any Environmental Law. No Environmental Law imposes any obligation upon
MIOA or its Subsidiaries arising out of or as a condition to any transaction
contemplated hereby, including, without limitation, any requirement to modify or
to transfer any permit or license, any requirement to file any notice or other
submission with any Governmental Authority, the placement of any notice,
acknowledgment, or covenant in any land records, or the modification of or
provision of notice under any agreement, consent order, or consent decree. No
lien has been placed upon any of MIOA's properties or its Subsidiaries'
properties under any Environmental Law.
(c) MIOA has made all filings with the SEC that it has been
required to make under the Securities Act and the Exchange Act (collectively,
the "Public Reports"), and has done so in a timely manner. Each of the Public
Reports has complied with the Securities Act and the Exchange Act, as
applicable, in all material respects. None of the Public Reports, as of their
respective dates, contained any untrue statement of a material fact or omitted
to state a material fact necessary to make the statements made therein, in light
of the circumstances under which they were made, not misleading.
(d) MIOA currently satisfies all applicable Nasdaq rules in order
to be listed on the Nasdaq SmallCap Market and has no reason to believe that it
will not satisfy such listing requirements at any time prior to the Effective
Time.
(e) To the best of MIOA's knowledge, MIOA and its Subsidiaries
are, and from the earlier of the dates of MIOA's acquisition of Global Air
Rescue, Inc. and Global Charter, Inc., have always been in compliance with all
applicable laws relating to drug testing of pilots, including without limitation
the provisions of 49 U.S.C. 45102 ET SEQ.
5.7. LICENSES AND PERMITS. Except as set forth in SCHEDULE 5.7, neither
MIOA nor any of its Subsidiaries has received notice of any violations in
respect of any licenses, permits, concessions, grants, franchises, approvals or
authorizations necessary or required for the use or ownership of their assets
and the operation of their business. No proceeding is pending or, to the
knowledge of MIOA, threatened, which seeks revocation or limitation of any such
licenses, permits, concessions, grants, franchises, approvals or authorizations.
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5.8. FINANCIAL INFORMATION.
(a) MIOA has filed a Quarterly Report on Form 10-QSB for the
fiscal quarter ended March 31, 1998 (the "Most Recent Fiscal Quarter End"), and
an Annual Report on Form 10-KSB for the fiscal year ended December 31, 1997,
copies of which are attached hereto as EXHIBIT 5.8. The financial statements
included in or incorporated by reference into these Public Reports (including
the related notes and schedules - the "Historical Financials") have been, and
MIOA's Monthly Financials will be, prepared in accordance with GAAP applied on a
consistent basis throughout the periods covered thereby, present fairly the
financial condition of MIOA and its Subsidiaries as of the indicated dates and
the results of operations of MIOA and its Subsidiaries for the indicated
periods, are consistent with the books and records of MIOA and its Subsidiaries
and, except as discussed on SCHEDULE 5.8, do not contain any material item of
special or non-recurring income not earned in the ordinary course of business;
provided, however, that the interim statements and such Monthly Financials are
subject to normal year-end adjustments that are not expected to be material in
amount.
(b) Except as and to the extent specifically disclosed in this
Agreement, there are no liabilities or obligations of MIOA or any of its
Subsidiaries of any nature, whether liquidated, accrued, absolute, contingent or
otherwise except for those (i) that are specifically reflected or reserved
against as to amount in the latest balance sheet contained in the Historical
Financials, (ii) that arose thereafter in the ordinary course of business, or
(iii) that are specifically set forth on SCHEDULE 5.8; and at all times after
the execution of this Agreement until the Closing, there will be no liabilities
or obligations of MIOA or any of its Subsidiaries of any nature, whether
liquidated, unliquidated, accrued, absolute, contingent or otherwise, which are
material individually or in the aggregate, except for those (A) that are
specifically reflected or reserved against as to amount in the latest balance
sheet contained in the Historical Financials, or (B) that arose after the date
of such balance sheet in the ordinary course of business (and are, individually
and in the aggregate, immaterial), (C) that are specifically set forth on
SCHEDULE 5.8, or (D) that are permitted as set forth on EXHIBITS 4.2, 4.2(B)(IV)
OR 4.2(F).
(c) MIOA and its Subsidiaries are not, nor have any of them been
during the twelve (12) months immediately preceding the execution of this
Agreement, insolvent within the meaning of 11 U.S.C. ss.101(31). MIOA and its
Subsidiaries have paid and are paying their debts as they become due.
5.9. NO UNDISCLOSED LIABILITIES. Except as and to the extent specifically
disclosed in this Agreement and those that are specifically reflected or
reserved against as to amount in the latest balance sheet contained in the
Historical Financials, neither MIOA nor any of its Subsidiaries knows of any
reasonable basis for the assertion against MIOA or any of its Subsidiaries of
any material liabilities or obligations of any nature, whether absolute,
accrued, contingent or otherwise and whether due or to become due, including,
without limitation, any liability for taxes and interest, penalties and other
charges payable with respect thereto. Except
-27-
as set forth in this Agreement, neither the execution and delivery of this
Agreement nor the consummation of the Merger will (a) result in any payment
(whether severance pay, unemployment compensation or otherwise) becoming due
from MIOA to any employee, director or officer or former employee, director or
officer of MIOA, (b) increase any benefits otherwise payable to any employee,
director or officer or former employee, director or officer of MIOA or (c)
result in the acceleration of the time of payment or vesting of any such
benefits.
5.10. INTELLECTUAL PROPERTY. Except as described in SCHEDULE 5.10, to the
knowledge of MIOA and its Subsidiaries, no patent, formula, process, trade
secret, trademark, trade name, assumed name or copyright relating to MIOA's
business and that of its Subsidiaries, including all intellectual property used
in the operation of the business of MIOA and its Subsidiaries (collectively, the
"MIOA Intellectual Property") infringes on any patent, copyright, trademark or
other intellectual property right of any Person, or violate the terms of any
agreements related thereto, nor to MIOA's knowledge have there been any claims
of infringement. Except as set forth in SCHEDULE 5.10, there are no pending or,
to MIOA's and its Subsidiaries' knowledge, threatened claims against MIOA or any
of its Subsidiaries contesting the validity of, or their right to use any of,
the MIOA Intellectual Property.
5.11. CONTRACTS AND COMMITMENTS. Except as disclosed on SCHEDULE 5.11:
(a) To MIOA's and its Subsidiaries' knowledge, no aspect of
MIOA's and its Subsidiaries' business or operations or the Assets is of such
character as would restrict the Surviving Corporation from carrying on the
business of MIOA and its Subsidiaries anywhere in the world.
(b) MIOA and its Subsidiaries have no consultants or independent
contractors who are officers or directors of MIOA or any of its Subsidiaries, or
who are affiliates of such officers or directors, to whom they are paying
compensation for services.
(c) Neither MIOA nor any of its Subsidiaries has material
contracts, commitments, arrangements, or understandings relating to their
business, operations, financial condition, or prospects. For purposes of this
Section 5.11(c), "material" means payment or performance of a contract,
commitment, arrangement or understanding entered into in the ordinary course of
business which is expected to (i) involve payments in excess of $100,000 per
year or (ii) have a duration exceeding five (5) years with expected payments
over its duration exceeding $100,000 (in each case other than leases not
required to be disclosed pursuant to Section 5.17), or any contract, commitment,
arrangement or understanding entered into not in the ordinary course of
business.
(d) To MIOA's and its Subsidiaries' knowledge, there are no
outstanding contracts, commitments or bids, or services, development, or sales
proposals, that will result in any substantial loss to MIOA or any of its
Subsidiaries (and/or the Surviving Corporation)
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upon completion or performance thereof, after allowance for normal direct
employee expenses, licensing, development, distribution expenses and other
costs.
(e) There are no outstanding material lease or purchase
commitments of MIOA or any of its Subsidiaries which are not consistent with
MIOA's and its Subsidiaries' past lease and purchase commitment practices.
5.12. ABSENCE OF CERTAIN CHANGES. Except as reflected on SCHEDULE 5.12, or
elsewhere in this Agreement or specifically identified on any Schedules hereto,
since December 31, 1997, MIOA and its Subsidiaries have not, and at the Closing
Date will not, have:
(a) Suffered a Material Adverse Effect, or become aware of any
circumstances which might reasonably be expected to result in such a Material
Adverse Effect; or suffered any material casualty loss to the Assets (whether or
not insured);
(b) Incurred any obligations specifically related to the Assets,
except in the ordinary course of business, consistent with past practices;
(c) Permitted or allowed any of the Assets to be mortgaged,
pledged, or subjected to any lien or encumbrance, except liens or encumbrances
specifically excepted by the provisions of Section 5.14;
(d) Written down the value of any inventory, contract or other
intangible asset, or written off as uncollectible any notes or accounts
receivable or any portion thereof, except for write-downs and write-offs in the
ordinary course of business, consistent with past practice and at a rate no
greater than during the latest complete fiscal year; cancelled any other debts
or claims, or waived any rights of substantial value, or sold or transferred any
of its material properties or assets, real, personal, or mixed, tangible or
intangible, except in the ordinary course of business and consistent with past
practice;
(e) Sold, licensed or transferred or agreed to sell, license or
transfer, any of the Assets, except in the ordinary course of business and
consistent with past practice;
(f) To MIOA's and its Subsidiaries' knowledge, received notice of
any pending or threatened adverse claim or an alleged infringement of
proprietary material, whether such claim or infringement is based on trademark,
copyright, patent, license, trade secret, contract or other restrictions on the
use or disclosure of proprietary materials;
(g) Incurred obligations to refund money to customers, except in
the ordinary course of business, all of which will have no Material Adverse
Effect;
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(h) Become aware of any event, condition or other circumstance
relating solely to the Assets (as opposed to any such event, condition, etc.
which is, for example, national or industry-wide in nature) which might
reasonably be expected to have a Material Adverse Effect on the Assets;
(i) Made any capital expenditures or commitments, any one of
which is more than $500,000, for additions to property, plant, or equipment,
unless approved in writing by PHC or deemed approved by PHC pursuant to EXHIBIT
4.2(B)(IV) hereof;
(j) Made any material change in any method of accounting or
accounting practice;
(k) Paid, loaned, guaranteed, or advanced any material amount to,
or sold, transferred, or leased any material properties or assets (real,
personal, or mixed, tangible or intangible) to, or entered into any agreement,
arrangement, or transaction with any of MIOA's or any Subsidiaries' officers or
directors, or any business or Person in which any officer or director of MIOA or
any of its Subsidiaries, or any affiliate or associate of any of such Persons
has any direct or indirect interest; or
(l) Agreed to take any action described in this Section 5.12.
5.13. TAXES.
(a) As used in this Agreement:
(i) "Adverse Consequences" means all actions, suits,
proceedings, hearings, investigations, charges, complaints, claims, demands,
injunctions, judgments, orders, decrees, rulings, damages, dues, penalties,
fines, costs, amounts paid in settlement, liabilities, obligations, taxes,
liens, losses, expenses, and fees, including court costs and attorneys' fees and
expenses;
(ii) "Affiliated Group" means any affiliated group within the
meaning of Code ss.1504(a) (or any similar group defined under a similar
provision of state, local or foreign law);
(iii) "Liability" means any liability (whether known or
unknown, whether asserted or unasserted, whether absolute or contingent, whether
accrued or unaccrued, whether liquidated or unliquidated, and whether due or to
become due), including, without limitation, any liability for Taxes;
(iv) "Security Interest" means any mortgage, lien, encumbrance
or other security including any "tax lien" (other than for current taxes not yet
due).;
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(v) "Tax" means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under Code
ss.59A), customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not;
(vi) "Tax Return" means any return, declaration, report, claim
for refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
(b) MIOA and its Subsidiaries have not been a member of an
Affiliated Group filing a consolidated federal income Tax Return other than a
group the common parent of which is MIOA. The Affiliated Group of which MIOA is
the common parent (the "MIOA Group") has filed all income Tax Returns that it
was required to file for each taxable period during which MIOA and its
Subsidiaries were a member of the MIOA Group. All such Tax Returns are correct
and complete in all material respects. All income Taxes owed by the MIOA Group
(whether or not shown on any Tax Return) have been paid for each taxable period
during which MIOA and its Subsidiaries filed a consolidated federal income Tax
Return.
(c) The amounts booked as provisions for Taxes on the Historical
Financials are sufficient for payment of all unpaid Taxes of MIOA, its
Subsidiaries, and the MIOA Group through March 31, 1998. Copies of the MIOA
Group's federal and state income Tax Returns for calendar years 1995, 1996, and
1997 have been provided to PHC.
(d) No claim has ever been made by a Governmental Authority in a
jurisdiction where MIOA or a Subsidiary does not file Tax Returns that it is or
it may be subject to taxation by that jurisdiction. There are no Security
Interests on any of the assets of MIOA or any of its Subsidiaries that arose in
connection with any failure (or alleged failure) to pay any Tax when due.
(e) MIOA, each MIOA Subsidiary, and the MIOA Group have withheld
and paid over to the proper governmental authorities all Taxes required to have
been withheld and paid over, and complied with all information reporting and
backup withholding requirements, including maintenance of required records with
respect thereto, in connection with amounts paid to any employee, independent
contractor, creditor, or other third party.
(f) There is no dispute or claim concerning any Tax Liability of
MIOA, a Subsidiary or the MIOA Group either (i) claimed or raised by any
Governmental Authority in writing or (ii) as to which any of MIOA or any of its
Subsidiaries (and employees responsible for Tax matters) has knowledge.
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(g) MIOA, its Subsidiaries, and the MIOA Group have not waived
any statute of limitations in respect of Taxes or agreed to any extension of
time with respect to a Tax assessment or deficiency.
(h) MIOA and its Subsidiaries do not have any liability for the
Taxes of any Person other than MIOA or its Subsidiaries (i) as a transferee or
successor, (ii) by contract, or (iii) otherwise.
(i) MIOA and each Subsidiary currently utilize the accrual method
of accounting for income Tax purposes. MIOA has utilized the accrual method of
accounting for income Tax purposes since the date of its incorporation. Each
Subsidiary of MIOA has utilized the accrual method of accounting for income Tax
purposes since the date of its incorporation or acquisition by MIOA, as the case
may be. MIOA, its Subsidiaries, and the MIOA Group have not agreed to, and are
not and will not be required to, make any adjustments under Code Section 481(a)
as a result of a change in accounting methods.
(j) There are no contracts, agreements, plans or arrangements,
including but not limited to the provisions of this Agreement, covering any
employee or former employee of MIOA or its Subsidiaries that, individually or
collectively, could give rise to the payment of any amount (or portion thereof)
that would not be deductible pursuant to Sections 280G, 404 or 162 of the Code.
5.14. TITLE TO PROPERTIES; ENCUMBRANCES. Except as specifically identified
in the Schedules hereto and except for items leased or licensed by MIOA or any
of its Subsidiaries, or on SCHEDULE 5.14, MIOA or such Subsidiaries have good,
valid, and marketable title to all of the Assets. All of the Assets are in the
possession or under the control of MIOA or a Subsidiary, and none of the Assets
are subject to any mortgage, pledge, lien, security interest, conditional sale
agreement, encumbrance, or charge of any kind except as set forth on SCHEDULE
5.14 or as specifically disclosed on the other Schedules hereto and, except
minor imperfections of title and encumbrances, if any, that are not substantial
in amount, do not materially detract from the value or functional utility of the
property subject thereto, and do not in any way materially impair the value of
the Assets.
5.15. EQUIPMENT. All of the equipment owned or leased by MIOA and its
Subsidiaries which has (or had at the date of its acquisition or execution of
the related lease by MIOA or its Subsidiary) a fair market value of $400,000 or
greater is listed on SCHEDULE 5.15 attached hereto. All of the equipment owned
or leased by MIOA and its Subsidiaries is in adequate operating condition and
repair subject to normal wear and tear, except as set forth on SCHEDULE 5.15.
5.16. REAL PROPERTY. SCHEDULE 5.16 contains a list of all real property
owned by MIOA and its Subsidiaries, including, without limitation, the
improvements and structures
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located thereon. To MIOA's and its Subsidiaries' knowledge, such improvements
and structures are structurally sound with no known defects and in good
operating condition and repair subject to normal wear and tear, and neither MIOA
nor any of its Subsidiaries has received any written notification that there is
any violation of any building, zoning, or other law, ordinance, or regulation in
respect of such property, improvements, or structures, and to the best of MIOA's
and its Subsidiaries' knowledge, no such violation exists.
5.17. LEASES. SCHEDULE 5.17 contains a list of all leases (including both
operating and capital leases) pursuant to which MIOA or any of its Subsidiaries
leases real or personal property and (i) which involve lease payments in excess
of $30,000 per year, (ii) which are between MIOA or any of its Subsidiaries, on
the one hand, and any of their Affiliates, on the other hand, or (iii) which
were not entered into in the ordinary course of business. Copies of all such
leases have been delivered to PHC. All such leases are valid, binding, and
enforceable in accordance with their terms (except as the enforceability thereof
may be limited by applicable bankruptcy, insolvency or other similar laws
relating to the enforcement of creditors' rights generally and by the
application of general principles of equity), are in full force and effect, and
except as set forth on SCHEDULE 5.17, no event has occurred which is a default
or which with the passage of time will constitute a default by MIOA or any of
its Subsidiaries thereunder, nor has any such event occurred to the knowledge of
MIOA and its Subsidiaries which is a default, or with the passage of time will
constitute a default, by any other party to such lease. All property leased by
MIOA or any of its Subsidiaries as lessee is in the possession of MIOA and its
Subsidiaries. Except as indicated in SCHEDULE 5.17, no consent of any lessor is
required in connection with the Transactions.
5.18. LITIGATION. Except as set forth in SCHEDULE 5.18, (i) there are no
pending (served) actions, proceedings or regulatory agency investigations
against MIOA or its Subsidiaries or, to MIOA or such Subsidiaries' knowledge,
threatened against MIOA or any of its Subsidiaries involving the Assets, and
(ii) no such action, proceeding, or regulatory agency investigation has been
pending (served) during the three-year period preceding the date of this
Agreement. No assertion has ever been made to MIOA or any of its Subsidiaries to
the effect that MIOA or any of its Subsidiaries has any liability as a successor
to a third party's business or product line, and neither MIOA nor any of its
Subsidiaries has knowledge of any basis for such an assertion.
5.19. EMPLOYEE BENEFIT PLANS; EMPLOYEES.
(a) SCHEDULE 5.19 sets forth a list of each material "employee
benefit plan" (as defined by Section 3(3) of ERISA) and any other material
compensation, deferred compensation, fringe benefit, severance, disability, sick
leave, vacation, or other agreement, policy, or arrangement (each such plan,
agreement, policy, or arrangement is referred to herein as a "MIOA Employee
Benefit Plan", and collectively, the "MIOA Employee Benefit Plans") for the
benefit of employees (and their beneficiaries) of MIOA or any of its
Subsidiaries (collectively,
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"MIOA Employees") or with respect to which MIOA or any "MIOA ERISA Affiliate"
(hereby defined to include any trade or business, whether or not incorporated,
other than MIOA, which has employees who are treated pursuant to Section
4001(a)(14) of ERISA and/or Section 414 of the Code as employees of a single
employer which includes MIOA).
(b) MIOA has, or will have prior to the Schedule Delivery Date,
delivered to PHC, with respect to each MIOA Employee Benefit Plan, copies of the
documents embodying the Plan, if any, and employee handbooks governing the
employment of MIOA Employees.
(c) Neither MIOA nor any Subsidiary has any obligation to
contribute to or provide benefits pursuant to, and has no other liability of any
kind with respect to, (i) a "multiple employer welfare arrangement" (within the
meaning of Section 3(40) of ERISA), (ii) a "plan maintained by more than one
employer" (within the meaning of Section 413(c) of the Code), (iii) a
"multiemployer plan" (within the meaning of Section 3(37) of ERISA), or (iv) a
"employee pension benefit plan" (within the meaning of Section 3(2) of ERISA)
which is subject to Title IV of ERISA.
(d) To the knowledge of MIOA, neither MIOA nor any Subsidiary is
subject to any liens, or excise or other taxes under ERISA, the Code or other
applicable law relating to any MIOA Employee Benefit Plan.
(e) The consummation of the Transactions will not give rise to
any liability for any employee benefits to any MIOA Employee, including, without
limitation, liability for severance pay, unemployment compensation, termination
pay or withdrawal liability.
(f) No MIOA Employee Benefit Plan in any way provides for any
benefits of any kind whatsoever (other than under Section 4980B of the Code and
Part 6 of Subtitle B of Title I of ERISA, the Federal Social Security Act or any
MIOA Employee Benefit Plan qualified under Section 401(a) of the Code) to any
MIOA Employee who, at the time the benefit is to be provided, is a former
director or employee of, or other provider of services to MIOA or an MIOA ERISA
Affiliate (or a beneficiary of any such person).
(g) Any contribution, insurance premium, excise tax, interest
charge or other liability or charge imposed or required with respect to any MIOA
Employee Benefit Plan which is attributable to any period or any portion of any
period prior to the Closing will be paid by MIOA or a Subsidiary or will be
reflected on the Historical Financials.
(h) Except as disclosed on SCHEDULE 5.19(H), to the knowledge of
MIOA, no claim, lawsuit, arbitration or other action has been asserted or
instituted or threatened in writing against any MIOA Employee Benefit Plan, any
trustee or fiduciaries thereof, MIOA, any of its Subsidiaries or any MIOA ERISA
Affiliate, any director, officer or employee thereof, or any of the assets of a
MIOA Employee Benefit Pan or any related trust.
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(i) Except as disclosed on SCHEDULE 5.19(I), to the knowledge of
MIOA, no MIOA Employee Benefit Plan is under audit or investigation by the IRS
or the DOL or any other governmental authority and no such completed audit, if
any, has resulted in the imposition of any tax, interest or penalty.
(j) Since December 31, 1997 and through the date hereof, and
except as set forth on SCHEDULE 5.19(J), neither MIOA, any of its Subsidiaries
nor any MIOA ERISA Affiliate has, nor will it, (i) institute or agree to
institute any new MIOA Employee Benefit Plan or practice, (ii) make or agree to
make any change in any MIOA Employee Benefit Plan, (iii) make or agree to make
any increase in the compensation payable or to become payable by MIOA, any of
its Subsidiaries or any MIOA ERISA Affiliate to any MIOA Employee, except for
normal periodic salary increases consistent with past practices, or (iv) except
pursuant to this Agreement and except for contributions required to provide
benefits pursuant to the provisions of the MIOA Employee Benefit Plans, pay or
accrue or agree to pay or accrue any bonus, percentage of compensation, or other
like benefit to, or for the credit of, any MIOA Employee.
(k) There are no collective bargaining or other labor union
agreements to which MIOA or any of its Subsidiaries is a party or by which any
of them is bound.
5.20. ADVISORS FEES. Other than as set forth on SCHEDULE 5.20, neither
MIOA nor any of its Subsidiaries or any Affiliate thereof has retained or
utilized the services of any advisor, broker, finder or intermediary, or paid or
agreed to pay any fee or commission to any other Person or entity for or on
account of the Transactions, or had any communications with any Person or entity
which would obligate PHC or the Surviving Corporation to pay any such fees or
commissions.
5.21. JOINT PROXY STATEMENT/PROSPECTUS. The registration statement on Form
S-4 (including the related Prospectus) including, but not limited to, the
related joint proxy statement ("Joint Proxy Statement/Prospectus") of MIOA and
PHC and prospectus of MIOA to be filed with the SEC by MIOA in connection with
the issuance of Merger Shares in the Merger will not, at the time the Joint
Proxy Statement/Prospectus becomes effective under the Securities Act, at the
time of mailing and at the time of the Special Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading.
5.22. SHARES TO BE DELIVERED. The Merger Shares to be issued with respect
to previously outstanding PHC Common Stock when issued and delivered to such PHC
stockholders pursuant to this Agreement will be duly authorized, validly issued,
fully paid and non-assessable shares of voting common stock of the Surviving
Corporation. The Merger Shares to be issued with respect to previously
outstanding PHC Class A Preferred Stock when issued and delivered to such PHC
stockholders pursuant to this Agreement will be duly authorized, validly issued,
fully paid and non-assessable shares of the preferred stock of the Surviving
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Corporation having substantially the same rights, preferences and privileges as
those enjoyed by the holders of PHC Class A Preferred Stock as set forth in the
Certificate of Incorporation of PHC as of the Closing. The Merger Shares to be
issued with respect to previously outstanding voting and non-voting PHC Series B
Preferred Stock when issued and delivered to such PHC stockholders pursuant to
this Agreement will be duly authorized, validly issued, fully paid and
non-assessable shares of preferred stock of the Surviving Corporation having
substantially the same rights, preferences and privileges as those enjoyed by
the holders of voting and non-voting PHC Class B Preferred Stock as set forth in
the Certificate of Incorporation of PHC as of the Closing, as applicable. The
Merger Shares to be issued with respect to previously outstanding voting and
non-voting PHC Series C Preferred Stock (if any) when issued and delivered to
such PHC stockholders pursuant to this Agreement will be duly authorized,
validly issued, fully paid and non-assessable shares of preferred stock of the
Surviving Corporation having substantially the same rights, preferences and
privileges as those enjoyed by the holders of voting and non-voting PHC Class C
Preferred Stock (if any) as set forth in the Certificate of Incorporation of PHC
as of the Closing, as applicable. The Merger Shares to be issued with respect to
previously outstanding PHC Common Stock and the Option/Warrant Shares shall as
of the Closing be subject to an effective SEC registration statement. Upon
delivery of the Merger Shares after the Closing and assuming that the former
stockholders of PHC are receiving the Merger Shares in good faith without notice
of any adverse claims, such stockholders will receive good and unencumbered
title to the Merger Shares, free and clear of all liens, restrictions, charges,
encumbrances and other security interests of any kind or nature whatsoever,
except for claims arising out of acts of or claims against such stockholders,
restrictions existing under applicable securities laws, and the restrictions
imposed hereby (as to Affiliates).
5.23. TAX FREE REORGANIZATION. To the knowledge of MIOA there is no fact
pertaining to it, any stockholder of MIOA or any of its Subsidiaries that would
prevent the Merger from qualifying as a tax-free reorganization under the Code.
5.24. NO EXISTING DISCUSSION FOR ACQUISITION PROPOSAL. As of the date
hereof, MIOA is not engaged in any negotiations with any other party with
respect to an Acquisition Proposal.
5.25. ACCOUNTS RECEIVABLE. Except as set forth on SCHEDULE 5.25 and as
otherwise may be specifically identified on the Historical Financials, all
accounts receivable (the "MIOA Receivables") of MIOA which are reflected on the
Historical Financials, and all MIOA Receivables acquired or generated since the
date of the Historical Financials, are in all material respects valid and bona
fide MIOA Receivables arising from the furnishing of goods or services to
customers in the ordinary course of business.
5.26. INVENTORIES. Any and all inventories of MIOA which are reflected on
the Historical Financials, plus any replacements for such items acquired on or
before the Closing, and minus any such items sold by MIOA in the ordinary course
of business on or before the
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Closing, are properly valued at the lower of cost (first-in, first-out) or
market in accordance with generally accepted accounting principles consistently
applied and, except for obsolete and slow moving items which have been fully
written off or reserved for and except for items sold in the ordinary course of
business, consist of items of a quality and quantity currently usable and
saleable in the ordinary course of business without markdown or discount.
5.27. SOFTWARE. Except as set forth on SCHEDULE 5.27, MIOA presently has
the right to use all computer software owned by it, and to the knowledge of
MIOA, the right to use all other computer software which is leased or licensed
to, or otherwise used by MIOA. To the knowledge of MIOA, neither MIOA nor any
Subsidiary is in violation of any license or other agreement related to its
software.
5.28. DISCLOSURE AND ALL DOCUMENTATION. No representation or warranty by
MIOA contained in this Agreement and no statement contained in any certificate
or schedule furnished to PHC pursuant to the provisions hereof contains or shall
contain any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements therein not misleading. To the
knowledge of MIOA and its Subsidiaries, there is no current event or condition
of any kind or character pertaining to MIOA or its Subsidiaries that may
reasonably be expected to have a Material Adverse Effect, except as disclosed in
this Agreement and except for those events and conditions which are national or
industry-wide in nature. Except as specifically indicated elsewhere in this
Agreement, all documents delivered by MIOA or its Subsidiaries to PHC in
connection herewith have been and will be complete originals, or exact copies
thereof.
5.29. NO SURVIVAL. The representations and warranties contained in this
Article 5 shall not survive the Closing.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF PHC
In order to induce MIOA to enter into this Agreement and consummate the
Transactions, PHC hereby represents and warrants the following to MIOA as of the
Schedule Delivery Date (and not the date hereof), each of which representations
and warranties shall be material to and relied upon by MIOA and shall be deemed
remade on and as of the date of the Closing:
6.1. ORGANIZATION AND AUTHORITY. PHC is a corporation duly organized and
validly existing under the laws of the State of Delaware. The PHC Subsidiaries
are identified on SCHEDULE 6.1. PHC and its Subsidiaries have all necessary
corporate power and authority to own, lease and operate their properties and
conduct their business as it is currently being conducted.
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6.2. CORPORATE POWER AND AUTHORITY; DUE AUTHORIZATION. Subject to PHC
Board Approval, PHC has full corporate power and authority, to execute and
deliver this Agreement and each of the Closing Documents to which PHC is or will
be a party and to consummate the Transactions. Each record owner of the shares
of PHC Capital Stock is set forth on SCHEDULE 6.2. No corporate proceeding of
PHC is necessary to approve the Transactions other than PHC Board Approval and
PHC Stockholder Approval. Assuming PHC Board Approval and that this Agreement
and each of the Closing Documents to which MIOA is a party constitutes a valid
and binding agreement of MIOA, this Agreement and each of the Closing Documents
to which PHC is a party constitutes, or will constitute when executed and
delivered, a valid and binding agreement of PHC in each case enforceable in
accordance with its terms, except as the enforceability thereof may be limited
by applicable bankruptcy, insolvency or other similar laws relating to the
enforcement of creditors' rights generally and by the application of general
principles of equity. The duly elected officers and directors of PHC are set
forth on SCHEDULE 6.2. True, correct and complete copies of the minute books of
PHC have been made available to MIOA.
6.3. SUFFICIENCY OF ASSETS. All material assets and rights relating to
PHC's business and that of its Subsidiaries are held solely by, and all
agreements, obligations, expenses and transactions relating to the business of
PHC and its Subsidiaries have been entered into, incurred and conducted solely
by, PHC and its Subsidiaries. Except as described in SCHEDULE 6.3, the Assets
are all of the items necessary to provide all services required in connection
with the business of PHC and its Subsidiaries, assuming competent personnel,
general office facilities, and adequate facilities are available.
6.4. NO CONFLICT; REQUIRED CONSENTS. Exclusive of PHC Board Approval and
PHC Stockholder Approval, SCHEDULE 6.4 lists all material third party consents
or approvals required with respect to PHC and its Subsidiaries for consummation
of the Transactions, which consents PHC agrees to use its best reasonable
efforts to obtain. Assuming all such consents and approvals have been obtained
and assuming the appropriate filings and mailings are made by PHC and MIOA to
effectuate the Merger under the Delaware Act and the Florida Act, and under the
Securities Act and the Exchange Act, the execution and delivery by PHC of this
Agreement and the Closing Documents and the consummation by PHC of the
Transactions do not and will not, except as set forth on SCHEDULE 6.4, (a)
require the consent, approval or action of, or any filing or notice to, any
corporation, firm, Person or other entity or any public, governmental or
judicial authority (except for such consents, approvals, actions, filings or
notices the failure of which to make or obtain will not in the aggregate have a
Material Adverse Effect); (b) violate in any material respect the terms of any
material instrument, document or agreement to which PHC or any of its
Subsidiaries is a party, or by which PHC or any of its Subsidiaries or the
property of PHC or any of its Subsidiaries is bound, or be in conflict in any
material respect with, result in a material breach of or constitute (upon the
giving of notice or lapse of time or both) a material default under any such
instrument, document or agreement, or result in the creation of any lien upon
any of the property or assets of PHC or any of its
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Subsidiaries; (c) violate in any respect the terms of any instrument, document
or agreement to which PHC or any of its Subsidiaries is a party, or by which PHC
or any of its Subsidiaries or the property of PHC or any of its Subsidiaries is
bound, or be in conflict in any respect with, result in a breach of or
constitute (upon the giving of notice or lapse of time or both) a default under
any such instrument, document or agreement, or result in the creation of any
lien upon any of the property or assets of PHC or any of its Subsidiaries if the
aggregate effect of all such violations listed in this subsection (c) results in
a Material Adverse Effect on PHC and its Subsidiaries taken as a whole; (d)
violate PHC's Certificate of Incorporation or Bylaws; or (e) violate any order,
writ, injunction, decree, judgment, ruling, law, rule or regulation of any
federal, state, county, municipal, or foreign court or governmental authority
applicable to PHC or any of its Subsidiaries, or the business or assets of PHC
or any of its Subsidiaries. Neither PHC nor any of its Subsidiaries is subject
to, or a party to, any mortgage, lien, lease, agreement, contract, instrument,
order, judgment or decree or any other material restriction of any kind or
character which would prevent or hinder the continued operation of the business
of PHC and its Subsidiaries after the Closing on substantially the same basis as
theretofore operated.
6.5. CAPITALIZATION. All of the authorized and outstanding PHC capital
stock is set forth on SCHEDULE 6.5. All outstanding PHC Capital Stock has been
duly authorized, and is validly issued, fully paid and nonassessable. No
preemptive (whether statutory or contractual) rights have been violated. Current
PHC stock option plans, all previous forms of those plans, and amendments, and
all outstanding options and warrants, are identified on SCHEDULE 6.5. All
options were granted in accordance with the provisions of PHC stock option
plans. Except for the outstanding options, warrants and other commitments set
forth in SCHEDULE 6.5, PHC has no convertible securities, options, or warrants
by which it is bound to issue any additional shares of PHC Capital Stock or
other securities. Except as set forth on SCHEDULE 6.2, PHC owns, directly or
indirectly, all of the equity in its Subsidiaries and no third party has a right
to acquire any such interest. All securities of PHC and its Subsidiaries were
offered and sold in compliance with applicable federal and state securities
laws. SCHEDULE 6.5 identifies each stock option plan and outstanding option,
warrant, or other right, if any, to acquire the capital stock of any of its
Subsidiaries, full and complete copies of which have been made available to
MIOA. Each and every dividend of PHC and each Subsidiary, if any, whether paid
in cash or other property, has been declared and paid in compliance with
applicable law, and neither PHC nor any of its Subsidiaries has any further
obligation with respect to such payment. SCHEDULE 6.5 also summarizes in detail
all currently effective registration rights which have been granted by PHC to
any other person or entity and all currently effective shareholder agreements
between any shareholders of PHC.
6.6. COMPLIANCE WITH LAWS. Except as set forth in SCHEDULE 6.6, (a) to the
best of PHC's knowledge, PHC is in compliance with, and PHC and its Subsidiaries
have operated Persons or businesses previously owned or operated by them in
compliance with, all applicable laws, orders, rules and regulations of all
governmental bodies and agencies, including applicable
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environmental laws and regulations, but excluding applicable laws and
regulations related to Medicare, Medicaid and other federally funded programs,
except where such noncompliance has and will have, in the aggregate, no Material
Adverse Effect; provided, however, that no representation or warranty contained
in this Section 6.6 is made with respect to any employee benefit plan of PHC or
any of its Subsidiaries or with respect to any other matters covered by Section
6.19. Neither PHC, nor any of its Subsidiaries has received notice of any
noncompliance with the foregoing.
(b) Without limiting the foregoing, PHC, and each of its
Subsidiaries, and any other person or entity for whose conduct PHC is legally
held responsible are in material compliance with all Environmental Laws. Neither
PHC nor any of its Subsidiaries, nor any other person or entity for whose
conduct PHC is legally responsible has (i) received any notice, demand, request
for information, or administrative inquiry relating to any violation of an
Environmental Law or the institution of any suit, action, claim, or proceeding
alleging such violation or investigation by any Governmental Authority or any
third party of any such violation, (ii) manufactured, generated, treated,
stored, handled, processed, released, transported or disposed of any Hazardous
Substance on, under, from or at any of PHC's or any of its Subsidiaries'
properties or any other properties, (iii) become aware or received notice of the
release or disposal of any Hazardous Substances in violation of any applicable
Environmental Law, on, under or at any of PHC's or any of its Subsidiaries'
properties or any other properties (iv) become aware or received notice of any
actual or potential material liability on the part of PHC for the response to or
remediation of any Hazardous Substance at or arising from any of PHC's or any of
its Subsidiaries' properties or any other properties owned or operated by PHC,
any of its Subsidiaries or any other Person for whose conduct PHC is legally
responsible, or (v) become aware of or received notice of any actual or
potential liability on the part of PHC for the costs of response to or
remediation of Hazardous Substances at or arising from any of PHC's or any its
Subsidiaries' properties or any other properties owned or operated by PHC or any
of its Subsidiaries or any other Person for whose conduct PHC is or may be held
responsible. No Environmental Law imposes any obligation upon PHC or its
Subsidiaries arising out of or as a condition to any transaction contemplated
hereby, including, without limitation, any requirement to modify or to transfer
any permit or license, any requirement to file any notice or other submission
with any Governmental Authority, the placement of any notice, acknowledgment, or
covenant in any land records, or the modification of or provision of notice
under any agreement, consent order, or consent decree. No lien has been placed
upon any of PHC's properties or its Subsidiaries' properties under any
Environmental Law.
6.7. LICENSES AND PERMITS. Except as set forth in SCHEDULE 6.7, neither
PHC nor any of its Subsidiaries has received notice of any violations in respect
of any licenses, permits, concessions, grants, franchises, approvals or
authorizations necessary or required for the use or ownership of their assets
and the operation of their business. No proceeding is pending or, to the
knowledge of PHC, threatened, which seeks revocation or limitation of any such
licenses, permits, concessions, grants, franchises, approvals or authorizations.
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6.8. FINANCIAL INFORMATION.
(a) PHC has provided to MIOA its interim financial statements for
the period through April 30, 1998 ("Interim Financials") and an audited
financial statement for the most recent fiscal year end December 31, 1997
("Audited Financial Statement"; together with the Interim Financials, the
"Financial Statements"), copies of which are attached hereto as EXHIBIT 6.8.
Except as disclosed on SCHEDULE 6.8 attached hereto, the Financial Statements
have been, and PHC's Monthly Financials will be, prepared in accordance with
GAAP (except as to notes necessary for the Interim Financials and PHC's Monthly
Financials) applied on a consistent basis throughout the periods covered
thereby, present fairly the financial condition of PHC and its Subsidiaries as
of the indicated dates and the results of operations of PHC and its Subsidiaries
for the indicated periods, are consistent with the books and records of PHC and
its Subsidiaries and, except as discussed on SCHEDULE 6.8, do not contain any
material item of special or non-recurring income not earned in the ordinary
course of business; provided, however, that the Interim Financials and such
Monthly Financials are subject to normal year-end adjustments that are not
expected to be material in amount.
(b) Except as and to the extent specifically disclosed in this
Agreement, there are no liabilities or obligations of PHC or any of its
Subsidiaries of any nature, whether liquidated, accrued, absolute, contingent or
otherwise except for those (i) that are specifically reflected or reserved
against as to amount in the latest balance sheet contained in the Financial
Statements, (ii) that arose thereafter in the ordinary course of business or
(iii) that are specifically set forth on SCHEDULE 6.8; and at all times after
the execution of this Agreement until the Closing, there will be no liabilities
or obligations of PHC or any of its Subsidiaries of any nature, whether
liquidated, unliquidated, accrued, absolute, contingent or otherwise, which are
material individually or in the aggregate, except for those (A) that are
specifically reflected or reserved against as to amount in the latest balance
sheet contained in the Financial Statements, or (B) that arose after the date of
such balance sheet in the ordinary course of business (and are, individually and
in the aggregate, immaterial), (C) that are specifically set forth on SCHEDULE
6.8, or (D) that are permitted as set forth on EXHIBITS 4.2, 4.2(B)(IV) OR
4.2(F).
(c) PHC and its Subsidiaries are not, nor have any of them been
during the twelve (12) months immediately preceding the execution of this
Agreement, insolvent within the meaning of 11 U.S.C. ss.101(31). PHC and its
Subsidiaries have paid and are paying their debts as they become due.
6.9. NO UNDISCLOSED LIABILITIES. Except as and to the extent specifically
disclosed in this Agreement and those that are specifically reflected or
reserved against as to amount in the latest balance sheet contained in the
Financial Statements, neither PHC nor any of its Subsidiaries knows of any
reasonable basis for the assertion against PHC or any of its Subsidiaries of any
material liabilities or obligations of any nature, whether absolute, accrued,
contingent or otherwise and whether due or to become due, including, without
limitation, any
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liability for taxes and interest, penalties and other charges payable with
respect thereto. Except as set forth in this Agreement, neither the execution
and delivery of this Agreement nor the consummation of the Merger will (a)
result in any payment (whether severance pay, unemployment compensation or
otherwise) becoming due from PHC to any employee, director or officer or former
employee, director or officer of PHC, (b) increase any benefits otherwise
payable to any employee, director or officer or former employee, director or
officer of PHC or (c) result in the acceleration of the time of payment or
vesting of any such benefits.
6.10. INTELLECTUAL PROPERTY. Except as described in SCHEDULE 6.10, to the
knowledge of PHC and its Subsidiaries, no patent, formula, process, trade
secret, trademark, trade name, assumed name or copyright relating to PHC's
business and that of its Subsidiaries, including all intellectual property used
in the operation of the business of PHC and its Subsidiaries (collectively, the
"PHC Intellectual Property") infringes on any patent, copyright, trademark or
other intellectual property right of any Person, or violate the terms of any
agreements related thereto, nor to PHC's knowledge have there been any claims of
infringement. Except as set forth in SCHEDULE 6.10, there are no pending or, to
PHC's and its Subsidiaries' knowledge, threatened claims against PHC or any of
its Subsidiaries contesting the validity of, or their right to use any of, the
PHC Intellectual Property.
6.11. CONTRACTS AND COMMITMENTS. Except as disclosed on SCHEDULE 6.11:
(a) To PHC's and its Subsidiaries' knowledge, no aspect of PHC's
and its Subsidiaries' business or operations or the Assets, is of such character
as would restrict the Surviving Corporation from carrying on the business of PHC
and its Subsidiaries anywhere in the world.
(b) PHC and its Subsidiaries have no consultants or independent
contractors who are officers or directors of PHC or any of its Subsidiaries, or
who are affiliates of such officers or directors, to whom they are paying
compensation for services.
(c) Neither PHC nor any of its Subsidiaries has material
contracts, commitments, arrangements, or understandings relating to their
business, operations, financial condition, or prospects. For purposes of this
Section 6.11(b), "material" means payment or performance of a contract,
commitment, arrangement or understanding entered into in the ordinary course of
business which is expected to involve payments in excess of $500,000 per year,
or any contract, commitment, arrangement or understanding entered into not in
the ordinary course of business.
(d) To PHC's and its Subsidiaries' knowledge, there are no
outstanding contracts, commitments or bids, or services, development, or sales
proposals, that will result in any substantial loss to PHC or any of its
Subsidiaries (and/or the Surviving Corporation) upon
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completion or performance thereof, after allowance for normal direct employee
expenses, licensing, development, distribution expenses and other costs.
(e) There are no outstanding material lease or purchase
commitments of PHC or any of its Subsidiaries which are not consistent with
PHC's and its Subsidiaries' past lease and purchase commitment practices.
6.12. ABSENCE OF CERTAIN CHANGES. Except as reflected on SCHEDULE 6.12, or
elsewhere in this Agreement or specifically identified on any Schedules hereto,
since December 31, 1997, PHC and its Subsidiaries have not, and at the Closing
Date will not, have:
(a) Suffered a Material Adverse Effect, or become aware of any
circumstances which might reasonably be expected to result in such a Material
Adverse Effect; or suffered any material casualty loss to the Assets (whether or
not insured);
(b) Incurred any obligations specifically related to the Assets,
except in the ordinary course of business, consistent with past practices;
(c) Permitted or allowed any of the Assets to be mortgaged,
pledged, or subjected to any lien or encumbrance, except liens or encumbrances
specifically excepted by the provisions of Section 6.14;
(d) Written down the value of any inventory, contract or other
intangible asset, or written off as uncollectible any notes or accounts
receivable or any portion thereof, except for write-downs and write-offs in the
ordinary course of business, consistent with past practice and at a rate no
greater than during the latest complete fiscal year; cancelled any other debts
or claims, or waived any rights of substantial value, or sold or transferred any
of its material properties or assets, real, personal, or mixed, tangible or
intangible, except in the ordinary course of business and consistent with past
practice;
(e) Sold, licensed or transferred or agreed to sell, license or
transfer, any of the Assets, except in the ordinary course of business and
consistent with past practice;
(f) To PHC's and its Subsidiaries' knowledge, received notice of
any pending or threatened adverse claim or an alleged infringement of
proprietary material, whether such claim or infringement is based on trademark,
copyright, patent, license, trade secret, contract or other restrictions on the
use or disclosure of proprietary materials;
(g) Incurred obligations to refund money to customers, except in
the ordinary course of business, all of which will have no Material Adverse
Effect;
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(h) Become aware of any event, condition or other circumstance
relating solely to the Assets (as opposed to any such event, condition, etc.
which is, for example, national or industry-wide in nature) which might
reasonably be expected to have a Material Adverse Effect on the Assets;
(i) Made any capital expenditures or commitments, any one of
which is more than $500,000, for additions to property, plant, or equipment,
unless approved in writing by MIOA or deemed approved by MIOA pursuant to
EXHIBIT 4.2(B)(IV) hereof;
(j) Made any material change in any method of accounting or
accounting practice;
(k) Paid, loaned, guaranteed, or advanced any material amount to,
or sold, transferred, or leased any material properties or assets (real,
personal, or mixed, tangible or intangible) to, or entered into any agreement,
arrangement, or transaction with any of PHC's or any Subsidiaries' officers or
directors, or any business or Person in which any officer or director of PHC or
any of its Subsidiaries, or any affiliate or associate of any of such Persons
has any direct or indirect interest; or
(l) Agreed to take any action described in this Section 6.12.
6.13. TAXES.
(a) Except as set forth on SCHEDULE 6.13(A), PHC and each
Subsidiary of which PHC owns more than fifty percent (50%) of such Subsidiary's
issued and outstanding equity interests, have not been a member of an Affiliated
Group filing a consolidated federal income Tax Return other than a group the
common parent of which is PHC. The Affiliated Group of which PHC is the common
parent (the "PHC Group") has filed all income Tax Returns that it was required
to file for each taxable period during which PHC and its Subsidiaries were a
member of the PHC Group. All such Tax Returns are correct and complete in all
material respects. All income Taxes owed by the PHC Group (whether or not shown
on any Tax Return) have been paid for each taxable period during which PHC and
its Subsidiaries filed a consolidated federal income Tax Return.
(b) The amounts booked as provisions for Taxes on the Financial
Statements are sufficient for payment of all unpaid Taxes of PHC its
Subsidiaries, and the PHC Group through April 30, 1998. Copies of the PHC
Group's federal and state income Tax Returns for calendar years 1995 and 1996
have been provided to MIOA. PHC has filed an extension with respect to its and
its Subsidiaries' federal and state income Tax Returns for calendar year 1997.
(c) No claim has ever been made by a Governmental Authority in a
jurisdiction where PHC or a Subsidiary does not file Tax Returns that it is or
it may be subject
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to taxation by that jurisdiction. There are no Security Interests on any of the
assets of PHC or any of its Subsidiaries that arose in connection with any
failure (or alleged failure) to pay any Tax when due.
(d) PHC, each PHC Subsidiary and the PHC Group have withheld and
paid over to the proper governmental authorities all Taxes required to have been
withheld and paid over, and complied with all information reporting and backup
withholding requirements, including maintenance of required records with respect
thereto, in connection with amounts paid to any employee, independent
contractor, creditor, or other third party.
(e) There is no dispute or claim concerning any Tax Liability of
PHC, a Subsidiary or the PHC Group either (i) claimed or raised by any
Governmental Authority in writing or (ii) as to which any of PHC or any of its
Subsidiaries (and employees responsible for Tax matters) has knowledge.
(f) PHC, its Subsidiaries and the PHC Group have not waived any
statute of limitations in respect of Taxes or agreed to any extension of time
with respect to a Tax assessment or deficiency.
(g) PHC and its Subsidiaries do not have any liability for the
Taxes of any Person other than PHC or its Subsidiaries (i) as a transferee or
successor, (ii) by contract, or (iii) otherwise.
(h) PHC and each Subsidiary currently utilizes the accrual method
of accounting for income Tax purposes. PHC has utilized the accrual method of
accounting for income Tax purposes since the date of its incorporation. Each
Subsidiary of PHC has utilized the accrual method of accounting for income Tax
purposes since the date of its incorporation or acquisition by PHC, as the case
may be. PHC, its Subsidiaries and the PHC Group have not agreed to, and are not
and will not be required to, make any adjustments under Code Section 481(a) as a
result of a change in accounting methods.
(i) There are no contracts, agreements, plans or arrangements,
including but not limited to the provisions of this Agreement, covering any
employee or former employee of PHC or its Subsidiaries that, individually or
collectively, could give rise to the payment of any amount (or portion thereof)
that would not be deductible pursuant to Sections 280G, 404 or 162 of the Code.
6.14. TITLE TO PROPERTIES; ENCUMBRANCES. Except as specifically identified
in the Schedules hereto and except for items leased or licensed by PHC or any of
its Subsidiaries, or on SCHEDULE 6.14, PHC or such Subsidiaries have good,
valid, and marketable title to all of the Assets. All of the Assets are in the
possession or under the control of PHC or a Subsidiary, and none of the Assets
are subject to any mortgage, pledge, lien, security interest, conditional sale
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agreement, encumbrance, or charge of any kind except as set forth on SCHEDULE
6.14 or as specifically disclosed on the other Schedules hereto and, except
minor imperfections of title and encumbrances, if any, that are not substantial
in amount, do not materially detract from the value or functional utility of the
property subject thereto, and do not in any way materially impair the value of
the Assets.
6.15. EQUIPMENT. All of the equipment owned or leased by PHC and its
Subsidiaries which has (or had at the date of its acquisition or execution of
the related lease by PHC or its Subsidiary) a fair market value of $400,000 or
greater is listed on SCHEDULE 6.15 attached hereto. All of the equipment owned
or leased by PHC and its Subsidiaries is in adequate operating condition and
repair subject to normal wear and tear, except as set forth on SCHEDULE 6.15.
6.16. REAL PROPERTY. SCHEDULE 6.16 contains a list of all real property
owned by PHC and its Subsidiaries, including, without limitation, the
improvements and structures located thereon. To PHC's and its Subsidiaries'
knowledge, such improvements and structures are structurally sound with no known
defects and in good operating condition and repair subject to normal wear and
tear, and neither PHC nor any of its Subsidiaries has received any written
notification that there is any violation of any building, zoning, or other law,
ordinance, or regulation in respect of such property, improvements, or
structures, and to the best of PHC's and its Subsidiaries' knowledge, no such
violation exists.
6.17. LEASES. SCHEDULE 6.17 contains a list of all leases (including both
operating and capital leases) pursuant to which PHC or any of its Subsidiaries
leases real or personal property and (i) which involve lease payments in excess
of $120,000 per year, (ii) which are between PHC or any of its Subsidiaries, on
the one hand, and any of their Affiliates, on the other hand, or (iii) which
were not entered into in the ordinary course of business. Copies of all such
leases have been delivered to MIOA; provided, however, that failure to disclose
any lease entered into or assumed by PHC in an arms-length transaction shall not
breach the foregoing representation and warranty. All such leases are valid,
binding, and enforceable in accordance with their terms (except as the
enforceability thereof may be limited by applicable bankruptcy, insolvency or
other similar laws relating to the enforcement of creditors' rights generally
and by the application of general principles of equity), are in full force and
effect, and except as set forth on SCHEDULE 6.17, no event has occurred which is
a default or which with the passage of time will constitute a default by PHC or
any of its Subsidiaries thereunder, nor has any such event occurred to the
knowledge of PHC and its Subsidiaries which is a default, or with the passage of
time will constitute a default, by any other party to such lease. All property
leased by PHC or any of its Subsidiaries as lessee is in the possession of PHC
and its Subsidiaries. Except as indicated in SCHEDULE 6.17, no consent of any
lessor is required in connection with the Transactions.
6.18. LITIGATION. Except as set forth in SCHEDULE 6.18, (i) there are no
pending (served) actions, proceedings or regulatory agency investigations
against PHC or its Subsidiaries
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or, to PHC's or its Subsidiaries' knowledge, threatened against PHC or any of
its Subsidiaries involving the Assets, and (ii) no such action, proceeding, or
regulatory agency investigation has been pending (served) during the three-year
period preceding the date of this Agreement. No assertion has ever been made to
PHC or any of its Subsidiaries to the effect that PHC or any of its Subsidiaries
has any liability as a successor to a third party's business or product line,
and neither PHC nor any of its Subsidiaries has knowledge of any basis for such
an assertion.
6.19. EMPLOYEE BENEFIT PLANS; EMPLOYEES.
(a) For the purposes of this Section 6.19, each material
"employee benefit plan" (as defined by Section 3(3) of ERISA) and any other
material compensation, deferred compensation, fringe benefit, severance,
disability, sick leave, vacation, or other agreement, policy, or arrangement for
the benefit of employees (and their beneficiaries) of PHC or any of its
Subsidiaries (collectively, "PHC Employees") or with respect to PHC or any "PHC
ERISA Affiliate" (hereby defined to include any trade or business, whether or
not incorporated, other than PHC, which has employees who are treated pursuant
to Section 4001(a)(14) of ERISA and/or Section 414 of the Code as employees of a
single employer which includes PHC) shall be referred to in this Agreement as a
"PHC Employee Benefit Plan", and collectively, as the "PHC Employee Benefit
Plans".
(b) Except as set forth in SCHEDULE 6.19(B), neither PHC nor any
Subsidiary has any obligation to contribute to or provide benefits pursuant to,
and has no other liability of any kind with respect to, (i) a "multiple employer
welfare arrangement" (within the meaning of Section 3(40) of ERISA), (ii) a
"plan maintained by more than one employer" (within the meaning of Section
413(c) of the Code), (iii) a "multiemployer plan" (within the meaning of Section
3(37) of ERISA), or (iv) a "employee pension benefit plan" (within the meaning
of Section 3(2) of ERISA) which is subject to Title IV of ERISA.
(c) To the knowledge of PHC, neither PHC nor any Subsidiary is
subject to any liens, or excise or other taxes under ERISA, the Code or other
applicable law relating to any PHC Employee Benefit Plan.
(d) To the knowledge of PHC, the consummation of the Transactions
will not give rise to any liability for any employee benefits to any PHC
Employee, including, without limitation, liability for severance pay,
unemployment compensation, termination pay or withdrawal liability.
(e) Except as disclosed on SCHEDULE 6.19(E), to the knowledge of
PHC, no claim, lawsuit, arbitration or other action has been asserted or
instituted or threatened in writing against any PHC Employee Benefit Plan, any
trustee or fiduciaries thereof, PHC, any of its Subsidiaries or any PHC ERISA
Affiliate, any director, officer or employee thereof, or any of the assets of a
PHC Employee Benefit Pan or any related trust.
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(f) Except as disclosed on SCHEDULE 6.19(F), to the knowledge of
PHC, no PHC Employee Benefit Plan is under audit or investigation by the IRS or
the DOL or any other governmental authority and no such completed audit, if any,
has resulted in the imposition of any tax, interest or penalty.
(g) Since December 31, 1997 and through the date hereof, and
except as set forth on SCHEDULE 6.19(G), neither PHC, any of its Subsidiaries
nor any PHC ERISA Affiliate has, nor will it, (i) make or agree to make any
increase in the compensation payable or to become payable by PHC, any of its
Subsidiaries or any PHC ERISA Affiliate to any PHC Employee, except for normal
periodic salary increases consistent with past practices, or (ii) except
pursuant to this Agreement and except for contributions required to provide
benefits pursuant to the provisions of the PHC Employee Benefit Plans, pay or
accrue or agree to pay or accrue any bonus, percentage of compensation, or other
like benefit to, or for the credit of, any PHC Employee.
(h) There are no collective bargaining or other labor union
agreements to which PHC or any of its Subsidiaries is a party or by which any of
them is bound.
6.20. ADVISORS FEES. Other than as set forth on SCHEDULE 6.20, neither PHC
nor any of its Subsidiaries nor any Affiliate thereof has retained or utilized
the services of any advisor, broker, finder or intermediary, or paid or agreed
to pay any fee or commission to any other Person or entity for or on account of
the Transactions, or had any communications with any Person or entity which
would obligate PHC or the Surviving Corporation to pay any such fees or
commissions.
6.21. TAX FREE REORGANIZATION. To the knowledge of PHC there is no fact
pertaining to it, any stockholder of PHC or any of its Subsidiaries that would
prevent the Merger from qualifying as a tax-free reorganization under the Code.
6.22. NO EXISTING DISCUSSION FOR ACQUISITION PROPOSAL. As of the date
hereof, PHC is not engaged in any negotiations with any other party with respect
to an Acquisition Proposal.
6.23. ACCOUNTS RECEIVABLE. Except as set forth on SCHEDULE 6.23 and as
otherwise may be specifically identified on the Financial Statements, all
accounts receivable (the "PHC Receivables") of PHC which are reflected on the
Financial Statements, and all PHC Receivables acquired or generated since the
date of the Financial Statements, are in all material respects valid and bona
fide PHC Receivables arising from the furnishing of goods or services to
customers in the ordinary course of business.
6.24. INVENTORIES. Any and all inventories of PHC which are reflected on
the Financial Statements, plus any replacements for such items acquired on or
before the Closing, and minus any such items sold by PHC in the ordinary course
of business on or before the
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Closing, are properly valued at the lower of cost (first-in, first-out) or
market in accordance with generally accepted accounting principles consistently
applied and, except for obsolete and slow moving items which have been fully
written off or reserved for and except for items sold in the ordinary course of
business, consist of items of a quality and quantity currently usable and
saleable in the ordinary course of business without markdown or discount.
6.25. SOFTWARE. Except as set forth on SCHEDULE 6.25, PHC presently has
the right to use all computer software owned by it, and to the knowledge of PHC,
the right to use all other computer software which is leased or licensed to, or
otherwise used by PHC. To the knowledge of PHC, neither PHC nor any Subsidiary
is in violation of any license or other agreement related to its software.
6.26. DISCLOSURE AND ALL DOCUMENTATION. No representation or warranty by
PHC contained in this Agreement and no statement contained in any certificate or
schedule furnished to MIOA pursuant to the provisions hereof contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements therein not misleading. To the knowledge of PHC and
its Subsidiaries, there is no current event or condition of any kind or
character pertaining to PHC or its Subsidiaries that may reasonably be expected
to have a Material Adverse Effect, except as disclosed in this Agreement and
except for those events and conditions which are national or industry-wide in
nature. Except as specifically indicated elsewhere in this Agreement, all
documents delivered by PHC or its Subsidiaries to MIOA in connection herewith
have been and will be complete originals, or exact copies thereof.
6.27. NO SURVIVAL. The representations and warranties contained in this
Article 6 shall not survive the Closing.
ARTICLE 7
CERTAIN ADDITIONAL COVENANTS
7.1. SPECIAL MEETING. Subject to Board Approval, each of MIOA and PHC
shall take all action necessary, in accordance with applicable law and their
respective Articles or Certificate of Incorporation and Bylaws, to convene a
special meeting of their respective stockholders (each, a "Special Meeting") as
promptly as practicable after the signing of this Agreement for the purpose of
considering and taking action upon this Agreement and the Transactions, and will
provide their stockholders with the Joint Proxy Statement/Prospectus. Subject to
Board Approval, the Board of Directors of each of MIOA and PHC will recommend,
subject to Section 7.4 hereof, that the MIOA stockholders and the PHC
stockholders, respectively, vote in favor of and approve the Merger, this
Agreement and the Articles or Certificate of Merger at the Special Meeting, as
applicable.
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7.2. NO SOLICITATION. Subject to the provisions of Section 7.4, in
consideration of the expenses to be incurred by PHC and MIOA in negotiating this
Agreement and in conducting their due diligence investigation, neither PHC nor
MIOA shall, directly or indirectly, through any officer, director, employee,
financial advisor, representative or agent of such party: (i) solicit, initiate,
or encourage any inquiries or proposals that constitute, or could reasonably be
expected to lead to, a proposal or offer for a merger, consolidation, business
combination, sale or transfer of substantial assets, sale of any shares of
capital stock (including without limitation by way of a tender offer) or similar
transaction involving such party or any of its Subsidiaries, other than the
Transactions (any of the foregoing inquiries or proposals being referred to in
this Agreement as an "Acquisition Proposal"), or (ii) engage in negotiations or
discussions concerning, or provide any non-public information to any Person
relating to, any Acquisition Proposal, or agree to or recommend any Acquisition
Proposal.
7.3. NOTIFICATION OF ACQUISITION PROPOSAL. MIOA and PHC shall notify the
other within three (3) Business Days after receipt by such party (or its
advisors) of any Acquisition Proposal or any request for non-public information
in connection with an Acquisition Proposal or for access to its properties,
books or records by any person or entity that informs such party that it is
considering making, or has made, an Acquisition Proposal. Such notice shall be
made orally and in writing and shall indicate in reasonable detail the identity
of the offeror and the terms and conditions of such proposal, inquiry or
contact. Such party shall continue to keep the other party informed, on a prompt
and current basis, of the status of any such discussions, negotiations and the
terms being discussed or negotiated.
7.4. FIDUCIARY OUT. (a) Notwithstanding the provisions of Section 7.2
above, nothing contained in this Agreement shall prevent MIOA or its Board of
Directors, from (A) furnishing non-public information, or entering into
discussions or negotiations, with, any person or entity in connection with an
unsolicited bona fide written Acquisition Proposal by such person or entity or
recommending an unsolicited bona fide written Acquisition Proposal to its
stockholders, if and only to the extent that (1) the Board of Directors of MIOA
believes in good faith (after consultation with its financial advisor) that such
Acquisition Proposal is reasonably capable of being completed on the terms
proposed and, after taking into account the strategic benefits anticipated to be
derived from the Merger and the long-term prospects of MIOA and PHC as a
combined company, such Acquisition Proposal would, if consummated, result in a
transaction significantly more favorable over the long term than the
Transactions, and MIOA's Board of Directors determines in good faith after
receipt of an opinion from outside legal counsel to the effect that such action
is likely necessary for the Board of Directors to comply with its fiduciary
duties to stockholders under applicable law and (2) prior to furnishing such
non-public information to, or entering into discussions or negotiations with,
such person or entity, the MIOA Board of Directors receives from such Person an
executed confidentiality agreement with terms no more favorable to such Person
than those contained in this Agreement and in the Confidentiality Agreement; or
(B) complying with Rule 14e-2 promulgated under the Exchange Act with regard to
an Acquisition Proposal. Without limiting Section 7.3 above,
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MIOA shall give written notice to PHC as soon as possible of any such
Acquisition Proposal that the MIOA Board of Directors determines meets the
standards set forth in this Agreement and whether MIOA will exercise its right
to use such Acquisition Proposal as a fiduciary out. Notice from MIOA to PHC of
its election to use such Acquisition Proposal as a fiduciary out shall mean that
this Agreement is terminated and a termination fee is payable by MIOA to PHC
pursuant to Section 7.5 hereof.
(b) Notwithstanding the provisions of Section 7.2 above, nothing
contained in this Agreement shall prevent PHC or its Board of Directors, from
(A) furnishing non-public information, or entering into discussions or
negotiations, with, any person or entity in connection with an unsolicited bona
fide written Acquisition Proposal by such person or entity or recommending an
unsolicited bona fide written Acquisition Proposal to its stockholders, if and
only to the extent that (1) the Board of Directors of PHC believes in good faith
(after consultation with its financial advisor) that such Acquisition Proposal
is reasonably capable of being completed on the terms proposed and, after taking
into account the strategic benefits anticipated to be derived from the Merger
and the long-term prospects of MIOA and PHC as a combined company, such
Acquisition Proposal would, if consummated, result in a transaction
significantly more favorable over the long term than the Transactions, and PHC's
Board of Directors determines in good faith after receipt of an opinion from
outside legal counsel to the effect that such action is likely necessary for the
Board of Directors to comply with its fiduciary duties to stockholders under
applicable law and (2) prior to furnishing such non-public information to, or
entering into discussions or negotiations with, such person or entity, the PHC
Board of Directors receives from such Person an executed confidentiality
agreement with terms no more favorable to such party than those contained in
this Agreement and in the Confidentiality Agreement. Without limiting Section
7.3 above, PHC shall give written notice to MIOA as soon as possible of any such
Acquisition Proposal that the PHC Board of Directors determines meets the
standards set forth in this Agreement and whether PHC will exercise its right to
use such Acquisition Proposal as a fiduciary out. Notice from PHC to MIOA of its
election to use such Acquisition Proposal as a fiduciary out shall mean that
this Agreement is terminated and a termination fee is payable by PHC to MIOA
pursuant to Section 7.5(a) hereof.
7.5. BREAK-UP FEE.
(a) UPON OCCURRENCE OF FIDUCIARY OUT. MIOA or PHC, as the case
may be, shall pay to the other party a termination fee upon the termination of
this Agreement pursuant to Section 7.4. The termination fee shall be the sum of
(i) the other party's Out-Of-Pocket Costs, and (ii) $3.5 million, but shall not
in any event exceed $4.5 million. The payment of a termination fee pursuant to
this subsection, which is agreed to be a fair estimate of the expenses and lost
opportunity which would be suffered by the non-terminating party in such event,
shall be the sole and exclusive remedy of the non-terminating party against the
terminating party and any of its Subsidiaries and their respective directors,
officers, employees, attorneys, agents, advisors or other representatives, with
respect to the occurrences giving rise to such payment;
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provided that this limitation shall not be applicable to the terminating party
in the event of a willful breach of Sections 4.5 or 4.6 of this Agreement by the
terminating party or its representatives.
(b) OPTION TO ACQUIRE STOCK. If MIOA or PHC terminates this
Agreement pursuant to Section 7.4, the non-terminating party shall have the
option to acquire 19.9% of the terminating party in accordance with the terms
set forth in the Stock Option Agreements set forth in EXHIBIT 7.5(B).
(c) FAILURE TO OBTAIN STOCKHOLDER APPROVAL; DISSENTER'S RIGHTS.
If the stockholders of MIOA do not approve the Merger by the Automatic
Termination Date and this Agreement has not otherwise been terminated pursuant
to Section 10.1(a), 10.1(b), 10.1(c), 10.1(d), 10.1(e), 10.1(f), 10.1(g) or
10.1(h), this Agreement shall be automatically terminated and MIOA shall
reimburse PHC for its Out-Of-Pocket Costs up to a maximum of $500,000. If the
number of MIOA Dissenting Shares exceeds in the aggregate five (5%) of the total
number of shares of MIOA Capital Stock issued and outstanding as of the date of
this Agreement (on an as-converted to MIOA Common Stock basis), then MIOA and
PHC each shall have the option to terminate this Agreement, whereupon MIOA shall
reimburse PHC for its Out-Of-Pocket Costs up to a maximum of $500,000 (provided
that if MIOA in good faith determines that it does not have sufficient cash to
pay PHC, MIOA and PHC will negotiate in good faith a mutually agreeable
alternative form of payment, which may be, for example and without obligating
either party to such a mechanism, MIOA stock or an interest-bearing note
convertible into MIOA Capital Stock at the option of the holder). The remedies
to PHC contained in the previous two sentences shall be mutually exclusive. If
the stockholders of PHC do not approve the Merger by the Automatic Termination
Date and this Agreement has not otherwise been terminated pursuant to Section
10.1(a), 10.1(b), 10.1(c), 10.1(d), 10.1(e), 10.1(f), 10.1(g) or 10.1(h), this
Agreement shall be automatically terminated and PHC shall reimburse MIOA for its
Out-Of- Pocket Costs, including those fees and expenses described in Section
3.1(f) hereof, up to a maximum of $500,000. If the number of PHC Dissenting
Shares exceeds in the aggregate five (5%) of the total number of shares of PHC
Capital Stock issued and outstanding as of the date of this Agreement (on an
as-converted to PHC Common Stock basis), then PHC and MIOA each shall have the
option to terminate this Agreement, whereupon PHC shall reimburse MIOA for its
Out-Of-Pocket Costs up to a maximum of $500,000 (provided that if PHC in good
faith determines that it does not have sufficient cash to pay MIOA, MIOA and PHC
will negotiate in good faith a mutually agreeable alternative form of payment,
which may be, for example and without obligating either party to such a
mechanism, PHC stock or an interest-bearing note convertible into PHC Capital
Stock at the option of the holder). The remedies to MIOA contained in the
previous two sentences shall be mutually exclusive. In addition, (i) if the
stockholders of MIOA do not approve the Merger at a time when there is an
Acquisition Proposal pending with respect to MIOA and the third party making
such Acquisition Proposal (or its related affiliate(s)) consummate a transaction
with MIOA at any time during the one (1) year period following the failure to
approve the Merger, then in such event MIOA shall pay to
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PHC a termination fee in an amount equal to $3.5 million, and (ii) if the
stockholders of PHC do not approve the Merger at a time when there is an
Acquisition Proposal pending with respect to PHC and the third party making such
Acquisition Proposal (or its related affiliate(s)) consummate a transaction with
PHC at any time during the one (1) year period following the failure to approve
the Merger, then in such event PHC shall pay to MIOA a termination fee in an
amount equal to $3.5 million. The provisions of this Section 7.5(c) shall not
apply if this Agreement is terminated pursuant to Section 7.4.
7.6. COMPLIANCE WITH THE SECURITIES ACT; REORGANIZATION. (a) Prior to the
Effective Time, PHC and MIOA shall cause to be delivered to the other party,
after consultation with its counsel, a certificate of its Chief Executive
Officer which identifies all persons who as of the date of the Joint Proxy
Statement/Prospectus, are likely to be considered "affiliates" of such party as
that term is used in Paragraphs (c) and (d) of Rule 145 under the Securities Act
("Affiliates"). PHC and MIOA shall cause its Chief Executive Officer to deliver
to the other party at the Closing a second certificate updating such original
certificate to the Effective Time.
(b) PHC and MIOA shall obtain a written agreement from each
current executive officer, director and stockholder who is identified as a
possible Affiliate in the certificates referred to in clause (a) above in
substantially the form attached hereto as EXHIBIT 7.6, which agreement will
provide that such person will not offer to sell, sell, or otherwise dispose of
any of the Merger Shares issued to such person pursuant to the Merger, except in
compliance with Rule 145, another exemption from the registration requirements
of the Securities Act, or pursuant to an effective registration under the
Securities Act. PHC and MIOA shall deliver such written agreements to the other
party on or prior to the Closing.
7.7. RULE 145 REQUIREMENTS. With a view to making available to the
Affiliates of PHC the benefits of Rule 145 promulgated under the Securities Act
and any other rule or regulation of the SEC that may at any time permit such
Affiliates to sell securities of the Surviving Corporation to the public without
registration, MIOA agrees that, at all times during which it is subject to the
reporting requirements of the Exchange Act, it will use its commercially
reasonable best efforts to file with the SEC in a timely manner all reports and
other documents required of MIOA under the Securities Act and the Exchange Act.
7.8. REGISTRATION RIGHTS. The Surviving Corporation will grant those
persons who are identified as possible PHC Affiliates pursuant to Section 7.6(a)
"piggyback" rights to cause the Surviving Corporation to register the resale of
such shares pursuant to the Registration Rights Agreement attached hereto as
EXHIBIT 7.8.
7.9. LISTING OF SHARES. MIOA shall ensure that, prior to the Effective
Time, the shares of common stock of the Surviving Corporation constituting
Merger Shares and Option/Warrant Shares will be approved for trading on the
Nasdaq Stock Market's SmallCap Market or National Market System.
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7.10. JOINT PROXY STATEMENT/PROSPECTUS. As soon as practicable after the
date hereof, but not until after the Schedule Delivery Date and the procurement
of MIOA Board Approval and PHC Board Approval, MIOA shall prepare the Joint
Proxy Statement/Prospectus, file it with the SEC after it has been approved by
PHC, use its best efforts to respond to comments of the staff of the SEC and
have the Joint Proxy Statement/Prospectus declared effective by the staff of the
SEC. PHC shall cooperate with MIOA in connection with MIOA's preparation of the
Joint Proxy Statement/Prospectus and the processing thereof with the SEC.
Promptly after the Joint Proxy Statement/Prospectus has been declared effective
by the SEC, MIOA and PHC shall mail the Joint Proxy Statement/Prospectus and
related Prospectus to all holders of MIOA Capital Stock and PHC Capital Stock,
respectively; provided, however, that MIOA shall not be under an obligation to
mail the definitive Joint Proxy Statement/Prospectus until PHC shall have
furnished to MIOA in writing for use in such proxy materials information about
itself and its plans as counsel to MIOA shall reasonably deem necessary in order
for such proxy materials to comply with the Exchange Act and as necessary to
respond satisfactorily to SEC comments with respect to the preliminary proxy
statement.
7.11. BREACH PRIOR TO CLOSING. (a) If MIOA becomes aware of breach(es) by
PHC of any of its representations or warranties contained in this Agreement
after the Schedule Delivery Date but prior to the date that is five (5) days
prior to the Closing Date (the "Settlement Cut-Off Date") as a result of its due
diligence investigation of PHC and its Subsidiaries or otherwise, it shall give
written notice to PHC of the nature and the amount of damages suffered as a
result of such breach(es). If in the exercise of its good faith business
judgment MIOA alleges that such damages exceed $250,000 in the aggregate, MIOA
and PHC shall in good faith negotiate a mutually acceptable dollar value
settlement (the "PHC Breach Settlement") of the damages caused by such
breach(es). If MIOA and PHC agree on the PHC Breach Settlement, they shall
jointly instruct the Exchange Agent to reduce the number of Merger Shares
issuable to all holders of PHC Capital Stock immediately prior to the Closing
(collectively, the "PHC Merger Stockholders") by an amount equal to the PHC
Breach Settlement divided by the Fair Market Value. Such reduction in the number
of Merger Shares to be issued to the PHC Merger Stockholders shall be allocated
among the PHC Merger Stockholders pro rata based upon the ownership of the PHC
Capital Stock immediately prior to the Merger. In the event that MIOA and PHC,
in the exercise of good faith efforts, cannot reach agreement on the PHC Breach
Settlement by the earlier of (i) the date that is thirty (30) days after the
notice of breach called for above in this subsection (a), or (ii) the Settlement
CutOff Date, MIOA shall have the right to terminate this Agreement, whereupon
each of MIOA and PHC shall be responsible for their own Out-Of-Pocket Costs
(except to the extent that such Out- Of-Pocket Costs or expenses incurred by
either party are agreed to be paid otherwise by the terms of this Agreement) and
neither MIOA nor PHC shall have any further obligation to the other under the
terms of this Agreement. If such damages do not exceed $250,000 in the
aggregate, or if PHC and MIOA do not agree on a PHC Breach Settlement and MIOA
does not exercise its right to terminate under this Section, no reduction in the
number of Merger Shares issuable to the PHC Merger Stockholders shall be made
and MIOA shall proceed to Closing.
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(b) If PHC becomes aware of breach(es) by MIOA of any of its
representations or warranties contained in this Agreement after the Schedule
Delivery Date but prior to the Settlement Cut-Off Date as a result of its due
diligence investigation of MIOA and its Subsidiaries or otherwise, it shall give
written notice to MIOA of the nature and the amount of damages suffered as a
result of such breach(es). If in the exercise of its good faith business
judgment PHC alleges that such damages exceed $250,000 in the aggregate, MIOA
and PHC shall in good faith negotiate a mutually acceptable dollar value
settlement (the "MIOA Breach Settlement") of the damages caused by such
breach(es). If MIOA and PHC agree on the MIOA Breach Settlement, they shall
jointly instruct the Exchange Agent to increase the number of Merger Shares
issuable to the PHC Merger Stockholders by an amount equal to the MIOA Breach
Settlement divided by the Fair Market Value. Such increase in the number of
Merger Shares to be issued to the PHC Merger Stockholders shall be allocated
among the PHC Merger Stockholders pro rata based upon the ownership of the PHC
Capital Stock immediately prior to the Merger. In the event that MIOA and PHC,
in the exercise of good faith efforts, cannot reach agreement on the MIOA Breach
Settlement by the earlier of (i) the date that is thirty (30) days after the
notice of breach called for above in this subsection (b), or (ii) the Settlement
CutOff Date, PHC shall have the right to terminate this Agreement, whereupon
each of MIOA and PHC shall be responsible for their own Out-Of-Pocket Costs
(except to the extent that such Out- Of-Pocket Costs or expenses incurred by
either party are agreed to be paid otherwise by the terms of this Agreement) and
neither MIOA nor PHC shall have any further obligation to the other under the
terms of this Agreement. If such damages do not exceed $250,000 in the
aggregate, or if PHC and MIOA do not agree on a MIOA Breach Settlement and PHC
does not exercise its right to terminate under this Section, no increase in the
number of Merger Shares issuable to the PHC Merger Stockholders shall be made
and PHC shall proceed to Closing.
(c) If an adjustment has been agreed to under both subsections
(a) and (b) above, the adjustments made pursuant thereto shall be netted against
each other in order to determine the net adjustment to the number of Merger
Shares.
(d) Notwithstanding anything to the contrary in this Section
7.11, (i) no adjustment shall be made to the number of Merger Shares if the
absolute difference between the aggregate amount of PHC Breach Settlement(s) and
the aggregate amount of MIOA Breach Settlement(s) does not exceed $250,000 and
(ii) in no event shall the net aggregate adjustment to the number of Merger
Shares exceed an amount equal to $2.5 million divided by the Fair Market Value.
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7.12 COMFORT LETTERS. MIOA and PHC shall mutually determine whether to
obtain a "Comfort Letter" from their respective independent accounting firms,
each such Comfort Letter to be delivered by the accounting firm to the party not
represented by said firm (e.g. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ will deliver its Comfort Letter
to MIOA and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ will deliver its Comfort Letter to PHC). The scope of
the Comfort Letter and its contents shall be determined by MIOA and PHC in
consultation with their respective accounting firms, but in any event the
Comfort Letters delivered shall in all events be comparable to each other. Each
of MIOA and PHC shall be responsible for the cost of the Comfort Letter
delivered by its own accounting firm, provided, however, that upon Closing any
outstanding obligation with respect to the Comfort Letter shall be paid by the
surviving corporation.
ARTICLE 8
CONDITIONS TO OBLIGATIONS OF PHC TO CLOSE
Each and every obligation of PHC under this Agreement to be performed on
or prior to the Closing shall be subject to the fulfillment, on or prior to the
Closing, of each of the following conditions, which conditions MIOA agrees to
use its best efforts to satisfy:
8.1. REPRESENTATIONS AND WARRANTIES AT CLOSING. The representations and
warranties made by MIOA in or pursuant to this Agreement or given on its behalf
hereunder shall be true and correct on and as of the Closing Date, in each case
with the same effect as though such representations and warranties had been made
or given on and as of the Closing Date except for such representations and
warranties which if not true and correct on and as of the Closing Date, do not
result in damages suffered by PHC in excess of $2,500,000.00 in the aggregate.
8.2. OBLIGATIONS PERFORMED. MIOA shall have performed and complied with
all material agreements and conditions required by this Agreement to be
performed or complied with by it prior to or at the Closing.
8.3. CONSENTS AND STOCKHOLDER APPROVAL.
(a) MIOA shall have obtained and delivered to PHC the written
consents or approvals specified, or to be specified, in SCHEDULE 5.4 (except for
such consents or approvals as to which, in the aggregate, the failure to obtain
them shall not have a Material Adverse Effect) and all of such consents shall
remain in full force and effect at and as of the Closing.
(b) This Agreement, the Merger and the Articles and Certificate
of Merger shall have received the requisite MIOA Board Approval, PHC Board
Approval, MIOA Stockholder Approval and PHC Stockholder Approval, as applicable.
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(c) PHC shall have received all consents to the consummation of
the Transactions that PHC deems necessary or appropriate from its lenders and
holders of PHC Preferred Stock.
8.4. CLOSING DELIVERIES. MIOA shall have delivered to PHC each of the
following, together with any additional items which PHC may reasonably request
to effect the Transactions:
(a) a certificate of the President of MIOA certifying as to the
matters set forth in Sections 8.1, 8.2 and 8.3 (except for 8.3(c)) hereof and as
to the satisfaction of all other conditions set forth in this Article 8;
(b) a confirmation letter from the Exchange Agent that the number
and types of Merger Shares are available for delivery at the Effective Time;
(c) Articles of Merger duly executed by an officer of MIOA for
filing in accordance with the provisions of Section 2.2 hereof;
(d) Employment Agreements duly executed by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and
▇▇▇▇ ▇. ▇▇▇▇▇▇▇;
(e) an opinion of counsel to MIOA and an opinion of counsel to
MIOA's Subsidiaries substantially in the forms of EXHIBIT 8.4(E)(I) AND
8.4(E)(II) attached hereto;
(f) Nondisclosure/Noncompete Agreements duly executed by ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ in the form of EXHIBIT 4.1(B);
(g) Standstill/Voting Agreements duly executed by ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ in the form of EXHIBIT 4.1(C)(I);
(h) Stockholders' Agreement duly executed by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ in the form of EXHIBIT 4.1(C)(II);
(i) an opinion of counsel to MIOA to the effect that the Merger
qualifies as a tax-free reorganization;
(j) agreements with certain Affiliates of MIOA in accordance with
Section 7.6;
(k) the Registration Rights Agreement in the form attached hereto
as EXHIBIT 7.8; and
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(l) any other documents or agreements contemplated hereby and/or
necessary or appropriate to consummate the Transactions.
8.5. JOINT PROXY STATEMENT/PROSPECTUS; NO CHALLENGE. The Joint Proxy
Statement/Prospectus shall have become effective under the Securities Act and
shall have been timely sent to the stockholders of PHC in accordance with the
Securities Act, and shall not be subject to any stop order or similar
proceedings. There shall not be pending or threatened any action, proceeding or
investigation before any court or administrative agency by any government agency
or any pending action by any other Person, challenging, or seeking material
damages in connection with the Merger or otherwise materially adversely
affecting the business, assets, prospects, financial condition or results of
operations of the Surviving Corporation and its Subsidiaries. MIOA shall have
satisfied all applicable Nasdaq rules in order for the common stock of the
Surviving Corporation constituting Merger Shares and Option/Warrant Shares to be
listed on the Nasdaq SmallCap Market.
8.6. NO INVESTIGATIONS OF MIOA AND ITS SUBSIDIARIES OR THEIR BUSINESS. As
of the Closing Date, there shall be no, and neither MIOA nor any of its
Subsidiaries shall have any knowledge of any material pending or threatened
investigation by any municipal, state or federal government agency or regulatory
body with respect to MIOA or its Subsidiaries, the Assets or the business of
MIOA and its Subsidiaries, other than such as have been disclosed to PHC prior
to the date hereof.
8.7. NO MATERIAL ADVERSE EFFECT. Since December 31, 1997, there shall have
been no Material Adverse Effect with respect to MIOA.
8.8. SECURITIES LAWS. The parties shall have complied with all federal and
state securities laws applicable to the Transactions. All SEC and "Blue Sky"
permits or approvals required to carry out the Transactions shall have been
received.
8.9. MINUTES. PHC shall have received at Closing copies of minutes of
meetings of the stockholders and the Board of Directors of MIOA, certified by
the corporate secretary of MIOA, approving and authorizing the Merger and the
Transactions.
8.10. REVISED SCHEDULES. MIOA and its Subsidiaries shall have provided PHC
with revised Schedules dated as of the Closing Date (the "MIOA Final Revised
Schedules"), with all material changes through such date duly noted thereon,
including any modifications to MIOA's representations and warranties resulting
from the Permitted Equity Financings, and the MIOA Final Revised Schedules will
not contain any disclosures which (i) should have been but were not disclosed on
the Schedules in accordance with Section 4.4, or (ii) set forth changes which,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect unless such disclosures are approved in writing by PHC.
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8.11. LEGALITY. No federal or state statute, rule, regulation, executive
order, decree or injunction shall have been enacted, entered, promulgated or
enforced by any court or governmental authority which is in effect and has the
effect of making the Merger illegal or otherwise prohibiting the consummation of
the Merger.
8.12. REGULATORY MATTERS. All filings shall have been made and all
approvals shall have been obtained as may be legally required pursuant to
federal and state laws prior to the consummation of the Transactions and all
actions by or in respect of, or filings with, any governmental body, agency or
official or any other Person required to permit the consummation of the Merger
so that the Surviving Corporation shall be able to continue to carry on the
business of MIOA substantially in the manner now conducted by MIOA shall have
been taken or made.
8.13. REPAYMENT OF DEBTS. At the Closing, all officers, directors,
stockholders and employees of MIOA and its Subsidiaries shall repay to the
Surviving Corporation in full any outstanding indebtedness, if any, owed to MIOA
and its Subsidiaries by them or their families, except for that certain
outstanding indebtedness described on SCHEDULE 8.13 attached hereto.
8.14. AGREEMENT AS TO EXHIBITS AND SCHEDULES. The parties hereto shall
have mutually agreed in the exercise of their respective sole discretion to the
terms contained in each Schedule and Exhibit to this Agreement.
8.15 ADDITIONAL CLOSING CONDITIONS. Each and every one of the additional
closing conditions, if any, required of MIOA or its stockholders set forth in
SCHEDULE 8.15 attached hereto shall have been completed or fulfilled, as the
case may be.
ARTICLE 9
CONDITIONS TO MIOA'S OBLIGATIONS
Each and every obligation of MIOA under this Agreement to be performed on
or prior to the Closing, shall be subject to the fulfillment, on or prior to the
Closing, of each of the following conditions, which conditions PHC agree to use
best efforts to satisfy:
9.1. REPRESENTATIONS AND WARRANTIES AT CLOSING. The representations and
warranties made by PHC in or pursuant to this Agreement or given on its behalf
hereunder shall be true and correct on and as of the Closing Date, in each case
with the same effect as though such representations and warranties had been made
or given on and as of the Closing Date, except for such representations and
warranties which if not true and correct on and as of the Closing Date do not
result in damages suffered by MIOA in excess of $2,500,000.00 in the aggregate.
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9.2. OBLIGATIONS PERFORMED. PHC shall have performed and complied with all
of its material obligations under this Agreement which are to be performed or
complied with by it prior to or at the Closing.
9.3. CONSENTS AND STOCKHOLDER APPROVAL.
(a) PHC shall have obtained and delivered to MIOA the written
consents or approvals specified, or to be specified, in SCHEDULE 6.4 (except for
such consents or approvals as to which, in the aggregate, the failure to obtain
them shall not have a Material Adverse Effect) and all of such consents shall
remain in full force and effect at and as of the Closing.
(b) This Agreement, the Merger and the Articles and Certificate
of Merger shall have received the requisite MIOA Board Approval, PHC Board
Approval, MIOA Stockholder Approval and PHC Stockholder Approval, as applicable.
9.4. CLOSING DELIVERIES. PHC shall have delivered to MIOA each of the
following, together with any additional items which MIOA may reasonably request
to effect the Transactions:
(a) a certificate of the President of PHC certifying as to the
matters set forth in Sections 9.1, 9.2 and 9.3 hereof and as to the satisfaction
of all other conditions set forth in this Article 9;
(b) an opinion of counsel to PHC substantially in the form of
EXHIBIT 9.4(F);
(c) Nondisclosure/Noncompete Agreements executed by ▇▇▇▇▇ ▇.
▇▇▇▇▇▇, J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, M.D. and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇; and
(d) the Standstill/Voting Agreement duly executed by ▇▇▇▇▇ ▇.
▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇;
(e) Employment Agreements duly executed by ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, J.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, M.D. and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇;
(f) Certificate of Merger duly executed by an officer of PHC for
filing in accordance with Section 2.2, or evidence of such filing;
(g) agreements with certain Affiliates of PHC in accordance with
Section 7.6; and
(h) any other documents or agreements contemplated hereby and/or
necessary or appropriate to consummate the Transactions.
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9.5. NO INVESTIGATIONS OF PHC AND ITS SUBSIDIARIES OR THEIR BUSINESS. As
of the Closing Date, there shall be no, and neither PHC nor any of its
Subsidiaries shall have any knowledge of any material pending or threatened
investigation by any municipal, state or federal government agency or regulatory
body with respect to PHC or its Subsidiaries, the Assets or the business of PHC
and its Subsidiaries, other than such as have been disclosed to MIOA prior to
the date hereof.
9.6. NO MATERIAL ADVERSE EFFECT. Since December 31, 1997, there shall have
been no Material Adverse Effect with respect to PHC.
9.7. SECURITIES LAWS. The parties shall have complied with all federal and
state securities laws applicable to the Transactions. All SEC and "Blue Sky"
permits or approvals required to carry out the Transactions shall have been
received.
9.8. MINUTES. MIOA shall have received at Closing copies of minutes of
meetings of the Board of Directors of PHC and the stockholders of PHC, certified
by the corporate secretary of PHC, approving and authorizing the Merger and the
Transactions.
9.9. REVISED SCHEDULES. PHC and its Subsidiaries shall have provided MIOA
with revised Schedules dated as of the Closing Date (the "PHC Final Revised
Schedules"), with all material changes through such date duly noted thereon,
including any modifications to PHC's representations and warranties resulting
from the Permitted Equity Financings, and the PHC Final Revised Schedules will
not contain any disclosures which (i) should have been but were not disclosed on
the Schedules in accordance with Section 4.4, or (ii) set forth changes which,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect unless such disclosures are approved in writing by MIOA.
9.10. LEGALITY. No federal or state statute, rule, regulation, executive
order, decree or injunction shall have been enacted, entered, promulgated or
enforced by any court or governmental authority which is in effect and has the
effect of making the Merger illegal or otherwise prohibiting the consummation of
the Merger.
9.11. REGULATORY MATTERS. All filings shall have been made and all
approvals shall have been obtained as may be legally required pursuant to
federal and state laws prior to the consummation of the Transactions and all
actions by or in respect of, or filings with, any governmental body, agency or
official or any other Person required to permit the consummation of the Merger
so that the Surviving Corporation shall be able to continue to carry on the
business of PHC substantially in the manner now conducted by PHC shall have been
taken or made.
9.12. REPAYMENT OF DEBTS. At the Closing, all officers, directors,
stockholders and employees of PHC shall repay to the Surviving Corporation in
full any outstanding indebtedness,
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if any, owed to PHC and its subsidiaries by them or their families, except for
that certain outstanding indebtedness described on SCHEDULE 9.11 attached
hereto.
9.13. AGREEMENT AS TO EXHIBITS AND SCHEDULES. The parties hereto shall
have mutually agreed in the exercise of their respective sole discretion to the
terms contained in each Schedule and Exhibit to this Agreement.
9.14 ADDITIONAL CLOSING CONDITIONS. Each and every one of the additional
closing conditions, if any, required of PHC or its stockholders set forth in
SCHEDULE 9.14 attached hereto shall have been completed or fulfilled, as the
case may be.
ARTICLE 10
TERMINATION
10.1. TERMINATION. This Agreement may be terminated:
(a) by mutual written consent of PHC and MIOA at any time before
the Closing Date;
(b) by either PHC or MIOA if there occurs prior to Closing a
substantial loss, damage or diminution of the other party's Assets or other
Material Adverse Effect on the business of the other party and its Subsidiaries
(taken as a whole) arising from any cause, including but not limited to theft,
fire, flood or act of God;
(c) by either PHC or MIOA in the exercise of their respective
sole discretion at any time prior to the Schedule Delivery Date;
(d) by either PHC or MIOA if MIOA Board Approval or PHC Board
Approval has not been obtained on or before August 3, 1998;
(e) by either PHC or MIOA if MIOA (and PHC if PHC determines that
it needs a Fairness Opinion) has not received the Fairness Opinion(s) on or
before August 3, 1998;
(f) by either PHC or MIOA if Nasdaq has not confirmed by
September 15, 1998, that the Merger and the securities of the Surviving
Corporation will conform with its listing requirements or, if Nasdaq has
responded with requirements for such listing, the holders of the PHC Preferred
Stock, within thirty (30) days after such notice from Nasdaq, do not agree to
the changes required by Nasdaq to meet such listing requirements;
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(g) by either PHC or MIOA if the Closing is not consummated on or
before November 13, 1998 (the "Automatic Termination Date"), unless the failure
to close by such date is attributable to actions or omissions of the party
seeking to terminate this Agreement under this subsection (g);
(h) by either MIOA or PHC pursuant to Section 7.4 (Fiduciary
Out);
(i) in accordance with Section 7.5(c) (Failure to Obtain
Stockholder Approval Dissenter's Rights);
(j) in accordance with Section 7.11(a) or (b), as applicable;
(k) by either MIOA or PHC if the Average MIOA Stock Price (as
defined below) is (i) less than the greater of $1.50 or ninety percent (90%) of
the average Daily Per Share Price (as defined below) on the NASDAQ Small Cap
Exchange for the MIOA common stock for the fifteen (15) consecutive trading day
period ending on the day prior to the day that the Joint Proxy
Statement/Prospectus is printed or (ii) greater than $4.00 per share. The
"Average MIOA Stock Price" is defined as the Daily Per Share Price on the NASDAQ
Small Cap Exchange for the MIOA common stock for the fifteen (15) consecutive
trading days ending on the fifth trading day prior to the meeting of MIOA
shareholders to vote upon the Merger. The "Daily Per Share Price" for any
trading day is defined as the weighted average of the per share selling prices
on the NASDAQ Small Cap Exchange for that day; or
(l) by MIOA in the event that PHC does not fund the balance of
that certain $3,000,000 loan from PHC to MIOA ($600,000 of which has already
been funded by PHC) (the "Loan") by August 14, 1998.
10.2. EFFECT OF TERMINATION. In the event this Agreement is terminated
pursuant to Sections 10.1(a), 10.1(b), 10.1(c), 10.1(d), 10.1(e), 10.1(f), or
10.1(g) above, no party shall have any obligations to the other hereunder except
for those obligations set forth in Section 4.3 (Expenses) and those with respect
to confidentiality and the return of confidential information set forth below.
If this Agreement is terminated pursuant to Section 10.1(h), then the remedies
set forth in Section 7.5(a) and (b) shall apply. If this Agreement is terminated
pursuant to Section 10.1(i), then the remedies set forth in Section 7.5(c) shall
apply. If this Agreement is terminated pursuant to Section 10.1(l), PHC shall
pay (x) the entire amount of the fees, costs and expenses payable to BancAmerica
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ in connection with the Merger, (y) all fees, costs and
expenses of Arnall Golden & ▇▇▇▇▇▇▇,LLP, and (z) the term of the $600,000
advance on the Loan shall automatically be extended to February 1, 1999. If this
Agreement is terminated, each party shall promptly return to the other party all
copies of the due diligence materials previously provided by such party to the
other or their representatives including, without limitation, each party's
Intellectual Property, and the obligations in respect of
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confidentiality set forth in this Agreement and in the Confidentiality Agreement
shall remain in effect.
ARTICLE 11
MISCELLANEOUS PROVISIONS
11.1. SEVERABILITY. If any provision of this Agreement is prohibited by
the laws of any jurisdiction as those laws apply to this Agreement, that
provision shall be ineffective to the extent of such prohibition and/or shall be
modified to conform with such laws, without invalidating the remaining
provisions hereto.
11.2. MODIFICATION. This Agreement may not be changed or modified except
in writing specifically referring to this Agreement and signed by each of the
parties hereto.
11.3. ASSIGNMENT, SURVIVAL AND BINDING AGREEMENT. This Agreement and the
Closing Documents may not be assigned by PHC, without the prior written consent
of MIOA, and may not be assigned by MIOA, without the prior written consent of
PHC. The terms and conditions hereof shall survive the Closing as provided in
this Agreement and shall inure to the benefit of and be binding upon the parties
hereto and their respective heirs, personal representatives, successors and
assigns.
11.4. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.5. NOTICES. All notices, requests, demands, claims and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
Business Days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid and addressed to the intended recipient as set forth
below.
If to MIOA: Medical Industries of America, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
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with a copy to: Mirkin & ▇▇▇▇▇, P.A.
SouthTrust Center
Suite 580
1700 Palm Beach ▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
If to PHC: Physician Health Corporation
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: Arnall Golden & ▇▇▇▇▇▇▇, LLP
2800 One Atlantic Center
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
Telefax: (▇▇▇) ▇▇▇-▇▇▇▇
or at such other address as any party hereto notifies the other parties hereof
in writing.
11.6. ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. This Agreement,
together with the Exhibits and Schedules attached hereto, constitutes the entire
agreement and supersedes any and all other prior agreements and undertakings,
both written and oral, among the parties, or any of them, with respect to the
subject matter hereof and, except as otherwise expressly provided in this
Agreement, is not intended to confer upon any Person other than PHC and MIOA,
any rights or remedies hereunder. No provision of this Agreement shall be
construed against any party on the ground that such party drafted the provision
or caused it to be drafted or the provision contains a covenant of such party.
11.7. GOVERNING LAW; JURISDICTION AND VENUE. This Agreement shall be
governed by, and construed and enforced in accordance with, the laws of the
State of Delaware, excluding those relating to conflicts of laws. The parties
hereto expressly agree that the exclusive jurisdiction and venue for legal
proceedings under this Agreement shall be the state or applicable federal court
having jurisdiction over the defendant's domicile (or in the case of PHC and
MIOA, the location of its principal corporate office).
-65-
11.8. ATTORNEY'S FEES. In any action between the parties to enforce any of
the terms of this Agreement, the prevailing party shall be entitled to recover
reasonable expenses, including reasonable attorney's fees.
11.9. HEADINGS. The section headings contained in this Agreement and the
Schedules and Exhibits attached hereto are inserted for convenience only and
shall not affect in any way the meaning or interpretation of this Agreement.
11.10. INCORPORATION OF EXHIBIT AND SCHEDULES. The Exhibits and Schedules
identified in this Agreement are incorporated in this Agreement by reference and
made a part hereof.
11.11. CONSTRUCTION. Within this Agreement, the singular shall include the
plural and the plural shall include the singular and any gender shall include
all other genders, all as the meaning and context of this Agreement shall
require. The parties hereto have participated jointly in the negotiation and
drafting of this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties hereto and no presumption or burden of proof shall arise favoring
or disfavoring any party hereto by virtue of the authorship of any of the
provisions of this Agreement.
(Signatures begin on following page S-1)
-66-
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
MEDICAL INDUSTRIES OF AMERICA, INC.
By:_________________________________
Its:_________________________________
PHYSICIAN HEALTH CORPORATION
By:_________________________________
Its:_________________________________
S-1
EXHIBITS
Exhibit 2.2(a) Articles of Merger
Exhibit 2.2(b) Certificate of Merger
Exhibit 2.5(a) Articles of Incorporation of Surviving Corporation
Exhibit 2.5(b) By-Laws of Surviving Corporation
Exhibit 2.5(c) Board of Directors of Surviving Corporations
Exhibit 3.1(a) Exchange Ratio
Exhibit 3.1(e) Permitted Equity Financings
Exhibit 3.3(a) Permitted PHC Options and Warrants between Signing and
Closing
Exhibit 3.3(e) Permitted MIOA Options and Warrants between Signing and
Closing
Exhibit 4.1(a) Employment Agreements
Exhibit 4.1(b) Nondisclosure/Noncompete Agreements
Exhibit 4.1(c)(i) Stockholders' Agreement
Exhibit 4.1(c)(ii) Standstill/Voting Agreements
Exhibit 4.2 Permitted Interim Actions
Exhibit 4.2(b)(iv) Capital Expenditures and Commitments in Excess of $500,000
Exhibit 4.2(f) Permitted Indebtedness Other than Ordinary Course of
Business
Exhibit 4.11 MIOA Transactions to be Closed with Reasonable Efforts
Exhibit 5.8 MIOA Annual Report on Form 10-KSB (Incorporated by
Reference)
Exhibit 6.8 PHC Financials
Exhibit 7.5(b) Form of Stock Option Agreements to Acquire 19.9% of Other
Party
Exhibit 7.6 Agreement of Affiliates
Exhibit 7.8 Registration Rights Agreement
EXHIBIT 2.2(A)
ARTICLES OF MERGER
Pursuant to the provisions of the Florida Business Corporation Act (the AAct@),
MEDICAL INDUSTRIES OF AMERICA, INC., a Florida corporation (hereinafter AMIOA@),
and PHYSICIAN HEALTH CORPORATION, a Delaware corporation (hereinafter APHC@),
adopt the following Articles of Merger for the purpose of merging PHC into MIOA.
At the Effective Time (hereinafter defined), PHC will merge (the AMerger@) into
MIOA and the shares of capital stock of PHC will be exchanged for shares of the
capital stock of MIOA, all upon the terms and conditions set forth herein.
1. The laws of the States of Florida and Delaware, the states under which the
parties hereto are organized, permit the Merger.
2. MIOA shall survive the Merger and continue to be governed by the laws of the
State of Florida.
3. The Agreement and Plan of Merger between MIOA and PHC dated as of July ___,
1998 and adopted by the respective Boards of Directors includes, without
limitation, the following provisions:
A. MIOA and PHC shall be merged into a single corporation in accordance
with applicable provisions of the laws of the States of Florida and
Delaware, with PHC merging into MIOA, which shall survive the
Merger. The Merger shall be effective on the date of filing of these
Articles of Merger (the AEffective Time@).
B. MIOA shall thereupon and thereafter possess all the rights,
privileges, immunities and franchises of a public or private
nature of each of the merging corporations. All property, real
or personal, and all debts due on whatever account, including
subscriptions for shares, and all other choses in action, and all
and every other interest of, or belonging to, or due to each of
the merging corporations, shall be taken and deemed to be vested
in MIOA without further act or deed; and the title to all real
estate, or any interest therein, vested in either of the merging
corporations shall not revert or be in any way impaired by reason
of the Merger.
C. MIOA shall thenceforth be responsible and liable for all of the
liabilities and obligations of each of the merging corporations.
Any claim existing or action or proceeding pending by or against
either of the merging corporations may be prosecuted to judgment
as if the Merger had not taken place, or MIOA may be substituted
in place of PHC, and neither the rights of creditors nor any
liens upon the property of either of the merging corporations
shall be impaired by the Merger.
-1-
D. The Articles of Incorporation of MIOA as existing immediately prior
to the Effective Time shall be amended and restated in their
entirety. Upon and after the filing of these Articles of Merger and
until further amended as provided by law, the Articles of
Incorporation as attached hereto as Exhibit AA@ shall constitute the
Articles of Incorporation of MIOA upon consummation of the Merger.
E. The Bylaws of MIOA as existing immediately prior to the Effective
Time shall be amended and restated in their entirety. Upon and after
the filing of these Articles of Merger and until further amended as
provided by law, the Bylaws as attached hereto as Exhibit AB@ shall
constitute the Bylaws of MIOA upon consummation of the Merger.
F. The directors of MIOA upon consummation of the Merger shall be
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇.
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇. The officers of MIOA shall be ______________,
president, ______________, vice president, ______________,
treasurer, and ______________, secretary upon consummation of the
Merger.
G. All shares of capital stock of PHC outstanding prior to the
Effective Time shall, by virtue of the Merger, be exchanged for
shares of capital stock of MIOA as follows:
[INSERT DETAILS OF EXCHANGE]
-2-
4. As to each of the merging corporations, the designation and number of
outstanding shares of each class entitled to vote as a class on the Agreement
and Plan of Merger are as follows:
NAME OF VOTING GROUP SHARES NUMBER OF VOTES
CORPORATION DESIGNATION OUTSTANDING ENTITLED TO BE COST
----------- ----------- ----------- -------------------
PHC Voting Common ________ __________
PHC Non-Voting Common ________ __________
PHC Prime Common ________ __________
PHC Class A Preferred ________ __________
PHC Series B Preferred ________ __________
PHC Series C Preferred ________ __________
MIOA Common ________ __________
MIOA Preferred ________ __________
5. As to each of the merging corporations, the total number of shares voted for
and against the Agreement and Plan of Merger, respectively, and as to each class
entitled to vote thereon are as follows:
NAME OF VOTING GROUP TOTAL TOTAL VOTED
CORPORATION DESIGNATION VOTED FOR AGAINST
----------- ----------- --------- -------
PHC Voting Common ________ __________
PHC Non-Voting Common ________ __________
PHC Prime Common ________ __________
PHC Class A Preferred ________ __________
PHC Series B Preferred ________ __________
PHC Series C Preferred ________ __________
MIOA Common ________ __________
MIOA Preferred ________ __________
6. Said Agreement and Plan of Merger was approved by the shareholders of PHC as
of ______________, 1998 and by the shareholders of MIOA as of ______________,
1998.
7. PHC hereby agrees that it may be served with process in the State of Delaware
in connection with any proceeding to enforce any obligations or rights of
dissenting shareholders of PHC or in connection with any proceeding based on a
cause of action arising with respect to PHC and irrevocably appoints the
Delaware Secretary of State as its agent to accept service of process in any
such proceeding and directs the Delaware Secretary of State to mail a copy of
such service of process served under this Section 7 to MIOA at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
#▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
8. MIOA will promptly pay to the dissenting shareholders of MIOA or PHC the
amount, if any, to which they are entitled as
-3-
provided by law with respect to the rights of dissenting shareholders.
Dated: ______________, 1998
MEDICAL INDUSTRIES OF AMERICA, INC.
By:________________________________
Name:___________________________
Title:__________________________
PHYSICIAN HEALTH CORPORATION
By:________________________________
Name:___________________________
Title:__________________________
-4-
EXHIBIT 2.2(B)
CERTIFICATE OF MERGER
Pursuant to the provisions of the Delaware General Corporation Law (the AAct@),
MEDICAL INDUSTRIES OF AMERICA, INC., a Florida corporation (hereinafter AMIOA@),
and PHYSICIAN HEALTH CORPORATION, a Delaware corporation (hereinafter APHC@),
adopt the following Certificate of Merger for the purpose of merging PHC into
MIOA. At the Effective Time (hereinafter defined), PHC will merge (the AMerger@)
into MIOA and the shares of capital stock of PHC will be exchanged for shares of
the capital stock of MIOA, all upon the terms and conditions set forth herein.
1. The laws of the States of Florida and Delaware, the states under which the
parties hereto are organized, permit the Merger.
2. MIOA shall survive the Merger and continue to be governed by the laws of the
State of Florida.
3. The Agreement and Plan of Merger between MIOA and PHC dated as of July ___,
1998 and adopted by the respective Boards of Directors includes, without
limitation, the following provisions:
A. MIOA and PHC shall be merged into a single corporation in accordance
with applicable provisions of the laws of the States of Florida and
Delaware, with PHC merging into MIOA, which shall survive the
Merger. The Merger shall be effective on the date of filing of this
Certificate of Merger (the AEffective Time@).
B. MIOA shall thereupon and thereafter possess all the rights,
privileges, immunities and franchises of a public or private
nature of each of the merging corporations. All property, real
or personal, and all debts due on whatever account, including
subscriptions for shares, and all other choses in action, and all
and every other interest of, or belonging to, or due to each of
the merging corporations, shall be taken and deemed to be vested
in MIOA without further act or deed; and the title to all real
estate, or any interest therein, vested in either of the merging
corporations shall not revert or be in any way impaired by reason
of the Merger.
C. MIOA shall thenceforth be responsible and liable for all of the
liabilities and obligations of each of the merging corporations.
Any claim existing or action or proceeding pending by or against
either of the merging corporations may be prosecuted to judgment
as if the Merger had not taken place, or MIOA may be substituted
in place of PHC, and neither the rights of creditors nor any
liens upon the property of either of the merging corporations
shall be impaired by the Merger.
D. The Articles of Incorporation of MIOA as existing immediately prior
to the Effective Time shall be amended and restated in their
entirety. Upon and after the filing of this Certificate of Merger
and until further amended as provided by law, the Articles of
Incorporation as attached hereto as Exhibit AA@ shall constitute the
Articles of Incorporation of MIOA upon consummation of the Merger.
E. The Bylaws of MIOA as existing immediately prior to the Effective
Time shall be amended and restated in their entirety. Upon and after
the filing of this Certificate of Merger and until further amended
as provided by law, the Bylaws as attached hereto as Exhibit AB@
shall constitute the Bylaws of MIOA upon consummation of the Merger.
F. The directors of MIOA upon consummation of the Merger shall be
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇.
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇. The officers of MIOA shall be ______________,
president, ______________, vice president, ______________,
treasurer, and ______________, secretary upon consummation of the
Merger.
G. All shares of capital stock of PHC outstanding prior to the
Effective Time shall, by virtue of the Merger, be exchanged for
shares of capital stock of MIOA as follows:
[INSERT DETAILS OF EXCHANGE]
Such adoption was undertaken in the manner prescribed by Section 252 of the Act.
-2-
4. As to each of the merging corporations, the designation and number of
outstanding shares of each class entitled to vote as a class on the Agreement
and Plan of Merger are as follows:
NAME OF VOTING GROUP SHARES NUMBER OF VOTES
CORPORATION DESIGNATION OUTSTANDING ENTITLED TO BE COST
----------- ----------- ----------- -------------------
PHC Voting Common ________ __________
PHC Non-Voting Common ________ __________
PHC Prime Common ________ __________
PHC Class A Preferred ________ __________
PHC Series B Preferred ________ __________
PHC Series C Preferred ________ __________
MIOA Common ________ __________
MIOA Preferred ________ __________
5. As to each of the merging corporations, the total number of shares voted for
and against the Agreement and Plan of Merger, respectively, and as to each class
entitled to vote thereon are as follows:
NAME OF VOTING GROUP TOTAL TOTAL VOTED
CORPORATION DESIGNATION VOTED FOR AGAINST
----------- ----------- --------- -------
PHC Voting Common ________ __________
PHC Non-Voting Common ________ __________
PHC Prime Common ________ __________
PHC Class A Preferred ________ __________
PHC Series B Preferred ________ __________
PHC Series C Preferred ________ __________
MIOA Common ________ __________
MIOA Preferred ________ __________
6. Said Agreement and Plan of Merger was approved by the shareholders of PHC as
of ______________, 1998 and by the shareholders of MIOA as of ______________,
1998. It is on file at the office of MIOA located at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
#▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇. Copies may be obtained upon request and
without cost by any shareholder of PHC or MIOA.
7. PHC hereby agrees that it may be served with process in the State of Delaware
in connection with any proceeding to enforce any obligations or rights of
dissenting shareholders of PHC or in connection with any proceeding based on a
cause of action arising with respect to PHC and irrevocably appoints the
Delaware Secretary of State as its agent to accept service of process in any
such proceeding and directs the Delaware Secretary of State to mail a copy of
such service of process served under this Section 7 to MIOA at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
#▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
-3-
8. MIOA will promptly pay to the dissenting shareholders of MIOA or PHC the
amount, if any, to which they are entitled as provided by law with respect to
the rights of dissenting shareholders.
Dated: ______________, 1998
MEDICAL INDUSTRIES OF AMERICA, INC.
By:________________________________
Name:___________________________
Title:__________________________
PHYSICIAN HEALTH CORPORATION
By:________________________________
Name:___________________________
Title:__________________________
STATE OF FLORIDA )
) ss.
COUNTY OF PALM BEACH )
The foregoing instrument was subscribed, sworn to and acknowledged before
me this ____ day of __________, 1998 by _______________________ as
_______________ of Medical Industries of America, Inc., who is personally known
to me or who has produced identification. Type of
identification:__________________.
Executed this ____ day of ____________, 1998.
SEAL
Signature of Notary
Name of Notary Printed
STATE OF GEORGIA )
) ss.
COUNTY OF ___________)
The foregoing instrument was subscribed, sworn to and acknowledged before
me this ____ day of _________, 1998 by _______________________ as
_______________ of Physician Health Corporation, who is personally known to me
or who has produced identification. Type of
identification:________________________.
Executed this ____ day of ____________, 1998.
SEAL
Signature of Notary
Name of Notary Printed
EXHIBIT 2.5(A)
ARTICLES OF INCORPORATION
OF MEDSURG ANCILLIARIES, INC.
ARTICLE I.
NAME
The name of the corporation is MedSurg Ancilliaries, Inc. (the
"CORPORATION").
ARTICLE II.
ADDRESS OF REGISTERED OFFICE;
NAME OF REGISTERED AGENT
The address of the registered office of the Corporation in the State of
Florida is [______________]. The name of its registered agent at that address is
[______________].
ARTICLE III.
PURPOSE AND POWERS
The purpose of the Corporation is to engage in any lawful act or activity
for which a corporation may now or hereunder be organized under the Florida
Business Corporation Act. It shall have all powers that may now or hereafter be
lawful for a corporation to exercise under the Florida Business Corporation Act.
ARTICLE IV.
CAPITAL STOCK
The Corporation shall have six classes of stock: Common Stock, Class A
Preferred Stock, Class B Preferred Stock, Class C Preferred Stock, Class D
Preferred Stock and Preferred Stock.
SECTION A. COMMON STOCK
1. DESIGNATION AND AMOUNT. The Corporation shall have the authority to
issue 200,000,000 shares of Common Stock, par value $.0025 per share.
2. VOTING RIGHTS.
(a) Except as otherwise required by law, or as granted to the
holders of the Class A Preferred Stock, the Class B Preferred Stock, the Class C
Preferred Stock, the Class D Preferred Stock, or as may be provided by the
resolutions of the Board of Directors authorizing the issuance of any class or
series of Preferred Stock (as provided in Section F of this Article IV), all
rights to vote and all voting power shall be vested exclusively in the holders
of the Common Stock.
(b) The holders of the Common Stock shall be entitled to one vote
per share on all matters submitted to a vote of shareholders, including, without
limitation, the election of directors.
564314.5
3. DIVIDENDS. Except as otherwise provided by law, or as granted to the
holders of the Class A Preferred Stock, the Class B Preferred Stock, the Class C
Preferred Stock, the Class D Preferred Stock, or as may be provided by the
resolutions of the Board of Directors authorizing the issuance of any class or
series of Preferred Stock (as provided in Section F of this Article IV), the
holders of the Common Stock shall be entitled to receive when, as and if
declared by the Board of Directors, out of funds legally available therefor,
dividends payable in cash, stock or otherwise.
4. LIQUIDATION. Upon any liquidation, dissolution or windingup of the
Corporation, whether voluntary or involuntary, and after payment or provision
for payment of the debts and other liabilities of the Corporation, and except as
may be granted to the holders of the Class A Preferred Stock, the Class B
Preferred Stock, the Class C Preferred Stock, the Class D Preferred Stock, or as
provided by the resolutions of the Board of Directors authorizing the issuance
of any class or series of Preferred Stock (as provided in Section F of this
Article IV), the remaining net assets of the Corporation shall be distributed
pro rata to the holders of the Common Stock.
SECTION B. CLASS A PREFERRED STOCK.
1. DESIGNATION AND AMOUNT. The Corporation shall have the authority to
issue [500,000] shares of Class A Preferred Stock, $.01 par value (the "CLASS A
PREFERRED STOCK"), having all of the following designations, preferences,
relative, participating, optional or other rights, qualifications, limitations
and restrictions.
2. DEFINED TERMS. In addition to the other terms defined in these
Articles, as used in this Section B, the following capitalized terms have the
respective meanings set forth below:
(1) "SENIOR DEBT DOCUMENTS" means (i) the Credit Agreement and the other
Credit Documents, in each case as amended (including by any amendment and
restatement), supplemented, modified or extended from time to time, including
each loan or credit agreement and other related agreements extending the
maturity of, replacing, refinancing, refunding, or otherwise restructuring
(including without limitation, increasing the amount of the available borrowings
thereunder), in whole or in part, the debt under the Credit Agreement, whether
by the same or any other agent, lender or group of lenders, and (ii) any other
loan or credit agreement, promissory note or other related credit document which
by its terms states that it is "Senior Debt" of the Corporation for purposes of
these Articles and, so long as the Agent under Senior Debt Documents (without
giving effect to this subsection (ii)) consents to such other loan, credit
agreement, promissory note or other related credit document being treated as
"Senior Debt Documents" for purposes of these Articles.
(2) "CREDIT AGREEMENT" means the Credit Agreement dated on or about
October 27, 1997, among the Corporation (as successor in interest to PHC), the
Banks party thereto and Banque Paribas, as Agent.
(3) "CREDIT DOCUMENTS" shall have the meaning provided in the Credit
Agreement.
(4) "SENIOR DEBT" means and includes all obligations, liabilities and
indebtedness of the Corporation now or hereafter existing, whether fixed or
contingent, and whether for principal,
564314.5
-2-
premium, interest (including, without limitation, interest accruing after the
filing of a bankruptcy petition), fees, expenses, indemnification, reimbursement
obligations or otherwise, under the Senior Debt Documents.
(5) "SUBORDINATED DEBT" means and includes all obligations, liabilities
and indebtedness of the Corporation now or hereafter existing, whether fixed or
contingent, and whether for principal, premium, interest (including, without
limitation, interest accruing after the filing of a bankruptcy petition), fees,
expenses, indemnification, reimbursement obligations or otherwise, under the
Senior Subordinated Loan Agreement (herein so called) dated on or about October
27, 1997, among the Corporation (as successor in interest to PHC), Paribas
Capital Funding LLC and the lenders party thereto and otherwise under the
Subordinated Debt Documents.
(6) "SUBORDINATED DEBT DOCUMENTS" means (i) the Senior Subordinated Loan
Agreement as amended (including by any amendment and restatement), supplemented,
modified or extended from time to time, including each loan or credit agreement
and other related agreements extending the maturity of, replacing, refinancing,
refunding, or otherwise restructuring (including without limitation, increasing
the amount of the available borrowings thereunder), in whole or in part, the
debt under the Senior Subordinated Loan Agreement, whether by the same or any
other agent, lender or group of lenders, and (ii) any other loan or credit
agreement, promissory note or other related credit document which by its terms
states that it is "Subordinated Debt" of the Corporation for purposes of these
Articles and, so long as the Agent under the Subordinated Debt Documents
(without giving effect to this subsection (ii)) consents to such other loan,
credit agreement, promissory note or other related credit document being treated
as "Subordinated Debt Documents" for purposes of these Articles.
3. VOTING.
(a) In addition to the rights specified in subsection 3(b) and 6(f)
below and any other rights provided in the Corporation's By-laws or by law, each
share of Class A Preferred Stock shall entitle the holder thereof to a number of
votes equal to the number of shares of Common Stock into which such share is
then convertible, and such holders shall be entitled to vote with the holders of
Common Stock on all matters as to which holders of Common Stock shall be
entitled to vote.
(b) In addition to the rights specified above, the holders of the
Class A Preferred Stock then outstanding shall, as a class, have the right to
elect two directors to the Corporation's Board of Directors and from time to
time to remove, replace and re-elect such directors.
4. DIVIDENDS.
(a) The holder of each share of Class A Preferred Stock shall be
entitled to receive, when and as declared by the Board of Directors of the
Corporation, out of funds legally available for that purpose, dividends in cash
or stock or otherwise; PROVIDED, HOWEVER, that the per share amount of any
dividend for the Class A Preferred Stock in any fiscal year of the Corporation
shall be at least equal to the per share amount, if any, of any dividend
declared for the Common Stock during such fiscal year. In connection with any
dividend declared for the Common Stock, each share of Class
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A Preferred Stock shall be deemed to be converted into shares of Common Stock as
provided in Section 6 hereof. All dividends declared upon the Class A Preferred
Stock shall be declared PRO RATA per share.
(b) In addition to any dividends received pursuant to subsection (a)
above, the holder of each share of Class A Preferred Stock shall also be
entitled to receive out of funds legally available for that purpose, dividends
equal to 10.0% per annum of the consideration received by the Corporation for
the issuance of the Class A Preferred Stock by the Corporation (the "ORIGINAL
ISSUANCE PRICE").
The dividend shall begin accruing on December 31, 1996, with respect
to each share of Class A Preferred Stock issued prior to that date. Shares
issued after that date will accrue dividends from the purchase date. Until the
later to occur (the "CASH PAYMENT DATE") of (i) January 1, 2003 and (ii) the
date on which no Senior Debt and no Subordinated Debt remains outstanding,
dividends will be payable at the option of the Corporation either in cash or by
the issuance of additional shares of Class A Preferred Stock. For this purpose,
Class A Preferred Stock shall be valued at $15.00 per share and whole and
fractional shares may be issued to make such payments. After the Cash Payment
Date, all dividends due on the Class A Preferred Stock must be paid in cash.
For purposes of determining the amounts due to holders of Class A
Preferred Stock issued in payment of any dividend due on Class A Preferred
Stock, the Original Issue Price of Class A Preferred Stock issued in payment of
any such dividend shall be $15 per share. The date of purchase of such stock
shall be deemed to be the date to which the dividend obligation paid with the
issuance of such stock had accrued.
(c) Payments of dividends shall be made annually beginning in 1998
for the year 1997. Payments shall be made on any date but in no event later than
June 30th in any year following the year for which dividends are due.
(d) If the Corporation is prevented by law from paying any accrued
dividend when required by this subsection, the Corporation shall make payment of
the dividend as soon as such legal prohibition is removed. Accrued but unpaid
dividends will not bear interest.
5. LIQUIDATION.
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, or upon the sale of substantially
all of the assets of the Corporation or upon a merger of the Corporation in
which the Corporation is not the surviving entity (collectively, a "DISTRIBUTION
EVENT"), the assets of the Corporation available for distribution to its
shareholders, shall be distributed in the following order of priority:
(1) The holders of Class A Preferred Stock shall be entitled
to receive, prior and in preference to any distribution to the holders of
Common Stock, but pari passu with the holders of Class B Preferred Stock,
Class C Preferred Stock and Class D Preferred Stock in
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accordance with the relative liquidation preferences of Class A Preferred
Stock, Class B Preferred Stock, Class C Preferred Stock and Class D
Preferred Stock, an amount equal to the Original Issuance Price computed
on a per share basis compounded at rate of 12% per annum from December 31,
1996, for all shares issued prior to that date and from the date of
purchase for all shares issued after that date, multiplied by the number
of shares of Class A Preferred Stock then outstanding.
(2) The 12% compounded annual rate of return shall be in lieu
of, and not in addition to, the dividends paid or payable by the
Corporation as set forth in Section 4 hereof. In the event the Corporation
has paid dividends on the Class A Preferred Stock prior to the
Distribution Event, all such dividends previously paid shall be deemed a
partial prepayment of the 12% annual return contemplated in this
subsection (a), whether paid in cash or in Class A Preferred Stock.
(3) In lieu of the distribution set forth in subsection (1),
the holders of Class A Preferred Stock shall receive, if greater than the
distribution set forth in subsection (1), prior and in preference to any
distribution to the holders of the Common Stock, but pari passu with the
holders of Class B Preferred Stock, Class C Preferred Stock and Class D
Preferred Stock in accordance with the relative liquidation preferences of
Class A Preferred Stock, Class B Preferred Stock, Class C Preferred Stock
and Class D Preferred Stock, an amount equal to the sum of: (A) any
dividends declared or accrued but unpaid on the Class A Preferred Stock,
plus (B) the distribution they would be entitled to receive if the Class A
Preferred Stock had been converted into Common Stock pursuant to the terms
hereof immediately prior to the Distribution Event.
(b) If the assets and funds of the Corporation available for
distribution to the holders of Class A Preferred Stock shall be insufficient to
permit the payment of the full preferential amounts set forth in subsection (a)
hereof, then all of the assets of the Corporation available for distribution
shall be distributed to holders of Class A Preferred Stock pro rata, in the
proportion that the aggregate amount due each of them bears to the aggregate
amount due all of the them, but pari passu with the holders of Class B Preferred
Stock, Class C Preferred Stock and Class D Preferred Stock in accordance with
the relative liquidation preferences of Class A Preferred Stock, Class B
Preferred Stock, Class C Preferred Stock and Class D Preferred Stock.
6. CONVERSION.
Subject to the terms and conditions of this Section 6, the holder of any
share or shares of Class A Preferred Stock shall have the right, at its option
at any time prior to December 29, 2005 to convert any of such share or shares of
Class A Preferred Stock (except that upon any liquidation of the Corporation the
right of conversion shall terminate at the close of business on the last full
business day next preceding the date fixed for payment of the liquidation
payments) into such number of fully paid and nonassessable whole shares of
Common Stock as is obtained by multiplying the number of shares of Class A
Preferred Stock to be converted by $15 and dividing the result by the Class A
Conversion Price.
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The Class A Conversion Price for Class A Preferred Stock (the "CLASS A
CONVERSION PRICE") shall mean $0.81967 (the "UNDILUTED CONVERSION PRICE NUMBER")
or such other Class A Conversion Price as shall be determined pursuant to the
last adjustment made pursuant to subsection 6(d) below (as if such Class A
Conversion Price had been in effect at the date of issuance of the Class A
Preferred Stock) and in effect at the date any share or shares of Class A
Preferred Stock are surrendered for conversion; provided, however, that the
Undiluted Conversion Price Number shall increase to:
(i) $2.500000 in the event the Corporation achieves net
after-tax income, as determined by the Corporation's independent outside
accountants in accordance with generally accepted accounting principles
consistently applied ("NET AFTER-TAX INCOME"), of at least $6.0 million in its
fiscal year ending December 31, 1998 or any fiscal year ending before December
31, 1998;
(ii) $2.6086956 in the event the Corporation achieves Net
After-Tax Income of at least $70 million in its fiscal year ending December 31,
1998 or any fiscal year ending before December 31, 1998; or
(iii) $2.7272727 in the event the Corporation achieves Net
After-Tax Income of at least $80 million in its fiscal year ending December 31,
1998 or any fiscal year ending before December 31, 1998.
(a) EXERCISE OF CONVERSION RIGHTS. The rights of conversion herein
provided shall be exercised by any holder of shares of Class A Preferred Stock
by giving written notice that such holder elects to convert a stated number of
shares of Class A Preferred Stock into Common Stock as shall be stated in the
notice and by surrender of a certificate or certificates for the shares to be so
converted to the Corporation at its principal office (or such other office or
agency of the Corporation as the Corporation may designate by notice in writing
to the holder or holders of the Class A Preferred Stock) at any time during its
usual business hours on the date set forth in such notice, together with a
statement of the name or names (with address) in which the certificate or
certificates for shares of Common Stock shall be issued.
(b) ISSUANCE OF CERTIFICATES; TIME CONVERSION EFFECTED. Promptly
after the receipt of the written notice referred to in subsection 6(a) and
surrender of the certificate or certificates for the share or shares of the
Class A Preferred Stock to be converted, the Corporation shall issue and
deliver, or cause to be issued and delivered, to such holder, registered in such
name or names as such holder may direct, subject to compliance with applicable
laws (as evidenced by an opinion of counsel acceptable to the Corporation, if
the Corporation so requests) to the extent such designation shall involve a
transfer, a certificate or certificates for the number of whole shares of Common
Stock issuable upon the conversion of such share or shares of Class A Preferred
Stock.
To the extent permitted by law, such conversion shall be deemed to have
been effected and the Class A Conversion Price shall be determined as of the
close of business on the date on which such written notice shall have been
received by the Corporation and the certificate or certificates for such share
or shares shall have been surrendered as aforesaid (the "CONVERSION EFFECTIVE
DATE"), and at such time the rights of the holder of such share or shares of
Class A Preferred Stock shall cease,
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and the person or persons in whose name or names any certificate or certificates
for shares of Common Stock that shall be issuable upon such conversion shall be
deemed to have become the holder or holders of record of the shares represented
thereby.
(c) FRACTIONAL SHARES; DIVIDENDS; PARTIAL CONVERSION. No fractional
shares shall be issued upon conversion of the Class A Preferred Stock into
Common Stock and no payment or adjustment shall be made upon any conversion on
account of any cash dividends on the Common Stock issued upon such conversion.
At the time of each conversion, to the extent permitted by law, the Senior
Debt Documents and the Subordinated Debt Documents, the Corporation shall pay in
cash an amount equal to all unpaid dividends declared or accrued on the shares
surrendered for conversion to the date upon which such conversion is deemed to
take place as provided in subsection 6(b).
To the extent that the Corporation is either not permitted by law, the
Senior Debt Documents or the Subordinated Debt Documents to pay all or any
portion of such amount at the time of each conversion, it shall pay such unpaid
amount as soon as it may legally do so to the person who was entitled to receive
such amount at the time of such conversion. Accrued but unpaid dividends shall
be prorated and paid through the Conversion Effective Date.
In case the number of shares of Class A Preferred Stock represented by the
certificate or certificates surrendered pursuant to subsection 6(a) exceeds the
number of shares converted, the Corporation shall, upon such conversion, execute
and deliver to the holder thereof, at the expense of the Corporation, a new
certificate or certificates for the number of shares of Class A Preferred Stock
of the same series represented by the certificate or certificates surrendered
that are not to be converted.
If any fractional interest in a share of Common Stock would, except for
the provisions of the first sentence of this subsection 6(c), be deliverable
upon any such conversion, the Corporation, in lieu of delivering the fractional
share thereof, may pay to the holder surrendering the Class A Preferred Stock
for conversion an amount in cash equal to the current market price of such
fractional interest as determined in good faith by the Board of Directors of the
Corporation if such payment is permitted by the Senior Debt Documents and the
Subordinated Debt Documents.
(d) ADJUSTMENT OF PRICE UPON ISSUANCE OF COMMON SHARES. Except as
provided in subsection 6(g) hereof, if and whenever the Corporation shall issue
or sell, or is, in accordance with subsections 6(d)(1) through 6(d)(7), deemed
to have issued or sold any shares of its Common Stock for a consideration per
share less than the Class A Conversion Price in effect immediately prior to the
time of such issue or sale, then, forthwith upon such issue or sale, the Class A
Conversion Price shall be reduced to the price determined by dividing:
(i) an amount equal to the sum of (a) the number of shares of Common
Stock outstanding immediately prior to such issue or sale (including
as outstanding all shares of Common Stock issuable upon conversion
of outstanding Class A Preferred Stock) multiplied by the then
existing Class A Conversion Price, and (b) the consideration, if
any, received,
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or deemed to have been received pursuant to such subsection 6(d)(1)
through 6(d)(7), by the Corporation upon such issue or sale; by
(ii) the total number of shares of Common Stock outstanding, or deemed to
be outstanding, immediately after such issue or sale (including as
outstanding all shares of Common Stock issuable upon conversion of
outstanding Class A Preferred Stock).
No adjustment of the Class A Conversion Price, however, shall be made in an
amount less than $0.001 per share, and any such lesser adjustment shall be
carried forward and shall be made at the time and together with the next
subsequent adjustment which together with any adjustments so carried forward
shall amount to $0.001 per share or more.
For purposes of this subsection 6(d) the following subsections 6(d)(1) to
6(d)(7) shall also be applicable except to the extent the securities described
in subsections 6(d)(1) to 6(d)(7) are issued to holders of Class A Preferred
Stock as part of any redemption or conversion of Class A Preferred Stock:
(d) (1) ISSUANCE OF RIGHTS OR OPTIONS. In case at any time the
Corporation shall in any manner grant (whether directly or by assumption in a
merger or otherwise) any rights to subscribe for or to purchase, or any options
for the purchase of, Common Stock or any stock or securities convertible into or
exchangeable for Common Stock (such rights or options being herein called
"OPTIONS" and such convertible or exchangeable stock or securities being herein
called "CONVERTIBLE SECURITIES") whether or not such Options or the right to
convert or exchange such Convertible Securities are immediately exercisable, and
the price per share for which Common Stock is issuable upon the exercise of such
options or upon conversion or exchange of such Convertible Securities
(determined by dividing (i) the total amount, if any, received or receivable by
the Corporation as consideration for the granting of such Options, plus the
minimum aggregate amount of additional consideration payable to the Corporation
upon the exercise of all such Options, plus, in the case of such Options which
relate to Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable upon the issue or sale of such Convertible
Securities and upon the conversion or exchange thereof, by (ii) the total
maximum number of shares of Common Stock issuable upon the exercise of such
Options or upon the conversion or exchange of all such Convertible Securities
issuable upon the exercise of such Options) shall be less than the Class A
Conversion Price in effect immediately prior to the time of the granting of such
Options, then the total maximum number of shares of Common Stock issuable upon
the exercise of such Options or upon conversion or exchange of the total maximum
amount of such Convertible Securities issuable upon the exercise of such Options
shall be deemed to have been issued for such price per share as of the date of
granting of such Options and thereafter shall be deemed to be outstanding.
Except as otherwise provided in subsection 6(d)(3), no adjustment of the
Class A Conversion Price shall be made upon the actual issue of such Common
Stock or of such Convertible Securities upon exercise of such Options or upon
the actual issue of such Common Stock upon conversion or exchange of such
Convertible Securities.
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(d) (2) ISSUANCE OF CONVERTIBLE SECURITIES. In case the Corporation
shall in any manner issue (whether directly or by assumption in a merger or
otherwise) or sell any Convertible Securities, whether or not the rights to
exchange or convert thereunder are immediately exercisable and the price per
share for which Common Stock is issuable upon such conversion or exchange
(determined by dividing (i) the total amount received or receivable by the
Corporation as consideration for the issue or sale of such Convertible
Securities plus the minimum aggregate amount of additional consideration, if
any, payable to the Corporation upon the conversion or exchange thereof, by (ii)
the total maximum number of shares of Common Stock issuable upon the conversion
or exchange of all such Convertible Securities) shall be less than the Class A
Conversion Price in effect immediately prior to the time of such issue or sale,
then the total maximum number of shares of Common Stock issuable upon conversion
or exchange of all such Convertible Securities shall be deemed to have been
issued for such price per share as of the date of the issue or sale of such
Convertible Securities and thereafter shall be deemed to be outstanding,
provided that:
(i) except as otherwise provided in subsection 6(d)(3) below,
no adjustment of the Class A Convertible Price shall be made upon the
actual issue of such Common Stock upon conversion or exchange of such
Convertible Securities, and
(ii) if any such issue or sale of such Convertible Securities
is made upon exercise of any Option to purchase any such Convertible
Securities for which adjustments of the Class A Conversion Price have been
or are to be made pursuant to other provisions of this subsection 6(d), no
further adjustment of the Class A Conversion Price shall be made by reason
of such issue or sale.
(d)(3) CHANGE IN OPTION PRICE OR CONVERSION RATE. Upon the happening
of any of the following events, namely if the purchase price provided for in any
Option referred to in subsection 6(d)(1), the additional consideration, if any,
payable upon the conversion or exchange of any Convertible Securities referred
to in subsection 6(d)(1) or 6(d)(2), or the rate at which any Convertible
Securities referred to in subsection 6(d)(1) or 6(d)(2) are convertible into or
exchangeable for Common Stock shall change at any time (in each case other than
under or by reason of provisions designed to protect against dilution), the
Class A Conversion Price in effect at the time of such event shall forthwith be
readjusted to the Class A Conversion Price which would have been in effect at
such time had such Options or Convertible Securities still outstanding provided
for such changed purchase price, additional consideration or conversion rate, as
the case may be, at the time initially granted, issued or sold.
On the expiration of any such Option or the termination of any such right
to convert or exchange such Convertible Securities (without exercise,
conversion, or exchange), the Class A Conversion Price then in effect hereunder
shall forthwith be increased to the Class A Conversion Price which would have
been in effect at the time of such expiration or termination had such Option or
Convertible Securities, to the extent outstanding immediately prior to such
expiration or termination, never been issued, and the Common Stock issuable
thereunder shall no longer be deemed to be outstanding.
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If the purchase price provided for in any such Option referred to in
subsection 6(d)(1) or the rate at which any Convertible Securities referred to
in subsection 6(d)(1) or 6(d)(2) are convertible into or exchangeable for Common
Stock shall be reduced at any time under or by reason of provisions with respect
thereto designed to protect against dilution, then, in case of the delivery of
Common Stock upon the exercise of any such Option or upon conversion or exchange
of any such Convertible Securities, the Class A Conversion Price then in effect
hereunder shall forthwith be adjusted to such respective amount as would have
been obtained had such Option or Convertible Securities never been issued as to
such Common Stock and had adjustments been made upon the issuance of the shares
of Common Stock delivered as aforesaid, but only if as a result of such
adjustment the Class A Conversion Price then in effect hereunder is thereby
reduced.
(d) (4) STOCK DIVIDENDS. In case the Corporation shall declare a
dividend or make any other distribution upon any stock of the Corporation
payable in Common Stock, Options for Convertible Securities, any Common Stock,
Options or Convertible Securities, as the case may be, issuable in payment of
such dividend or distribution shall be deemed to have been issued or sold
without consideration except that a dividend or distribution of Class A
Preferred Stock to holders of Class A Preferred Stock shall be deemed to be an
issuance or sale for consideration equal to the number of shares of Class A
Preferred Stock paid as a dividend or distributed times $15 per share.
(d) (5) CONSIDERATION FOR STOCK. In case any shares of Common Stock,
Options or Convertible Securities shall be issued or sold for cash, the
consideration received therefor shall be deemed to be the amount received by the
Corporation therefor, without deduction therefrom of any expenses incurred or
any underwriting commissions or concessions paid or allowed by the Corporation
in connection therewith.
In case any shares of Common Stock, Options or Convertible Securities
shall be issued or sold for a consideration other than cash, the amount of the
consideration other than cash received by the Corporation shall be deemed to be
the fair value of such consideration as determined in good faith by the Board of
Directors of the Corporation, without deduction therefrom of any expenses
incurred or any underwriting commissions or concessions paid or allowed by the
Corporation in connection therewith.
The amount of consideration deemed to be received by the Corporation
pursuant to the foregoing provisions of this subsection 6(d)(5) upon any
issuance and/or sale of shares of Common Stock, Options or Convertible
Securities, pursuant to an established compensation plan of the Corporation, to
directors, officers or employees of the Corporation in connection with their
employment shall be increased by the amount of any tax benefit realized by the
Corporation as a result of such issuance and/or sale, the amount of such tax
benefit being the amount by which the federal and/or state income or other tax
liability of the Corporation shall be reduced by reason of any deduction or
credit in respect of such issuance and/or sale in the fiscal year of such
issuance and/or sale.
In case any Options shall be issued in connection with the issue and sale
of other securities of the Corporation, together comprising one integral
transaction in which no specific consideration
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is allocated to such Options by the parties thereto, such Options shall be
deemed to have been issued without consideration.
(d) (6) RECORD DATE. In case the Corporation shall take a record of
the holders of its Common Stock for the purpose of entitling them (i) to receive
a dividend or other distribution payable in Common Stock, Options or Convertible
Securities, or (ii) to subscribe for or purchase Common Stock, Options or
Convertible Securities, then such record date shall be deemed to be the date of
the issue or sale of the shares of Common Stock deemed to have been issued or
sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
(d) (7) TREASURY SHARES. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by or for
the account of the Corporation, and the disposition of any such shares shall be
considered an issue or sale of Common Stock for the purpose of this subsection
6(d).
(e) SUBDIVISION OR COMBINATION OF STOCK. In case the Corporation
shall at any time subdivide its outstanding shares of Common Stock into a
greater number of shares, the Class A Conversion Price in effect immediately
prior to such subdivision shall be proportionately reduced, and conversely, in
case the outstanding shares of Common Stock of the Corporation shall be combined
into a smaller number of shares, the Class A Conversion Price in effect
immediately prior to such combination shall be proportionately increased.
(f) REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE.
If any capital reorganization or reclassification of the capital stock of the
Corporation or any consolidation or merger of the Corporation with another
Corporation or the sale of all or substantially all of its assets to another
Corporation shall be effected in such a way (including, without limitation, by
way of consolidation or merger) that holders of Common Stock shall be entitled
to receive stock securities or assets with respect to or in exchange for Common
Stock, then, as a condition of such reorganization or reclassification, lawful
and adequate provisions (in form reasonably satisfactory to the holders of at
least 66-2/3% of the outstanding shares of Class A Preferred Stock) shall be
made whereby each holder of a share or shares of Class A Preferred Stock shall
thereafter have the right to receive, upon the basis and upon the terms and
conditions specified herein and in lieu of the shares of Common Stock of the
Corporation immediately theretofore receivable upon the conversion of such share
or shares of the Class A Preferred Stock such shares of stock, securities or
assets as may be issued or payable with respect to or in exchange for a number
of outstanding shares of such Common Stock equal to the number of shares of such
stock immediately theretofore so receivable had such reorganization or
reclassification not taken place.
In such case appropriate provision shall be made with respect to the
rights and interests of such holder to the end that the provisions hereof
(including without limitation provisions for adjustment of the Class A
Conversion Price) shall thereafter be applicable, as nearly as may be, in
relation to any shares of stock, securities or assets thereafter deliverable
upon the exercise of such conversion rights (including, if necessary to effect
the adjustments contemplated herein, an immediate adjustment, by reason of such
reorganization reclassification, of the Class A Conversion Price to the value
for
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the Common Stock reflected by the terms of such reorganization or
reclassification if the value so reflected is less than the respective Class A
Conversion Price or Prices in effect immediately prior to such reorganization or
reclassification).
In the event of a merger or consolidation of the Corporation as a result
of which a greater or lesser number of shares of Common Stock of the surviving
corporation are issuable to holders of Common Stock of the Corporation
outstanding immediately prior to such merger or consolidation, the Class A
Conversion Price in effect immediately prior to such merger or consolidation
shall be adjusted in the same manner as though there were a subdivision or
combination of the outstanding shares of Common Stock of the Corporation.
The Corporation will not effect any such consolidation or merger, or any
sale of all or substantially all of its assets and properties, unless prior to
the consummation thereof the successor corporation (if other than the
Corporation) resulting from such consolidation or merger, or the corporation
purchasing such assets, shall assume by written instrument (in form reasonably
satisfactory to the holders of at least 66-2/3% of the shares of Class A
Preferred Stock at the time outstanding) executed and mailed or delivered to
each holder of shares of Class A Preferred Stock at the last address of such
holder appearing on the book of the Corporation, the obligation to deliver to
such holder such shares of stock, securities or assets as, in accordance with
the foregoing provisions, such holder may be entitled to receive.
(g) TREATMENT OF CERTAIN ISSUES OF COMMON STOCK. Anything herein to
the contrary notwithstanding, the Corporation shall not be required to make any
adjustment of the Class A Conversion Price by reason of (i) any Common Stock
issued or sold (or deemed to have been issued or sold in accordance with
subsections 6(d)(1) through 6(d)(7) hereof) prior to December 29, 1995; (ii) any
Common Stock issued or sold after such date as the result of the exercise of any
Option or the conversion of any Convertible Security (including Class A
Preferred Stock) issued prior to such date; (iii) any warrants granted in
connection with the Stock and Warrant Purchase Agreement (the "STOCK AND WARRANT
PURCHASE AGREEMENT") dated December 29, 1995 between the Corporation (as
successor in interest to Physician Health Corporation ("PHC")); (iv) the
issuance or exercise of incentive stock options or other stock options covering
Common Stock of the Corporation pursuant to a plan adopted by the Board of
Directors of the Corporation on or before December 29, 1995, which provides for
the issuance of options to employees and consultants of the Corporation only,
and which allows for the issuance of options covering not more than 1,414,000
shares of Common Stock; (v) the issuance of any shares of Common Stock upon
exercise of the options described in subsection (iv) above; (vi) any issuance of
Options, Convertible Securities, Common Stock or other securities of the
Corporation which have, in advance of grant or issuance, been approved by the
Board of Directors of the Corporation and consented to in writing by EGL
Holdings, Inc., or the successor in interest of EGL Holdings, Inc. ("EGL"); or
(vii) the issuance of 626,000 shares of Common Stock (or a lesser number of
shares of Common Stock, coupled with Common Stock warrants, which, when
exercised, will total 626,000 shares of the Corporation's Common Stock, when
added to the Common Stock originally issued), to be issued to ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇
or an entity controlled by ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇, for cash consideration of not less
than $720,000.
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Consent or a vote of approval as a director by any member of the Board of
Directors nominated or elected by EGL or the holders of the Class A Preferred
Stock Series 1 shall not constitute the consent required in subsection (vi)
above.
(h) AUTOMATIC CONVERSION. In the event that at any time while any of
the Class A Preferred Stock shall be outstanding, the Corporation shall complete
a firm commitment underwritten public offering involving the sale by the
Corporation of shares of Common Stock with minimum net proceeds to the
Corporation (after deducting underwriting discount and offering expenses) of
$20,000,000, then all outstanding shares of the Class A Preferred Stock shall,
automatically and without further action on the part of the holders of the Class
A Preferred Stock, be converted into shares of Common Stock in accordance with
the terms of this subsection 6 with the same effect as if the certificates
evidencing such shares had been surrendered for conversion, such conversion to
be effected simultaneously with the closing of such underwritten public
offering, provided, however, that certificates evidencing the shares of Common
Stock issuable upon such conversion shall not be issued except on surrender of
the certificates for the shares of Class A Preferred Stock so converted.
(i) NOTICE OF ADJUSTMENT. Upon any adjustment of the Class A
Conversion Price, the Corporation shall give written notice thereof, by first
class mail, postage prepaid, addressed to each holder of shares of Class A
Preferred Stock at the address of such holder as shown on the books of the
Corporation, which notice shall state the Class A Conversion Price resulting
from such adjustment, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
(j) NOTICES. In case at any time
(1) the Corporation shall declare any dividend upon its Common
Stock payable in cash or stock or make any other distribution to the
holders of its Common Stock;
(2) the Corporation shall offer for subscription PRO RATA to
the holders of its Common Stock any additional shares of stock of any
class or other rights;
(3) there shall be any capital reorganization or
reclassification of the capital stock of the Corporation, or consolidation
or merger of the Corporation with, or a sale of all or substantially all
its assets to another Corporation;
(4) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Corporation; or
(5) the Corporation shall take any action or there shall be
any event which would result in an automatic conversion of the Class A
Preferred Stock pursuant to subsection 6(h);
then, in any one or more of said cases, the Corporation shall give, by first
class mail, postage prepaid, return receipt requested, addressed to each holder
of any shares of Class A Preferred Stock at the address of such holder as shown
on the books of the Corporation:
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(a) at least 20 days' prior written notice of the date on
which the books of the Corporation shall close or a record shall be taken
for such dividend, distribution or subscription rights or for determining
rights to vote in respect of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up;
(b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, at
least 20 days' prior written notice of the date when the same shall take
place; and
(c) in the case of any event which would result in an
automatic conversion of the Class A Preferred Stock pursuant to subsection
6(h), at least 20 days' prior written notice of the date on which the same
is expected to be completed.
Such notice in accordance with the foregoing subsection (a) shall also specify,
in the case of such dividend, distribution or subscription rights, the date on
which the holders of Common Stock shall be entitled thereto, and such notice in
accordance with the foregoing subsection (b) shall also specify the date on
which the holders of Common Stock shall be entitled to exchange their Common
Stock for securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, as the case may be.
(k) STOCK TO BE RESERVED. The Corporation will at all times reserve
and keep available out of its authorized Common Stock, solely for the purpose of
issue upon the conversion of the Class A Preferred Stock as herein provided,
such number of shares of Common Stock as shall be issuable upon the conversion
of all outstanding shares of Class A Preferred Stock.
The Corporation covenants that all shares of Common Stock which shall be
so issued upon any such conversion shall be duly and validly issued and fully
paid and nonassessable and free from all taxes, liens and charges arising out of
or by reason of the issue thereof. The Corporation will take all such action as
may be necessary on its part to assure that all such shares of Common Stock may
be so issued without violation of any applicable law or regulation, or of any
requirements of any national securities exchange upon which the Common Stock of
the Corporation may be listed.
The Corporation will not take any action which would cause the total
number of shares of Common Stock issued and issuable after such action upon
conversion of the Class A Preferred Stock to exceed the total number of shares
of Common Stock then authorized by these Articles of Incorporation.
(l) NO REISSUANCE OF CLASS A PREFERRED STOCK. Shares of Class A
Preferred Stock which are converted into shares of Common Stock as provided
herein shall not be reissued.
(m) ISSUE TAX. The issuance of certificates for shares of Common
Stock upon conversion of the Class A Preferred Stock shall be made without
charge to the holders thereof for any issuance tax in respect thereof, provided
that the Corporation shall not be required to pay any tax which may be payable
in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than of the holder of the Class A Preferred Stock
which is being converted.
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(n) CLOSING OF BOOKS. The Corporation will at no time close its
transfer books against the transfer of any Class A Preferred Stock or of any
shares of Common Stock issued or issuable upon the conversion of any shares of
Class A Preferred Stock in any manner which interferes with the timely
conversion of such Class A Preferred Stock.
(o) DEFINITION OF COMMON STOCK. As used in this Section 6, the term
"COMMON STOCK" shall mean and include the Corporation's authorized Common Stock,
$.0025 par value per share, as constituted on the effective date of these
Articles of Incorporation, and shall also include any capital stock or any class
of the Corporation thereafter authorized which shall not be limited to a fixed
sum or percentage of par value in respect of the rights of the holders thereof
to participate in dividends or in the distribution of assets upon the voluntary
or involuntary liquidation, dissolution or winding up of the Corporation;
PROVIDED that the shares of Common Stock receivable upon conversion of shares of
the Class A Preferred Stock of the Corporation, or in case of any reorganization
or reclassification of the outstanding shares thereof, the stock, securities or
assets provided for in subsection 6(f) shall include only shares designated as
Common Stock of the Corporation on the effective date of these Articles of
Incorporation, and PROVIDED FURTHER, that Class A Preferred Stock shall be
deemed to be "COMMON STOCK" for the purposes of this Section 6(o).
7. REDEMPTION.
(a) (i) At any time on or after the Cash Payment Date (as defined in
subsection 4(b) above), the Corporation shall (unless otherwise prevented by
law) at the written request of any of the holder(s) redeem the shares of Class A
Preferred Stock then owned by such holder(s) of Class A Preferred Stock and
submitted for redemption.
The amount per share of Class A Preferred Stock at which the shares of
Class A Preferred Stock are to be redeemed pursuant to this subsection 7(a)(i)
shall be an amount equal to the GREATER OF (i) the Original Issuance Price plus
any declared or accrued but unpaid dividends on the Class A Preferred Stock
which is so redeemed; or (ii) the Fair Market Value of the Class A Preferred
Stock which is so redeemed (the "REDEMPTION PRICE").
The Redemption Price of the Class A Preferred Stock which is redeemed
shall be paid in eight equal quarterly installments beginning on the first March
31, June 30, September 30 or December 31 to occur after the Corporation receives
written notice from a holder electing to redeem any or all of the Class A
Preferred Stock then owned by such holder (the "REDEMPTION DATE"); provided,
however, that if the Redemption Price is determined pursuant to subpart (i) of
the preceding sentence, the accrued but unpaid dividends on the Class A
Preferred Stock which is so redeemed shall be paid in full with the first
installment payment of the Redemption Price.
For this purpose, "FAIR MARKET VALUE" shall mean an amount agreed to by
the Corporation and the holder(s) of the Class A Preferred Stock being redeemed,
or in the event that the Corporation and the holder(s) of the Class A Preferred
Stock being redeemed cannot agree upon an amount, an amount equal to the Fair
Market Value of the Class A Preferred Stock, without any discount for minority
position, as determined by an appraiser who shall be associated with a
nationally-recognized accounting or investment banking firm, or who shall have
no less than five (5) years of experience
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in the appraisal of businesses such as the Corporation's business, who shall be
selected by the independent certified public accountants that are regularly
employed by the Corporation to audit its books and records.
(ii) At any time on or after the Cash Payment Date (as defined
in subsection 4(b) above) and either (A) the sale of 20% or more of the
outstanding shares of capital stock of the Corporation by the Principals
(identified below in subsection 7(a)(iii)) or (B) the occurrence of an Event of
Default (defined in subsection 7(a)(iii) below), the Corporation shall (unless
otherwise prevented by law) at the written request of any of the holder(s)
thereof, redeem the shares of Class A Preferred Stock then owned by such holders
of Class A Preferred Stock and submitted for redemption for an amount per share
of Class A Preferred Stock determined in the manner provided in subsection
7(a)(i) above. The redemption price so determined shall be paid in full upon
submission by the holder of written notice of election to redeem and delivery of
the certificate for the shares of Class A Preferred Stock to be so redeemed.
(iii) An Event of Default for purposes of subsection 7(a)(ii)
shall be and include:
(A) the occurrence of any "materially adverse"
misrepresentation or default or breach of warranty or covenant by the
Corporation or the Principals under the Stock and Warrant Purchase
Agreement, the Class A stockholders and certain management level employees
of the Corporation identified therein as the "Principals";
(B) the acceleration of any indebtedness of the
Corporation which exceeds, in the aggregate, Five Hundred Thousand Dollars
($500,000); or
(C) (1) the filing of any petition, whether voluntary or
involuntary, seeking the reorganization or liquidation of the Corporation
under any provision of the Federal Bankruptcy Code or any other federal or
state reorganization, insolvency or debtor relief law, (2) the appointment
of any receiver, liquidator or trustee for the Corporation or any of its
properties by a court order and which appointment is not vacated within 30
days, or (3) the Corporation is adjudicated insolvent, or the Corporation
shall make an assignment for the benefit of any of its creditors, admit in
writing an inability to pay debts when they become due in the ordinary
course of its business, or consent to the appointment of a receiver,
trustee or liquidator for the Corporation or all or any part of the
property of the Corporation; or
(D) the occurrence of any "Remedy Event" as defined in
Section C of this Article IV.
Notwithstanding the foregoing, an Event of Default shall not include the
failure of any Principal to fulfill his or her obligations under Section 4.1 of
the Stock and Warrant Purchase Agreement except for any violation by ▇▇▇▇▇ ▇.
▇▇▇▇▇▇ of the noncompete covenant contained in Section 4.1 of the Stock and
Warrant Purchase Agreement which expressly shall be considered an Event of
Default.
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As used in this subsection 7(a)(iii), "materially adverse" shall mean a
single or combination of misrepresentations or defaults or breaches of warranty
or covenant that result in a loss or damage to the Corporation or the holders of
the Class A Preferred Stock, and which is or are not cured within 30 days after
notice and opportunity to cure, equal to or in excess of $700,000.
(b) Until the entire redemption price for the shares of Class A
Preferred Stock, which have been submitted for redemption has been paid in full
pursuant to this Section 7, the holder of the Class A Preferred Stock which has
been submitted for redemption shall retain possession of and all rights
attendant to the shares of Class A Preferred Stock including the right to vote
submitted shares on all matters. Shares submitted for redemption shall be deemed
redeemed only after payment of the full redemption price. Shares converted
pursuant to subsection 6 prior to payment of the full redemption price may be
converted only after repayment to the Corporation of the amount of the Original
Issuance Price paid by the Corporation to the holder pursuant to Section 7(a)
above prior to conversion.
(c) If the Corporation is prevented by law from redeeming any Class
A Preferred Stock when required by this Section 7, the Corporation shall offer
to redeem so many of the shares of the Class A Preferred Stock PRO RATA among
its holders as it is able and shall notify the holders of the Class A Preferred
Stock when and as such legal prohibition is removed.
SECTION C. CLASS B PREFERRED STOCK.
1. DESIGNATION AND AMOUNT. The Corporation shall have authority to issue
6,000,000 shares of Class B Redeemable Convertible Preferred Stock (the "CLASS B
PREFERRED STOCK"), subject to increase (but only as to shares of Preferred Stock
authorized by these Articles of Incorporation with respect to which the powers,
designations, preferences and rights shall not then have been previously
designated) or decrease (but not below the number of shares thereof then
outstanding) from time to time by action of the Board of Directors.
[con
The Class B Preferred Stock has been issued pursuant to an amended and
restated Securities Purchase Agreement dated as of June 26, 1998 among the
Corporation (as successor in interest to PHC), Weston Presidio Capital II, L.P.
and certain other investors (as in effect from time to time, the "WESTON
PRESIDIO PURCHASE AGREEMENT"), as well as a Securities Purchase Agreement dated
as of October 31, 1997 between the Corporation (as successor in interest to PHC)
and Paribas Principal Incorporated (as in effect from time to time, the "PARIBAS
PURCHASE AGREEMENT," and, together with the Weston Presidio Purchase Agreement,
the "PURCHASE AGREEMENTS"), and the Warrant, Preferred Stock and Assets
Commitment dated as of April 27, 1998 among the Corporation (as successor in
interest to PHC), Medical Industries of America, Inc. and certain investors, as
in effect from time to time. A copy of the Purchase Agreements will be provided
to any registered holder of shares of capital stock of the Corporation following
written request directed to the Secretary of the Corporation at its registered
address.
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The relative powers, preferences and rights, and relative participating,
optional or other special rights, and the qualifications, limitations or
restrictions thereof, granted to or imposed on the Class B Preferred Stock are
set forth below:
2. DEFINED TERMS. Certain capitalized terms are used in this Section C of
Article IV as specifically defined below in this Section 2. Except as the
context otherwise explicitly requires, (a) the capitalized term "Section" refers
to sections of this Section C of Article IV, (b) references to a particular
Section include all subsections thereof, (c) the word "including" shall be
construed as "including without limitation", (d) accounting terms not otherwise
defined herein have the meaning provided under generally accepted accounting
principles, (e) references to a particular statute or regulation include all
rules and regulations thereunder and any successor statute, regulation or rules,
in each case as from time to time in effect and (f) references to a particular
Person include such Person's successors and assigns to the extent not prohibited
by these Articles of Incorporation and the Purchase Agreements.
(1) "ACCEPTED SHARES" is defined in Section 10(b).
(2) "ACCRUAL YEAR" means the 12-month period commencing on the Original
Issue Date and each 12-month period thereafter.
(3) "ADDITIONAL SHARES OF COMMON STOCK" is defined in Section 6(e)(1).
(4) "AFFILIATE" is defined in Section 6(d)(1).
(5) "BY-LAWS" means all written rules, regulations, procedures, by-laws
and all other similar documents relating to the management, governance or
internal regulation of a Person other than an individual, or interpretive of the
Articles of Incorporation or other charter documents of such Person, each as
from time to time amended or modified.
(6) "CASH PAYMENT DATE" is defined in Section 4(c).
(7) "CLASS A PREFERRED STOCK" means the Class A Preferred Stock, $0.01 par
value, of the Corporation.
(8) "CLASS B PREFERRED STOCK" is defined in Section 1.
(9) "CLASS C PREFERRED STOCK" means the Class C Redeemable Convertible
Preferred Stock of the Corporation, $0.01 par value per share.
(10) "CONVERSION PRICE" is defined in Section 6(a).
(11) "CONVERSION WARRANTS" is defined in Section 7(b).
(12) "CONVERTIBLE SECURITIES" is defined in Section 6(e)(1).
564314.5
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(13) "DISTRIBUTION EVENT" is defined in Section 5.
(14) "FUTURE SHARES" is defined in Section 10(a).
(15) "FUTURE SHARES EXERCISE PERIOD" is defined in Section 10(a).
(16) "INDEBTEDNESS" means (a) all debt for borrowed money and similar
monetary obligations evidenced by bonds, notes, debentures, capitalized lease
obligations, deferred purchase price of property (other than ordinary trade
payables) or otherwise, whether direct or indirect; and (b) all liabilities
secured by any Liens existing on property owned or acquired, whether or not the
liability secured thereby shall have been assumed.
(17) "INVESTOR AGREEMENTS" is defined in the Purchase Agreements,
respectively.
(18) "LIQUIDITY EVENT" means any of the following transactions so long as
the aggregate net cash proceeds (or market value of freely tradable marketable
securities with a market float reasonably satisfactory to the Required Holders)
to the Corporation and its stockholders as a result of such transaction are at
least $20,000,000:
(i) an underwritten public offering of Common Stock registered under
the federal Securities Act of 1933; or
(ii) the sale of all or substantially all the assets or stock of the
Corporation; or
(iii) a merger or consolidation of the Corporation described in
Section 7(b)(2).
(19) "LIQUIDITY SHARE PRICE" means, with respect to any Liquidity Event,
the weighted average price per share paid for (or properly allocable to) Common
Stock, $0.0025 par value, on a fully diluted basis (giving effect to the
exercise of all outstanding options, warrants, conversion rights and rights to
acquire shares). For purposes of these calculations, shares of Class A Preferred
Stock, Class B Preferred Stock and Class C Preferred Stock (and any other shares
of the Corporation's stock having a liquidation preference over the Common
Stock) shall be deemed to have been converted into Common Stock immediately
prior to such Liquidity Event.
(20) "NOTICE OF PURCHASE" is defined in Section 10(b).
(21) "OFFEREE" is defined in Section 10(a).
(22) "OPTIONS" is defined in Section 6(e)(1).
(23) "ORGANIC CHANGE" is defined in Section 7(b).
(24) "ORIGINAL ISSUE DATE" is defined in Section 6(e)(1).
(25) "PARIBAS PURCHASE AGREEMENT" is defined in Section 1.
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(26) "PCF WARRANT AGREEMENT" means the Warrant Agreement dated as of
October 31, 1997 between the Corporation (as successor in interest to PHC) and
Paribas Capital Funding LLC.
(27) "PERSON" means an individual, partnership, corporation, company,
association, trust, joint venture, unincorporated organization, business trust,
limited liability company and any governmental department or agency or political
subdivision.
(28) "PREFERENTIAL AMOUNT" is defined in Section 5.
(29) "PREFERRED DIRECTOR" is defined in Section 3(c).
(30) "PREFERRED STOCK" is defined in Section 1.
(31) "PROPORTIONATE PERCENTAGE" is defined in Section 10(a).
(32) "PROPORTIONATE VOTING SHARE" means, with respect to a particular
class of stock, a fraction (a) the numerator of which is the number of shares of
Common Stock into which such class of stock may be converted and (b) the
denominator of which is the aggregate number of shares of Common Stock on a
fully diluted basis (giving effect to the exercise of all then exercisable
conversion, purchase or exercise rights).
(33) "PROPOSAL" is defined in Section 10(a).
(34) "PURCHASE AGREEMENTS" is defined in Section 10(a).
(35) "REMEDY EVENT" is defined in Section 8.
(36) "REMEDY NOTICE" is defined in Section 3(b)(2).
(37) "REQUIRED HOLDERS" means the holders of two-thirds of the outstanding
Class B Preferred Stock.
(38) "SBA HOLDER" means any holder of Class B Preferred Stock that is
subject to the Small Business Investment Act of 1958, as amended, and the rules
and regulations thereunder.
(39) "SBA DIVIDEND" is defined in Section 4(b)(1).
(40) "SBA DIVIDEND PAYMENT DATE" is defined in Section 4(b)(1).
(41) "SECTION 4(B)(2) DIVIDEND" is defined in Section 4(b)(1).
(42) "SENIOR DEBT DOCUMENTS" means the Credit Agreement dated as of
October 31, 1997 among the Corporation (as successor in interest to PHC), the
financial institutions party thereto from time to time and Banque Paribas, as
Agent, as well as the other Credit Documents, as defined therein, in each case
as amended (including by any amendment or restatement), supplemented, modified
or
564314.5
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extended from time to time including each loan or credit agreement and other
related agreements extending the maturity of, replacing, refinancing, refunding,
or otherwise restructuring (including, without limitation, increasing the amount
of the available borrowings thereunder), in whole or in part, the debt under the
Credit Agreement, whether by the same or any other agent, lender or group of
lenders.
(43) "SUBORDINATED DEBT DOCUMENTS" means the Subordinated Loan Agreement,
as well as the other Loan Documents, as defined therein, in each case as amended
(including by any amendment or restatement), supplemented, modified or extended
from time to time including each loan or credit agreement and other related
agreements extending the maturity of, replacing, refinancing, refunding or
otherwise restructuring (including, without limitation, increasing the available
borrowings thereunder), in whole or in part, the debt under the Senior
Subordinated Loan Agreement, whether by the same or any other lender or group of
lenders.
(44) "SUBORDINATED LOAN AGREEMENT" means the Senior Subordinated Loan
Agreement dated as of October 31, 1997, among the Corporation (as successor in
interest to PHC), PHC Holding Corporation, the lenders party thereto and Paribas
Capital Funding LLC, as amended, supplemented or refinanced from time to time..
(45) "COMMON STOCK" means the Common Stock, $0.0025 par value, of the
Corporation.
(46) "WESTON PRESIDIO PURCHASE AGREEMENT" is defined in Section 1.
3. VOTING RIGHTS.
(a) CLASS B PREFERRED STOCK VOTES PER SHARE; NOTICES. Except as
otherwise provided herein (including the election of Preferred Directors
pursuant to Section 3(b)(1) and a majority of the members of the Corporation's
Board of Directors pursuant to Section 3(b)(2)) or required by law, the holders
of Class B Preferred Stock shall vote as a single class with the holders of
Common Stock and shall have such votes in respect of each share of Class B
Preferred Stock on any matter submitted to the holders of Common Stock as the
number of shares of Common Stock into which shares of Class B Preferred Stock
may then be converted. Record holders of Class B Preferred Stock shall be
entitled to notice of any stockholders' meeting or solicitation of stockholders'
consents in the manner provided in the Bylaws of the Corporation for general
notices.
(b) PREFERRED DIRECTORS.
(1) REPRESENTATIVE DIRECTOR. In addition to the rights set
forth in Section 3(b)(2), the holders of a majority of the shares of Class
B Preferred Stock and Class C Preferred Stock, voting together as a
single, separate class, shall be entitled to elect one director. Except as
provided in Section 3(b)(2), the number of directors of the Corporation
shall not exceed nine.
(2) MAJORITY DIRECTORS.
564314.5
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(i) In the event that any Remedy Event shall occur,
then, upon notice to the Corporation given by the holders of
two-thirds of the outstanding Class A Preferred Stock, Class B
Preferred Stock, Class C Preferred Stock and Class D Preferred
Stock, taken together as a single class (a "REMEDY NOTICE"), the
number of directors shall be increased as provided in Section
3(b)(2)(ii) and the holders of Class A Preferred Stock, Class B
Preferred Stock, Class C Preferred Stock and Class D Preferred
Stock, voting together as a single, separate class, weighted among
the Class A Preferred Stock, the Class B Preferred Stock, the Class
C Preferred Stock and the Class D Preferred Stock according to their
respective Proportionate Voting Shares, shall become entitled to
elect a majority of the Board of Directors of the Corporation until
any such Remedy Event shall have been rectified or cured to the
written satisfaction of the holders of two-thirds of the outstanding
Class A Preferred Stock, Class B Preferred Stock, Class C Preferred
Stock and Class D Preferred Stock, taken together as a single class,
whereupon such right of the holders of the Class B Preferred Stock
to elect a majority of the Board of Directors of the Corporation
(together with holders of Class A Preferred Stock, Class C Preferred
Stock, and Class D Preferred Stock to the extent provided above)
shall cease, and the maximum number of directors shall be reduced to
the number in effect immediately prior to such Remedy Notice,
subject to being again revived from time to time upon the
reoccurrence of the conditions above described.
(ii) Immediately upon receipt by the Corporation of a
Remedy Notice pursuant to Section 3(b)(2)(i) above, the number of
directors of the Corporation shall automatically be increased to the
minimum number sufficient to permit the election of additional
directors so that after such election a majority of directors will
have been elected by the holders of the Class B Preferred Stock
(together with holders of Class A Preferred Stock, Class C Preferred
Stock and Class D Preferred Stock to the extent provided above).
Upon such increase, the directors of the Corporation shall thereupon
be divided into classes. One class shall consist of a number of
directors equal to a majority of all the directors and shall be
elected solely by the holders of Class B Preferred Stock (together
with holders of Class A Preferred Stock, Class C Preferred Stock and
Class D Preferred Stock to the extent provided above), voting
separately as a single class, and the other class shall consist of
the remaining directors and shall be elected by the holders of the
capital stock of the Corporation entitled to vote generally in the
election of directors. Subject to Section 8, any director then in
office who was elected pursuant to Section 3(b)(1) shall
automatically become a member of the class of directors elected
solely by the holders of Class B Preferred Stock (together with
holders of Class A Preferred Stock, Class C Preferred Stock and
Class D Preferred Stock to the extent provided above).
(c) TENURE. Each Director elected by the holders of Class B
Preferred Stock and Class C Preferred Stock pursuant to Section 3(b) (a
"PREFERRED DIRECTOR") shall serve for a term of the lesser of (a) one year and
until such Preferred Director's successor is elected and qualified, or (b) until
the right to elect such Preferred Director ceases (at which time such Preferred
Director will be deemed to be removed). So long as the holders of Class B
Preferred Stock and Class C Preferred
564314.5
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Stock are entitled to elect a Preferred Director, any vacancy in the position of
a Preferred Director may be filled only by vote of the holders of a majority of
the shares of Class B Preferred Stock and Class C Preferred Stock entitled to
vote thereon (together with holders of Class A Preferred Stock to the extent
provided above). A Preferred Director may, during such Preferred Director's term
of office, be removed at any time, with or without cause, only by the
affirmative vote of the holders of record of a majority of the outstanding
shares of Class B Preferred Stock and Class C Preferred Stock (together with
holders of Class A Preferred Stock to the extent provided above).
4. DIVIDENDS.
(a) COMMON STOCK DIVIDENDS. No dividends of cash or other property
(other than additional shares of Common Stock) shall be paid on the Common Stock
unless the shares of Class B Preferred Stock which are not subject to a
Securities Escrow (as defined in the respective Purchase Agreements) at the time
of payment of such dividend receive the same dividends that such shares would
have received had they been converted into Common Stock immediately prior to the
record date for such dividend.
(b) PREFERRED DIVIDENDS.
(1) SBA HOLDERS DIVIDENDS. In addition to the dividends
contemplated by Section 4(a), each SBA Holder holding shares of Class B
Preferred Stock shall be entitled to receive cash dividends on each share
of Class B Preferred Stock held by such SBA Holder, which dividends shall
accrue daily and compound quarterly at a rate of 14% per annum on a deemed
value of $4.00 per share of Class B Preferred Stock (the "SBA DIVIDEND").
The Corporation shall declare and pay the SBA Dividend on the last day of
December, March, June and September of each year (each a "SBA DIVIDEND
PAYMENT DATE"); PROVIDED, HOWEVER, that in the event the Corporation shall
not declare and pay the SBA Dividend on any SBA Dividend Payment Date,
each SBA Holder shall be entitled to receive the dividend set forth in
Section 4(b)(2) (the "SECTION 4(B)(2) DIVIDEND") on the terms and
conditions set forth in Section 4(b)(2), as if the Section 4(b)(2)
Dividend had accrued, with respect to the shares of Class B Preferred
Stock held by each SBA Holder, for the entire quarterly period ending on
such SBA Dividend Payment Date, and each SBA Holder shall continue to be
entitled to receive the Section 4(b)(2) Dividend until the Section 4(b)(2)
Dividend has been paid in accordance with Section 4(b)(2). The rights to
receive the Section 4(b)(2) Dividend as stated in the immediately
preceding sentence shall be the sole and exclusive remedy of each SBA
Holder with respect to the failure of the Corporation to pay any SBA
Dividend on any SBA Dividend Payment Date.
(2) CLASS B PREFERRED STOCK. In addition to the dividends
contemplated by Section 4(a), during each Accrual Year, each holder of
Class B Preferred Stock (other than those shares of Class B Preferred
Stock held by SBA Holders, except in the circumstances set forth in
Section 4(b)(1)) shall be entitled to receive, when and as declared by the
Board of Directors of the Corporation out of funds legally available
therefor, an annual dividend payable on the last day of such Accrual Year
with respect to each share of Class B Preferred Stock held by such holder
in an amount equal to 20% of the sum of (a) $4 PLUS (b) the amount
564314.5
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of all cumulated and unpaid dividends (if any) in respect of such share of
Class B Preferred Stock, which dividend (i) shall be payable in preference
and priority to any payment of any dividend with respect to the Common
Stock, (ii) shall accrue daily (whether or not declared or funds are
legally available therefor), and (iii) to the extent not paid, shall
cumulate (and thereby compound) annually on the last day of each Accrual
Year. If the purchase price for a share of Class B Preferred Stock is
released from a Purchase Price Escrow (as defined in the respective
Purchase Agreements), or a share of Class B Preferred Stock is purchased
pursuant to the Paribas Purchase Agreement, on a date after the Original
Issue Date, then the annual dividend payable pursuant to this Section
4(b)(2) in respect of such share for the Accrual Year in which such share
is released or purchased, as the case may be, shall be prorated
accordingly (on the basis of a 365 day year). Accrued and unpaid dividends
(if any) payable under this Section 4(b)(2) shall terminate and be
canceled, forgiven and extinguished in the event a Liquidity Event is
consummated on the following terms:
(A) prior to May 1, 2000 at a Liquidity Share Price
exceeding $8.00; or
(B) after April 30, 2000 and prior to May 1, 2001 at a
Liquidity Share Price exceeding $10.00; or
(C) after April 30, 2001 and prior to May 1, 2002 at a
Liquidity Share Price exceeding $12.50.
All amounts in Section 4(b) shall be appropriately adjusted for any stock
dividends, stock splits, recapitalizations or other similar changes in the
outstanding shares of Common Stock after the Original Issue Date.
(c) SPECIAL CONTINGENT DIVIDENDS. In addition to the dividend
contemplated by Sections 4(a) and in lieu of the dividends contemplated in
Section 4(b), upon the consummation of any Liquidity Event described below, the
Corporation shall, after all Indebtedness under the Senior Debt Documents and
the Subordinated Debt Documents has been repaid in full in cash or at any time
when such payment is otherwise permitted by the Senior Debt Documents and the
Subordinated Debt Documents (the "CASH PAYMENT DATE"), pay dividends on each
share of Class B Preferred Stock as follows (except with respect to any share of
Class B Preferred Stock for which the holder has elected mandatory redemption
under Section 7(b)):
(1) If the Liquidity Event occurs prior to May 1, 1998 at a
Liquidity Share Price less than $7.00, upon consummation of such Liquidity Event
the Corporation shall pay a dividend on each share of Class B Preferred Stock
outstanding immediately prior to such Liquidity Event in an amount equal to the
product of (i) the number of shares of Common Stock into which such share of
Class B Preferred Stock would then be convertible MULTIPLIED BY (ii) the excess
of $7.00 over such Liquidity Share Price.
(2) If the Liquidity Event occurs after April 30, 1998 and
prior to May 1, 2000 at a Liquidity Share Price less than $8.00, upon
consummation of such Liquidity Event the Corporation shall pay a dividend on
each share of Class B Preferred Stock outstanding immediately
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prior to such Liquidity Event in an amount equal to the product of (i) the
number of shares of Common Stock into which such share of Class B Preferred
Stock would then be convertible MULTIPLIED BY (ii) the excess of $8.00 over such
Liquidity Share Price.
(3) If the Liquidity Event occurs after April 30, 2000 and
prior to May 1, 2001 at a Liquidity Share Price less than $10.00, upon
consummation of such Liquidity Event the Corporation shall pay a dividend on
each share of Class B Preferred Stock outstanding immediately prior to such
Liquidity Event in an amount equal to the product of (i) the number of shares of
Common Stock into which such share of Class B Preferred Stock would then be
convertible MULTIPLIED BY (ii) the excess of $10.00 over such Liquidity Share
Price.
(4) If the Liquidity Event occurs after April 30, 2001 and
prior to May 1, 2002 at a Liquidity Share Price less than $12.50, upon
consummation of such Liquidity Event the Corporation shall pay a dividend on
each share of Class B Preferred Stock outstanding immediately prior to such
Liquidity Event in an amount equal to the product of (i) the number of shares of
Common Stock into which such share of Class B Preferred Stock would then be
convertible MULTIPLIED BY (ii) the excess of $12.50 over such Liquidity Share
Price.
All per share amounts in this Section 4(c) shall be appropriately adjusted
for any stock dividends, stock splits, recapitalizations or other similar
changes in the outstanding shares of Common stock after the Original Issue Date.
The payment of such special contingent dividends shall be made in cash or
in shares of Common Stock that are freely tradeable and registered under the
Securities Act. Such payment shall be made immediately prior to the automatic
conversion of the Class B Preferred Stock into Common Stock pursuant to Section
6(b) upon consummation of such Liquidity Event; PROVIDED, HOWEVER, that in the
event of an initial public offering of the Common Stock, the dividend
contemplated by subsection 4(c)(1) or (c)(2) above may be paid on the first
anniversary of the initial closing of such public offering or, if earlier, on
the bankruptcy, liquidation or sale of all or substantially all the assets or
stock of the Corporation; PROVIDED, FURTHER, HOWEVER, that in the event the
public trading price of Common Stock exceeds (i) $7.00 per share, in the event
the initial public offering occurs prior to May 1, 1998, or (ii) $8.00 per
share, in the event the initial public offering occurs after April 30, 1998 and
prior to May 1, 2000, in each case for 20 consecutive trading days, the dividend
contemplated by subsection 4(c)(1) or (c)(2) above shall be terminated and
canceled.
(d) GENERAL. The Corporation shall not subdivide or combine any
share of Class B Preferred Stock, or pay any dividend or make any other
distribution on any share of Class B Preferred Stock, or redeem any share of
Class B Preferred Stock, or accord any other similar payment, benefit or
preference to any share of Class B Preferred Stock, except by extending such
subdivision, combination, distribution, redemption, payment, benefit or
preference equally to all shares of Class B Preferred Stock; PROVIDED, HOWEVER,
that in the case of dividends or other distributions payable in shares of Common
Stock, or options, warrants or rights to acquire shares of Common Stock, or
securities convertible into or exchangeable for shares of Common Stock, the
shares, options, warrants, rights to acquire shares or securities so convertible
or exchangeable shall
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be payable in shares of or options, warrants or rights to acquire shares of, or
securities convertible into or exchangeable for, Common Stock in respect of
Class B Preferred Stock.
5. LIQUIDATION. In the event of (a) any liquidation, dissolution or
winding up of the Corporation, either voluntary or involuntary, or (b) unless
agreed otherwise in writing by the Required Holders, a merger or consolidation
of the Corporation (each, a "DISTRIBUTION EVENT"), distributions to the
stockholders of the Corporation shall be made in the following manner. The
holders of Class B Preferred Stock shall first be entitled to receive, prior and
in preference to any distribution of any of the assets of the Corporation to the
holders of any other series of Preferred Stock, Common Stock or other capital
stock of the Corporation by reason of their ownership of such stock, but pari
passu with the holders of Class A Preferred Stock, the Class B Preferred Stock,
the Class C Preferred Stock and the Class D Preferred Stock in accordance with
the relative liquidation preferences of the Class A Preferred Stock, the Class B
Preferred Stock, the Class C Preferred Stock and the Class D Preferred Stock, an
amount per share equal to the greater of (i) the sum of (A) $4.00 PLUS (B) all
accrued and unpaid dividends on the Class B Preferred Stock due under Section 4
(such sum being referred to as the "PREFERENTIAL AMOUNT") and (ii) the sum of
(A) the distribution to which the holder of such share of Class B Preferred
Stock would have been entitled if such share had been converted into Common
Stock pursuant to Section 6 immediately prior to the Distribution Event PLUS (B)
all accrued and unpaid dividends on the Class B Preferred Stock due under
Section 4. If the assets and funds of the Corporation shall be insufficient to
permit the payment of the full amount specified in the immediately preceding
sentence to the holders of Class B Preferred Stock, then the entire assets of
the Corporation legally available for distribution shall be distributed ratably
among the holders of Class A Preferred Stock, Class B Preferred Stock, Class C
Preferred Stock and Class D Preferred Stock in accordance with the relative
liquidation preferences of the shares of Class A Preferred Stock, Class B
Preferred Stock, Class C Preferred Stock and Class D Preferred Stock held by
each of them.
6. CONVERSION.
(a) RIGHT OF CONVERSION OF CLASS B PREFERRED STOCK INTO COMMON
STOCK. Each share of Class B Preferred Stock shall be convertible, at the option
of the holder thereof at any time at the office of the Corporation or any
transfer agent into the number of shares of the Common Stock of the Corporation
obtained by dividing $4.00 by the then effective conversion price of the Class B
Preferred Stock (as from time to time adjusted by this Section 6, the
"CONVERSION PRICE"). The initial Conversion Price shall be $2.09424 per share;
PROVIDED, HOWEVER, that in the event a Liquidity Event has not been consummated
prior to May 1, 2002, the initial Conversion Price for each share of Class B
Preferred Stock then outstanding shall be deemed to be $3.00 per share. All
calculations under this Section 6 shall be made to the nearest one hundredth of
a cent.
(b) AUTOMATIC CONVERSION OF CLASS B PREFERRED STOCK INTO COMMON
STOCK. Each share of Class B Preferred Stock shall automatically be converted
into shares of Common Stock at the then effective Conversion Price at any time
upon the closing of a Liquidity Event (to the extent such share of Class B
Preferred Stock is not then redeemed under Section 7(b)).
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(c) MECHANICS OF CONVERSION UNDER SECTIONS 6(A) AND 6(B). Before any
holder of Class B Preferred Stock shall be entitled to convert the same into
shares of Common Stock and to receive certificates therefor, such holder shall
surrender the Class B Preferred Stock certificates, duly endorsed, at the office
of the Corporation or of any transfer agent for the Class B Preferred Stock, and
shall give written notice to the Corporation at such office that such holder
elects to convert the same; PROVIDED, HOWEVER, that in the event of an automatic
conversion pursuant to Section 6(b), the outstanding shares of Class B Preferred
Stock shall be converted automatically without any further action by the holders
of such shares and whether or not the certificates representing such shares are
surrendered to the Corporation or its transfer agent; and PROVIDED, FURTHER that
the Corporation shall not be obligated to issue certificates evidencing the
shares of Common Stock issuable upon such automatic conversion unless the
certificates evidencing such shares of Class B Preferred Stock are either
delivered to the Corporation or its transfer agent as provided above, or the
holder notifies the Corporation or its transfer agent that such certificates
have been lost, stolen or destroyed and executes an agreement reasonably
satisfactory to the Corporation to indemnify the Corporation from any loss
incurred by it in connection with such certificates. The Corporation shall, as
soon as practicable after such delivery, or execution of such agreement in the
case of a lost certificate, issue and deliver at such office to such holder of
Class B Preferred Stock a certificate or certificates for the number of shares
of Common Stock to which such holder shall be entitled as aforesaid and a check
payable to the holder in the amount of any cash amounts payable as the result of
a conversion into fractional shares of Common Stock plus all accrued and unpaid
dividends on such holder's Class B Preferred Stock so converted; PROVIDED,
HOWEVER, that in the event of a conversion prior to the Cash Payment Date, the
Corporation shall issue fractional shares in lieu of the cash payments
contemplated above except that the Corporation may pay cash for such fractional
shares (a) to the extent permitted by its lending agreements and (b) as a result
of a reverse stock split consummated for a legitimate business purpose (such as
in preparation for an initial public offering) so long as the cash amount paid
for such fractional shares is not material. Such conversion shall be deemed to
have been made immediately prior to the close of business on the date of such
surrender of the shares of Class B Preferred Stock to be converted, or in the
case of automatic conversion immediately upon closing of the Liquidity Event,
and the person entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder of such shares
of Common Stock on such date.
(d) INTENTIONALLY DELETED.
(e) ADJUSTMENT OF CONVERSION PRICE DUE TO ISSUANCE OF ADDITIONAL
SHARES. The Conversion Price shall be subject to adjustment as follows:
(1) SPECIAL DEFINITIONS.
"OPTIONS" shall mean rights, options or warrants to subscribe
for, purchase or otherwise acquire either Common Stock or Convertible
Securities.
"ORIGINAL ISSUE DATE" shall mean, with respect to any share of
Class B Preferred Stock, the date on which such share of Class B Preferred
Stock is issued by the Corporation.
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"CONVERTIBLE SECURITIES" shall mean any indebtedness, shares
or other securities convertible into or exchangeable for Common Stock.
"ADDITIONAL SHARES OF COMMON STOCK" shall mean all shares of
Common Stock issued (or, pursuant to Section 6(e)(5), deemed to be issued)
by the Corporation after the Original Issue Date, other than shares of
Common Stock issued or issuable (or, pursuant to Section 6(e)(5), deemed
to be issued) at any time:
(i) upon conversion of the Class B Preferred Stock
authorized herein or upon exercise or exchange of the Purchase Warrants
(as defined in the respective Purchase Agreements), Conversion Warrants
(as defined in the respective Purchase Agreements), Contingent Warrants
(as defined in the Weston Presidio Purchase Agreement), Warrants (as
defined in the Subordinated Loan Agreement), and the other options and
warrants set forth in Exhibit 4.3.1 to either Purchase Agreement;
(ii) as a stock dividend, stock split or similar
distribution on the Class A Preferred Stock, Class B Preferred Stock,
Class C Preferred Stock, Class D Preferred Stock or any other event for
which adjustment is made pursuant to Section 6(e)(3);
(iii) pursuant to a stock option, stock bonus or other
employee stock plan permitted by section 5.14 of the Weston Presidio
Purchase Agreement and section 5.13 of the Paribas Purchase Agreement or
approved by the Preferred Director at a meeting or by unanimous written
consent of the Board of Directors or approved by the Required Holders,
which approval shall specify the number of shares of Common Stock
available for distribution under any such plan;
(iv) upon conversion of the Corporation's Class A
Preferred Stock into Common Stock, conversion of the Class C Preferred
Stock into Common Stock, or conversion of the Class D Preferred Stock into
Common Stock;
(v) in connection with sales of Common Stock or other
Future Shares to the holders of the Class B Preferred Stock pursuant to
the exercise by such holders of their rights under section 10(a) or to the
holders of Class C Preferred Stock pursuant to the exercise by such
holders of their rights under Section 10(a) of Section D of this Article
IV; or
(vi) by way of dividend or other distribution on shares
of Common Stock excluded from the definition of Additional Shares of
Common Stock by the foregoing subsections of this Section 6(e)(1).
(2) NO ADJUSTMENT OF CONVERSION PRICE. No adjustment in the
Conversion Price shall be made in respect of the issuance of Additional
Shares of Common Stock (a) unless the consideration per share (determined
pursuant to Section 6(e)(6)) for an Additional Share of Common Stock
issued or deemed to be issued by the Corporation is less than the
applicable Conversion Price in effect on the date of, and immediately
prior to, such issue or (b) if prior to such issuance the Required Holders
give a written waiver of such adjustment.
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(3) ADJUSTMENT OF CONVERSION PRICE UPON ISSUANCE OF ADDITIONAL
SHARES OF COMMON STOCK. In the event the Corporation shall issue
Additional Shares of Common Stock (including Additional Shares of Common
Stock deemed to be issued pursuant to Section 6(e)(5)) for a consideration
per share less than the applicable Conversion Price of the Class B
Preferred Stock in effect on the date of and immediately prior to such
issue, then and in such event, the applicable Conversion Price shall be
reduced, concurrently with such issue (calculated to the nearest one
hundredth of a cent), to a new Conversion Price obtained by dividing (a)
an amount equal to the sum of (i) the number of shares of Common Stock
outstanding immediately prior to such issue multiplied by the then
applicable Conversion Price and (ii) the consideration, if any, deemed
received by the Corporation upon such issue by (b) the total number of
shares of Common Stock deemed to be outstanding immediately after such
issue; PROVIDED, HOWEVER, that, for purposes of any calculation under this
Section 6(e)(3), all shares of Common Stock outstanding and issuable upon
conversion of outstanding Options, Convertible Securities and the Class B
Preferred Stock immediately prior to giving effect to such calculation
shall be deemed to be outstanding. In no event will the Conversion Price
be adjusted as the result of any issuance of any Additional Shares of
Common Stock for any amount higher than the Conversion Price in effect
immediately prior to such issuance.
(4) ADJUSTMENTS FOR SUBDIVISIONS, STOCK DIVIDENDS,
COMBINATIONS OR CONSOLIDATION OF COMMON STOCK. In the event the
outstanding shares of Common Stock shall be increased by way of stock
issued as a dividend for no consideration or subdivided (by stock split or
otherwise) into a greater number of shares of Common Stock, the respective
Conversion Prices then in effect shall, concurrently with the
effectiveness of such increase or subdivision, be proportionately
decreased. In the event the outstanding shares of Common Stock shall be
combined or consolidated, by reclassification or otherwise, into a lesser
number of shares of Common Stock, the respective Conversion Prices then in
effect shall, concurrently with the effectiveness of such combination or
consolidation, be proportionately increased.
(5) DEEMED ISSUE OF ADDITIONAL SHARES OF COMMON STOCK -
OPTIONS AND CONVERTIBLE SECURITIES. Except as provided in Section 6(e)(3)
or Section 6(e)(4), in the event the Corporation at any time after the
Original Issue Date shall issue any Options or Convertible Securities or
shall fix a record date for the determination of holders of any class of
securities entitled to receive any such Options or Convertible Securities,
then the maximum number of shares (as set forth in the instrument relating
thereto without regard to any provisions contained therein for a
subsequent adjustment of such number) of Common Stock issuable upon the
exercise of such Options or, in the case of Convertible Securities and
Options therefor, the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of Common Stock issued
as of the time of such issue or, in case such a record date shall have
been fixed, as of the close of business on such record date; PROVIDED,
HOWEVER, that Additional Shares of Common Stock shall not be deemed to
have been issued unless the consideration per share (determined pursuant
to Section 6(e)(6)) of such Additional Shares of Common Stock would be
less than the applicable Conversion Price in effect on the
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date of, and immediately prior to, such issue, or such record date, as the
case may be; and PROVIDED, further, that in any such case in which
Additional Shares of Common Stock are deemed to be issued:
(i) no further adjustment in the applicable Conversion
Price shall be made upon the subsequent issue of shares of Common Stock
upon the exercise of such Options or conversion or exchange of such
Convertible Securities or upon the subsequent issue of such Convertible
Securities or Options;
(ii) if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for any increase in
the consideration payable to the Corporation, or any increase in the
number of shares of Common Stock issuable, upon the exercise, conversion
or exchange thereof, the applicable Conversion Price computed upon the
original issue thereof (or upon the occurrence of a record date with
respect thereto), and any subsequent adjustments based thereon, shall,
upon any such increase becoming effective, be recomputed to reflect such
increase insofar as it affects such Options or the rights of conversion or
exchange under such Convertible Securities;
(iii) upon the expiration of any such Options or any
rights of conversion or exchange under such Convertible Securities which
shall not have been exercised, the applicable Conversion Price computed
upon the original issue thereof (or upon the occurrence of a record date
with respect thereto), and any subsequent adjustments based thereon shall
remain in effect upon and after such expiration, but the Additional Shares
of Common Stock deemed issued as the result of the original issue of such
Option or rights shall not be deemed issued for the purposes of any
subsequent adjustment to the Conversion Price;
(iv) in the event of any changes in the number of shares
of Common Stock issuable upon the exercise, conversion or exchange of such
Options or Convertible Securities, including a change resulting from the
anti-dilution provisions thereof, the Conversion Price then in effect
shall be readjusted to the Conversion Price that would have been in effect
if the adjustment which was made upon the issuance of such Options or
Convertible Securities had been made upon the basis of such change;
(v) no readjustment pursuant to subsections (ii) or (iv)
above shall have the effect of increasing the applicable Conversion Price
to an amount which exceeds the lower of (x) the applicable Conversion
Price on the original adjustment date, or (y) the applicable Conversion
Price that resulted from the issuance or deemed issuance of other
Additional Shares of Common Stock between the original adjustment date and
such readjustment date; and
(vi) in the event the Corporation amends the terms of
any Options or Convertible Securities (whether such Options or Convertible
Securities were outstanding on
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the Original Issue Date or were issued after the Original Issue Date),
then such Options or Convertible Securities, as so amended, shall be
deemed to have been issued after the Original Issue Date and the
provisions of this Section 6(e)(5) shall apply.
(6) DETERMINATION OF CONSIDERATION. For purposes of this
Section 6(e), the consideration received by the Corporation for the issue
of any Additional Shares of Common Stock shall be computed as follows:
(i) CASH AND PROPERTY. Such consideration shall:
(A) insofar as it consists of cash, be computed at the
aggregate amount of net cash proceeds received by the Corporation
excluding amounts paid or payable for accrued interest or accrued
dividends;
(B) insofar as it consists of property other than cash,
be computed at the fair value thereof at the time of such issue, as
determined in good faith by the Board of Directors of the Corporation; and
(C) in the event Additional Shares of Common Stock are
issued together with other shares or securities or other assets of the
Corporation for consideration which covers both, be the proportion of such
consideration so received, computed as provided in subsections (A) and (B)
above, which is allocated to the Additional Shares of Common Stock as
determined in good faith by the Board of Directors.
(ii) OPTIONS AND CONVERTIBLE SECURITIES. The consideration per
share received by the Corporation for Additional Shares of Common Stock
deemed to have been issued pursuant to Section 6(e)(5), relating to
Options and Convertible Securities, shall be determined by dividing:
(A) the total amount, if any, received or receivable by
the Corporation as consideration for the issue of such Options or
Convertible Securities, plus, subject to Section 6(e)(5)(ii), the minimum
aggregate amount of additional consideration (as set forth in the
instruments relating thereto, without regard to any provision contained
therein for a subsequent adjustment of such consideration) payable to the
Corporation upon the exercise of such Options or the conversion or
exchange of such Convertible Securities, or in the case of Options for
Convertible Securities, the exercise of such Options for Convertible
Securities and the conversion or exchange of such Convertible Securities
by
(B) the maximum number of shares of Common Stock (as set
forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number) issuable
upon the exercise of such Options or the conversion or exchange of such
Convertible Securities.
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(7) OTHER DILUTIVE EVENTS. In case any event shall occur as to
which the other provisions of this Section 6(e) are not strictly
applicable, but the failure to make any adjustment in the Conversion Price
would not, in the reasonable judgment of a majority of the directors of
the Corporation, fairly protect the conversion rights represented by the
Class B Preferred Stock in accordance with the intention of this Section
6, then, upon request of the Required Holders, the Board of Directors of
the Corporation shall appoint a firm of independent public accountants of
recognized national standing (which may be the regular auditors of the
Corporation) to give their opinion as to the adjustment, if any, on a
basis consistent with the intention of this Section 6, necessary to
preserve without dilution the conversion rights represented by the Class B
Preferred Stock. Upon receipt of such opinion, the Corporation will
promptly furnish a copy thereof to the holders of the Class B Preferred
Stock and the Conversion Price shall be adjusted in accordance therewith
to the extent recommended by such accountants. The fees and expenses of
such accountants shall be paid by the Corporation; PROVIDED, HOWEVER, that
if such accountants opine that the total adjustment per share of Class B
Preferred Stock is less than 10% of the previous per share Conversion
Price, such fees and expenses will be paid by the holders of the Class B
Preferred Stock.
(f) OTHER DISTRIBUTIONS. In the event the Corporation shall declare
a distribution payable in securities of the Corporation (other than shares of
Common Stock), securities of other entities, securities evidencing indebtedness
issued by the Corporation or other entities, assets (including cash dividends)
or options or rights, then, in each such case for the purpose of this Section 6,
the holders of the Class B Preferred Stock shall be entitled to a proportionate
share of any such distribution as though they were the holders of the number of
shares of Common Stock of the Corporation into which their shares of such Class
B Preferred Stock were convertible as of the record date fixed for the
determination of the holders of Common Stock of the Corporation entitled to
receive such distribution.
(g) SUBSEQUENT EVENTS. In the event of any recapitalization,
consolidation or merger of the Corporation or its successor which does not
require redemption of the Class B Preferred Stock pursuant to Section 7(b), the
shares of Class B Preferred Stock shall be convertible into such shares or other
interests as the Class B Preferred Stock would have been entitled if the Class B
Preferred Stock had been converted into Common Stock immediately prior to such
event.
(h) CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of the Conversion Price pursuant to this Section 6,
the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each holder of
Class B Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment is
based. The Corporation shall, upon the written request at any time of any holder
of Class B Preferred Stock, furnish or cause to be furnished to such holder a
certificate setting forth (a) all such adjustments and readjustments previously
made, (b) the Conversion Price at the time in effect, and (c) the number of
shares of
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Common Stock and the amount, if any, of other property which at such time would
be received upon the conversion of Class B Preferred Stock.
(i) ISSUE TAX. The issuance of certificates for shares of Common
Stock upon conversion of Class B Preferred Stock shall be made without charge to
the holders thereof for any issuance tax; PROVIDED, HOWEVER, that the
Corporation shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of any certificate in a
name other than the name of the holder of the Class B Preferred Stock which is
being converted to Common Stock.
7. REDEMPTION.
(a) MANDATORY REDEMPTION. Except as set forth in Section 7(b),
irrespective of any other redemptions or acquisitions of shares of the Class B
Preferred Stock, the Corporation will redeem at a price equal to the
Preferential Amount that number of shares of Class B Preferred Stock equal to
6.25% of the total number of issued and outstanding shares of Class B Preferred
Stock as of the later of December 31, 2002 and the Cash Payment Date (or such
lesser number as is then outstanding) on the last day of each March, June,
September and December, commencing on the later of March 2003 or the first such
date following the Cash Payment Date.
(b) MANDATORY CONTINGENT REDEMPTION. Upon the earliest to occur of:
(1) the sale by the Corporation of all or a substantial
portion of its assets,
(2) the merger of the Corporation with, or the consolidation
of the Corporation into, any other corporation as a result of which the
stockholders of the Corporation immediately prior to such merger or
consolidation do not own stock having more than 50% of the outstanding voting
power (assuming conversion of all convertible securities and exercise of all
outstanding options and warrants) of the surviving corporation,
(3) the dissolution or liquidation of the Corporation,
(4) ▇▇▇▇▇ ▇▇▇▇▇▇ shall cease for any reason to be Chairman of,
and actively involved in the executive management of, the Corporation and a
replacement satisfactory to the Required Holders shall not be in place within
180 days,
(5) more than 50% of the outstanding voting stock of the
Corporation becomes owned by Persons other than (i) holders of Class B Preferred
Stock or Class C Preferred Stock and their transferees and (ii) stockholders of
record on the Original Issue Date (the foregoing events described in subsections
(1) through (5) shall constitute an "ORGANIC CHANGE"), or
(6) a Remedy Event,
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except in the case of a transaction described in subsections (1), (2), (5)
or (6) above that constitutes a Liquidity Event consummated on the terms
described in Section 4(b)(2), each holder of Class B Preferred Stock may
require the Corporation, on the Cash Payment Date, to redeem all or any
portion of the then outstanding shares of the Class B Preferred Stock of
such holder, at the holder's option, at a price equal to the Preferential
Amount, together with warrants in substantially the form of Exhibit 2.1A
of the Purchase Agreements (the "CONVERSION WARRANTS") to purchase the
number of shares of Common Stock into which the shares of Class B
Preferred Stock so redeemed could at the time have been converted at a
purchase price per share equal to the aggregate cash consideration
received by the holder in connection with the redemption divided by such
number of shares of Common Stock. The number of shares for which each
Conversion Warrant shall be exercisable shall be reduced in proportion to
the mandatory redemption of Class B Preferred Stock under Section 7(a).
(c) NOTICE OF REDEMPTION; PRO RATA TREATMENT. Written notice of
redemption of Class B Preferred Stock pursuant to Sections 7(a) and 7(b) shall
be given not fewer than 30 days prior to the redemption date by first class
mail, postage prepaid, to each holder of record of shares of the Class B
Preferred Stock, at such holder's address on the books of the Corporation. Each
such notice shall state: (a) the redemption date; (b) the number of shares of
the Class B Preferred Stock to be redeemed; (c) the Preferential Amount; (d) the
place or places where certificates for such shares are to be surrendered for
payment of the Preferential Amount; and (e) that dividends on the shares to be
redeemed will cease to accrue on such redemption date. Redemptions under
Sections 7(a) and 7(b) shall be made pro rata among all holders of Class B
Preferred Stock.
(d) SPECIFIC PERFORMANCE. If any holder becomes obligated so to
deliver any shares of Class B Preferred Stock to the Corporation upon any
redemption under this Section 7 and fails to deliver the certificate therefor in
accordance with these Articles of Incorporation, the Corporation may, at its
option, in addition to all other remedies it may have, cancel on its books such
certificate representing such shares to be redeemed.
8. REMEDY EVENT. The term "REMEDY EVENT" shall mean the occurrence and
continuance of any of the following events for a period exceeding 30 days
(unless otherwise specified below) after written notice of the occurrence of
such event has been furnished to the Corporation at its registered address:
(a) The Corporation shall fail to make any payment in respect of
dividends on or redemptions of any shares of Class B Preferred Stock as the same
shall become due.
(b) The Corporation shall fail to perform or observe any of the
covenants, agreements or other provisions set forth in these Articles of
Incorporation.
(c) Any written representation or warranty of or with respect to the
Corporation made in, or pursuant to the express requirements of, either Purchase
Agreement shall prove to have
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been false in any material respect on the date as of which it was made without
reference to whether such representation or warranty was made with knowledge or
without knowledge.
(d) The Corporation or any of its Subsidiaries shall fail to make
any required payment on any Indebtedness exceeding $100,000 in principal amount
of (or guaranteed by) the Corporation or any of its Subsidiaries or with respect
to any share of capital stock (whether because funds are not legally available
therefor or otherwise), or the Corporation or any of its Subsidiaries shall fail
to perform or observe any of the covenants or provisions required to be
performed or observed by it pursuant to any senior lending agreement (as from
time to time in effect), and (i) such failure shall continue, without having
been duly cured, waived or consented to, beyond the period of grace, if any,
therein specified or (ii) any security interest in or other lien on any property
securing any such indebtedness shall be enforced, unless contested in good faith
by the Corporation by appropriate proceedings or (iii) any such Indebtedness
shall become due and payable prior to stated maturity.
(e) The Corporation shall fail to keep reserved a sufficient number
of shares of Common Stock for issuance upon conversion of the Class B Preferred
Stock, or shall fail to issue an amount of shares of Common Stock upon the
conversion by the holders thereof of the Class B Preferred Stock.
(f) An Organic Change shall occur.
(g) The sum of Stockholders' Equity of the Corporation and its
subsidiaries PLUS (to the extent not included in Stockholders' Equity) the Class
B Preferred Stock and the Class C Preferred Stock, all determined in accordance
with generally accepted accounting principles consistently applied, shall at any
time be less than the amount equal to (i) $22,000,000 (being the Corporation's
pro forma net worth on the Original Issue Date) MINUS (ii) 25% of the aggregate
purchase price for the then outstanding Class B Preferred Stock and Class C
Preferred Stock MINUS (iii) the amount, not exceeding $14,000,000 in the
aggregate, by which Stockholders' Equity has been reduced after the Original
Issue Date by the non-recurring write-off of intangible assets carried on the
balance sheet of the Corporation or any of its Subsidiaries in connection with
the acquisition of professional practices acquired by the Corporation and its
Subsidiaries.
(h) A final judgment which, in the aggregate with other outstanding
final judgments against the Corporation or any of its Subsidiaries, exceeds
$100,000 above insurance coverage shall be rendered against the Corporation or
any of its Subsidiaries and, within 30 days after entry thereof, such judgment
shall not have been discharged or stayed pending appeal, or within 30 days after
expiration of such stay such judgment shall not have been discharged.
(i) The Corporation or any of its Subsidiaries or their Affiliates
shall fail to perform or observe any other covenant, other agreement or
provision to be performed or observed by it under either Purchase Agreement or
any other Investor Agreement to which the Corporation is
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a party and such failure shall not be rectified or cured to the satisfaction of
the Required Holders within 30 days after actual knowledge by an executive
officer of the Corporation.
(j) The Corporation or any of its subsidiaries owning at least 10%
of the assets, or contributing over the past fiscal year at least 10% of the
cash flow, of the Corporation and its subsidiaries on a consolidated basis,
shall:
(1) commence a voluntary case under Title 11 of the United
States as from time to time in effect, or authorize, by appropriate
proceedings of its Board of Directors or other governing body, the
commencement of such a voluntary case;
(2) have filed against it a petition commencing an involuntary
case under such Title 11 and such petition is not dismissed within 30
days;
(3) seek relief as a debtor under any applicable law, other
than such Title 11, of any jurisdiction relating to the liquidation or
reorganization of debtors or to the modification or alteration of the
rights of creditors, or consent to or acquiesce in such relief;
(4) have entered against it any nonappealable order by a court
of competent jurisdiction (A) finding it to be bankrupt or insolvent, (B)
ordering or approving its liquidation, reorganization or any modification
or alteration of the rights of its creditors, or (C) assuming custody of,
or appointing a receiver or other custodian for, all or a substantial part
of its property; or
(5) make an assignment for the benefit of, or enter into a
composition with, its creditors, or appoint or consent to the appointment
of a receiver or other custodian for all or a substantial part of its
property.
9. CERTAIN COVENANTS.
(a) SPECIAL RESTRICTIONS. At any time when shares of Class B
Preferred Stock are outstanding, except where the vote or written consent of the
holders of a greater number of shares of the Corporation is required by law or
by the Articles of Incorporation, and in addition to any other vote required by
law or the Articles of Incorporation, without the consent of the Required
Holders, given in writing or by vote at a meeting, consenting or voting (as the
case may be) separately as a class, the Corporation will not:
(1) create or authorize the creation of any additional class
or series of shares of stock, or issue any shares thereof, unless the same
ranks junior to the Class B Preferred Stock as to the distribution of
assets on the liquidation, dissolution or winding up of the Corporation or
increase the authorized amount of the Class B Preferred Stock or increase
the authorized amount of any additional class or series of shares of stock
unless the same ranks
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junior to the Class B Preferred Stock as to the distribution of assets on
the liquidation, dissolution or winding up of the Corporation, or create
or authorize any instrument or security convertible into shares of Class B
Preferred Stock or into shares of any other class or series of stock
unless the same ranks junior to the Class B Preferred Stock as to the
distribution of assets on the liquidation, dissolution or winding up of
the Corporation, whether any such creation, authorization or increase
shall be by means of amendment to the Articles of Incorporation or by
merger, consolidation or otherwise;
(2) amend, alter or repeal its Articles of Incorporation or
By-laws in a manner that is adverse to the holders of Class B Preferred
Stock in any respect or for which the holders of Class B Preferred Stock
did not receive prior written notice;
(3) purchase or set aside any sums for the purchase of any
shares of the Corporation's capital stock other than the Class B Preferred
Stock, except for (i) the purchase of shares of Common Stock from former
employees of the Corporation who acquired such shares directly from the
Corporation pursuant to the Stock Option Plan (as defined in the Weston
Presidio Purchase Agreement), if each such purchase is made pursuant to
contractual rights held by the Corporation relating to the termination of
employment of any such former employee and the total purchase price does
not exceed $100,000 plus any applicable life insurance payments for all
such purchases from each such former employee and (ii) redemptions
required by the warrants issued to the lenders under the Senior Loan
Agreement (as defined in the Weston Presidio Purchase Agreement) or by the
PCF Warrant Agreement or by the Charter (as defined in the respective
Purchase Agreements) of the Corporation with respect to Class A Preferred
Stock;
(4) redeem or otherwise acquire any shares of Class B
Preferred Stock except as expressly authorized in Section 7 or pursuant to
a purchase offer made pro rata to all holders of the shares of Class B
Preferred Stock on the basis of the aggregate number of outstanding shares
of Class B Preferred Stock then held by each such holder;
(5) consent to any liquidation, dissolution or winding up of
the Corporation; or
(6) consolidate or merge into or with any other entity or
entities or sell or transfer all or substantially all its assets, except
that the Corporation may, without the consent of the holders of at least a
majority of the then outstanding shares of Class B Preferred Stock,
effectuate a merger in which (i) the Corporation is the surviving
corporation and (ii) the stockholders of the Corporation immediately prior
to the merger hold more than 50% of the outstanding voting power of the
surviving corporation (assuming conversion of all convertible securities
and exercise of all outstanding options and warrants).
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(b) NO IMPAIRMENT. The Corporation will not, by amendment of its
Articles of Incorporation or through any reorganization, recapitalization,
transfer of all or a substantial portion of its assets, consolidation, merger,
dissolution, issue or sale of securities, closing or transfer books or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed under these Articles of Incorporation by
the Corporation, but will at all times in good faith assist in carrying out all
the provisions of these Articles of Incorporation and in taking all such action
as may be necessary or appropriate in order to protect the conversion and other
rights of the holders of Class B Preferred Stock against impairment.
(c) RESERVATION OF SHARES. So long as any share of Class B Preferred
Stock shall remain outstanding, the Corporation shall at all times reserve and
keep available, free from preemptive rights, out of its authorized capital
stock, for the purpose of issuance upon conversion of the Class B Preferred
Stock, the full number of shares of Common Stock then issuable upon exercise of
all outstanding shares of Class B Preferred Stock. If the Corporation's Common
Stock shall be listed on any national stock exchange, the Corporation at its
expense shall include in its listing application all of the shares of Common
Stock reserved for issuance upon conversion of the Class B Preferred Stock
(subject to issuance or notice of issuance to the exchange) and will similarly
procure the listing of any further Common Stock reserved for issuance upon
conversion of the Class B Preferred Stock at any subsequent time as a result of
adjustments in the outstanding Common Stock or otherwise.
(d) VALIDITY OF SHARES. The Corporation will from time to time take
all such action as may be required to assure that all shares of Common Stock
which may be issued upon conversion of any share of the Class B Preferred Stock
will, upon issuance, be legally and validly issued, fully paid and
non-assessable and free from all taxes, liens and charges with respect to the
issuance thereof. Without limiting the generality of the foregoing, the
Corporation will from time to time take all such action as may be required to
assure that the par value per share, if any, of the Common Stock is at all times
equal to or less than the lowest quotient obtained by dividing the then current
par value of the Class B Preferred Stock by the number of shares of Common Stock
into which each share of Class B Preferred Stock can, from time to time, be
converted.
(e) NOTICE OF CERTAIN EVENTS. If at any time:
(1) the Corporation shall declare any dividend or distribution
payable to the holders of its Common Stock;
(2) the Corporation shall offer for subscription pro rata to
the holders of Common Stock any additional shares of stock of any class or
any other rights;
(3) any recapitalization of the Corporation, or consolidation
or merger of the Corporation with, or sale of all or substantially all of
its assets to, another corporation or business organization shall occur;
or
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(4) a voluntary or involuntary dissolution, liquidation or
winding up of the Corporation shall occur;
then, in any one or more of such cases, the Corporation shall give the
registered holders of the Class B Preferred Stock written notice, by
registered mail, of the date on which a record shall be taken for such
dividend, distribution or subscription rights or for determining
stockholders entitled to vote upon such recapitalization, consolidation,
merger, sale, dissolution, liquidation or winding up and of the date when
any such transaction shall take place, as the case may be. Such notice
shall also specify the date as of which the holders of Common Stock of
record shall participate in such dividend, distribution or subscription
rights, or shall be entitled to exchange their Common Stock for securities
or other property deliverable upon such recapitalization, consolidation,
merger, sale, dissolution, liquidation or winding up, as the case may be.
Such written notice shall be given at least 20 days prior to the record
date with respect thereto.
(f) NO REISSUANCE OF PREFERRED STOCK. No shares of Class B Preferred
Stock acquired by the Corporation by reason of redemption, purchase, conversion
or otherwise shall be reissued, and all such shares shall be canceled, retired
and eliminated from the shares which the Corporation shall be authorized to
issue. The Corporation may from time to time take such appropriate corporate
action as may be necessary to reduce the authorized number of shares of
Preferred Stock accordingly.
10. PREEMPTIVE RIGHTS.
(a) RIGHT OF FIRST OFFER. Until the closing under a Liquidity Event,
the Corporation shall not issue or sell any Common Stock (including securities
convertible into, or options, warrants or other rights to purchase Common Stock,
but excluding the shares described in Section 10(g)) (collectively, the "FUTURE
SHARES") to any Person (an "OFFEREE") without first providing each holder of
Class B Preferred Stock the right to subscribe for its Proportionate Percentage
of the Future Shares at a price and on such other terms which are at least as
favorable as shall have been offered or are proposed to be offered by the
Corporation to such Offeree and which shall have been specified by the
Corporation in a notice delivered to each holder of Class B Preferred Stock (the
"PROPOSAL"); PROVIDED, HOWEVER, that the holder of Class B Preferred Stock shall
have the option to purchase Future Shares with cash, regardless of the method of
purchase offered to such Offeree. The Proposal by its terms shall remain open
and irrevocable for a period of 30 days from the date it is delivered by the
Corporation to each holder of Class B Preferred Stock (the "FUTURE SHARES
EXERCISE PERIOD"). The Proposal shall also certify that the Corporation has
either (a) received a bona fide offer from a prospective purchaser, who shall be
identified in such certification, and that the Corporation in good faith
believes a binding agreement of sale is obtainable for consideration having a
fair market, cash equivalent or present value set forth in such certification;
or (b) intends in good faith to make an offering of its securities to
prospective purchasers, who shall be identified to the extent possible in such
certification at the price and on the terms set forth in such certification.
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"PROPORTIONATE PERCENTAGE" means, for any holder of Class B Preferred
Stock, the percentage of Future Shares covered by the Proposal equal to (i) the
number of shares of Common Stock into which the shares of Class B Preferred
Stock held by such holder would then be convertible divided by (ii) the total
number of shares of Common Stock outstanding at the time of delivery of the
Proposal PLUS the aggregate number of shares of Common Stock into which all
shares of Class B Preferred Stock would then be convertible.
(b) NOTICE. Notice of the intention of each holder of Class B
Preferred Stock to accept the Proposal made pursuant to Section 10(a) shall be
evidenced by a writing signed by such holder and delivered to the Corporation
prior to the end of the Future Shares Exercise Period (the "NOTICE OF PURCHASE")
setting forth that portion of the Future Shares such holder elects to purchase
(the "ACCEPTED SHARES").
(c) FULL ACCEPTANCE. In the event that each holder of Class B
Preferred Stock elects to purchase all of the shares offered to such holder in
the Proposal, the Corporation shall sell to each such holder, pursuant to
Section 10(f), the number of Accepted Shares set forth in such holder's Notice
of Purchase.
(d) PARTIAL ACCEPTANCE. In the event that one or more holders of
Class B Preferred Stock do not elect to purchase all of the shares offered to
such holders in the Proposal, the Corporation shall sell to each such holder,
pursuant to Section 10(f), the number of Accepted Shares, if any, set forth in
such holder's Notice of Purchase. Holders of Class B Preferred Stock may
purchase pursuant to Section 10(f) any remaining shares offered in the Proposal
not purchased by the other holders of Class B Preferred Stock pro rata based on
the respective Proportionate Percentages of such holders wishing to purchase
additional shares, or as they may otherwise agree.
(e) NO FRACTIONAL SHARES. For the purpose of avoiding fractions as
to Future Shares, the Corporation may adjust upward or downward by not more than
one full share the number of Future Shares which any holder of Class B Preferred
Stock would otherwise be entitled to purchase.
(f) SALE OF SHARES. No later than 30 days after the expiration of
the Future Shares Exercise Period, the Corporation shall deliver to each holder
of Class B Preferred Stock who has submitted a Notice of Purchase to the
Corporation a notice indicating the number of Future Shares which the
Corporation shall sell to such holder pursuant to this Section 10 and the terms
and conditions of such sale, which shall be in all respects (including unit
price and interest rates) the same as specified in the proposal. The sale to
such holders of such Future Shares shall take place not later than 10 days after
receipt of such notice.
Any sale to an Offeree of Future Shares that were not selected for
purchase by the holders of Class B Preferred Stock as provided above shall take
place not later than 90 days after the expiration of the Future Shares Exercise
Period. Such sale shall be upon terms and conditions in all respects
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(including unit price and interest rates) which are no more favorable to such
Offeree or less favorable to the Corporation than those set forth in the
Proposal. Any refused Future Shares not purchased by the Offeree as contemplated
by the Proposal within the 90-day period specified above shall remain subject to
this Section 10.
(g) EXCLUSION OF CERTAIN SHARES. Notwithstanding any contrary
provision of this Section 10, Future Shares shall not include Additional Shares
of Common Stock, Warrant Shares (as defined in the PCF Warrant Agreement),
shares issued by the Corporation as consideration in acquisitions permitted by
the Purchase Agreements, or shares issued in connection with a Liquidity Event.
11. AMENDMENTS. The provisions of these terms of the Class B Preferred
Stock contained in this Section C of Article IV may not be amended, modified or
waived without the written consent or affirmative vote of the Required Holders;
PROVIDED, HOWEVER, that (a) any amendment reducing or postponing the payment of
dividends or redemptions or increasing the amount of the Conversion Price shall
require the written consent or affirmative vote of holders of 90% of the then
outstanding shares of Class B Preferred Stock, (b) any amendment adversely
affecting the rights of holders of Class A Preferred Stock under Section 3 shall
require the written consent or affirmative vote of holders of a majority of the
then outstanding shares of Class A Preferred Stock, (c) any amendment adversely
affecting the rights of holders of Class C Preferred Stock under Section 3 shall
require the written consent or affirmative vote of the Required Holders (as
defined in Section D of this Article IV), and (d) any amendment, modification or
waiver adversely affecting the rights of an SBA Holder differently from the
effects on the other holders of Class B Preferred Stock shall require the prior
written consent of each SBA Holder.
SECTION D. CLASS C PREFERRED STOCK.
1. DESIGNATION AND AMOUNT. The Corporation shall have authority to issue
3,000,000 shares of Class C Redeemable Convertible Preferred Stock (the "CLASS C
PREFERRED STOCK"), subject to increase (but only as to shares of Preferred Stock
authorized by these Articles of Incorporation with respect to which the powers,
designations, preferences and rights shall not then have been previously
designated) or decrease (but not below the number of shares thereof then
outstanding) from time to time by action of the Board of Directors.
The Class C Preferred Stock has been issued pursuant to an Amended and
Restated Securities Purchase Agreement dated as of June 26, 1998 among the
Corporation (as successor in interest to PHC), Weston Presidio Capital II, L.P.
and certain other investors (as in effect from time to time, the "WESTON
PRESIDIO PURCHASE AGREEMENT"). A copy of the Weston Presidio Purchase Agreement
will be provided to any registered holder of shares of capital stock of the
Corporation following written request directed to the Secretary of the
Corporation at its registered address. As set forth in the Weston Presidio
Purchase Agreement, holders of Class C Preferred Stock are entitled to receive
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certain Contingent Warrants to purchase Common Stock in the event the
Corporation does not obtain increased senior debt financing by certain specified
dates, the earliest of which is October 23, 1998.
The relative powers, preferences and rights, and relative participating,
optional or other special rights, and the qualifications, limitations or
restrictions thereof, granted to or imposed on the Class C Preferred Stock are
set forth below:
2. DEFINED TERMS. Certain capitalized terms are used in this Section D of
Article IV as specifically defined below in this Section 2. Except as the
context otherwise explicitly requires, (a) the capitalized term "Section" refers
to sections of this Section D of Article IV, (b) references to a particular
Section include all subsections thereof, (c) the word "including" shall be
construed as "including without limitation", (d) accounting terms not otherwise
defined herein have the meaning provided under generally accepted accounting
principles, (e) references to a particular statute or regulation include all
rules and regulations thereunder and any successor statute, regulation or rules,
in each case as from time to time in effect and (f) references to a particular
Person include such Person's successors and assigns to the extent not prohibited
by these Articles of Incorporation and the Purchase Agreements.
(1) "ACCEPTED SHARES" is defined in Section 10(b).
(2) "ACCRUAL YEAR" means the 12-month period commencing on the Original
Issue Date and each 12-month period thereafter.
(3) "ADDITIONAL SHARES OF COMMON STOCK" is defined in Section 6(e)(1).
(4) "AFFILIATE" is defined in Section 6(d)(1).
(5) "BY-LAWS" means all written rules, regulations, procedures, by-laws
and all other similar documents relating to the management, governance or
internal regulation of a Person other than an individual, or interpretive of the
Articles of Incorporation or other charter documents of such Person, each as
from time to time amended or modified.
(6) "CASH PAYMENT DATE" means the date after the consummation of a
Liquidity Event when all Indebtedness under the Senior Debt Documents and the
Subordinated Debt Documents has been paid in full in cash or redemption of the
Class C Preferred Stock is otherwise permitted by the Senior Debt Documents and
the Subordinated Debt Documents.
(7) "CLASS A PREFERRED STOCK" means the Class A Preferred Stock, $0.01 par
value, of the Corporation.
(8) "CLASS B PREFERRED STOCK" means the Class B Redeemable Convertible
Preferred Stock of the Corporation, $0.01 par value per share.
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(9) "CLASS C PREFERRED STOCK" is defined in Section 1.
(10) "CONVERSION PRICE" is defined in Section 6(a).
(11) "CONVERSION WARRANTS" is defined in Section 7(b).
(12) "CONVERTIBLE SECURITIES" is defined in Section 6(e)(1).
(13) "DISTRIBUTION EVENT" is defined in Section 5.
(14) "FUTURE SHARES" is defined in Section 10(a).
(15) "FUTURE SHARES EXERCISE PERIOD" is defined in Section 10(a).
(16) "INDEBTEDNESS" means (a) all debt for borrowed money and similar
monetary obligations evidenced by bonds, notes, debentures, capitalized lease
obligations, deferred purchase price of property (other than ordinary trade
payables) or otherwise, whether direct or indirect; and (b) all liabilities
secured by any Liens existing on property owned or acquired, whether or not the
liability secured thereby shall have been assumed.
(17) "INVESTOR AGREEMENTS" is defined in the Purchase Agreements,
respectively.
(18) "LIQUIDITY EVENT" means any of the following transactions so long as
the aggregate net cash proceeds (or market value of freely tradable marketable
securities with a market float reasonably satisfactory to the Required Holders)
to the Corporation and its stockholders as a result of such transaction are at
least $20,000,000:
(i) an underwritten public offering of Common Stock registered under
the federal Securities Act of 1933; or
(ii) the sale of all or substantially all the assets or stock of the
Corporation; or
(iii) a merger or consolidation of the Corporation described in
Section 7(b)(2).
(19) "LIQUIDITY SHARE PRICE" means, with respect to any Liquidity Event,
the weighted average price per share paid for (or properly allocable to) Common
Stock, $0.0025 par value, on a fully diluted basis (giving effect to the
exercise of all outstanding options, warrants, conversion rights and rights to
acquire shares). For purposes of these calculations, shares of Class A Preferred
Stock, Class B Preferred Stock and Class C Preferred Stock (and any other shares
of the Corporation's stock having a liquidation preference over the Common
Stock) shall be deemed to have been converted into Common Stock immediately
prior to such Liquidity Event.
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(20) "NOTICE OF PURCHASE" is defined in Section 10(b).
(21) "OFFEREE" is defined in Section 10(a).
(22) "OPTIONS" is defined in Section 6(e)(1).
(23) "ORGANIC CHANGE" is defined in Section 7(b).
(24) "ORIGINAL ISSUE DATE" is defined in Section 6(e)(1).
(25) "PARIBAS PURCHASE AGREEMENT" means the Securities Purchase Agreement
dated as of October 31, 1997 between the Corporation (as successor in interest
to PHC) and Paribas Principal Incorporated, as in effect from time to time.
(26) "PCF WARRANT AGREEMENT" means the Warrant Agreement dated as of
October 31, 1997 between the Corporation (as successor in interest to PHC) and
Paribas Capital Funding LLC.
(27) "PERSON" means an individual, partnership, corporation, company,
association, trust, joint venture, unincorporated organization, business trust,
limited liability company and any governmental department or agency or political
subdivision.
(28) "PREFERENTIAL AMOUNT" is defined in Section 5.
(29) "PREFERRED DIRECTOR" is defined in Section 3(c).
(30) "PREFERRED STOCK" is defined in Section 1.
(31) "PROPORTIONATE PERCENTAGE" is defined in Section 10(a).
(32) "PROPORTIONATE VOTING SHARE" means, with respect to a particular
class of stock, a fraction (a) the numerator of which is the number of shares of
Common Stock into which such class of stock may be converted and (b) the
denominator of which is the aggregate number of shares of Common Stock on a
fully diluted basis (giving effect to the exercise of all then exercisable
conversion, purchase or exercise rights).
(33) "PROPOSAL" is defined in Section 10(a).
(34) "PURCHASE AGREEMENTS" means the Weston Presidio Purchase Agreement
and the Paribas Purchase Agreement, collectively.
(35) "REMEDY EVENT" is defined in Section 8.
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(36) "REMEDY NOTICE" is defined in Section 3(b)(2).
(37) "REQUIRED HOLDERS" means the holders of two-thirds of the outstanding
Class C Preferred Stock.
(38) "SBA HOLDER" means any holder of Class C Preferred Stock that is
subject to the Small Business Investment Act of 1958, as amended, and the rules
and regulations thereunder.
(39) "SBA DIVIDEND" is defined in Section 4(b)(1).
(40) "SBA DIVIDEND PAYMENT DATE" is defined in Section 4(b)(1).
(41) "SECTION 4(B)(2) DIVIDEND" is defined in Section 4(b)(1).
(42) "SENIOR DEBT DOCUMENTS" means the Credit Agreement dated as of
October 31, 1997 among the Corporation (as successor in interest to PHC), the
financial institutions party thereto from time to time and Banque Paribas, as
Agent, as well as the other Credit Documents, as defined therein, in each case
as amended (including by any amendment or restatement), supplemented, modified
or extended from time to time including each loan or credit agreement and other
related agreements extending the maturity of, replacing, refinancing, refunding,
or otherwise restructuring (including, without limitation, increasing the amount
of the available borrowings thereunder), in whole or in part, the debt under the
Credit Agreement, whether by the same or any other agent, lender or group of
lenders.
(43) "SUBORDINATED DEBT DOCUMENTS" means the Subordinated Loan Agreement,
as well as the other Loan Documents, as defined therein, in each case as amended
(including by any amendment or restatement), supplemented, modified or extended
from time to time including each loan or credit agreement and other related
agreements extending the maturity of, replacing, refinancing, refunding or
otherwise restructuring (including, without limitation, increasing the available
borrowings thereunder), in whole or in part, the debt under the Senior
Subordinated Loan Agreement, whether by the same or any other lender or group of
lenders.
(44) "SUBORDINATED LOAN AGREEMENT" means the Senior Subordinated Loan
Agreement dated as of October 31, 1997, among the Corporation (as successor in
interest to PHC), PHC Holding Corporation, the lenders party thereto and Paribas
Capital Funding LLC, as amended, supplemented or refinanced from time to time.
(45) "COMMON STOCK" means the Common Stock, $0.0025 par value, of the
Corporation.
(46) "WESTON PRESIDIO PURCHASE AGREEMENT" is defined in Section 1.
3. VOTING RIGHTS.
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(a) CLASS C PREFERRED STOCK VOTES PER SHARE; NOTICES. Except as
otherwise provided herein (including the election of Preferred Directors
pursuant to Section 3(b)(1) and a majority of the members of the Corporation's
Board of Directors pursuant to Section 3(b)(2)) or required by law, the holders
of Class C Preferred Stock shall vote as a single class with the holders of
Common Stock and shall have such votes in respect of each share of Class C
Preferred Stock on any matter submitted to the holders of Common Stock as the
number of shares of Common Stock into which shares of Class C Preferred Stock
may then be converted. Record holders of Class C Preferred Stock shall be
entitled to notice of any stockholders' meeting or solicitation of stockholders'
consents in the manner provided in the Bylaws of the Corporation for general
notices.
(b) PREFERRED DIRECTORS.
(1) REPRESENTATIVE DIRECTOR. In addition to the rights set
forth in Section 3(b)(2), the holders of a majority of the shares of Class
B Preferred Stock and Class C Preferred Stock, voting together as a
single, separate class, shall be entitled to elect one director. Except as
provided in Section 3(b)(2), the number of directors of the Corporation
shall not exceed nine.
(2) MAJORITY DIRECTORS.
(i) In the event that any Remedy Event shall occur,
then, upon notice to the Corporation given by the holders of
two-thirds of the outstanding Class A Preferred Stock, Class B
Preferred Stock, Class C Preferred Stock and Class D Preferred
Stock, taken together as a single class (a "REMEDY NOTICE"), the
number of directors shall be increased as provided in Section
3(b)(2)(ii) and the holders of Class A Preferred Stock, Class B
Preferred Stock, Class C Preferred Stock and Class D Preferred
Stock, voting together as a single, separate class, weighted among
the Class A Preferred Stock, the Class B Preferred Stock, the Class
C Preferred Stock and the Class D Preferred Stock according to their
respective Proportionate Voting Shares, shall become entitled to
elect a majority of the Board of Directors of the Corporation until
any such Remedy Event shall have been rectified or cured to the
written satisfaction of the holders of two-thirds of the outstanding
Class A Preferred Stock, Class B Preferred Stock, Class C Preferred
Stock and Class D Preferred Stock, taken together as a single class,
whereupon such right of the holders of the Class C Preferred Stock
to elect a majority of the Board of Directors of the Corporation
(together with holders of Class A Preferred Stock, Class B Preferred
Stock, and Class D Preferred Stock to the extent provided above)
shall cease, and the maximum number of directors shall be reduced to
the number in effect immediately prior to such Remedy Notice,
subject to being again revived from time to time upon the
reoccurrence of the conditions above described.
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(ii) Immediately upon receipt by the Corporation of a
Remedy Notice pursuant to Section 3(b)(2)(i) above, the number of
directors of the Corporation shall automatically be increased to the
minimum number sufficient to permit the election of additional
directors so that after such election a majority of directors will
have been elected by the holders of the Class C Preferred Stock
(together with holders of Class A Preferred Stock, Class B Preferred
Stock and Class D Preferred Stock to the extent provided above).
Upon such increase, the directors of the Corporation shall thereupon
be divided into classes. One class shall consist of a number of
directors equal to a majority of all the directors and shall be
elected solely by the holders of Class C Preferred Stock (together
with holders of Class A Preferred Stock, Class B Preferred Stock and
Class D Preferred Stock to the extent provided above), voting
separately as a single class, and the other class shall consist of
the remaining directors and shall be elected by the holders of the
capital stock of the Corporation entitled to vote generally in the
election of directors. Subject to Section 8, any director then in
office who was elected pursuant to Section 3(b)(1) shall
automatically become a member of the class of directors elected
solely by the holders of Class C Preferred Stock (together with
holders of Class A Preferred Stock, Class B Preferred Stock and
Class D Preferred Stock to the extent provided above).
(c) TENURE. Each Director elected by the holders of Class C
Preferred Stock and Class B Preferred Stock pursuant to Section 3(b) (a
"PREFERRED DIRECTOR") shall serve for a term of the lesser of (a) one year and
until such Preferred Director's successor is elected and qualified, or (b) until
the right to elect such Preferred Director ceases (at which time such Preferred
Director will be deemed to be removed). So long as the holders of Class C
Preferred Stock and Class B Preferred Stock are entitled to elect a Preferred
Director, any vacancy in the position of a Preferred Director may be filled only
by vote of the holders of a majority of the shares of Class C Preferred Stock
and Class B Preferred Stock entitled to vote thereon (together with holders of
Class A Preferred Stock to the extent provided above). A Preferred Director may,
during such Preferred Director's term of office, be removed at any time, with or
without cause, only by the affirmative vote of the holders of record of a
majority of the outstanding shares of Class C Preferred Stock and Class B
Preferred Stock (together with holders of Class A Preferred Stock to the extent
provided above).
4. DIVIDENDS.
(a) COMMON STOCK DIVIDENDS. No dividends of cash or other property
(other than additional shares of Common Stock) shall be paid on the Common Stock
unless the shares of Class C Preferred Stock at the time of payment of such
dividend receive the same dividends that such shares would have received had
they been converted into Common Stock immediately prior to the record date for
such dividend.
(b) PREFERRED DIVIDENDS.
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(1) SBA HOLDERS DIVIDENDS. In addition to the dividends
contemplated by Section 4(a), each SBA Holder holding shares of Class C
Preferred Stock shall be entitled to receive cash dividends on each share
of Class C Preferred Stock held by such SBA Holder, which dividends shall
accrue daily and compound quarterly at a rate of 14% per annum on a deemed
value of $4.00 per share of Class C Preferred Stock (the "SBA DIVIDEND").
The Corporation shall declare and pay the SBA Dividend on the last day of
December, March, June and September of each year (each a "SBA DIVIDEND
PAYMENT DATE"); PROVIDED, HOWEVER, that in the event the Corporation shall
not declare and pay the SBA Dividend on any SBA Dividend Payment Date,
each SBA Holder shall be entitled to receive the dividend set forth in
Section 4(b)(2) (the "SECTION 4(B)(2) DIVIDEND") on the terms and
conditions set forth in Section 4(b)(2), as if the Section 4(b)(2)
Dividend had accrued, with respect to the shares of Class C Preferred
Stock held by each SBA Holder, for the entire quarterly period ending on
such SBA Dividend Payment Date, and each SBA Holder shall continue to be
entitled to receive the Section 4(b)(2) Dividend until the Section 4(b)(2)
Dividend has been paid in accordance with Section 4(b)(2). The rights to
receive the Section 4(b)(2) Dividend as stated in the immediately
preceding sentence shall be the sole and exclusive remedy of each SBA
Holder with respect to the failure of the Corporation to pay any SBA
Dividend on any SBA Dividend Payment Date.
(2) CLASS C PREFERRED STOCK. In addition to the dividends
contemplated by Section 4(a), during each Accrual Year, each holder of
Class C Preferred Stock (other than those shares of Class C Preferred
Stock held by SBA Holders, except in the circumstances set forth in
Section 4(b)(1)) shall be entitled to receive, when and as declared by the
Board of Directors of the Corporation out of funds legally available
therefor, an annual dividend payable on the last day of such Accrual Year
with respect to each share of Class C Preferred Stock held by such holder
in an amount equal to 20% of the sum of (a) $4 PLUS (b) the amount of all
cumulated and unpaid dividends (if any) in respect of such share of Class
C Preferred Stock, which dividend (i) shall be payable in preference and
priority to any payment of any dividend with respect to the Common Stock,
(ii) shall accrue daily (whether or not declared or funds are legally
available therefor), and (iii) to the extent not paid, shall cumulate (and
thereby compound) annually on the last day of each Accrual Year. Upon the
consummation of a Liquidity Event, each holder of Class C Preferred Stock
shall have the option of either (i) receiving all accrued and unpaid
dividends (if any) payable to such Investor pursuant to this Section
4(b)(2), in which case any Purchase Warrants (as defined in the Weston
Presidio Purchase Agreement) issued to such Investor at the Fourth Closing
or the Fifth Closing (as such terms are defined in the Weston Presidio
Purchase Agreement) shall be cancelled, or (ii) waiving all accrued and
unpaid dividends (if any) payable to such Investor pursuant to this
Section 4(b)(2), in which case any Purchase Warrants issued to such
Investor at such Closings shall become exercisable pursuant to the terms
thereof.
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All amounts in Section 4(b) shall be appropriately adjusted for any stock
dividends, stock splits, recapitalizations or other similar changes in the
outstanding shares of Common Stock after the Original Issue Date.
(c) GENERAL. The Corporation shall not subdivide or combine any
share of Class C Preferred Stock, or pay any dividend or make any other
distribution on any share of Class C Preferred Stock, or redeem any share of
Class C Preferred Stock, or accord any other similar payment, benefit or
preference to any share of Class C Preferred Stock, except by extending such
subdivision, combination, distribution, redemption, payment, benefit or
preference equally to all shares of Class C Preferred Stock; PROVIDED, HOWEVER,
that in the case of dividends or other distributions payable in shares of Common
Stock, or options, warrants or rights to acquire shares of Common Stock, or
securities convertible into or exchangeable for shares of Common Stock, the
shares, options, warrants, rights to acquire shares or securities so convertible
or exchangeable shall be payable in shares of or options, warrants or rights to
acquire shares of, or securities convertible into or exchangeable for, Common
Stock in respect of Class C Preferred Stock.
5. LIQUIDATION. In the event of (a) any liquidation, dissolution or
winding up of the Corporation, either voluntary or involuntary, or (b) unless
agreed otherwise in writing by the Required Holders, a merger or consolidation
of the Corporation (each, a "DISTRIBUTION EVENT"), distributions to the
stockholders of the Corporation shall be made in the following manner. The
holders of Class C Preferred Stock shall first be entitled to receive, prior and
in preference to any distribution of any of the assets of the Corporation to the
holders of any other series of Preferred Stock, Common Stock or other capital
stock of the Corporation by reason of their ownership of such stock, but pari
passu with the holders of Class A Preferred Stock, the Class B Preferred Stock
and the Class D Preferred Stock in accordance with the relative liquidation
preferences of the Class A Preferred Stock, the Class B Preferred Stock, the
Class C Preferred Stock and the Class D Preferred Stock, an amount per share
equal to the greater of (i) the sum of (A) $4.00 PLUS (B) all accrued and unpaid
dividends on the Class C Preferred Stock due under Section 4 (such sum being
referred to as the "PREFERENTIAL AMOUNT") and (ii) the sum of (A) the
distribution to which the holder of such share of Class C Preferred Stock would
have been entitled if such share had been converted into Common Stock pursuant
to Section 6 immediately prior to the Distribution Event PLUS (B) all accrued
and unpaid dividends on the Class C Preferred Stock due under Section 4. If the
assets and funds of the Corporation shall be insufficient to permit the payment
of the full amount specified in the immediately preceding sentence to the
holders of Class C Preferred Stock, then the entire assets of the Corporation
legally available for distribution shall be distributed ratably among the
holders of Class A Preferred Stock, Class B Preferred Stock, Class C Preferred
Stock and Class D Preferred Stock in accordance with the relative liquidation
preferences of the shares of Class A Preferred Stock, Class B Preferred Stock,
Class C Preferred Stock and Class A Preferred Stock held by each of them.
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6. CONVERSION.
(a) RIGHT OF CONVERSION OF CLASS C PREFERRED STOCK INTO COMMON
STOCK. Each share of Class C Preferred Stock shall be convertible, at the option
of the holder thereof at any time at the office of the Corporation or any
transfer agent into the number of shares of the Common Stock of the Corporation
obtained by dividing $4.00 by the then effective conversion price of the Class C
Preferred Stock (as from time to time adjusted by this Section 6, the
"CONVERSION PRICE"). The initial Conversion Price shall be $2.09424 per share;
PROVIDED, HOWEVER, that in the event a Liquidity Event has not been consummated
prior to May 1, 2002, the initial Conversion Price for each share of Class C
Preferred Stock then outstanding shall be deemed to be $3.00 per share. All
calculations under this Section 6 shall be made to the nearest one hundredth of
a cent.
(b) AUTOMATIC CONVERSION OF CLASS C PREFERRED STOCK INTO COMMON
STOCK. Each share of Class C Preferred Stock shall automatically be converted
into shares of Common Stock at the then effective Conversion Price at any time
upon the closing of a Liquidity Event (to the extent such share of Class C
Preferred Stock is not then redeemed under Section (b)).
(c) MECHANICS OF CONVERSION UNDER SECTIONS 6(A) AND 6(B). Before any
holder of Class C Preferred Stock shall be entitled to convert the same into
shares of Common Stock and to receive certificates therefor, such holder shall
surrender the Class C Preferred Stock certificates, duly endorsed, at the office
of the Corporation or of any transfer agent for the Class C Preferred Stock, and
shall give written notice to the Corporation at such office that such holder
elects to convert the same; PROVIDED, HOWEVER, that in the event of an automatic
conversion pursuant to Section 6(b), the outstanding shares of Class C Preferred
Stock shall be converted automatically without any further action by the holders
of such shares and whether or not the certificates representing such shares are
surrendered to the Corporation or its transfer agent; and PROVIDED, FURTHER that
the Corporation shall not be obligated to issue certificates evidencing the
shares of Common Stock issuable upon such automatic conversion unless the
certificates evidencing such shares of Class C Preferred Stock are either
delivered to the Corporation or its transfer agent as provided above, or the
holder notifies the Corporation or its transfer agent that such certificates
have been lost, stolen or destroyed and executes an agreement reasonably
satisfactory to the Corporation to indemnify the Corporation from any loss
incurred by it in connection with such certificates. The Corporation shall, as
soon as practicable after such delivery, or execution of such agreement in the
case of a lost certificate, issue and deliver at such office to such holder of
Class C Preferred Stock, a certificate or certificates for the number of shares
of Common Stock to which such holder shall be entitled as aforesaid and a check
payable to the holder in the amount of any cash amounts payable as the result of
a conversion into fractional shares of Common Stock plus all accrued and unpaid
dividends on such holder's Class C Preferred Stock so converted; PROVIDED,
HOWEVER, that in the event of a conversion prior to the Cash Payment Date, the
Corporation shall issue fractional shares in lieu of the cash payments
contemplated above except that the Corporation may pay cash for such fractional
shares (a) to the extent permitted by its lending agreements and (b) as a result
of a reverse stock split consummated for a legitimate business purpose (such as
in preparation for an initial public offering) so long as the cash amount paid
for such
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fractional shares is not material. Such conversion shall be deemed to have been
made immediately prior to the close of business on the date of such surrender of
the shares of Class C Preferred Stock to be converted, or in the case of
automatic conversion immediately upon closing of the Liquidity Event, and the
person entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder of such shares
of Common Stock on such date.
(d) INTENTIONALLY DELETED.
(e) ADJUSTMENT OF CONVERSION PRICE DUE TO ISSUANCE OF ADDITIONAL
SHARES. The Conversion Price shall be subject to adjustment as follows:
(1) SPECIAL DEFINITIONS.
"OPTIONS" shall mean rights, options or warrants to subscribe
for, purchase or otherwise acquire either Common Stock or
Convertible Securities.
"ORIGINAL ISSUE DATE" shall mean, with respect to any share of
Class C Preferred Stock, the date on which such share of Class C
Preferred Stock is issued by the Corporation .
"CONVERTIBLE SECURITIES" shall mean any indebtedness, shares
or other securities convertible into or exchangeable for Common
Stock.
"ADDITIONAL SHARES OF COMMON STOCK" shall mean all shares of
Common Stock issued (or, pursuant to Section 6(e)(5), deemed to be
issued) by the Corporation after the Original Issue Date, other than
shares of Common Stock issued or issuable (or, pursuant to Section
6(e)(5), deemed to be issued) at any time:
(i) upon conversion of the Class C Preferred Stock
authorized herein or upon exercise or conversion of the
Purchase Warrants (as defined in the respective Purchase
Agreements), Conversion Warrants (as defined in the respective
Purchase Agreements), Contingent Warrants (as defined in the
Weston Presidio Purchase Agreement), Warrants (as defined in
the Subordinated Loan Agreement), and the other options and
warrants set forth in Exhibit 4.3.1 to either Purchase
Agreement;
(ii) as a stock dividend, stock split or similar
distribution on the Class A Preferred Stock , Class B
Preferred Stock, Class C Preferred Stock or Class D Preferred
Stock or any other event for which adjustment is made pursuant
to Section 6(e)(3);
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(iii) pursuant to a stock option, stock bonus or other
employee stock plan permitted by section 5.14 of the Weston
Presidio Purchase Agreement and section 5.13 of the Paribas
Purchase Agreement or approved by the Preferred Director at a
meeting or by unanimous written consent of the Board of
Directors or approved by the Required Holders, which approval
shall specify the number of shares of Common Stock available
for distribution under any such plan;
(iv) upon conversion of the Corporation's Class A
Preferred Stock into Common Stock, conversion of the
Corporation's Class B Preferred Stock into Common Stock, or
conversion of the Class D Preferred Stock into Common Stock;
(v) in connection with sales of Common Stock or other
Future Shares to the holders of the Class C Preferred Stock
pursuant to the exercise by such holders of their rights under
section 10(a) or to the holders of Class B Preferred Stock
pursuant to the exercise by such holders of their rights under
Section 10(a) of Section C of this Article IV; or
(vi) by way of dividend or other distribution on shares
of Common Stock excluded from the definition of Additional
Shares of Common Stock by the foregoing subsections of this
Section 6(e)(1).
(2) NO ADJUSTMENT OF CONVERSION PRICE. No adjustment in the
Conversion Price shall be made in respect of the issuance of Additional
Shares of Common Stock (a) unless the consideration per share (determined
pursuant to Section 6(e)(6)) for an Additional Share of Common Stock
issued or deemed to be issued by the Corporation is less than the
applicable Conversion Price in effect on the date of, and immediately
prior to, such issue or (b) if prior to such issuance the Required Holders
give a written waiver of such adjustment.
(3) ADJUSTMENT OF CONVERSION PRICE UPON ISSUANCE OF ADDITIONAL
SHARES OF COMMON STOCK. (i) Except as otherwise indicated in Section
6(e)(3)(ii), in the event the Corporation shall issue Additional Shares of
Common Stock (including Additional Shares of Common Stock deemed to be
issued pursuant to Section 6(e)(5)) for a consideration per share less
than the applicable Conversion Price of the Class C Preferred Stock in
effect on the date of and immediately prior to such issue, then and in
such event, the applicable Conversion Price shall be reduced, concurrently
with such issue (calculated to the nearest one hundredth of a cent), to a
new Conversion Price obtained by dividing (A) an amount equal to the sum
of (x) the number of shares of Common Stock outstanding immediately prior
to such issue multiplied by the then applicable Conversion Price and (y)
the consideration, if any, deemed received by the Corporation upon such
issue by (B) the total number of shares of Common Stock deemed to be
outstanding immediately after such issue; PROVIDED, HOWEVER, that, for
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purposes of any calculation under this Section 6(e)(3)(i), all shares of
Common Stock outstanding and issuable upon conversion of outstanding
Options, Convertible Securities, Class B Preferred Stock and Class C
Preferred Stock immediately prior to giving effect to such calculation
shall be deemed to be outstanding.
(ii) Notwithstanding Section 6(e)(3)(i), in the event
the Corporation shall issue Additional Shares of Common Stock (including
Additional Shares of Common Stock deemed to be issued pursuant to Section
6(e)(5)) in a transaction or series of related transactions in which the
consideration actually received or deemed received hereunder by the
Corporation is at least $5,000,000 (determined without aggregating the
consideration received by the Corporation in connection with
contemporaneuous acquisitions of unrelated parties) for a consideration
per share less than the applicable Conversion Price of the Series C
Preferred Stock in effect on the date of and immediately prior to such
issue, then and in such event, the applicable Conversion Price shall be
reduced, concurrently with such issue (calculated to the nearest one
hundredth of a cent), to a new Conversion Price equal to such
consideration per share.
(iii) In no event will the Conversion Price be adjusted
pursuant to Section 6(e)(3)(i) or Section 6(e)(3)(ii) as the result of any
issuance of Additional Shares of Common Stock for any amount higher than
the Conversion Price in effect immediately prior to such issuance.
(4) ADJUSTMENTS FOR SUBDIVISIONS, STOCK DIVIDENDS,
COMBINATIONS OR CONSOLIDATION OF COMMON STOCK. In the event the
outstanding shares of Common Stock shall be increased by way of stock
issued as a dividend for no consideration or subdivided (by stock split or
otherwise) into a greater number of shares of Common Stock, the respective
Conversion Prices then in effect shall, concurrently with the
effectiveness of such increase or subdivision, be proportionately
decreased. In the event the outstanding shares of Common Stock shall be
combined or consolidated, by reclassification or otherwise, into a lesser
number of shares of Common Stock, the respective Conversion Prices then in
effect shall, concurrently with the effectiveness of such combination or
consolidation, be proportionately increased.
(5) DEEMED ISSUE OF ADDITIONAL SHARES OF COMMON STOCK -
OPTIONS AND CONVERTIBLE SECURITIES. Except as provided in Section 6(e)(3)
or Section 6(e)(4), in the event the Corporation at any time after the
Original Issue Date shall issue any Options or Convertible Securities or
shall fix a record date for the determination of holders of any class of
securities entitled to receive any such Options or Convertible Securities,
then the maximum number of shares (as set forth in the instrument relating
thereto without regard to any provisions contained therein for a
subsequent adjustment of such number) of Common Stock issuable upon the
exercise of such Options or, in the case of Convertible Securities and
Options therefor, the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of Common Stock issued
as of the time of such issue or, in case such
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a record date shall have been fixed, as of the close of business on such
record date; PROVIDED, HOWEVER, that Additional Shares of Common Stock
shall not be deemed to have been issued unless the consideration per share
(determined pursuant to Section 6(e)(6)) of such Additional Shares of
Common Stock would be less than the applicable Conversion Price in effect
on the date of, and immediately prior to, such issue, or such record date,
as the case may be; and PROVIDED, further, that in any such case in which
Additional Shares of Common Stock are deemed to be issued:
(i) no further adjustment in the applicable Conversion
Price shall be made upon the subsequent issue of shares of Common
Stock upon the exercise of such Options or conversion or exchange of
such Convertible Securities or upon the subsequent issue of such
Convertible Securities or Options;
(ii) if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for any
increase in the consideration payable to the Corporation, or any
increase in the number of shares of Common Stock issuable, upon the
exercise, conversion or exchange thereof, the applicable Conversion
Price computed upon the original issue thereof (or upon the
occurrence of a record date with respect thereto), and any
subsequent adjustments based thereon, shall, upon any such increase
becoming effective, be recomputed to reflect such increase insofar
as it affects such Options or the rights of conversion or exchange
under such Convertible Securities;
(iii) upon the expiration of any such Options or any
rights of conversion or exchange under such Convertible Securities
which shall not have been exercised, the applicable Conversion Price
computed upon the original issue thereof (or upon the occurrence of
a record date with respect thereto), and any subsequent adjustments
based thereon shall remain in effect upon and after such expiration,
but the Additional Shares of Common Stock deemed issued as the
result of the original issue of such Option or rights shall not be
deemed issued for the purposes of any subsequent adjustment to the
Conversion Price;
(iv) in the event of any changes in the number of shares
of Common Stock issuable upon the exercise, conversion or exchange
of such Options or Convertible Securities, including a change
resulting from the anti-dilution provisions thereof, the Conversion
Price then in effect shall be readjusted to the Conversion Price
that would have been in effect if the adjustment which was made upon
the issuance of such Options or Convertible Securities had been made
upon the basis of such change;
(v) no readjustment pursuant to subsections (ii) or (iv)
above shall have the effect of increasing the applicable Conversion
Price to an amount which exceeds the lower of (x) the applicable
Conversion Price on the original adjustment
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date, or (y) the applicable Conversion Price that resulted from the
issuance or deemed issuance of other Additional Shares of Common
Stock between the original adjustment date and such readjustment
date; and
(vi) in the event the Corporation amends the terms of
any Options or Convertible Securities (whether such Options or
Convertible Securities were outstanding on the Original Issue Date
or were issued after the Original Issue Date), then such Options or
Convertible Securities, as so amended, shall be deemed to have been
issued after the Original Issue Date and the provisions of this
Section 6(e)(5) shall apply.
(6) DETERMINATION OF CONSIDERATION. For purposes of this
Section 6(e), the consideration received by the Corporation for the issue
of any Additional Shares of Common Stock shall be computed as follows:
(i) CASH AND PROPERTY. Such consideration shall:
(A) insofar as it consists of cash, be computed at the
aggregate amount of net cash proceeds received by the
Corporation excluding amounts paid or payable for accrued
interest or accrued dividends;
(B) insofar as it consists of property other than cash,
be computed at the fair value thereof at the time of such
issue, as determined in good faith by the Board of Directors
of the Corporation; and
(C) in the event Additional Shares of Common Stock are
issued together with other shares or securities or other
assets of the Corporation for consideration which covers both,
be the proportion of such consideration so received, computed
as provided in subsections (A) and (B) above, which is
allocated to the Additional Shares of Common Stock as
determined in good faith by the Board of Directors.
(ii) OPTIONS AND CONVERTIBLE SECURITIES. The consideration per
share received by the Corporation for Additional Shares of Common Stock
deemed to have been issued pursuant to Section 6(e)(5), relating to
Options and Convertible Securities, shall be determined by dividing
(A) the total amount, if any, received or receivable by
the Corporation as consideration for the issue of such Options
or Convertible Securities, plus, subject to Section
6(e)(5)(ii), the minimum aggregate amount of additional
consideration (as set forth in the instruments relating
thereto, without regard to any provision contained therein for
a subsequent adjustment
564314.5
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of such consideration) payable to the Corporation upon the
exercise of such Options or the conversion or exchange of such
Convertible Securities, or in the case of Options for
Convertible Securities, the exercise of such Options for
Convertible Securities and the conversion or exchange of such
Convertible Securities by
(B) the maximum number of shares of Common Stock (as set
forth in the instruments relating thereto, without regard to
any provision contained therein for a subsequent adjustment of
such number) issuable upon the exercise of such Options or the
conversion or exchange of such Convertible Securities.
(7) OTHER DILUTIVE EVENTS. In case any event shall occur as to
which the other provisions of this Section 6(e) are not strictly
applicable, but the failure to make any adjustment in the Conversion Price
would not, in the reasonable judgment of a majority of the directors of
the Corporation, fairly protect the conversion rights represented by the
Class C Preferred Stock in accordance with the intention of this Section
6, then, upon request of the Required Holders, the Board of Directors of
the Corporation shall appoint a firm of independent public accountants of
recognized national standing (which may be the regular auditors of the
Corporation) to give their opinion as to the adjustment, if any, on a
basis consistent with the intention of this Section 6, necessary to
preserve without dilution the conversion rights represented by the Class C
Preferred Stock. Upon receipt of such opinion, the Corporation will
promptly furnish a copy thereof to the holders of the Class C Preferred
Stock and the Conversion Price shall be adjusted in accordance therewith
to the extent recommended by such accountants. The fees and expenses of
such accountants shall be paid by the Corporation; PROVIDED, HOWEVER, that
if such accountants opine that the total adjustment per share of Class C
Preferred Stock is less than 10% of the previous per share Conversion
Price, such fees and expenses will be paid by the holders of the Class C
Preferred Stock.
(f) OTHER DISTRIBUTIONS. In the event the Corporation shall declare
a distribution payable in securities of the Corporation (other than shares of
Common Stock), securities of other entities, securities evidencing indebtedness
issued by the Corporation or other entities, assets (including cash dividends)
or options or rights, then, in each such case for the purpose of this Section 6,
the holders of the Class C Preferred Stock shall be entitled to a proportionate
share of any such distribution as though they were the holders of the number of
shares of Common Stock of the Corporation into which their shares of such Class
C Preferred Stock were convertible as of the record date fixed for the
determination of the holders of Common Stock of the Corporation entitled to
receive such distribution.
(g) SUBSEQUENT EVENTS. In the event of any recapitalization,
consolidation or merger of the Corporation or its successor which does not
require redemption of the Class C Preferred Stock pursuant to Section 7(b), the
shares of Class C Preferred Stock shall be convertible into such shares
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or other interests as the Class C Preferred Stock would have been entitled if
the Class C Preferred Stock had been converted into Common Stock immediately
prior to such event.
(h) CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of the Conversion Price pursuant to this Section 6,
the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each holder of
Class C Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment is
based. The Corporation shall, upon the written request at any time of any holder
of Class C Preferred Stock, furnish or cause to be furnished to such holder a
certificate setting forth (a) all such adjustments and readjustments previously
made, (b) the Conversion Price at the time in effect, and (c) the number of
shares of Common Stock and the amount, if any, of other property which at such
time would be received upon the conversion of Class C Preferred Stock.
(i) ISSUE TAX. The issuance of certificates for shares of Common
Stock upon conversion of Class C Preferred Stock shall be made without charge to
the holders thereof for any issuance tax; PROVIDED, HOWEVER, that the
Corporation shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of any certificate in a
name other than the name of the holder of the Class C Preferred Stock which is
being converted to Common Stock.
7. REDEMPTION.
(a) MANDATORY REDEMPTION. Except as set forth in Section 7(b),
irrespective of any other redemptions or acquisitions of shares of the Class C
Preferred Stock, the Corporation will redeem at a price equal to the
Preferential Amount that number of shares of Class C Preferred Stock equal to
6.25% of the total number of issued and outstanding shares of Class C Preferred
Stock as of the later of December 31, 2002 and the Cash Payment Date (or such
lesser number as is then outstanding) on the last day of each March, June,
September and December, commencing on the later of March 2003 or the first such
date following the Cash Payment Date.
(b) MANDATORY CONTINGENT REDEMPTION. Upon the earliest to occur of:
(1) the sale by the Corporation of all or a substantial
portion of its assets,
(2) the merger of the Corporation with, or the consolidation
of the Corporation into, any other corporation as a result of which the
stockholders of the Corporation immediately prior to such merger or
consolidation do not own stock having more than 50% of the outstanding
voting power (assuming conversion of all convertible securities and
exercise of all outstanding options and warrants) of the surviving
corporation,
(3) the dissolution or liquidation of the Corporation,
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(4) ▇▇▇▇▇ ▇▇▇▇▇▇ shall cease for any reason to be Chairman of,
and actively involved in the executive management of, the Corporation and
a replacement satisfactory to the Required Holders shall not be in place
within 180 days,
(5) more than 50% of the outstanding voting stock of the
Corporation becomes owned by Persons other than (i) holders of Class B
Preferred Stock or Class C Preferred Stock and their transferees and (ii)
stockholders of record on the Original Issue Date (the foregoing events
described in subsections (1) through (5) shall constitute an "ORGANIC
CHANGE"), or
(6) a Remedy Event,
except in the case of a transaction described in subsections (1), (2), (5)
or (6) above that constitutes a Liquidity Event consummated on the terms
described in Section 4(b)(2), each holder of Class C Preferred Stock may
require the Corporation, on the Cash Payment Date, to redeem all or any
portion of the then outstanding shares of the Class C Preferred Stock of
such holder, at the holder's option, at a price equal to the Preferential
Amount, together with warrants in substantially the form of Exhibit 2.1B
to the Weston Presidio Purchase Agreement (the "CONVERSION WARRANTS") to
purchase the number of shares of Common Stock into which the shares of
Class C Preferred Stock so redeemed could at the time have been converted
at a purchase price per share equal to the aggregate cash consideration
received by the holder in connection with the redemption divided by such
number of shares of Common Stock. The number of shares for which each
Conversion Warrant shall be exercisable shall be reduced in proportion to
the mandatory redemption of Class C Preferred Stock under Section 7(a).
(c) NOTICE OF REDEMPTION; PRO RATA TREATMENT. Written notice of
redemption of Class C Preferred Stock pursuant to Sections 7(a) and 7(b) shall
be given not fewer than 30 days prior to the redemption date by first class
mail, postage prepaid, to each holder of record of shares of the Class C
Preferred Stock, at such holder's address on the books of the Corporation. Each
such notice shall state: (a) the redemption date; (b) the number of shares of
the Class C Preferred Stock to be redeemed; (c) the Preferential Amount; (d) the
place or places where certificates for such shares are to be surrendered for
payment of the Preferential Amount; and (e) that dividends on the shares to be
redeemed will cease to accrue on such redemption date. Redemptions under
Sections 7(a) and 7(b) shall be made pro rata among all holders of Class C
Preferred Stock.
(d) SPECIFIC PERFORMANCE. If any holder becomes obligated so to
deliver any shares of Class C Preferred Stock to the Corporation upon any
redemption under this Section 7 and fails to deliver the certificate therefor in
accordance with these Articles of Incorporation, the Corporation may, at its
option, in addition to all other remedies it may have, cancel on its books such
certificate representing such shares to be redeemed.
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8. REMEDY EVENT. The term "REMEDY EVENT" shall mean the occurrence and
continuance of any of the following events for a period exceeding 30 days
(unless otherwise specified below) after written notice of the occurrence of
such event has been furnished to the Corporation at its registered address:
(a) The Corporation shall fail to make any payment in respect of
dividends on or redemptions of any shares of Class C Preferred Stock as the same
shall become due.
(b) The Corporation shall fail to perform or observe any of the
covenants, agreements or other provisions set forth in these Articles of
Incorporation.
(c) Any written representation or warranty of or with respect to the
Corporation made in, or pursuant to the express requirements of, the Purchase
Agreement shall prove to have been false in any material respect on the date as
of which it was made without reference to whether such representation or
warranty was made with knowledge or without knowledge.
(d) The Corporation or any of its Subsidiaries shall fail to make
any required payment on any Indebtedness exceeding $100,000 in principal amount
of (or guaranteed by) the Corporation or any of its Subsidiaries or with respect
to any share of capital stock (whether because funds are not legally available
therefor or otherwise), or the Corporation or any of its Subsidiaries shall fail
to perform or observe any of the covenants or provisions required to be
performed or observed by it pursuant to any senior lending agreement (as from
time to time in effect), and (i) such failure shall continue, without having
been duly cured, waived or consented to, beyond the period of grace, if any,
therein specified or (ii) any security interest in or other lien on any property
securing any such indebtedness shall be enforced, unless contested in good faith
by the Corporation by appropriate proceedings or (iii) any such Indebtedness
shall become due and payable prior to stated maturity.
(e) The Corporation shall fail to keep reserved a sufficient number
of shares of Common Stock for issuance upon conversion of the Class C Preferred
Stock, or shall fail to issue an amount of shares of Common Stock upon the
conversion by the holders thereof of the Class C Preferred Stock.
(f) An Organic Change shall occur.
(g) The sum of Stockholders' Equity of the Corporation and its
subsidiaries PLUS (to the extent not included in Stockholders' Equity) the Class
B Preferred Stock and the Class C Preferred Stock, all determined in accordance
with generally accepted accounting principles consistently applied, shall at any
time be less than the amount equal to (i) $22,000,000 (being the Corporation's
pro forma net worth on the Original Issue Date (as defined in Section C of this
Article IV)) MINUS (ii) 25% of the aggregate purchase price for the then
outstanding Class B Preferred Stock and Class C Preferred Stock MINUS (iii) the
amount, not exceeding $14,000,000 in the aggregate, by
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which Stockholders' Equity has been reduced after such Original Issue Date by
the non-recurring write-off of intangible assets carried on the balance sheet of
the Corporation or any of its Subsidiaries in connection with the acquisition of
professional practices acquired by the Corporation and its Subsidiaries.
(h) A final judgment which, in the aggregate with other outstanding
final judgments against the Corporation or any of its Subsidiaries, exceeds
$100,000 above insurance coverage shall be rendered against the Corporation or
any of its Subsidiaries and, within 30 days after entry thereof, such judgment
shall not have been discharged or stayed pending appeal, or within 30 days after
expiration of such stay such judgment shall not have been discharged.
(i) The Corporation or any of its Subsidiaries or their Affiliates
shall fail to perform or observe any other covenant, other agreement or
provision to be performed or observed by it under either Purchase Agreement or
any other Investor Agreement to which the Corporation is a party and such
failure shall not be rectified or cured to the satisfaction of the Required
Holders within 30 days after actual knowledge by an executive officer of the
Corporation.
(j) The Corporation or any of its subsidiaries owning at least 10%
of the assets, or contributing over the past fiscal year at least 10% of the
cash flow, of the Corporation and its subsidiaries on a consolidated basis,
shall:
(1) commence a voluntary case under Title 11 of the United
States as from time to time in effect, or authorize, by appropriate
proceedings of its Board of Directors or other governing body, the
commencement of such a voluntary case;
(2) have filed against it a petition commencing an involuntary
case under such Title 11 and such petition is not dismissed within 30
days;
(3) seek relief as a debtor under any applicable law, other
than such Title 11, of any jurisdiction relating to the liquidation or
reorganization of debtors or to the modification or alteration of the
rights of creditors, or consent to or acquiesce in such relief;
(4) have entered against it any nonappealable order by a court
of competent jurisdiction (A) finding it to be bankrupt or insolvent, (B)
ordering or approving its liquidation, reorganization or any modification
or alteration of the rights of its creditors, or (C) assuming custody of,
or appointing a receiver or other custodian for, all or a substantial part
of its property; or
(5) make an assignment for the benefit of, or enter into a
composition with, its creditors, or appoint or consent to the appointment
of a receiver or other custodian for all or a substantial part of its
property.
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9. CERTAIN COVENANTS.
(a) SPECIAL RESTRICTIONS. At any time when shares of Class C
Preferred Stock are outstanding, except where the vote or written consent of the
holders of a greater number of shares of the Corporation is required by law or
by the Articles of Incorporation, and in addition to any other vote required by
law or the Articles of Incorporation, without the consent of the Required
Holders, given in writing or by vote at a meeting, consenting or voting (as the
case may be) separately as a class, the Corporation will not:
(1) create or authorize the creation of any additional class
or series of shares of stock, or issue any shares thereof, unless the same
ranks junior to the Class C Preferred Stock as to the distribution of
assets on the liquidation, dissolution or winding up of the Corporation or
increase the authorized amount of the Class C Preferred Stock or increase
the authorized amount of any additional class or series of shares of stock
unless the same ranks junior to the Class C Preferred Stock as to the
distribution of assets on the liquidation, dissolution or winding up of
the Corporation, or create or authorize any instrument or security
convertible into shares of Class C Preferred Stock or into shares of any
other class or series of stock unless the same ranks junior to the Class C
Preferred Stock as to the distribution of assets on the liquidation,
dissolution or winding up of the Corporation, whether any such creation,
authorization or increase shall be by means of amendment to the Articles
of Incorporation or by merger, consolidation or otherwise;
(2) amend, alter or repeal its Articles of Incorporation or
By-laws in a manner that is adverse to the holders of Class C Preferred
Stock in any respect or for which the holders of Class C Preferred Stock
did not receive prior written notice;
(3) purchase or set aside any sums for the purchase of any
shares of the Corporation's capital stock other than the Class C Preferred
Stock, except for (i) the purchase of shares of Common Stock from former
employees of the Corporation who acquired such shares directly from the
Corporation pursuant to the Stock Option Plan (as defined in the Weston
Presidio Purchase Agreement), if each such purchase is made pursuant to
contractual rights held by the Corporation relating to the termination of
employment of any such former employee and the total purchase price does
not exceed $100,000 plus any applicable life insurance payments for all
such purchases from each such former employee and (ii) redemptions
required by the warrants issued to the lenders under the Senior Loan
Agreement (as defined in the Weston Presidio Purchase Agreement) or by the
PCF Warrant Agreement or by the Charter (as defined in the respective
Purchase Agreements) of the Corporation with respect to Class A Preferred
Stock;
(4) redeem or otherwise acquire any shares of Class C
Preferred Stock except as expressly authorized in Section 7 or pursuant to
a purchase offer made pro rata to
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all holders of the shares of Class C Preferred Stock on the basis of the
aggregate number of outstanding shares of Class C Preferred Stock then
held by each such holder;
(5) consent to any liquidation, dissolution or winding up of
the Corporation; or
(6) consolidate or merge into or with any other entity or
entities or sell or transfer all or substantially all its assets, except
that the Corporation may, without the consent of the holders of at least a
majority of the then outstanding shares of Class C Preferred Stock,
effectuate a merger in which (i) the Corporation is the surviving
corporation and (ii) the stockholders of the Corporation immediately prior
to the merger hold more than 50% of the outstanding voting power of the
surviving corporation (assuming conversion of all convertible securities
and exercise of all outstanding options and warrants).
(b) NO IMPAIRMENT. The Corporation will not, by amendment of its
Articles of Incorporation or through any reorganization, recapitalization,
transfer of all or a substantial portion of its assets, consolidation, merger,
dissolution, issue or sale of securities, closing or transfer books or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed under these Articles of Incorporation by
the Corporation, but will at all times in good faith assist in carrying out all
the provisions of these Articles of Incorporation and in taking all such action
as may be necessary or appropriate in order to protect the conversion and other
rights of the holders of Class C Preferred Stock against impairment.
(c) RESERVATION OF SHARES. So long as any share of Class C Preferred
Stock shall remain outstanding, the Corporation shall at all times reserve and
keep available, free from preemptive rights, out of its authorized capital
stock, for the purpose of issuance upon conversion of the Class C Preferred
Stock the full number of shares of Common Stock then issuable upon exercise of
all outstanding shares of Class C Preferred Stock. If the Corporation's Common
Stock shall be listed on any national stock exchange, the Corporation at its
expense shall include in its listing application all of the shares of Common
Stock reserved for issuance upon conversion of the Class C Preferred Stock
(subject to issuance or notice of issuance to the exchange) and will similarly
procure the listing of any further Common Stock reserved for issuance upon
conversion of the Class C Preferred Stock at any subsequent time as a result of
adjustments in the outstanding Common Stock or otherwise.
(d) VALIDITY OF SHARES. The Corporation will from time to time take
all such action as may be required to assure that all shares of Common Stock
which may be issued upon conversion of any share of the Class C Preferred Stock
will, upon issuance, be legally and validly issued, fully paid and
non-assessable and free from all taxes, liens and charges with respect to the
issuance thereof. Without limiting the generality of the foregoing, the
Corporation will from time to time take all such action as may be required to
assure that the par value per share, if any, of the Common Stock is at all times
equal to or less than the lowest quotient obtained by dividing the then current
par value of
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the Class C Preferred Stock by the number of shares of Common Stock into which
each share of Class C Preferred Stock can, from time to time, be converted.
(e) NOTICE OF CERTAIN EVENTS. If at any time:
(1) the Corporation shall declare any dividend or distribution
payable to the holders of its Common Stock;
(2) the Corporation shall offer for subscription pro rata to
the holders of Common Stock any additional shares of stock of any class or
any other rights;
(3) any recapitalization of the Corporation, or consolidation
or merger of the Corporation with, or sale of all or substantially all of
its assets to, another corporation or business organization shall occur;
or
(4) a voluntary or involuntary dissolution, liquidation or
winding up of the Corporation shall occur;
then, in any one or more of such cases, the Corporation shall give the
registered holders of the Class C Preferred Stock written notice, by
registered mail, of the date on which a record shall be taken for such
dividend, distribution or subscription rights or for determining
stockholders entitled to vote upon such recapitalization, consolidation,
merger, sale, dissolution, liquidation or winding up and of the date when
any such transaction shall take place, as the case may be. Such notice
shall also specify the date as of which the holders of Common Stock of
record shall participate in such dividend, distribution or subscription
rights, or shall be entitled to exchange their Common Stock for securities
or other property deliverable upon such recapitalization, consolidation,
merger, sale, dissolution, liquidation or winding up, as the case may be.
Such written notice shall be given at least 20 days prior to the record
date with respect thereto.
(f) NO REISSUANCE OF PREFERRED STOCK. No shares of Class C Preferred
Stock acquired by the Corporation by reason of redemption, purchase, conversion
or otherwise shall be reissued, and all such shares shall be canceled, retired
and eliminated from the shares which the Corporation shall be authorized to
issue. The Corporation may from time to time take such appropriate corporate
action as may be necessary to reduce the authorized number of shares of
Preferred Stock accordingly.
10. PREEMPTIVE RIGHTS.
(a) RIGHT OF FIRST OFFER. Until the closing under a Liquidity Event,
the Corporation shall not issue or sell any Common Stock (including securities
convertible into, or options, warrants or other rights to purchase Common Stock,
but excluding the shares described in Section 10(g))
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(collectively, the "FUTURE SHARES") to any Person (an "OFFEREE") without first
providing each holder of Class C Preferred Stock the right to subscribe for its
Proportionate Percentage of the Future Shares at a price and on such other terms
which are at least as favorable as shall have been offered or are proposed to be
offered by the Corporation to such Offeree and which shall have been specified
by the Corporation in a notice delivered to each holder of Class C Preferred
Stock (the "PROPOSAL"); PROVIDED, HOWEVER, that the holder of Class C Preferred
Stock shall have the option to purchase Future Shares with cash, regardless of
the method of purchase offered to such Offeree. The Proposal by its terms shall
remain open and irrevocable for a period of 30 days from the date it is
delivered by the Corporation to each holder of Class C Preferred Stock (the
"FUTURE SHARES EXERCISE PERIOD"). The Proposal shall also certify that the
Corporation has either (a) received a bona fide offer from a prospective
purchaser, who shall be identified in such certification, and that the
Corporation in good faith believes a binding agreement of sale is obtainable for
consideration having a fair market, cash equivalent or present value set forth
in such certification; or (b) intends in good faith to make an offering of its
securities to prospective purchasers, who shall be identified to the extent
possible in such certification at the price and on the terms set forth in such
certification.
"PROPORTIONATE PERCENTAGE" means, for any holder of Class C Preferred
Stock, the percentage of Future Shares covered by the Proposal equal to (i) the
number of shares of Common Stock into which the shares of Class C Preferred
Stock held by such holder would then be convertible divided by (ii) the total
number of shares of Common Stock outstanding at the time of delivery of the
Proposal PLUS the aggregate number of shares of Common Stock into which all
shares of Class C Preferred Stock would then be convertible.
(b) NOTICE. Notice of the intention of each holder of Class C
Preferred Stock to accept the Proposal made pursuant to Section 10(a) shall be
evidenced by a writing signed by such holder and delivered to the Corporation
prior to the end of the Future Shares Exercise Period (the "NOTICE OF PURCHASE")
setting forth that portion of the Future Shares such holder elects to purchase
(the "ACCEPTED SHARES").
(c) FULL ACCEPTANCE. In the event that each holder of Class C
Preferred Stock elects to purchase all of the shares offered to such holder in
the Proposal, the Corporation shall sell to each such holder, pursuant to
Section 10(f), the number of Accepted Shares set forth in such holder's Notice
of Purchase.
(d) PARTIAL ACCEPTANCE. In the event that one or more holders of
Class C Preferred Stock do not elect to purchase all of the shares offered to
such holders in the Proposal, the Corporation shall sell to each such holder,
pursuant to Section 10(f), the number of Accepted Shares, if any, set forth in
such holder's Notice of Purchase. Holders of Class C Preferred Stock may
purchase pursuant to Section 10(f) any remaining shares offered in the Proposal
not purchased by the other holders of Class C Preferred Stock pro rata based on
the respective Proportionate Percentages of such holders wishing to purchase
additional shares, or as they may otherwise agree.
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(e) NO FRACTIONAL SHARES. For the purpose of avoiding fractions as
to Future Shares, the Corporation may adjust upward or downward by not more than
one full share the number of Future Shares which any holder of Class C Preferred
Stock would otherwise be entitled to purchase.
(f) SALE OF SHARES. No later than 30 days after the expiration of
the Future Shares Exercise Period, the Corporation shall deliver to each holder
of Class C Preferred Stock who has submitted a Notice of Purchase to the
Corporation a notice indicating the number of Future Shares which the
Corporation shall sell to such holder pursuant to this Section 10 and the terms
and conditions of such sale, which shall be in all respects (including unit
price and interest rates) the same as specified in the proposal. The sale to
such holders of such Future Shares shall take place not later than 10 days after
receipt of such notice.
Any sale to an Offeree of Future Shares that were not selected for
purchase by the holders of Class C Preferred Stock as provided above shall take
place not later than 90 days after the expiration of the Future Shares Exercise
Period. Such sale shall be upon terms and conditions in all respects (including
unit price and interest rates) which are no more favorable to such Offeree or
less favorable to the Corporation than those set forth in the Proposal. Any
refused Future Shares not purchased by the Offeree as contemplated by the
Proposal within the 90-day period specified above shall remain subject to this
Section 10.
(g) EXCLUSION OF CERTAIN SHARES. Notwithstanding any contrary
provision of this Section 10, Future Shares shall not include Additional Shares
of Common Stock, Warrant Shares (as defined in the PCF Warrant Agreement),
shares issued by the Corporation as consideration in acquisitions permitted by
the Purchase Agreements, or shares issued in connection with a Liquidity Event.
11. AMENDMENTS. The provisions of these terms of the Class C Preferred
Stock may not be amended, modified or waived without the written consent or
affirmative vote of the Required Holders; PROVIDED, HOWEVER, that (a) any
amendment reducing or postponing the payment of dividends or redemptions or
increasing the amount of the Conversion Price shall require the written consent
or affirmative vote of holders of 90% of the then outstanding shares of Class C
Preferred Stock, (b) any amendment adversely affecting the rights of holders of
Class A Preferred Stock under Section 3 shall require the written consent or
affirmative vote of holders of a majority of the then outstanding shares of
Class A Preferred Stock, (c) any amendment adversely affecting the rights of
holders of Class B Preferred Stock under Section 3 shall require the written
consent or affirmative vote of the Required Holders (as defined in Section C of
this Article IV), and (d) any amendment, modification or waiver adversely
affecting the rights of an SBA Holder differently from the effects on the other
holders of Class C Preferred Stock shall require the prior written consent of
each SBA Holder.
SECTION E. CLASS D PREFERRED STOCK.
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1. DESIGNATION AND AMOUNT. The Corporation shall have authority to issue
[200,000] shares of no par value "Class D Convertible Preferred Stock", all of
which shares shall rank equally and be identical in all respects. The Class D
Convertible Preferred Stock is sometimes referred to herein as the "CLASS D
PREFERRED STOCK."
2. VOTING RIGHTS. Except as otherwise specifically provided by the Florida
Business Corporation Act, the holders of Class D Preferred Stock shall not be
entitled to vote on any matters required or permitted to be submitted to
stockholders of the Corporation for their approval. Notwithstanding the
foregoing, the affirmative vote or written consent of the holders of a majority
of the Class D Preferred Stock outstanding from time to time shall be required
for the amendment of these Articles of Incorporation to authorize the issuance
of additional shares of Class D Preferred Stock.
3. DIVIDENDS.
(a) To the extent not prohibited by Florida law, the Board of
Directors of the Corporation shall declare, and the Corporation shall pay,
dividends to the holders of Class D Preferred Stock accrued as provided herein
and no more dividends. Except as otherwise provided herein, dividends on each
share of Class D Preferred Stock (a "SHARE") shall accrue cumulatively from the
date of issuance at an annual rate of 7% per annum on the Liquidated Amount Per
Share (as defined below), whether or not such dividends have been declared and
whether or not there are profits, surplus or other funds of the Corporation
legally available for the payment of dividends. For purposes of this Section
3(a), the date on which the Corporation initially issues any Share is its "date
of issuance", regardless of the number of times transfer of such Share is made
on the stock records maintained by or for the Corporation and regardless of the
number of certificates that may be issued to evidence such Share (whether by
reason of transfer of such Share of for any other reason). The term "LIQUIDATED
AMOUNT PER SHARE" shall mean, (1) two million dollars ($2,000,000), less, (2)
the aggregate Redemption Payments (as hereinafter defined) previously paid with
respect to the Class D Preferred Stock, divided by, (3) the number of Shares of
Class D Preferred Stock then outstanding.
(b) The Class D Preferred Stock shall be preferred as to the payment
of dividends over the shares of the Common Stock and pari passu with the Class A
Preferred Stock, the Class B Preferred Stock and the Class C Preferred Stock of
the Corporation. Dividends (whether current or in arrears) on the Class D
Preferred Stock shall be paid before any dividends (other than dividends payable
in Common Stock) on any junior stock shall be declared and set apart for payment
or paid.
(c) All dividends payable on the Class D Preferred Stock shall be
cumulative and shall be paid on the date of the redemption by the Corporation of
the shares of Class D Preferred Stock outstanding prior to such date of
redemption.
(d) If, at any time, the Corporation pays less than the total amount
of dividends then accrued with respect to the Class D Preferred Stock, such
payment will be distributed ratably among
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the holders of the Class D Preferred Stock so that an equal amount is paid with
respect to each outstanding Share.
4. LIQUIDATION. The Class D Preferred Stock shall be preferred upon
liquidation over the Common Stock and any other class or classes of stock of the
Corporation (but shall rank in parity with the Class A Preferred Stock, the
Class B Preferred Stock and the Class C Preferred Stock of the Corporation), so
that the holders of shares of Class D Preferred Stock shall be entitled to be
paid, before any distribution is made to the holders of the Common Stock and
junior stock upon the voluntary or involuntary dissolution, liquidation or
winding-up of the Corporation, the Liquidated Amount per Share plus an amount
equal to all accrued an unpaid dividends to and including the date of payment
and no more. If, upon any such liquidation, dissolution or winding-up of the
Corporation, its net assets shall be insufficient to permit the payment in full
of the amounts to which the holders of all outstanding shares of Class D
Preferred Stock are entitled as above provided, the entire net assets of the
Corporation remaining shall be distributed among the holders of shares of Class
D Preferred Stock in amounts proportionate to the full preferential amounts to
which they and holders of shares of preferred stock ranking in parity with the
Class D Preferred Stock as to rights and preferences are respectively entitled.
For the purpose of this Section 4, the voluntary sale, lease, exchange or
transfer, for cash, shares of stock, securities or other consideration, of all
or substantially all the Corporation's property or assets to, or its
consolidation or merger with, one or more corporations shall not be deemed to be
a liquidation, dissolution or winding-up of Corporation, voluntary or
involuntary.
5. CONVERSION. The holders of shares of Class D Preferred Stock shall have
conversion rights as follows:
(a) The Shares of Class D Preferred Stock will be convertible, at
the option of the holder thereof, for a period of ten (10) years from the date
of issuance, exercisable by giving written notice to the Corporation not less
than thirty (30) days prior to such Conversion Date, subject to adjustment as
provided in the following sections, into shares of Common Stock at a price which
is fixed at an average of the bid and ask price as listed by NASDAQ for the
thirty (30) days prior to the conversion date.
(b) Any dividends on the Class D Preferred Stock so converted which
shall have been declared prior to, and which shall be payable subsequent to such
conversion, shall be payable on the specified payment date to the holder of such
Class D Preferred Stock who so converted, provided such conversion did not occur
prior to the record date for such dividend, but not dividends accumulated on
such shares and not declared prior to such conversion shall be payable. In the
event that any dividends on the outstanding Common Stock shall have been
declared prior to, and shall be payable subsequent to the conversion of such
Class D Preferred Stock, such dividends shall not be payable on any Common Stock
into which such Class D Preferred Stock shall have been converted.
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(c) The Board of Directors of the Corporation shall reserve a
sufficient number of shares of Common Stock for issuance upon conversion of
shares of Class D Preferred Stock into Common Stock as aforesaid.
(d) In the event that the Corporation shall at any time or from time
to time change the then outstanding shares of Common Stock into the same or
different number of shares or units of any other class or classes of capital
stock or other securities, then, notwithstanding the provisions thereof, from
and after the first such change each holder of shares of Class D Preferred Stock
shall, upon the conversion of such shares, be entitled to receive that number of
shares or units of such other stock or security which such holder would then
have if he (1) had, prior to the first such change, converted into shares of
Common Stock, pursuant to the provisions hereof, a number of shares of Class D
Preferred Stock equal to the number then being converted by him, and (2) had
held the shares which he would have so received or any other shares or units
into which the same would subsequently have been changed if they had then been
outstanding until the day of the conversion of the shares of Class D Preferred
Stock when being converted.
(e) The Conversion Price, or the number of shares of Common Stock
into which a share of Class D Preferred Stock shall be converted as determined
pursuant to Section 6(b), as applicable, shall be appropriately adjusted to
eliminate any dilution of holders of Class D Preferred Stock by reason of any of
the following events: (1) if the Corporation pays a dividend or makes a
distribution in shares of Common Stock or other class of capital stock to
holders of Common Stock, or (2) if the Corporation subdivides its outstanding
Common Stock into a greater number of shares or combines its outstanding Common
Stock into a smaller number of shares.
6. REDEMPTION. The shares of Class D Preferred Stock shall be subject to
redemption as follows:
(a) The Corporation shall have the right, in its sole discretion,
upon receipt of a notice of conversion pursuant to Section 5, or earlier without
receipt of any notice of conversion, to redeem in whole or in part any shares of
Class D Preferred Stock submitted for conversion, immediately prior to
conversion, or otherwise outstanding and subject to a right of conversion.
(b) The Redemption Payment per Share for each redemption of the
Class D Preferred Stock shall be at a stated value of $10.00 per share. If less
than all of the outstanding shares of the Class D Preferred Stock are redeemed
at any time under this Section 6, then the shares of Class D Preferred Stock
held by each holder of record shall be redeemed pro rata, according to the
number of shares of Class D Preferred Stock held by such holder, subject,
however, to such adjustment as may be equitably determined by the Corporation in
order to avoid the redemption of fractional shares.
(c) The Corporation shall effect each such redemption by giving
notice of its election to redeem, by facsimile within one (1) business day of
receipt of a notice of conversion from
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a Subscriber, or upon the giving of a Notice of Mandatory Conversion by the
Corporation to a Subscriber, with a copy by two-day courier, to the holder of
shares of Class D Preferred Stock submitted for the conversion at the address
and facsimile number of such holder appearing in the Corporation's register for
the Class D Preferred Stock. Such redemption notice shall indicate whether the
Corporation will redeem all or part of the shares of Class D Preferred Stock
submitted for conversion and the applicable redemption price. The Corporation
shall not be entitled to send any notice of redemption and begin the redemption
procedure unless it has the full amount of the redemption price, in cash or
liquid assets, available in a demand or other immediately available account in a
bank or similar financial institution on the date the redemption notice is sent
to shareholders.
The redemption price shall be paid to the holder of shares of Class
D Preferred Stock redeemed within ten (10) business days of the delivery of the
notice of such redemption to such holder; provided, however, that the
Corporation shall not be obligated to deliver any portion of such redemption
price unless either the certificate(s) evidencing the shares of Class D
Preferred Stock are delivered to the Corporation or its transfer agent or the
holder notifies the Corporation or its transfer agent that such certificate(s)
have been lost, stolen, or destroyed and executes an agreement satisfactory to
the Corporation to indemnify the Corporation from any loss incurred by it in
connection with such certificate(s).
7. PREEMPTIVE RIGHTS. The holders of shares of Class D Preferred Stock
shall have no preemptive rights in connection with any security of any kind
which the Corporation shall at any time issue or be authorized to issue.
8. REACQUIRED SHARES. Any shares of Class D Preferred Stock that have been
converted into shares of Common Stock or issued and subsequently reacquired by
the Corporation or redeemed or purchased or otherwise acquired by the
Corporation in any manner whatsoever shall be retired and cancelled promptly
after the acquisition thereof. All such Shares upon their cancellation shall
become authorized but unissued shares of the Preferred Stock of the Corporation
and may be reissued as part of a new series of Preferred Stock of the
Corporation to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance set forth in
these Articles of Incorporation.
SECTION F. BLANK CHECK PREFERRED STOCK. Subject to the limitations
prescribed by law and the provisions of these Articles of Incorporation, the
board of directors of the Corporation is authorized to issue [50 million] shares
of Preferred Stock from time to time in one or more series, each of such series
to have such voting powers, full or limited, or no voting powers, and such
designations, preferences and relative, participating, optional or other special
rights, and such qualifications, limitations or restrictions thereof, as shall
be determined by the board of directors in a resolution or resolutions providing
for the issue of such Preferred Stock.
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ARTICLE V
INDEMNIFICATION
SECTION A. RIGHT TO INDEMNIFICATION. Each person who was or is made a
party or is threatened to be made a party to or is otherwise involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "PROCEEDING"), by reason of the fact:
(a) that he or she is or was a director or officer of the
Corporation, or
(b) that he or she, being at the time a director or officer of the
Corporation, is or was serving at the request of the Corporation as a director,
trustee, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to an
employee benefit plan (collectively, "another enterprise" or "other
enterprise"), whether either in case (1) or in case (2) the basis of such
Proceeding is alleged action or inaction (x) in an official capacity as a
director or office of the Corporation, or as a director, trustee, officer
employee or agent of such other enterprise, or (y) in any other capacity related
to the Corporation or such other enterprise while so serving as a director,
trustee, officer, employee or agent, shall be indemnified and held harmless by
the Corporation to the fullest extent not prohibited by [SECTION ____ OF THE
FLORIDA BUSINESS CORPORATION ACT] (or any successor provision or provisions) as
the same exists or may hereafter be amended (but, in the case of any such
amendment, with respect to alleged action or inaction occurring prior to such
amendment, only to the extent that such amendment permits the Corporation to
provide broader indemnification rights than permitted prior thereto), against
all expense, liability and loss (including without limitation attorneys' fees
and expenses, judgments, fines, ERISA excise taxes or penalties and amounts paid
in settlement) reasonably incurred or suffered by such person in connection
therewith. The persons indemnified by this Article are hereinafter referred to
as "indemnitees." Such indemnification as to such alleged action or inaction
shall continue as to an indemnitee who has after such alleged action or inaction
ceased to be a director or officer of the Corporation, or director, trustee,
officer, employee or agent of such other enterprise; and shall inure to the
benefit of the indemnitee's heirs, executors and administrators. Notwithstanding
the foregoing, except as may be provided in the Bylaws or by the board of
directors, the Corporation shall not indemnify any such indemnitee in connection
with a Proceeding (or portion thereof) initiated by such indemnitee (but this
prohibition shall not apply to a counterclaim, cross-claim or third party claim
brought by the indemnitee in any Proceeding) unless such Proceeding (or portion
thereof) was authorized by the Board of Directors. The right to indemnification
conferred in this Article: (i) shall be a contract right; (ii) shall not be
affected adversely to any indemnitee by any amendment of this Articles of
Incorporation with respect to any alleged action or inaction occurring prior to
such amendment; and (iii) shall, subject to any requirements imposed by law and
the Bylaws, include the right to be paid by the Corporation the expenses
incurred in defending any such Proceeding in advance of its final disposition.
SECTION B. RELATIONSHIP TO OTHER RIGHTS AND PROVISIONS CONCERNING
INDEMNIFICATION. The rights to indemnification and to the advancement of
expenses conferred in this Article shall not
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be exclusive of any other right which any person may have or hereafter acquire
under these Articles of Incorporation, any statute, bylaw, agreement, vote of
stockholders or disinterested directors or otherwise. The Bylaws may contain
such other provisions concerning indemnification, including provisions
specifying reasonable procedures relating to and conditions to the receipt by
indemnitees of indemnification, provided that such provisions are not
inconsistent with the provisions of this Article.
SECTION C. AGENTS AND EMPLOYEES. The Corporation may, to the extent
authorized from time to time by the Board of Directors, grant rights to
indemnification, and to the advancement of expenses, to any employee or agent of
the Corporation (or any person serving at the Corporation's request as a
director, trustee, officer, employee or agent of another enterprise) or to any
person who is or was a director, officer, employee or agent of any of the
Corporation's affiliates, predecessor or subsidiary corporations or of a
constituent corporation absorbed by the Corporation in a consolidation or merger
or who is or was serving at the request of such affiliate, predecessor or
subsidiary corporation or of such constituent corporation as a director,
trustee, officer, employee or agent of another enterprise, in each case as
determined by the Board of Directors to the fullest extent of the provisions of
this Article in cases of the indemnification and advancement of expenses of
directors and officers of the Corporation, or to any lesser extent (or greater
extent, if permitted by law) determined by the Board of Directors.
ARTICLE VI
LIMITATION ON LIABILITY OF DIRECTORS
No person shall be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
provided, however, that the foregoing shall not eliminate or limit the liability
of a director (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
[SECTION ___ OF THE FLORIDA BUSINESS CORPORATION ACT], or (iv) for any
transaction from which the director derived an improper personal benefit. If the
Florida Business Corporation Act is amended hereafter to authorize corporate
action further eliminating or limiting the personal liability of directors, then
the liability of a director of the Corporation shall be eliminated or limited to
the fullest extent permitted by the Florida Business Corporation Act, as so
amended. Any amendment, repeal or modification of this Article shall not
adversely affect any right or protection of a director of the Corporation
existing hereunder with respect to any act or omission occurring prior to such
amendment, repeal or modification.
ARTICLE VII
COMPROMISE
Whenever a compromise or arrangement is proposed between this Corporation
and its creditors or any class of them and/or between this Corporation and its
stockholders or any class of these, any court of equitable jurisdiction within
the State of Florida may, on the application in a summary way
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of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of [SECTION ___ OF THE FLORIDA BUSINESS CORPORATION ACT] or on
the application of trustees in dissolution or of any receiver or receivers
appointed for this Corporation under the provisions of [SECTION ____ OF THE
FLORIDA BUSINESS CORPORATION ACT] order a meeting of the creditors or class of
creditors and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, to be summoned in such a manner as the said
court directs. If a majority in number representing three fourths in value of
the creditors or class of creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of this Corporation as a consequence of
such compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders, of this Corporation, as the case
may be, and also of this Corporation.
ARTICLE VIII
MEETINGS OF STOCKHOLDERS
At all meetings of stockholders, a quorum will be present if the holders
of a majority of the shares entitled to vote at the meeting are represented at
the meeting in person or by proxy. From and after the first date as of which any
class of the Corporation's equity securities is traded on a national securities
exchange or through the Nasdaq Stock Market's automated quotation system, any
action required or permitted to be taken by the stockholders of the Corporation
must be effected at an annual or special meeting of stockholders of the
Corporation and may not be effected by any consent in writing by such
stockholders.
ARTICLE IX
DENIAL OF CUMULATIVE VOTING AND PREEMPTIVE RIGHTS
Stockholders of the Corporation will not have the right of cumulative
voting for the election of directors or for any other purpose. Except as
otherwise set forth in these Articles, no stockholder of the Corporation will,
solely by reason of holding shares of any class, have any preemptive or
preferential right to purchase or subscribe for any shares of the Corporation,
now or hereafter to be authorized, or any notes, debentures, bonds or other
securities convertible into or carrying warrants, rights or options to purchase
shares of any class, now or hereafter to be authorized, whether or not the
issuance of any such shares or such notes, debentures, bonds or other securities
would adversely affect the dividend, voting or any other rights of such
stockholder. The Board of Directors may authorize the issuance of, and the
Corporation may issue, shares of any class of the Corporation, or any notes,
debentures, bonds or other securities convertible into or carrying warrants,
rights or options to purchase any such shares, without offering any shares of
any class to the existing holders of any class of stock of the Corporation.
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ARTICLE X
CLASSIFIED BOARD OF DIRECTORS
From and after the first date as of which any class of the Corporation's
equity securities is traded on a national securities exchange or through the
Nasdaq Stock Market's automated quotation system, the directors shall be
classified, with respect to the time for which they severally hold office, into
three classes (Class A, Class B and Class C), as nearly equal in number as
possible, as determined by the Board of Directors, one class to hold office
initially for a term expiring at the annual meeting of stockholders to be held
in [1998], another class to hold office initially for a term expiring at the
annual meeting of stockholders to be held in [1999] and another class to hold
office for a term expiring at the annual meeting of stockholders to be held in
[2000], with members of each class to hold office until whichever of the
following occurs first: his or her successor is elected and qualified, his or
her resignation, his or her removal from office by the stockholders or his or
her death. At each annual meeting of stockholders of the Corporation, the
successors to the class of directors whose term expires at the meeting shall be
elected to hold office for a term expiring at the annual meeting of stockholders
held in the third year following the year of their election.
ARTICLE XI
AMENDMENT OF BYLAWS
The Board of Directors shall have the power to adopt, amend, alter, change
or repeal any Bylaws of the Corporation to the fullest extent permitted by the
Florida Business Corporation Act.
ARTICLE XII
AMENDMENT OF ARTICLES OF INCORPORATION
The Corporation hereby reserves the right to amend, alter, change or
repeal any provision contained in these Articles of Incorporation, in the manner
now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
ARTICLE XIII
SEVERABILITY
In the event that any of the provisions of these Articles of Incorporation
(including any provision within a single Section, paragraph or sentence) is held
by a court of competent jurisdiction to be invalid, void or otherwise
unenforceable, the remaining provisions are severable and shall remain
enforceable to the full extent permitted by law.
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EXHIBIT 2.5(B)
BYLAWS
OF
MEDICAL AFFILIATES, INC.
ADOPTED
, 1998
TABLE OF CONTENTS
ARTICLE I. OFFICES
1.01 Principal and Business Offices............................... 1
1.02 Registered Office............................................ 1
ARTICLE II. SHAREHOLDERS
2.01 Annual Meeting .............................................. 1
2.02 Special Meeting ............................................. 1
2.03 Place of Meeting ............................................ 1
2.04 Notice of Meeting ........................................... 2
2.05 Closing of Transfer Books or Fixing of Record Date .......... 2
2.06 Voting Records .............................................. 2
2.07 Quorum ...................................................... 3
2.08 Conduct of Meeting .......................................... 3
2.09 Proxies ..................................................... 3
2.10 Voting of Shares ............................................ 4
2.11 Voting of Shares by Certain Holders ......................... 4
(a)Other Corporations ........................................ 4
(b)Legal Representatives and Fiduciaries ..................... 4
(c)Receiver .................................................. 4
(d)Pledgees .................................................. 4
(e)Subsidiaries .............................................. 4
ARTICLE III. BOARD OF DIRECTORS
3.01 General Powers and Numbers .................................. 5
3.02 Tenure and Qualifications ................................... 5
3.03 Regular Meetings ............................................ 5
3.04 Special Meetings ............................................ 5
3.05 Notice of Meetings .......................................... 5
3.06 Quorum ...................................................... 6
3.07 Manner of Acting ............................................ 6
3.08 Conduct of Meetings ......................................... 6
3.09 Vacancies ................................................... 6
3.10 Compensation ................................................ 6
3.11 Presumption of Assent ....................................... 7
3.12 Committees .................................................. 7
ARTICLE IV. OFFICERS
4.01 Number ...................................................... 7
4.02 Election and Term of Office ................................. 8
4.03 Removal ..................................................... 8
4.04 Vacancies ................................................... 8
4.05 President ................................................... 8
4.06 Vice Presidents ............................................. 9
4.07 Secretary ................................................... 9
i
ARTICLES IV. OFFICERS
4.08 Treasurer ................................................... 9
4.09 Assistant Secretaries and Assistant Treasurers .............. 10
4.10 Other Assistants and Acting Officers ........................ 10
4.11 Salaries .................................................... 10
ARTICLE V. CONTRACTS, LOANS, CHECKS AND DEPOSITS
5.01 Contracts ................................................... 10
5.02 Loans ....................................................... 11
5.03 Checks, Drafts, etc ......................................... 11
5.04 Deposits .................................................... 11
5.05 Voting of Securities Owned by this Corporation .............. 11
ARTICLE VI. CERTIFICATES FOR SHARES AND THEIR TRANSFER
6.01 Certificate for Shares ...................................... 12
6.02 Facsimile Signatures and Seal ............................... 12
6.03 Transfer of Shares .......................................... 12
6.04 Restrictions on Transfer .................................... 12
6.05 Lost, Destroyed or Stolen Certificates ...................... 12
6.06 Consideration for Shares .................................... 13
6.07 Stock Regulations ........................................... 13
ARTICLE VII. WAIVER OF NOTICE
ARTICLE VIII. CONSENT WITHOUT A MEETING
ARTICLE IX. INDEMNIFICATION
ARTICLE X. SEAL
ARTICLE XI. FISCAL YEAR
ARTICLE XII. AMENDMENTS
12.01 By Shareholders ............................................ 14
12.02 By Directors ............................................... 14
12.03 Implied Amendments ......................................... 14
ii
ARTICLE I. OFFICES
1.01. PRINCIPAL AND BUSINESS OFFICES. The corporation may have such
principal and other business offices, either within or outside the State of
Florida, as the Board of Directors may designate or as the business of the
corporation may require from time to time.
1.02. REGISTERED OFFICE. The registered office of the corporation
required by the Florida Business Corporation Act to be maintained in the State
of Florida may be, but need not be, identical with the principal office in the
State of Florida. The address of the registered office may be changed from time
to time by the Board of Directors or, if within the county, by the registered
agent. The business office of the registered agent of the corporation shall be
identical to such registered office.
ARTICLE II. SHAREHOLDERS
2.01. ANNUAL MEETING. The annual meeting of the shareholders shall
be held on the third Wednesday of _________ in each calendar year at 9:00
o'clock a.m., or at such other time and date as may be fixed by or under the
authority of the Board of Directors, for the purpose of electing directors and
for the transaction of such other business as may come before the meeting. If
the day fixed for the annual meeting shall be a legal holiday in the State of
Florida, such meeting shall be held on the next succeeding business day. If the
election of directors shall not be held on the day designated herein, or fixed
as herein provided, for any annual meeting of the shareholders, or at any
adjournment thereof, the Board of Directors shall cause the election to be held
at a special meeting of the shareholders as soon thereafter as convenient.
2.02. SPECIAL MEETING. Special meetings of the shareholders, for
any purpose or purposes, unless otherwise prescribed by statute, may be called
by the President or the Board of Directors or by the person designated in the
written request of the holders of not less than onetenth of all shares of the
corporation entitled to vote at the meeting.
2.03. PLACE OF MEETING. The Board of Directors may designate any
place either within or outside the State of Florida as the place of meeting for
any annual meeting or for any special meeting called by the Board of Directors.
A waiver of notice signed by all shareholders entitled to vote at a meeting may
designate any place, whether within or outside the State of Florida, as the
place for the holding of such meeting. If no designation is made, or if a
special meeting be otherwise called, the place of meeting shall be the principal
business office of the corporation in the State of Florida or such other
suitable place in the county of such principal office as may be designated by
the person calling such meeting, but any meeting may be adjourned to reconvene
at any place designated by vote of a majority of the shares represented thereat.
2.04. NOTICE OF MEETING. Written notice stating the place, day and
hour of the meeting and, in case of a special meeting, the purpose or purposes
for which the meeting is called, shall be delivered not less than ten (10) days
(unless a longer period is required by law) nor more than thirty (30) days
before the date of the meeting, either personally or by mail, by or at the
direction of the President, the Secretary, or the person(s) calling the meeting,
to each shareholder of record entitled to vote at such meeting. If mailed, such
notice shall be deemed to be delivered when deposited in the United States mail,
addressed to the shareholder at his or her address as it appears on the stock
record books of the corporation, with postage thereon prepaid.
2.05. CLOSING OF TRANSFER BOOK OR FIXING OF RECORD DATE. For the
purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders, or any adjournment thereof, or shareholders entitled to
receive payment of any dividend, or in order to make a determination of
shareholders for any other proper purpose, the Board of Directors may provide
that the stock transfer books shall be closed for a stated period but not to
exceed, in any case, thirty (30) days. If the stock transfer books shall be
closed for the purpose of determining shareholders entitled to notice of or to
vote at a meeting of shareholders, such books shall be closed for at least ten
(10) days immediately preceding such meeting. In lieu of closing the stock
transfer books, the Board of Directors may fix in advance a date as the record
date for any such determination of shareholders, such date in any case to be
not more than thirty (30) days and, in case of a meeting of shareholders, not
less than ten (10) days prior to the date on which the particular action
requiring such determination of shareholders is to be taken. If the stock
transfer books are not closed and no record date is fixed for the determination
of shareholders entitled to notice of or to vote at a meeting of shareholders,
or shareholders entitled to receive payment of a dividend, the close of business
on the date on which notice of the meeting is mailed or on the date on which the
resolution of the Board of Directors declaring such dividend is adopted, as
the case may be, shall be the record date for such determination of
shareholders. When a determination of shareholders entitled to vote at any
meeting of shareholders has been made as provided in this section, such
determination shall be applied to any adjournment thereof except where the
determination has been made through the closing of the stock transfer books and
the stated period of closing has expired.
2.06. VOTING RECORDS. In the event the corporation issues its stock
to more than six (6) shareholders Section 607.0901 of the Florida Business
Corporation Act dealing with affiliated transactions and control-share
acquisitions shall apply.
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2.07. QUORUM. Except as otherwise provided in the articles of
incorporation, a majority of the shares entitled to vote, represented in person
or by proxy, shall constitute a quorum at a meeting of shareholders but in no
event shall a quorum consist of less than one-third of the shares entitled to
vote at the meeting. When a specified item of business is required to be voted
on by a class or series of stock, a majority of the shares of such class or
series shall constitute a quorum for the transaction of such item of business by
that class or series. If a quorum is present, the affirmative vote of the
majority of the shares represented at the meeting and entitled to vote on the
subject matter shall be the act of the shareholders unless the vote of a greater
number or voting by classes is required by the Florida Business Corporation Act
or the articles of incorporation. If less than a quorum is represented at a
meeting, a majority of the shares so represented may adjourn the meeting from
time to time without further notice. At such adjourned meeting at which a quorum
shall be present or represented, any business may be transacted which might have
been transacted at the meeting as originally noticed. The shareholders present
at a duly organized meeting may continue to transact business until
adjournment, notwithstanding the withdrawal of enough shareholders to leave less
than a quorum.
2.08. CONDUCT OF MEETINGS. The President, or in the President's
absence, a Vice President in the order provided under Section 4.06, and in their
absence, any person chosen by the shareholders present shall call the meeting of
the shareholders to order and shall act as chairman of the meeting, and the
Secretary shall act as secretary of all meetings of the shareholders, but, in
the absence of the Secretary, the presiding officer may appoint any other person
to act as secretary of the meeting.
2.09. PROXIES. At all meetings of shareholders, a shareholder
entitled to vote may vote in person or by proxy appointed in writing by the
shareholder or by his duly authorized attorney-in-fact. Such proxy shall be
filed with the Secretary before or at the time of the meeting. Unless otherwise
provided in the proxy or Section 607.101 of the Florida Business Corporation
Act, a proxy may be revoked at any time before it is voted, either by written
notice filed with the Secretary or the acting secretary of the meeting or by
oral notice given by the shareholder to the presiding officer during the
meeting. The presence of a shareholder who has filed a proxy shall not of itself
constitute a revocation. No proxy shall be valid after eleven (11) months from
the date of its execution, unless otherwise provided in the proxy. The Board of
Directors shall have the power and authority to make rules as to the validity
and sufficiency of proxies.
-3-
2.10. VOTING OF SHARES. Each outstanding share shall be entitled to
one vote on each matter submitted to a vote at a meeting of shareholders, except
to the extent that the voting rights of the shares of any class or classes are
enlarged, limited or denied by the articles of incorporation.
2.11. VOTING OF SHARES BY CERTAIN HOLDERS.
(a) OTHER CORPORATIONS. Shares standing in the name of another
corporation, domestic or foreign, may be voted either in person or by proxy by
the president of such corporation or any other officer appointed by such
president. A proxy executed by any principal officer of such other corporation
or assistant thereto shall be conclusive evidence of the signer's authority to
act, in the absence of express notice to this corporation, given in writing to
the Secretary of this corporation, of the designation of some other person by
the Board of Directors or the bylaws of such other corporation.
(b) LEGAL REPRESENTATIVES AND FIDUCIARIES. Shares held by an
administrator, executor, guardian, conservator or assignee for creditors may be
voted by such person, either in person or by proxy. Shares standing in the name
of a trustee may be voted by him or her, either in person or by proxy, but no
trustee shall be entitled to vote shares held by him or her without a transfer
of such shares into his or her name. Shares standing in the name of a fiduciary
may be voted by him or her, either in person or by proxy. A proxy executed by a
fiduciary shall be conclusive evidence of the signer's authority to act in the
absence of express notice given in writing to the Secretary that such manner of
voting is prohibited or otherwise directed by the document creating the
fiduciary relationship.
(c) RECEIVER. Shares standing in the name of a receiver may be voted by
such receiver, and shares held by or under the control of a receiver may be
voted by such receiver without the transfer thereof into his or her name if
authority to do so is contained in an appropriate court order pursuant to which
such receiver was appointed.
(d) PLEDGEES. A shareholder whose shares are pledged shall be entitled to
vote such shares in person or by proxy, until the shares have been transferred
into the name of the pledgee, and thereafter the pledgee or his or her nominee
shall be entitled to vote the shares so transferred.
(e) SUBSIDIARIES. Neither shares of the corporation's stock owned by
another corporation, the majority of the voting stock of which is owned or
controlled by it, nor shares of its own stock held by another corporation in a
fiduciary capacity shall be voted, directly or indirectly, at any meeting; and
such shares shall not be counted in determining the total number of outstanding
shares at any given time.
-4-
ARTICLE III. BOARD OF DIRECTORS
3.01. GENERAL POWERS AND NUMBER. The business and affairs of the
corporation shall be managed by its Board of Directors. The number of directors
of the corporation initially shall be a minimum of seven (7) but may be
increased to not more than fifteen (15) without amendment. The number of
directors may be increased or decreased from time to time by amendment to this
Section adopted by the shareholders or the Board of Directors but no decrease
shall have the effect of shortening the term of an incumbent director.
3.02. TENURE AND QUALIFICATIONS. Each director shall hold office
until the next annual meeting of shareholders and until the director's
successor shall have been elected, or until his or her prior death, resignation
or removal. Any director or the entire Board of Directors may be removed from
office, with or without cause, by affirmative vote of a majority of the
outstanding shares entitled to vote for the election of such director, or the
Board of Directors. A director may resign at any time by filing a written
resignation with the Secretary of the corporation. Directors need not be
residents of the State of Florida or shareholders of the corporation.
3.03. REGULAR MEETINGS. A regular meeting of the Board of Directors
shall be held, without other notice than this bylaw, immediately after the
annual meeting of shareholders, and each adjourned session thereof. The place of
such regular meeting shall be the same as the place of the meeting of
shareholders which precedes it, or such other suitable place as may be announced
at such meeting of shareholders. The Board of Directors may provide, by
resolution, the time and place, either within or outside the State of Florida,
for the holding of additional regular meetings without other notice than such
resolution.
3.04. SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by or at the request of the President or any two directors. The
persons calling any special meeting of the Board of Directors may fix any place,
either within or outside the State of Florida, as the place for holding any
special meeting of the Board of Directors called by them, and if no other place
is fixed the place of meeting shall be the principal business office of the
corporation in the State of Florida. Special meetings may be held by means of a
telephone conference circuit and connecting to such circuit shall constitute
presence at such meeting.
-5-
3.05. NOTICE OF MEETINGS. Notice of each meeting of the Board of
Directors (unless otherwise provided in or pursuant to Section 3.03) shall be
given by written notice delivered personally or mailed or given by telephone or
telegram to each director at his or her business or home address or at such
other address as such director shall have designated in writing filed with the
Secretary, in each case not less than 48 hours prior thereto. If mailed, such
notice shall be deemed to be delivered when deposited in the United States mail
so addressed, with postage thereon prepaid. If notice be given by telegram,
such notice shall be deemed to be delivered when the telegram is delivered to
the telegraph company; if by telephone, at the time the call is completed. The
attendance of a director at a meeting shall constitute a waiver of notice of
such meeting, except where a director attends a meeting and objects thereat to
the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the Board of Directors need be specified in the
notice or waiver of notice of such meeting.
3.06. QUORUM. A majority of the number of directors as provided in
Section 3.01 shall constitute a quorum for the transaction of business at any
meeting of the Board of Directors, but a majority of the directors present
(though less than such quorum) may adjourn the meeting from time to time without
further notice.
3.07. MANNER OF ACTING. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors, unless the act of a greater number is required by the Florida
Business Corporation Act, the corporation's articles of incorporation or these
bylaws.
3.08. CONDUCT OF MEETINGS. The President, and in the President's
absence, a Vice President in the order provided under Section 4.06, and in their
absence, any director chosen by the directors present, shall call meetings of
the Board of Directors to order and shall chair the meeting. The Secretary of
the corporation shall act as secretary of all meetings of the Board of
Directors, but in the absence of the Secretary, the presiding officer may
appoint any assistant secretary or any director or other person present to act
as secretary of the meeting.
3.09. VACANCIES. Any vacancy occurring in the Board of Directors,
including a vacancy created by an increase in the number of directors, may be
filled until the next succeeding annual election by the affirmative vote of a
majority of the directors then in office, though less than a quorum of the
Board of Directors, provided that in case of a vacancy created by removal of a
director(s), the shareholders shall have the right to fill such vacancy at the
same meeting or any adjournment thereof.
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3.10. COMPENSATION. The Board of Directors, by affirmative vote of a
majority of the directors then in office, and irrespective of any personal
interest of any of its members, may establish reasonable compensation of all
directors for services to the corporation as directors, officers or otherwise,
and the manner and time of payment thereof, or may delegate such authority to
an appropriate committee. The Board of Directors also shall have authority to
provide for or to delegate authority to an appropriate committee to provide for
reasonable pensions, disability or death benefits, and other benefits or
payments, to directors, officers and employees and to their estates, families,
dependents or beneficiaries on account of prior services rendered by such
directors, officers and employees to the corporation.
3.11. PRESUMPTION OF ASSENT. A director who is present at a meeting
of the Board of Directors or a committee thereof of which he is a member at
which action on any corporate matter is taken shall be presumed to have assented
to the action taken unless his dissent shall be entered in the minutes of the
meeting or unless he shall file his written dissent to such action with the
person acting as the secretary of the meeting before the adjournment thereof or
shall forward such dissent by registered mail to the Secretary of the
corporation immediately after the adjournment of the meeting. Such right to
dissent shall not apply to a director who voted in favor of such action.
3.12. COMMITTEES. The Board of Directors, by resolution adopted by
the affirmative vote of a majority of the number of directors as provided in
Section 3.01, may designate one or more committees, each committee to consist of
three or more directors elected by the Board of Directors, which to the extent
provided in said resolution as initially adopted, and as thereafter supplemented
or amended by further resolution adopted by a like vote, shall have and may
exercise, when the Board of Directors is not in session, the powers of the
Board of Directors in the management of the business and affairs of the
corporation, except action in respect to dividends to shareholders, election of
the principal officers or the filling of vacancies on the Board of Directors or
committees created pursuant to this Section. The Board of Directors may elect
one or more of its members as alternate members of any such committee who may
take the place of any absent member or members at any meeting of such
committee, upon request by the President or upon request by the chairman of
such meeting. Each such committee shall fix its own rules governing the conduct
of its activities and shall make such reports to the Board of Directors of its
activities as the Board of Directors may request.
ARTICLE IV. OFFICERS
4.01. NUMBER. The principal officers shall be a President, one or more Vice
Presidents (the number and designations to be determined by the Board of
Directors), a Secretary and a Treasurer, each of whom shall be elected by the
Board of Directors; the Board of Directors may elect a chairman who if so
elected shall be a principal officer. Any two or more offices may be
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held by the same person. The Board of Directors may designate one of the Vice
Presidents as the Executive Vice President. Such other officers and assistant
officers as may be deemed necessary may be elected or appointed by the Board of
Directors or the President.
4.02. ELECTION AND TERM OF OFFICE. The officers to be elected by the Board of
Directors shall be elected annually by the Board of Directors at the first
meeting of the Board of Directors held after each annual meeting of the
shareholders. If the election of officers shall not be held at such meeting,
such election shall be held as soon thereafter as conveniently may be. Each
officer shall hold office until his successor shall have been duly elected or
until his prior death, resignation or removal.
4.03. REMOVAL. Any officer or agent may be removed by the Board of Directors
whenever in its judgment the best interests of the corporation will be served
thereby, but such removal shall be without prejudice to the contract rights, if
any, of the person so removed. Election or appointment shall not of itself
create contract rights.
4.04. VACANCIES. A vacancy in any principal office because of death,
resignation, removal, disqualification or otherwise, shall be filled by the
Board of Directors for the unexpired portion of the term.
4.05. PRESIDENT. The President shall be the principal executive officer and,
subject to the control of the Board of Directors, shall in general supervise and
control all of the business and affairs of the corporation. He or she shall
preside at all meetings of the shareholders and of the Board of Directors. The
President shall have authority, subject to such rules as may be prescribed by
the Board of Directors, to appoint such agents and employees of the corporation
as he or she shall deem necessary, to prescribe their powers, duties and
compensation, and to delegate authority to them. Such agents and employees shall
hold office at the discretion of the President. The President shall have
authority to sign, execute and acknowledge, on behalf of the corporation, all
deeds, mortgages, bonds, stock certificates, contracts, leases, reports and all
other documents or instruments necessary or proper to be executed in the course
of the corporation's regular business, or which shall be authorized by
resolution of the Board of Directors; and, except as otherwise provided by law
or the Board of Directors, the President may authorize any Vice President or
other officer or agent of the corporation to sign, execute and acknowledge such
documents or instruments in his or her place and stead. In general he shall
perform all duties incident to the office of President and such other duties as
may be prescribed by the Board of Directors from time to time.
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4.06. VICE PRESIDENTS. In the absence of the President, or in the event of the
President's death, inability or refusal to act, or in the event for any reason
it shall be impracticable for the President to act personally, the Vice
President (or in the event there be more than one Vice President, the Vice
Presidents in the order designated by the Board of Directors, or in the absence
of any designation, then in the order of their election) shall perform the
duties of the President, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the President. Any Vice President may sign,
with the Secretary or Assistant Secretary, certificates for shares of the
corporation, and shall perform such other duties and have such authority as from
time to time may be delegated or assigned to him or her by the President or the
Board of Directors. The execution of any instrument of the corporation by any
Vice President shall be conclusive evidence, as to third parties, of the Vice
President's authority to act in the stead of the President.
4.07. SECRETARY. The Secretary shall: (a) keep the minutes of the meetings of
the shareholders and of the Board of Directors in one or more books provided for
that purpose; (b) see that all notices are duly given in accordance with the
provisions of these bylaws or as required by law; (c) be custodian of the
corporate records and of the seal of the corporation, if any, and see that the
seal of the corporation, if any, is affixed to all documents which are
authorized to be executed on behalf of the corporation under its seal; (d) keep
or arrange for the keeping of a register of the post office address of each
shareholder which shall be furnished to the Secretary by such shareholder; (e)
sign with the President, or a Vice President, certificates for shares of the
corporation, the issuance of which shall have been authorized by resolution of
the Board of Directors; (f) have general charge of the stock transfer books of
the corporation; and (g) in general perform all duties incident to the office of
Secretary and have such other duties and exercise such authority as from time to
time may be delegated or assigned to him or her by the President or by the Board
of Directors.
4.08. TREASURER. The Treasurer shall: (a) have charge and custody of and be
responsible for all funds and securities of the corporation; (b) receive and
give receipts for moneys due and payable to the corporation from any source
whatsoever, and deposit all such moneys in the name of the corporation in such
banks, trust companies or other depositaries as shall be selected in accordance
with the provisions of Section 5.04; and (c) in general perform all of the
duties incident to the office of Treasurer and have such other duties and
exercise such other authority as from time to time may be delegated or assigned
to him or her by the President or by the Board of Directors.
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4.09. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. There shall be such number
of Assistant Secretaries and Assistant Treasurers as the Board of Directors or
President from time to time authorizes. The Assistant Secretaries may sign with
the President or a Vice President certificates for shares of the corporation
the issuance of which shall have been authorized by a resolution of the Board of
Directors. The Assistant Secretaries and Assistant Treasurers, in general, shall
perform such duties and have such authority as from time to time shall be
delegated or assigned to them by the Secretary or the Treasurer, respectively,
or by the President or the Board of Directors.
4.10. OTHER ASSISTANTS AND ACTING OFFICERS. The Board of Directors and the
President shall have the power to appoint any person to act as assistant to any
officer, or as agent for the corporation in the officer's stead, or to perform
the duties of such officer whenever for any reason it is impracticable for such
officer to act personally, and such assistant or acting officer or other agent
so appointed by the Board of Directors or President shall have the power to
perform all the duties of the office to which that person is so appointed to be
assistant, or as to which he or she is so appointed to act, except as such
power may be otherwise defined or restricted by the Board of Directors or
President.
4.11. SALARIES. Salaries may be paid to the principal officers of the
corporation at the discretion of the Board of Directors, and if so paid, shall
be fixed from time to time by the Board of Directors or by a duly authorized
committee thereof, and no officer shall be prevented from receiving such salary
by reason of the fact that such officer is also a director of the corporation.
ARTICLE V. CONTRACTS, LOANS, CHECKS AND DEPOSITS
5.01. CONTRACTS. The Board of Directors may authorize any officer or officers,
agent or agents, to enter into any contract or execute or deliver any instrument
in the name of and on behalf of the corporation, and such authorization may be
general or confined to specific instances. No contract or other transaction
between the corporation and one or more of its directors or any other
corporation, firm, association or entity in which one or more of its directors
are directors or officers or are financially interested, shall be either void or
voidable because of such relationship or interest or because such director or
directors are present at the meeting of the Board of Directors or a committee
thereof which authorizes, approves or ratifies such contract or transaction or
because the votes of the interested director(s) are counted for such purpose, if
(1) the fact of such relationship or interest is disclosed or known to the Board
of Directors or committee which authorizes, approves or ratifies the contract or
transaction by a vote or consent sufficient for the purpose without counting the
votes or consents
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of such interested directors; or (2) the fact of such relationship or interest
is disclosed or known to the shareholders entitled to vote and they authorize,
approve or ratify such contract or transaction by vote or written consent; or
(3) the contract or transaction is fair and reasonable to the corporation.
Common or interested directors may be counted in determining the presence of a
quorum at a meeting of the Board of Directors or a committee thereof which
authorizes, approves or ratifies such contract or transaction.
5.02. LOANS. No indebtedness for borrowed money shall be contracted on behalf of
the corporation and no evidences of such indebtedness shall be issued in its
name unless authorized by or under the authority of a resolution of the Board of
Directors. Such authorization may be general or confined to specific instances.
5.03. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for the payment
of money, notes or other evidences of indebtedness issued in the name of the
corporation shall be signed by such officer(s), employee(s) or agents of the
corporation and in such manner as shall from time to time be determined by or
under the authority of a resolution of the Board of Directors.
5.04. DEPOSITS. All funds of the corporation not otherwise employed shall be
deposited from time to time to the credit of the corporation in such banks,
trust companies or other depositaries as may be selected by or under the
authority of a resolution of the Board of Directors.
5.05. VOTING OF SECURITIES OWNED BY THIS CORPORATION. Subject always to the
specific directions of the Board of Directors, (a) any shares or other
securities issued by any other corporation and owned or controlled by this
corporation may be voted at any meeting of security holders of such other
corporation by the President of this corporation if he or she is present, or in
the President's absence, by any Vice President of this corporation who may be
present, and (b) whenever, in the judgment of the President, or in the
President's absence, of any Vice President, it is desirable for this
corporation to execute a proxy or written consent with respect to any shares or
other securities issued by any other corporation and owned by this corporation,
such proxy or consent shall be executed in the name of this corporation by the
President or one of the Vice Presidents of this corporation, without necessity
of any authorization by the Board of Directors, affixation of corporate seal or
countersignature or attestation by another officer. Any person or persons
designated in the manner above stated as the proxy or proxies of this
corporation shall have full right, power and authority to vote the shares or
other securities issued by such other corporation and owned by this corporation
the same as
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such shares or other securities might be voted by this corporation.
ARTICLE VI. CERTIFICATES FOR SHARES AND THEIR TRANSFERS
6.01. CERTIFICATE FOR SHARES. Certificates representing shares of the
corporation shall be in such form, consistent with law, as shall be determined
by the Board of Directors. Such certificates shall be signed by the President.
All certificates for shares shall be consecutively numbered or otherwise
identified. The name and address of the person to whom the shares represented
thereby are issued, with the number of shares and the date of issue, shall be
entered on the stock transfer books of the corporation. All certificates
surrendered to the corporation for transfer shall be cancelled and no new
certificate shall be issued until the former certificate for a like number of
shares shall have been surrendered and cancelled, except as provided in Section
6.05.
6.02. FACSIMILE SIGNATURES AND SEAL. The seal of the corporation, if the
corporation has elected to have a seal, on any certificates for shares may be a
facsimile. The signature of the President upon a certificate may be a facsimile
if the certificate is manually signed on behalf of a transfer agent or a
registrar, other than the corporation itself or an employee of the corporation.
6.03. TRANSFER OF SHARES. Prior to due presentment of a certificate for shares
for registration of transfer, the corporation may treat the registered owner of
such shares as the person exclusively entitled to vote, to receive notifications
and otherwise to have and exercise all the rights and powers of an owner. Where
a certificate for shares is presented to the corporation with a request to
register for transfer, the corporation shall not be liable to the owner, or any
other person suffering loss as a result of such registration of transfer if (a)
there were on or with the certificate the necessary endorsements, and (b) the
corporation had no duty to inquire into adverse claims or has discharged any
such duty. The corporation may require reasonable assurance that said
endorsements are genuine and effective and in compliance with such other
regulations as may be prescribed by or under the authority of the Board of
Directors.
6.04. RESTRICTIONS ON TRANSFER. The face or reverse side of each certificate
representing shares shall bear a conspicuous notation of any restriction imposed
by the corporation upon the transfer of such shares.
6.05. LOST, DESTROYED OR STOLEN CERTIFICATES. Where the owner claims that his or
her certificate for shares has been lost, destroyed or wrongfully taken, a new
certificate shall be issued in place thereof if the owner (a) so requests before
the corporation has notice that such shares have been acquired by a
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bona fide purchaser, and (b) if required by the corporation, files with the
corporation a sufficient indemnity bond, and (c) satisfies such other reasonable
requirements as may be prescribed by or under the authority of the Board of
Directors.
6.06. CONSIDERATION FOR SHARES. The shares of the corporation may be issued for
such consideration as shall be fixed from time to time by the Board of
Directors, provided that any shares having a par value shall not be issued for a
consideration less than the par value thereof. The consideration to be paid for
shares may be paid in whole or in part, in money, in other property, tangible or
intangible, or in labor or services actually performed for the corporation. When
payment of the consideration for which shares are to be issued shall have been
received by the corporation, such shares shall be deemed to be fully paid and
nonassessable by the corporation. No certificate shall be issued for any share
until such share is fully paid.
6.07. STOCK REGULATIONS. The Board of Directors shall have the power and
authority to make all such rules and regulations not inconsistent with the
statutes of the State of Florida as it may deem expedient concerning the issue,
transfer and registration of certificates representing shares of the
corporation.
ARTICLE VII. WAIVER OF NOTICE
Whenever any notice is required to be given under the provisions of the Florida
Business Corporation Act or under corresponding provisions of the corporation's
articles of incorporation or bylaws, a waiver thereof in writing, signed at any
time, whether before or after the time of the meeting, by the person or persons
entitled to such notice, shall be deemed equivalent to the giving of such
notice. Such waiver by a shareholder in respect of any matter of which notice
is required under any provision of the Florida Business Corporation Act shall
contain the same information as would have been required to be included in such
notice under any applicable provisions of said Law, except that the time and
place of meeting need not be stated.
ARTICLE VIII. CONSENT WITHOUT A MEETING
Any action required by the articles of incorporation or these bylaws or any
provisions of the Florida Business Corporation Act to be taken at a meeting or
any other action which may be taken at a meeting may be taken without a meeting
if a consent in writing setting forth the action so taken shall be signed by the
requisite number of shareholders or directors under law or all of the members of
a committee thereof entitled to vote with respect to the subject matter thereof
and such consent shall have the same force and effect as a vote.
ARTICLE IX. INDEMNIFICATION
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The corporation shall indemnify all directors and officers to the fullest extent
now or hereafter permitted by the Florida Statues. This bylaw shall not limit
the rights of such persons or other persons to indemnification as provided or
permitted as a matter of law, under the Florida Statutes or otherwise.
ARTICLE X. SEAL
The Board of Directors may provide a corporate seal which shall be circular in
form and shall have inscribed thereon the name of the corporation and the state
of incorporation and the words "Corporate Seal."
ARTICLE XI. FISCAL YEAR
Except as the Board of Directors may otherwise determine, the fiscal year of
the corporation shall be the year ending on the last day of December of each
year.
ARTICLE XII. AMENDMENTS
12.01. BY SHAREHOLDERS. These bylaws may be altered, amended or repealed and new
bylaws may be adopted by the shareholders by affirmative vote of not less than
a majority of the shares present or represented at an annual or special meeting
of the shareholders at which a quorum is in attendance.
12.02. BY DIRECTORS. These bylaws may also be altered, amended or repealed and
new bylaws may be adopted by the Board of Directors by affirmative vote of a
majority of the number of directors present at any meeting at which a quorum is
in attendance; but no bylaw adopted by the shareholders shall be amended or
repealed by the Board of Directors if the bylaw so adopted so provides.
12.03. IMPLIED AMENDMENTS. Any action taken or authorized by the shareholders
or by the Board of Directors which would be inconsistent with the bylaws then in
effect but is taken or authorized by affirmative vote of not less than the
number of shares or the number of directors required to amend the bylaws so that
the bylaws would be consistent with such action, shall be given the same effect
as though the bylaws had been temporarily amended or suspended so far, but only
so far, as is necessary to permit the specific action so taken or authorized.
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EXHIBIT 2.5(C)
ADDITIONAL MEMBERS OF BOARD OF DIRECTORS OF SURVIVING CORPORATION
None.
EXHIBIT 3.1(A)
EXCHANGE RATIOS
Shares of the capital stock of the Surviving Corporation shall be issued
to the holders of shares of PHC and MIOA as follows:
PHC CAPITAL STOCK
VOTING COMMON STOCK. Each share of PHC Voting Common Stock shall be
converted into the right to receive 1.91 shares of the Common Stock of the
Surviving Corporation.
NON-VOTING COMMON STOCK. Each share of PHC Non-Voting Common Stock shall
be converted into the right to receive 1.91 shares of the Common Stock of the
Surviving Corporation.
PRIME COMMON STOCK. Each share of PHC Prime Common Stock shall be
converted into the right to receive 1.91 shares of the Common Stock of the
Surviving Corporation.
SERIES 1 CLASS A STOCK. Each share of PHC Series 1 Class A Stock shall be
converted into the right to receive one share of the Class A Preferred Stock of
the Surviving Corporation, each share of which, upon conversion, is entitled to
receive 18.3 shares of the Common Stock of the Surviving Corporation.
SERIES 2 CLASS A STOCK. Each share of PHC Series 2 Class A Stock shall be
converted into the right to receive one share of the Class A Preferred Stock of
the Surviving Corporation, each share of which, upon conversion, is entitled to
receive 18.3 shares of the Common Stock of the Surviving Corporation.
SERIES B REDEEMABLE CONVERTIBLE PREFERRED STOCK. Each share of PHC Series
B Redeemable Convertible Preferred Stock shall be exchanged into the right to
receive one share of the Class B Redeemable Convertible Preferred Stock of the
Surviving Corporation, each share of which, upon conversion, is entitled to
receive 1.91 shares of the Common Stock of the Surviving Corporation.
SERIES B NON-VOTING REDEEMABLE CONVERTIBLE PREFERRED STOCK. Each share of
PHC Series B Non-Voting Redeemable Convertible Preferred Stock shall be
converted into the right to receive one share of the Class B Redeemable
Convertible Preferred Stock of the Surviving Corporation, each share of which,
upon conversion, is entitled to receive 1.91 shares of the Common Stock of the
Surviving Corporation.
568147.3/08-18-98/11:56AM
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SERIES C REDEEMABLE CONVERTIBLE PREFERRED STOCK. Each share of PHC Series
C Redeemable Convertible Preferred Stock shall be converted into the right to
receive one share of the Class C Redeemable Convertible Preferred Stock of the
Surviving Corporation, each share of which, upon conversion, is entitled to
receive 1.91 shares of the Common Stock of the Surviving Corporation.
SERIES C NON-VOTING REDEEMABLE CONVERTIBLE PREFERRED STOCK. Each share of
PHC Series C Non-Voting Redeemable Convertible Preferred Stock shall be
converted into the right to receive one share of the Class C Redeemable
Convertible Preferred Stock of the Surviving Corporation, each share of which,
upon conversion, is entitled to receive 1.91 shares of the Common Stock of the
Surviving Corporation.
MIOA CAPITAL STOCK
COMMON STOCK. Each share of MIOA Common Stock shall continue to represent
one share of the Common Stock of the Surviving Corporation. Each certificate
representing shares of the MIOA Common Stock shall be substituted, upon
surrender of the stock certificate representing the MIOA Common Stock, with a
new certificate representing the shares of the Common Stock of the Surviving
Corporation.
PREFERRED STOCK. PHC and MIOA agree that MIOA will take all necessary
actions to ensure that no other shares of MIOA Capital Stock shall be
outstanding as of the Closing. Notwithstanding the foregoing, the parties agree
that MIOA shall be permitted to have shares of its Series B Convertible
Preferred Stock outstanding at the Closing, provided that the total value
represented by said Series B Convertible Preferred Stock, based on the per share
closing trading price per share of the MIOA Common Stock on the Closing Date,
shall in no event exceed $300,000. Each share of MIOA Series B Convertible
Preferred Stock, if outstanding as of the Closing, shall be exchanged into the
right to receive one (1) share of the Class D Convertible Preferred Stock of the
Surviving Corporation.
PHC OPTIONS AND WARRANTS
OPTIONS AND WARRANTS TO PURCHASE PHC COMMON STOCK. The applicable Exchange
Ratio for options and warrants to purchase PHC Common Stock ("PHC Common
Options/Warrants") shall be the Exchange Ratio applicable to the PHC Common
Stock; provided that such Exchange Ratio as applied to the PHC Common
Options/Warrants shall be adjusted to reflect the actual effective exchange
ratio applied to the PHC Voting Common Stock (other than shares of PHC Voting
Common Stock issued for cash after the date of this Agreement) after giving
effect to any increase or reduction in Merger Shares pursuant to Section 7.11 of
the Agreement.
An illustrative example of such an adjustment follows, assuming the
following facts: (a) 100 shares of PHC Voting Common Stock are outstanding as of
the date of this Agreement, (b)
568147.3/08-18-98/11:56AM
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an Exchange Ratio of 1.91 is applied to such PHC Voting Common Stock pursuant to
this Exhibit 3.1(a), (c) 20 shares of PHC Common Stock are issued after the date
of this Agreement but prior to the Closing at a cash price of $4.00 per share,
(d) the fair market value of MIOA shares, based on the average closing trading
price per share of MIOA Common Stock for the twenty (20) trading days
immediately preceding the date of issuance of PHC Common Shares referenced in
(c) above, is $2.00 and (e) pursuant to Section 7.11, the number of Merger
Shares is reduced by 10.
Thenumber of Merger Shares that would have been issued but for the
adjustment pursuant to Section 7.11 is:
(100x1.91) + (20x($4/$2)) = 231 Merger Shares
Pursuant to Section 7.11, only 221 Merger Shares will be issued, the
reduction to be applied pro rata among each of the shares of PHC Voting
Common Stock.
Accordingly, each share of PHC Voting Common Stock will be exchanged for
221/231 of the Merger Shares that would otherwise have been received.
Theeffective exchange ratio applied to the shares of PHC Voting Common
Stock outstanding as of the date of this Agreement (which is the
adjusted exchange rate to be applied to the PHC Common
Options/Warrants) is therefore:
1.91 x (221/231) = 1.8273160...
WARRANTS TO PURCHASE CLASS A PREFERRED STOCK. The applicable Exchange
Ratio for warrants to purchase PHC Class A Preferred Stock ("Series A Warrants")
shall be the Exchange Ratio applicable to the PHC Class A Preferred Stock;
provided that such Exchange Ratio as applied to the Series A Warrants shall be
adjusted to reflect the actual exchange ratio applied to the PHC Class A
Preferred Stock after giving effect to any increase or reduction in Merger
Shares pursuant to Section 7.11 of the Agreement.
568147.3/08-18-98/11:56AM
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EXHIBIT 3.1(E)
PERMITTED EQUITY FINANCINGS
Prior to Closing, PHC may consummate a sale of the PHC Series C Preferred
Stock as contemplated by the fifth closing pursuant to that certain Amended and
Restated Securities Purchase Agreement, dated as of June 26, 1998, among PHC,
Weston Presidio Capital II, L.P. and Certain Other Investors. Consummation of
the fifth closing would result in the issuance of approximately 2,075,000 shares
of PHC Series C Preferred Stock and warrants to purchase 691,667 shares of PHC
Common Stock at an exercise price of $0.01 per share. The total purchase price
for these securities would be approximately $8,300,000. Up to an additional
750,000 shares of Series C Preferred Stock and warrants to purchase 250,000
shares of PHC Common Stock may be issued on the same terms as provided in the
Securities Purchase Agreement (i.e. for an aggregate purchase price of
$3,000,000). If the full amount of securities allotted for fifth closing (with
or without such additional $3,000,000 allotment) are not purchased, the purchase
price will be prorated. In addition, prior to Closing, PHC may issue warrants
exercisable for 10,000 shares of PHC Common Stock at an exercise price of $4.00
per share pursuant to a Warrant and Preferred Stock Commitment to be entered
into among PHC, PHC Holding Corporation, MIOA, Weston Presidio Capital II, L.P.
and certain other Investors.
MIOA is in the process of revising the number of shares and options given
to the shareholders of PRN of North Carolina, Inc. ("PRN") at the time of the
merger transaction between MIOA and PRN resulting from the change in direction
of MIOA in which PRN will solely go after physical pain and Ivanhoe Medical
Systems, Inc. ("Ivanhoe") will do interventional pain. Accordingly, MIOA will be
shifting certain of the options awarded primarily to the main shareholder over
to Ivanhoe as potential earn-up shares in connection with the growth of the
interventional pain and sleep business. Note the shifting of the options does
not result in additional options being issued. Furthermore, the terms will
change from issuing stock options at a fixed price to issuing earn-up shares
with a similar or higher strike price.
MIOA is currently in the process of revising the terms of the payments
pursuant to the acquisition on FPII. FPII has previously lost money.
Accordingly, we are negotiating an adjustment of the purchase price with ▇▇.
▇▇▇. See EXHIBIT 3.3(E)
In no case will either of these last two negotiations have a material
adverse impact or change on the financial position, results of operations, or
number of shares of MIOA.
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EXHIBIT 3.3(A)
PERMITTED PHC OPTIONS AND WARRANTS
BETWEEN THE SCHEDULE DELIVERY DATE AND CLOSING
Prior to Closing, PHC is permitted to issue options or warrants which
taken together grant the holder(s) thereof the right to purchase in the
aggregate up to 100,000 shares of PHC Common Stock at exercise price(s) equal to
or greater than the current market value of PHC Common Stock with vesting
schedule(s) substantially similar to options and warrants issued by PHC to third
parties prior to the Schedule Delivery Date.
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EXHIBIT 3.3(E)
PERMITTED MIOA OPTIONS AND WARRANTS
BETWEEN THE SCHEDULE DELIVERY DATE AND CLOSING
Prior to Closing, MIOA is permitted to issue options or warrants which
taken together grant the holder(s) thereof the right to purchase in the
aggregate up to 100,000 shares of MIOA Common Stock at exercise price(s) equal
to or greater than the Fair Market Value of MIOA Common Stock with vesting
schedule(s) substantially similar to options and warrants issued by MIOA to
third parties prior to the Schedule Delivery Date.
▇▇. ▇▇▇ will be issued warrants to purchase 200,000 shares at a strike
price of $2.50 exercisable at anytime within three (3) years. ▇▇. ▇▇▇ will
srrender 83,000 shares of MIOA Common Stock as part of the purchase price
adjustment for the purchase of the FPII practice.
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EXHIBIT 4.1(A)
[FORM OF EMPLOYMENT AGREEMENT FOR ▇▇▇▇▇▇▇, SUBJECT TO
CERTAIN CHANGES MADE BY AGREEMENT OF THE PARTIES.]
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "Agreement") is effective as of the ___
day of _________, 1998 (the "Effective Date"), by and between ________________
(formerly Medical Industries of America, Inc.), a Florida corporation (the
"Employer") and J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, M.D. ("Employee").
W I T N E S S E T H:
WHEREAS, Employee was formerly employed as the President of the Ancillary
Division of Physician Health Corporation, a Delaware corporation ("PHC"),
pursuant to an Employment Agreement, dated as of January 1, 1998; and
WHEREAS, Employer merged with Physician Health Corporation, a Delaware
corporation on ____________, 1998 with Employer being the surviving corporation;
and
WHEREAS, Employer and Employee entered into that certain
NonDisclosure/NonCompete Agreement (the "NonCompete Agreement") simultaneously
herewith and attached hereto as EXHIBIT A; and
WHEREAS, the parties hereto desire to amend and restate said employment
agreement as set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
ARTICLE I. RESPONSIBILITIES
SECTION 1.1 SCOPE OF EMPLOYMENT. Employee is employed by Employer to serve
as ________________ of the Employer with responsibility for ASC Embedded Surgery
Centers, St. Louis Market and Birthing Centers (?), together with such other
powers and responsibilities set forth for such position in the Bylaws of the
Employer or as may be designated from time to time by the Chief Executive
Officer ("CEO") or President of the Employer, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇. Employee accepts
employment upon the terms set forth in this Agreement and will perform
diligently to the best of his abilities those duties set forth in the Bylaws or
as may be designated from time to time by the CEO or President of the Employer,
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, and in this Agreement in a manner that promotes the interests
and goodwill of the Employer. Employee will faithfully devote his best efforts
and substantially all his working time to and for the benefit of the Employer;
provided, however, that Employee may, at his option, devote reasonable time and
attention to civic, charitable, business or social organizations or speaking
engagements as he deems appropriate.
ARTICLE II. COMPENSATION
SECTION 2.1 GENERAL TERMS. (a) The Employer agrees to compensate Employee
on a salary basis at an annual rate of Two Hundred Thousand Dollars ($200,000),
payable in accordance with the Employer's ordinary payroll policies and
procedures subject to annual review and adjustment by the Board of Directors of
the Employer (the "Board") or the Compensation Committee thereof.
[Notwithstanding the foregoing, upon the consummation of the underwritten
initial public offering (the "IPO") of the Employer's common stock, Employee
will be compensated at an annual rate of Two Hundred Fifty Thousand Dollars
($250,000).]
(b) The Employer shall pay the Employee an annual bonus (the
"Bonus") from a bonus pool ("Bonus Pool") established by the Board of Directors
of Employer in the exercise of its sole discretion and judgment, based upon the
earnings before interest, taxes, depreciation and amortization ("EBITDA") of
Employer and distributed, in the sole discretion of the Board of Directors of
Employer, to Employee and certain other employees of the Company, including
without limitation, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇.
EBITDA shall be determined in accordance with generally accepted accounting
principles. Any Bonus shall be payable within thirty (30) days after completion
and delivery of the audited financial statements of Employer to Employer for the
fiscal year to which the Bonus relates.
SECTION 2.2 REIMBURSEMENT. It is acknowledged by the parties that
Employee, in connection with the services to be performed by him pursuant to the
terms of this Agreement, will be required to make payments for travel,
communications, entertainment of business associates and similar expenses. The
Employer will reimburse Employee for all reasonable documented expenses of types
authorized by the Employer and incurred by Employee in the performance of his
duties hereunder. Employee will comply with such budget limitations and approval
and reporting requirements with respect to expenses as the Employer may
establish from time to time.
SECTION 2.3 EMPLOYEE BENEFITS. During the term of this Agreement, Employee
shall be entitled to participate in and receive benefits under any and all
employee benefit plans and programs which are from time to time generally made
available to the executive employees of the Employer including, without
limitation, health and disability insurance and bonuses. Such benefits shall
include, but not be limited to, the following:
(a) a whole life insurance policy for the Employee for his
designated beneficiaries in the amount of $1,000,000; and
(b) disability insurance [need detail].
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ARTICLE III.
NONDISCLOSURE OF CONFIDENTIAL INFORMATION
SECTION 3.1 The terms of the NonCompete Agreement with respect to matters
of confidentiality are incorporated herein by this reference.
ARTICLE IV. NONCOMPETITION
SECTION 4.1 The terms of the NonCompete Agreement with respect to matters
of non-competition with the Employer are incorporated herein by this reference.
ARTICLE V. TERM
SECTION 5.1 The term of this Agreement will commence as of the date hereof
and will end on December 31, 2001, unless earlier terminated by either party
pursuant to the terms hereof (the "Term"). Assuming all conditions of this
Agreement have been satisfied and there has been no breach of the Agreement
during its initial term, Employer and Employee may mutually extend the Term for
an additional one (1) year term by their mutual agreement ("Extended Term").
ARTICLE VI. TERMINATION
SECTION 6.1 TERMINATION. Employee's employment hereunder will terminate
upon the occurrence of any of the following events:
(a) BY EMPLOYER WITHOUT CAUSE. The Employer may terminate this
Agreement at any time without cause. In the event of the termination of
this Agreement pursuant to this Subsection, Employee's salary shall be
paid at the then current rate, for a period of one (1) year after
termination pursuant to this Subsection. Employee also shall be entitled
to receive expense reimbursements under Section 2.2 hereof for expenses
incurred in the performance of his duties prior to termination.
(b) BY EMPLOYEE WITHOUT CAUSE. Employee may terminate this Agreement
at any time without cause. Upon termination of his employment pursuant to
this Subsection, the Employer will pay any portion of Employee's salary at
the then current rate and benefits, if any, accrued but unpaid from the
last monthly payment date to the date of termination. Employee shall also
be paid expense reimbursements under Section 2.2 hereof for expenses
incurred in the performance of his duties hereunder prior to termination.
(c) BY EMPLOYER WITH CAUSE. This Agreement may be terminated by
Employer at any time upon written notice for any of the following reasons:
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I. a substantial breach by the Employee of a material provision
of this Agreement, which breach remains uncorrected for more
than thirty (30) days following written notice detailing the
specific provision for which a breach is alleged, and setting
forth the actions, which, when taken, will correct the breach;
II. conviction of the Employee for a felony which in the
reasonable judgment of the CEO materially affects Employee's
ability to perform his duties pursuant to this Agreement;
III. commission by Employee of an act of fraud, embezzlement, or
material dishonesty against the Employer or its affiliates as
determined by the Employer's Chief Executive Officer based on
information she deems reasonable and adequate; or
IV. intentional neglect of or material inattention to Employee's
duties, which neglect or inattention remains uncorrected for
more than thirty (30) days following written notice from the
Board detailing the Board's concern.
Employee will not be entitled to any severance pay or other compensation
upon termination of his employment pursuant to this Subsection except for
any portion of his base salary accrued but unpaid from the last monthly
payment date to the date of termination and expense reimbursements under
Section 2.2 hereof for expenses incurred in the performance of his duties
hereunder prior to termination.
(d) TERMINATION ON DEATH. In the event of Employee's death, this
Agreement will be deemed to have terminated on the date of his death. In
the event of his death, the Employer will pay to the testamentary trusts
created by Employee's will, or if there are no such trusts, to his estate,
any portion of Employee's salary at the then current rate and benefits, if
any, accrued but unpaid from the last monthly payment date to the date of
termination. In the event of the termination of this Agreement pursuant to
this Subsection, Employee's salary shall be paid at the then current rate
for a period of six (6) months. Additionally, the Employer will pay to
such testamentary trusts or Employee's estate expense reimbursements under
Section 2.2 hereof for expenses incurred in the performance of his duties
hereunder prior to his death.
(e) TERMINATION ON DISABILITY. This Agreement will terminate
immediately in the event Employee becomes physically or mentally disabled.
Employee will be deemed disabled if, as a result of Employee's incapacity
due to physical or mental illness, Employee shall have been absent from
his duties with the Employer on a full-time basis for 120 consecutive
business days. In the event of the termination of this Agreement pursuant
to this Subsection, Employee's salary shall be paid at the then current
rate for
565079.2/08-18-98/11:54AM
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a period of six (6) months. Additionally, the Employer will pay Employee
expense reimbursements under Section 2.2 hereof for expenses incurred in
the performance of his duties hereunder prior to termination.
ARTICLE VII. CHANGE IN CONTROL TERMINATION PAYMENT
SECTION 7.1 TERMINATION PAYMENT. Notwithstanding anything to the contrary
contained in Article VI hereof, if, after a Change In Control (as defined in
Section 7.2 hereof), Employee's employment with the Employer terminates pursuant
to Section 6.1(a) of this Agreement following a Change In Control or Employee
terminates this Agreement because he is requested to relocate, his salary is
reduced from the amount in effect immediately prior to the Change in Control,
his title is reduced or his duties and responsibilities are substantially
diminished, the Employer will pay Employee a lump sum payment (the "Termination
Payment") in cash equal to three (3) years salary at the then current rate in
effect immediately prior to the Change In Control.
SECTION 7.2 CHANGE IN CONTROL. A Change In Control will be deemed to have
occurred for purposes hereof, upon any one of the following events: (i) any
person (within the meaning of Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")), other than the Employer
(including its subsidiaries, directors, and executive officers) has become the
beneficial owner, within the meaning of Rule 13d-3 under the Exchange Act, of
fifty percent (50%) or more of the combined voting power of the Employer's then
outstanding Common Stock or equivalent in voting power of any class or classes
of the Employer's outstanding securities ordinarily entitled to vote in
elections of directors ("voting securities"); or (ii) shares representing fifty
percent (50%) or more of the combined voting power of the Employer's voting
securities are purchased pursuant to a tender offer or exchange offer (other
than an offer by the Employer or its subsidiaries or affiliates); or (iii) as a
result of, or in connection with, any tender offer or exchange offer, merger or
other business combination, sale of assets, or contested election, or any
combination of the foregoing transactions (a "Transaction"), the persons who
were Directors of the Employer before the Transaction shall cease to constitute
a majority of the Board of the Employer or of any successor to the Employer; or
(iv) following the Effective Date, the Employer is merged or consolidated with
another corporation and as a result of such merger or consolidation less than
fifty percent (50%) of the outstanding voting securities of the surviving or
resulting corporation shall then be owned in the aggregate by the former
shareholders of the Employer, other than (A) any party to such merger or
consolidation, or (B) any affiliates of any such party; or (v) the Employer
transfers more than fifty percent (50%) of its assets, or the last of a series
of transfers results in the transfer of more than fifty percent (50%) of the
assets of the Employer, to another entity that is not wholly-owned by the
Employer. For purposes of this subsection (v), the determination of what
constitutes fifty percent (50%) of the assets of the Employer shall be made by
the Board, as constituted immediately prior to the events that would constitute
a Change in Control if fifty percent (50%) of the Employer's assets were
transferred in connection with such events, in its sole discretion.
Notwithstanding anything to the contrary contained in this Section 7.2, a Change
In Control shall
565079.2/08-18-98/11:54AM
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not be deemed to have occurred for the purposes hereof, upon any of the
following events: (1) the consummation of an IPO; or (2) the conversion of
existing classes of Class A Stock and Preferred Stock of the Employer into
Common Stock.
SECTION 7.3 NO RIGHT TO CONTINUED EMPLOYMENT. This Article VII will not
give Employee any right of continued employment or any right to compensation or
benefits from the Employer except the rights specifically stated herein.
SECTION 7.4 ARBITRATION. Any dispute arising under this Article VII will
be resolved in the manner provided in Article VIII.
ARTICLE VIII. ARBITRATION
SECTION 8.1 SCOPE. The Employer and Employee acknowledge and agree that
any claim or controversy arising out of or relating to Section VII of this
Agreement shall be settled by final and binding arbitration in the city in which
the Employer's principal executive offices are located in accordance with the
National Rules of the American Arbitration Association for the Resolution of
Employment Disputes in effect on the date of the event giving rise to the claim
or controversy. The Employer and Employee further acknowledge and agree that
either party must request arbitration of any claim or controversy within sixty
(60) days of the date of the event giving rise to the claim or controversy by
giving written notice of the party's request for arbitration. Failure to give
notice of any claim or controversy within sixty (60) days of the event giving
rise to the claim or controversy shall constitute waiver of the claim or
controversy.
SECTION 8.2 PROCEDURES. All claims or controversies subject to arbitration
shall be submitted to arbitration within six (6) months from the date that a
written notice of request for arbitration is effective. All claims or
controversies shall be resolved by a panel of three (3) arbitrators at least one
of whom is licensed to practice law in the State of Georgia and who are
experienced in the arbitration of labor and employment disputes. These
arbitrators shall be selected in accordance with the National Rules of the
American Arbitration Association for the Resolution of Employment Disputes in
effect at the time the claim or controversy arises. Either party may request
that the arbitration proceeding be stenographically recorded by a Certified
Shorthand Reporter. The arbitrators shall issue a written decision with respect
to all claims or controversies within thirty (30) days from the date the claims
or controversies are submitted to arbitration. The parties shall be entitled to
be represented by legal counsel at any arbitration proceedings. Employee and the
Employer acknowledge and agree that each party will bear fifty percent (50%) of
the cost of the arbitration proceeding, and each party shall be responsible for
paying its own attorneys' fees, if any, unless the arbitrators determine
otherwise.
SECTION 8.3 ENFORCEMENT. The Employer and Employee acknowledge and agree
that the arbitration provisions in this Agreement may be specifically enforced
by either party, and that submission to arbitration proceedings may be compelled
by any court of competent jurisdiction.
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The Employer and Employee further acknowledge and agree that the decision of the
arbitrators may be specifically enforced by either party in any court of
competent jurisdiction.
SECTION 8.4 LIMITATIONS. Notwithstanding the arbitration provisions set
forth herein, Employee and the Employer acknowledge and agree that nothing in
this Agreement shall be construed to require the arbitration of any claim or
controversy arising under Articles III or IV of this Agreement. These provisions
shall be enforceable by any court of competent jurisdiction and shall not be
subject to arbitration. Employee and the Employer further acknowledge and agree
that nothing in this Agreement shall be construed to require arbitration of any
claim for workers' compensation or unemployment compensation.
ARTICLE IX. GENERAL TERMS
SECTION 9.1 NOTICES. All notices and other communications hereunder will
be in writing or by written telecommunication, and will be deemed to have been
duly given if delivered personally or if sent by overnight courier or by written
telecommunication, to the relevant address set forth below, or to such other
address as the recipient of such notice or communication will have specified to
the other party hereto in accordance with this Section:
If to the Employer to:
=======================
=======================
Attn: __________________
Fax No.: _______________
with a copy to:
=======================
=======================
Attn: __________________
Fax No.: _______________
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If to Employee, to:
J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, M.D.
▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax No.: ▇▇▇-▇▇▇-▇▇▇▇
SECTION 9.2 WITHHOLDING; NO OFFSET. All payments required to be made by
the Employer under this Agreement to Employee will be subject to the withholding
of such amounts, if any, relating to federal, state and local taxes as may be
required by law. No payment under this Agreement will be subject to offset or
reduction attributable to any amount Employee may owe to the Employer or any
other person.
SECTION 9.3 ENTIRE AGREEMENT; MODIFICATION. This Agreement constitutes the
complete and entire agreement between the parties with respect to the subject
matter hereof and supersedes all prior agreements between the parties. The
parties have executed this Agreement based upon the express terms and provisions
set forth herein and have not relied on any communications or representations,
oral or written, which are not set forth in this Agreement.
SECTION 9.4 AMENDMENT. The covenants or provisions of this Agreement may
not be modified by an subsequent agreement unless the modifying agreement: (i)
is in writing; (ii) contains an express provision referencing this Agreement;
(iii) is signed and executed on behalf of the Employer by an officer of the
Employer other than Employee; (iv) is approved by resolution of the Board; and
(v) is signed by Employee.
SECTION 9.5 LEGAL CONSULTATION. Both parties have been accorded a
reasonable opportunity to review this Agreement with legal counsel prior to
executing this Agreement.
SECTION 9.6 CHOICE OF LAW. This Agreement and the performance hereof will
be construed and governed in accordance with the laws of the State of Georgia,
without regard to its choice of law principles.
SECTION 9.7 ATTORNEY'S FEES. If legal action is commenced by either party
to enforce or defend its rights under this Agreement, the party substantially
obtaining the relief requested
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in such action shall be entitled to recover its costs and reasonable attorneys'
fees in addition to any other relief granted.
SECTION 9.8 SUCCESSORS AND ASSIGNS. The obligations, duties and
responsibilities of Employee under this Agreement are personal and shall not be
assignable. In the event of Employee's death or disability, this Agreement shall
be enforceable by Employee's estate, executors or legal representatives.
SECTION 9.9 WAIVER OF PROVISIONS. Any waiver of any terms and conditions
hereof must be in writing and signed by the parties hereto. The waiver of any of
the terms and conditions of this Agreement shall not be construed as a waiver of
any subsequent breach of the same or any other terms and conditions hereof.
SECTION 9.10 SEVERABILITY. The provisions of this Agreement shall be
deemed severable, and if any portion shall be held invalid, illegal or
enforceable for any reason, the remainder of this Agreement shall be effective
and binding upon the parties provided that the substance of the economic
relationship created by this Agreement remains materially unchanged.
SECTION 9.11 REMEDIES. The parties hereto acknowledge and agree that upon
any breach by Employee of his obligations under either of Articles III and IV
hereof, the Employer will have no adequate remedy at law, and accordingly will
be entitled to specific performance and other appropriate injunctive and
equitable relief. No remedy set forth in this Agreement or otherwise conferred
upon or reserved to any party shall be considered exclusive of any other remedy
available to any party, but the same shall be distinct, separate and cumulative
and may be exercised from time to time as often as occasion may arise or as may
be deemed expedient.
SECTION 9.12 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which will be deemed an original, and all of which
together will constitute one and the same instrument.
[intentionally left blank]
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IN WITNESS WHEREOF, Employer and Employee have caused this Agreement to be
executed on the day and year indicated below to be effective on the day and year
first written above.
EMPLOYEE:
--------------------------------------------------- ------------------
J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, M.D. Date
EMPLOYER:
-------------------------
By:____________________________________________________ __________________
___________, President Date
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EXHIBIT 4.1(A)
[FORM OF EMPLOYMENT AGREEMENT FOR ▇▇▇▇▇▇▇, SUBJECT TO
CERTAIN CHANGES MADE BY AGREEMENT OF THE PARTIES.]
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "Agreement") is effective as of the ___
day of ________, 1998 (the "Effective Date"), by and between ________________
(formerly Medical Industries of America, Inc.), a Florida corporation (the
"Employer") and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. ("Employee").
W I T N E S S E T H:
WHEREAS, Employee was formerly employed as the Executive Vice President,
Chief Financial Officer and Treasurer of Physician Health Corporation, a
Delaware corporation ("PHC"), pursuant to an Employment Agreement, dated as of
January 1, 1998; and
WHEREAS, Employer merged with Physician Health Corporation, a Delaware
corporation on ____________, 1998 with Employer being the surviving corporation;
and
WHEREAS, Employer and Employee entered into that certain
NonDisclosure/NonCompete Agreement (the "NonCompete Agreement") simultaneously
herewith and attached hereto as EXHIBIT A; and
WHEREAS, the parties hereto desire to amend and restate said employment
agreement as set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
ARTICLE I. RESPONSIBILITIES
SECTION 1.1 SCOPE OF EMPLOYMENT. Employee is employed by Employer to serve
as Executive Vice President, _______________ and Treasurer of the Employer,
together with such other powers and responsibilities set forth for such position
in the Bylaws of the Employer or as may be designated from time to time by the
Chief Executive Officer ("CEO") or President of the Employer, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇.
Employee accepts employment upon the terms set forth in this Agreement and will
perform diligently to the best of his abilities those duties set forth in the
Bylaws or as may be designated from time to time by the CEO and Chairman of the
Employer, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, and in this Agreement in a manner that promotes the
interests and goodwill of the Employer. Employee will devote his best efforts
and 40 hours per week, exclusive of paid vacation and sick time available to
Employee pursuant to Section 2.3 hereof, to and for the benefit of the Employer.
Employee may, at his option, devote reasonable time and attention to civic,
charitable, business or social organizations or speaking engagements as he deems
appropriate and engage in the other activities set forth on Annex I attached
hereto.
ARTICLE II. COMPENSATION
SECTION 2.1 GENERAL TERMS. (a) The Employer agrees to compensate Employee
on a salary basis at an annual rate of Two Hundred Five Thousand Dollars
($205,000), payable in accordance with the Employer's ordinary payroll policies
and procedures subject to annual review and adjustment by the Board of Directors
of the Employer (the "Board") or the Compensation Committee thereof.
[Notwithstanding the foregoing, upon the consummation of the underwritten
initial public offering (the "IPO") of the Employer's common stock or in the
event that any class of equity securities of the Employer or one of its
successors becomes registered under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), Employee will be compensated at an annual rate of
Two Hundred Sixty Thousand Dollars ($260,000).]
(b) The Employer shall pay the Employee an annual bonus (the
"Bonus") from a bonus pool ("Bonus Pool") established by the Board of Directors
of Employer in the exercise of its sole discretion and judgment, based upon the
earnings before interest, taxes, depreciation and amortization ("EBITDA") of
Employer and distributed, in the sole discretion of the Board of Directors of
Employer, to Employee and certain other employees of the Company, including
without limitation, ▇▇▇▇▇ ▇▇▇▇▇▇, J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇
▇▇▇▇▇▇▇. EBITDA shall be determined in accordance with generally accepted
accounting principles. Any Bonus shall be payable within thirty (30) days after
completion and delivery of the audited financial statements of Employer to
Employer for the fiscal year to which the Bonus relates.
SECTION 2.2 REIMBURSEMENT. It is acknowledged by the parties that
Employee, in connection with the services to be performed by him pursuant to the
terms of this Agreement, will be required to make payments for travel,
communications, entertainment of business associates and similar expenses. The
Employer will reimburse Employee for all reasonable documented expenses of types
authorized by the Employer and incurred by Employee in the performance of his
duties hereunder, including reasonable documented expenses related to providing
puzzles and other appropriate modest gifts to vendors and development prospects.
Employee will comply with such budget limitations and approval and reporting
requirements with respect to expenses as the Employer may establish from time to
time. Approval of any reimbursement to Employee by the Employer's Chief
Executive Officer shall be conclusive evidence that such reimbursement is
reasonable. Expenses incurred by Employee prior to the date of this Agreement
shall also be subject to the foregoing reimbursement provision.
SECTION 2.3 EMPLOYEE BENEFITS. During the term of this Agreement, Employee
shall be entitled to participate in and receive benefits under any and all
employee benefit plans and programs which are from time to time generally made
available to the executive employees of the Employer including, without
limitation, health and disability insurance and bonuses as may be specified in
applicable employee manuals. Such benefits shall include, but not be limited to,
the following:
(a) a whole life insurance policy for the Employee for his
designated beneficiaries in the amount of $1,000,000; and
(b) disability insurance [need detail].
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ARTICLE III.
NONDISCLOSURE OF CONFIDENTIAL INFORMATION
SECTION 3.1 The terms of the NonCompete Agreement with respect to matters
of confidentiality are incorporated herein by this reference.
ARTICLE IV. NONCOMPETITION
SECTION 4.1 The terms of the NonCompete Agreement with respect to matters
of non-competition with the Employer are incorporated herein by this reference.
ARTICLE V. TERM
SECTION 5.1 The term of this Agreement will commence as of the date hereof
and will end on December 31, 2001, unless earlier terminated by either party
pursuant to the terms hereof (the "Term"). Assuming all conditions of this
Agreement have been satisfied and there has been no breach of the Agreement
during its initial term, Employer and Employee may mutually extend the Term for
an additional one (1) year term by their mutual agreement ("Extended Term").
ARTICLE VI. TERMINATION
SECTION 6.1 TERMINATION. Employee's employment hereunder will terminate
upon the occurrence of any of the following events:
(a) BY EMPLOYER WITHOUT CAUSE. The Employer may terminate this
Agreement at any time without cause. In the event of the termination of
this Agreement pursuant to this Subsection, Employee's salary shall be
paid at the then current rate, for a period of one (1) year after
termination pursuant to this Subsection. Employee also shall be entitled
to receive expense reimbursements under Section 2.2 hereof for expenses
incurred in the performance of his duties prior to termination.
(b) BY EMPLOYEE WITHOUT CAUSE. Employee may terminate this Agreement
at any time without cause. Upon termination of his employment pursuant to
this Subsection, the Employer will pay any portion of Employee's salary at
the then current rate and benefits, if any, accrued but unpaid from the
last monthly payment date to the date of termination. Employee shall also
be paid expense reimbursements under Section 2.2 hereof for expenses
incurred in the performance of his duties hereunder prior to termination.
(c) BY EMPLOYER WITH CAUSE. This Agreement may be terminated by
Employer acting through its Chief Executive Officer at any time upon
written notice for any of the following reasons:
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I. a substantial breach by the Employee of a material provision
of this Agreement, which breach remains uncorrected for more
than thirty (30) days following written notice detailing the
specific provision for which a breach is alleged, and setting
forth the actions, which, when taken, will correct the breach;
II. conviction of the Employee for a felony which in the
reasonable judgment of the CEO materially affects Employee's
ability to perform his duties pursuant to this Agreement;
III. commission by Employee of an act of fraud, embezzlement, or
material dishonesty against the Employer or its affiliates as
determined by the Employer's Chief Executive Officer based on
information she deems reasonable and adequate; or
IV. intentional neglect of or material inattention to Employee's
duties, which neglect or inattention remains uncorrected for
more than thirty (30) days following written notice from the
Board detailing the Board's concern.
Employee will not be entitled to any severance pay or other compensation
upon termination of his employment pursuant to this Subsection except for
any portion of his base salary accrued but unpaid from the last monthly
payment date to the date of termination and expense reimbursements under
Section 2.2 hereof for expenses incurred in the performance of his duties
hereunder prior to termination.
Prior to any termination for cause based on allegations of improper
payment or reimbursement of business or personal expenses, Employee will
be given written notice of the expenses at issue and the opportunity to
pay to the Employer such expenses during the ten (10) day period following
the delivery of the notice. In the event that the payment is made during
the ten (10) day period, the Employee will not be terminated. If at the
time of Employees termination for cause ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ is not the
Employer's Chairman of the Board or Chief Executive Officer or in the
event that during the 90 day period following the date of Employee's
termination for cause ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ is removed as the Employer's
Chairman of the Board or Chief Executive Officer, any determination made
under subparagraph III above must be confirmed by arbitration in
accordance with the "Expedited Procedures" set forth in the Commercial
Arbitration Rules of the American Arbitration Association as then in
effect (the "Rules"). The arbitration shall be held in such place in the
metropolitan Atlanta, Georgia area as may be specified by the arbitrator,
and shall be conducted in accordance with the Rules and (regardless of any
other choice of law provision in this agreement) the United States
Arbitration Act (9 U.S.C. ss.ss.1-16) to the extent not inconsistent with
this Agreement. The decision of the arbitrator will be final and binding
upon the parties. The determination of which party (or combination of
them) will bear the costs and expenses of the arbitration proceeding shall
be determined
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by the arbitrator. The arbitrator will have the discretionary authority to
award to a party part of the reasonable attorney's fees expense of a
party. The Employer and Employee further acknowledge and agree that either
party must request arbitration of any claim or controversy within sixty
(60) days of the date of the event giving rise to the claim or controversy
by giving written notice of the party's request for arbitration. Failure
to give notice of any claim or controversy within sixty (60) days of the
event giving rise to the claim or controversy shall constitute waiver of
the claim or controversy.
(d) TERMINATION ON DEATH. In the event of Employee's death, this
Agreement will be deemed to have terminated on the date of his death. In
the event of his death, the Employer will pay to the testamentary trusts
created by Employee's will, or if there are no such trusts, to his estate,
any portion of Employee's salary at the then current rate and benefits, if
any, accrued but unpaid from the last monthly payment date to the date of
termination. In the event of the termination of this Agreement pursuant to
this Subsection, Employee's salary shall be paid at the then current rate
for a period of six (6) months. Additionally, the Employer will pay to
such testamentary trusts or Employee's estate expense reimbursements under
Section 2.2 hereof for expenses incurred in the performance of his duties
hereunder prior to his death.
(e) TERMINATION ON DISABILITY. This Agreement will terminate
immediately in the event Employee becomes physically or mentally disabled.
Employee will be deemed disabled if, as a result of Employee's incapacity
due to physical or mental illness, Employee shall have been absent from
his duties with the Employer on a full-time basis for 120 consecutive
business days. In the event of the termination of this Agreement pursuant
to this Subsection, Employee's salary shall be paid at the then current
rate for a period of six (6) months. Additionally, the Employer will pay
Employee expense reimbursements under Section 2.2 hereof for expenses
incurred in the performance of his duties hereunder prior to termination.
(f) BY EMPLOYEE ON CONSTRUCTIVE TERMINATION. Employee shall have the
right to terminate this Agreement in the event that his duties or
responsibilities are substantially diminished or in the event of
irreconcilable policy differences between Employee and the Employer's
Chief Executive Officer. In the event of termination of this Agreement
pursuant to this Subsection, Employee's salary shall be paid at the then
current rate, for a period of one year after termination pursuant to this
Subsection. Employee shall also be entitled to receive expense
reimbursements under Section 2.2 hereof for expenses incurred in
performance of his duties prior to termination. Any disputes under this
subparagraph (f) must be submitted to arbitration in accordance with the
"Expedited Procedures" set forth in the Rules. The arbitration shall be
held in such place in the metropolitan Atlanta, Georgia area as may be
specified by the arbitrator, and shall be conducted in accordance with the
Rules and (Regardless of any other choice of law provision in this
agreement) the United States Arbitration Act (9 U.S.C. ss.ss.1-16) to the
extent not inconsistent with this Agreement. The decision of the
arbitrator will be final
565078.4/08-18-98/11:53AM
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and binding upon the parties. The determination of which party (or
combination of them) will bear the costs and expenses of the arbitration
proceeding shall be determined by the arbitrator. The arbitrator will have
the discretionary authority to award to a party part of the reasonable
attorney's fees expense of a party. The Employer and Employee further
acknowledge and agree that either party must request arbitration of any
claim or controversy within sixty (60) days of the date of the event
giving rise to the claim or controversy by giving written notice of the
party's request for arbitration. Failure to give notice of any claim or
controversy within sixty (60) days of the event giving rise to the claim
or controversy shall constitute waiver of the claim or controversy.
ARTICLE VII. CHANGE IN CONTROL TERMINATION PAYMENT
SECTION 7.1 TERMINATION PAYMENT. Notwithstanding anything to the contrary
contained in Article VI hereof, if, after a Change In Control (as defined in
Section 7.2 hereof), Employee's employment with the Employer terminates pursuant
to Section 6.1(a) of this Agreement following a Change In Control or Employee
terminates this Agreement because he is requested to relocate, his salary is
reduced from the amount in effect immediately prior to the Change in Control,
his title is reduced or his duties and responsibilities are substantially
diminished, the Employer will pay Employee a lump sum payment (the "Termination
Payment") in cash equal to three years salary at the then current rate in effect
immediately prior to the Change In Control. The Termination Payment shall be
payable on or before the tenth (10th) day following the date of termination of
employment. Late payments of the Termination Payment shall bear interest at the
rate of eight percent (8%) per annum.
SECTION 7.2 CHANGE IN CONTROL. A Change In Control will be deemed to have
occurred for purposes hereof, upon any one of the following events: (i) any
person (within the meaning of Sections 13(d) and 14(d) of the Exchange Act),
other than the Employer (including its subsidiaries, directors, and executive
officers) has become the beneficial owner, within the meaning of Rule 13d-3
under the Exchange Act, of fifty percent (50%) or more of the combined voting
power of the Employer's then outstanding Common Stock or equivalent in voting
power of any class or classes of the Employer's outstanding securities
ordinarily entitled to vote in elections of directors ("voting securities"); or
(ii) shares representing fifty percent (50%) or more of the combined voting
power of the Employer's voting securities are purchased pursuant to a tender
offer or exchange offer (other than an offer by the Employer or its subsidiaries
or affiliates); or (iii) as a result of, or in connection with, any tender offer
or exchange offer, merger or other business combination, sale of assets, or
contested election, or any combination of the foregoing transactions (a
"Transaction"), the persons who were Directors of the Employer before the
Transaction shall cease to constitute a majority of the Board of the Employer or
of any successor to the Employer; or (iv) following the Effective Date, the
Employer is merged or consolidated with another corporation and as a result of
such merger or consolidation less than fifty percent (50%) of the outstanding
voting securities of the surviving or resulting corporation shall then be owned
in the aggregate by the former shareholders of the Employer, other than (A) any
party to such merger or consolidation, or (B) any affiliates of any such party;
or (v) the
565078.4/08-18-98/11:53AM
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Employer transfers more than fifty percent (50%) of its assets, or the last of a
series of transfers results in the transfer of more than fifty percent (50%) of
the assets of the Employer, to another entity that is not wholly-owned by the
Employer; or (vi) ▇▇▇▇▇ ▇. ▇▇▇▇▇▇'▇ employment by the Employer as Chief
Executive Officer is terminated. For purposes of subsection (v), the
determination of what constitutes fifty percent (50%) of the assets of the
Employer shall be made by the Board, as constituted immediately prior to the
events that would constitute a Change in Control if fifty percent (50%) of the
Employer's assets were transferred in connection with such events, in its sole
discretion. Notwithstanding anything to the contrary contained in this Section
7.2, a Change In Control shall not be deemed to have occurred for the purposes
hereof, upon any of the following events: (1) the consummation of an IPO; or (2)
the conversion of existing classes of Class A Stock and Preferred Stock of the
Employer into Common Stock.
SECTION 7.3 NO RIGHT TO CONTINUED EMPLOYMENT. This Article VII will not
give Employee any right of continued employment or any right to compensation or
benefits from the Employer except the rights specifically stated herein.
SECTION 7.4 ARBITRATION. Any dispute arising under this Article VII will
be resolved in the manner provided in Article VIII.
ARTICLE VIII. ARBITRATION
SECTION 8.1 SCOPE. The Employer and Employee acknowledge and agree that
any claim or controversy arising out of or relating to Section VII of this
Agreement shall be settled by final and binding arbitration in the city in which
the Employer's principal executive offices are located in accordance with the
National Rules of the American Arbitration Association for the Resolution of
Employment Disputes in effect on the date of the event giving rise to the claim
or controversy. The Employer and Employee further acknowledge and agree that
either party must request arbitration of any claim or controversy within sixty
(60) days of the date of the event giving rise to the claim or controversy by
giving written notice of the party's request for arbitration. Failure to give
notice of any claim or controversy within sixty (60) days of the event giving
rise to the claim or controversy shall constitute waiver of the claim or
controversy.
SECTION 8.2 PROCEDURES. All claims or controversies subject to arbitration
shall be submitted to arbitration within six (6) months from the date that a
written notice of request for arbitration is effective. All claims or
controversies shall be resolved by a panel of three (3) arbitrators at least one
of whom is licensed to practice law in the State of Georgia and who are
experienced in the arbitration of labor and employment disputes. These
arbitrators shall be selected in accordance with the National Rules of the
American Arbitration Association for the Resolution of Employment Disputes in
effect at the time the claim or controversy arises. Either party may request
that the arbitration proceeding be stenographically recorded by a Certified
Shorthand Reporter. The arbitrators shall issue a written decision with respect
to all claims or controversies within thirty (30) days from the date the claims
or controversies are submitted to arbitration. The parties shall be entitled to
be represented by legal counsel at any arbitration
565078.4/08-18-98/11:53AM
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proceedings. Employee and the Employer acknowledge and agree that each party
will bear fifty percent (50%) of the cost of the arbitration proceeding, and
each party shall be responsible for paying its own attorneys' fees, if any,
unless the arbitrators determine otherwise.
SECTION 8.3 ENFORCEMENT. The Employer and Employee acknowledge and agree
that the arbitration provisions in this Agreement may be specifically enforced
by either party, and that submission to arbitration proceedings may be compelled
by any court of competent jurisdiction. The Employer and Employee further
acknowledge and agree that the decision of the arbitrators may be specifically
enforced by either party in any court of competent jurisdiction.
SECTION 8.4 LIMITATIONS. Notwithstanding the arbitration provisions set
forth herein, Employee and the Employer acknowledge and agree that nothing in
this Agreement shall be construed to require the arbitration of any claim or
controversy arising under Articles III or IV of this Agreement. These provisions
shall be enforceable by any court of competent jurisdiction and shall not be
subject to arbitration. Employee and the Employer further acknowledge and agree
that nothing in this Agreement shall be construed to require arbitration of any
claim for workers' compensation or unemployment compensation.
ARTICLE IX. GENERAL TERMS
SECTION 9.1 NOTICES. All notices and other communications hereunder will
be in writing or by written telecommunication, and will be deemed to have been
duly given if delivered personally or if sent by overnight courier or by written
telecommunication, to the relevant address set forth below, or to such other
address as the recipient of such notice or communication will have specified to
the other party hereto in accordance with this Section:
If to the Employer to:
======================
----------------------
Attn: _________________
Fax No.: _____________
with a copy to:
===================
-------------------
Attn: ______________
Fax No.: ___________
565078.4/08-18-98/11:53AM
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If to Employee, to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
▇▇▇▇ ▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
with a copy by U.S. Mail to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
P. O. ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
SECTION 9.2 WITHHOLDING; NO OFFSET. All payments required to be made by
the Employer under this Agreement to Employee will be subject to the withholding
of such amounts, if any, relating to federal, state and local taxes as may be
required by law. No payment under this Agreement will be subject to offset or
reduction attributable to any amount Employee may owe to the Employer or any
other person.
SECTION 9.3 ENTIRE AGREEMENT; MODIFICATION. This Agreement and its
Attachments constitute the complete and entire agreement between the parties
with respect to the subject matter hereof and supersedes all prior agreements
between the parties. The parties have executed this Agreement based upon the
express terms and provisions set forth herein and have not relied on any
communications or representations, oral or written, which are not set forth in
this Agreement.
SECTION 9.4 AMENDMENT. The covenants or provisions of this Agreement may
not be modified by an subsequent agreement unless the modifying agreement: (i)
is in writing; (ii) contains an express provision referencing this Agreement;
(iii) is signed and executed on behalf of the Employer by an officer of the
Employer other than Employee; (iv) is approved by resolution of the Board; and
(v) is signed by Employee.
SECTION 9.5 LEGAL CONSULTATION. Both parties have been accorded a
reasonable opportunity to review this Agreement with legal counsel prior to
executing this Agreement.
SECTION 9.6 CHOICE OF LAW. This Agreement and the performance hereof will
be construed and governed in accordance with the laws of the State of Georgia,
without regard to its choice of law principles.
SECTION 9.7 ATTORNEY'S FEES; INTEREST.
(a) If legal action is commenced by either party to enforce or
defend its rights under this Agreement, the party substantially obtaining
the relief requested in such action shall be entitled to recover its costs
and reasonable attorneys' fees in addition to any other relief granted.
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(b) In the event that ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ceases to serve as Chairman of
the Board or Chief Executive Officer of the Employer, the Employer fails
to fulfill its obligations to Employee under this Agreement and Employee
takes legal action or submits issues to arbitration to enforce his rights
under this Agreement, the Employer will pay any and all legal fees
incurred by Employee in successfully enforcing his rights under this
Agreement. Such fees shall be paid monthly in advance by the Employer
based on the estimates of Employee's counsel. Any unused advances shall be
returned to the Employer. In the event that a court or arbitration panel
determines that Employee's legal actions were without merit, Employee
shall be obligated to reimburse the Employer for all such advances. The
Employer waives any rights to contest the enforceability of this Section
9.7(b) on public policy or any other grounds.
(c) Any amounts recovered by Employee as damages resulting from a
breach by the Employer of the terms of this Agreement shall bear interest
at the rate of eight percent (8%) per annum from the date that the breach
occurred.
SECTION 9.8 SUCCESSORS AND ASSIGNS. The obligations, duties and
responsibilities of Employee under this Agreement are personal and shall not be
assignable. In the event of Employee's death or disability, this Agreement shall
be enforceable by Employee's estate, executors or legal representatives.
SECTION 9.9 WAIVER OF PROVISIONS. Any waiver of any terms and conditions
hereof must be in writing and signed by the parties hereto. The waiver of any of
the terms and conditions of this Agreement shall not be construed as a waiver of
any subsequent breach of the same or any other terms and conditions hereof.
SECTION 9.10 SEVERABILITY. The provisions of this Agreement shall be
deemed severable, and if any portion shall be held invalid, illegal or
enforceable for any reason, the remainder of this Agreement shall be effective
and binding upon the parties provided that the substance of the economic
relationship created by this Agreement remains materially unchanged.
SECTION 9.11 REMEDIES. The parties hereto acknowledge and agree that upon
any breach by Employee of his obligations under either of Articles III and IV
hereof, the Employer will have no adequate remedy at law, and accordingly will
be entitled to specific performance and other appropriate injunctive and
equitable relief. No remedy set forth in this Agreement or otherwise conferred
upon or reserved to any party shall be considered exclusive of any other remedy
available to any party, but the same shall be distinct, separate and cumulative
and may be exercised from time to time as often as occasion may arise or as may
be deemed expedient.
SECTION 9.12 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which will be deemed an original, and all of which
together will constitute one and the same instrument.
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IN WITNESS WHEREOF, Employer and Employee have caused this Agreement to be
executed on the day and year indicated below to be effective on the day and year
first written above.
EMPLOYEE:
------------------------------------------------- ------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. Date
EMPLOYER:
------------------------
By: ______________________________________________ ________________________
_______________, President Date
1660249.05
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ANNEX I
The Employer acknowledges that Employee may during the term of this
Agreement:
1. Continue to serve as the Chairman of Continental Film Laboratories.
2. Continue to manage the real estate interests owned by him at the date
of this Agreement.
3. Attend puzzle conventions and events.
4. Work with the Gathering for ▇▇▇▇▇▇▇▇ organization.
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EXHIBIT 4.1(A)
[FORM OF EMPLOYMENT AGREEMENT FOR PERSHES
SUBJECT TO FURTHER MODIFICATION AS AGREED BY THE PARTIES]
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Amended and Restated Employment Agreement (the "Agreement"), entered
into as of the ___ day of _________, 1998 by and between ________________
(formerly Medical Industries of America, Inc.), a Florida corporation
(hereinafter referred to as "Employer"), and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ("Employee").
W I T N E S S E T H:
WHEREAS, Employer and Employee entered into an employment agreement dated
January 6, 1997 which was amended as of February 11, 1998; and
WHEREAS, Employer merged with Physician Health Corporation, a Delaware
corporation on _____________, 1998 with Employer being the surviving
corporation; and
WHEREAS, Employer and Employee entered into that certain
NonDisclosure/Non- Compete Agreement (the "NonCompete Agreement") simultaneously
herewith and attached hereto as EXHIBIT A; and
WHEREAS, the parties hereto desire to amend and restate said employment
agreement as set forth herein.
NOW THEREFORE, for and in consideration of the mutual covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledge, the parties hereto
agree as follows:
1. EMPLOYMENT. Employer hereby agrees to employ Employee and Employee
hereby accepts employment with Employer upon the terms and conditions
hereinafter set forth.
2. DUTIES. Subject to the power of the Board of Directors of Employer to
elect and remove officers, Employee will serve as President and Chief Financial
Officer of the Medical Industries of America ancillary division of Employer and
as a Director and Executive Vice President of the Employer (public holding
company) and will faithfully and diligently perform the services and functions
relating to such offices or otherwise reasonable incident to such offices,
including, without limitation, the management of air ambulance, pharmacy, pain,
rehabilitation, home infusion, sleep labs, cardiac cath labs and other ancillary
services, provided, however, that all such services and functions will be
reasonable and within Employee's area of
564394.7/08-18-98/11:52AM
expertise. Employee will, during the term of this Agreement (or any extension
thereof), devote his full business time, attention and skills and best efforts
to the promotion of the business of Employer. Employee will be based out of the
Palm Beach County, Florida office of the Company and will not be required to
relocate. The foregoing will not be construed as preventing Employee from making
investments in other business or enterprises provided that (a) Employee agrees
not to become engaged in any other business activity that interferes with his
ability to discharge his duties and responsibilities to Employer and (b)
Employee does not violate any other provision of this Agreement.
3. TERM. The term of this Agreement will commence as of the date hereof
and will end on that December 31, 2001, unless earlier terminated by either
party pursuant to the terms hereof ("Term"). Assuming all conditions of this
Agreement have been satisfied and there has been no breach of the Agreement
during its initial term, Employer and Employee may mutually extend the Term for
an additional one (1) year term by their mutual agreement ("Extended Term").
4. COMPENSATION. As compensation for the services rendered under this
Agreement, Employee will be entitled to receive the following:
(a) SALARY. Commencing upon the date of this Agreement, Employee
will be paid a minimum annual salary of $190,000 per year, payable in accordance
with the then current payroll policies of Employer or as otherwise agreed to by
the parties (the "Salary), subject to adjustment in accordance with subparagraph
(h) hereof. At any time the Salary may be increased for the remaining portion of
the Term if so determined by the Board of Directors of Employer after a review
of Employee's performance of his duties, but such decision shall be in the sole
discretion and judgment of the Compensation Committee and Board of Directors of
Employer.
(b) OPTIONS.
(i) Upon execution of this Agreement, Employee agrees to
return and retire 150,000 options at no further compensation to Employer.
(ii) In the event Employee decides to leave on his own accord
on or before the first anniversary of this Agreement, Employee agrees to sell to
the Company 350,000 shares of stock of Employer subject to an option(s) at the
lower of (A) $2.55 per share or (B) the market price of the stock of Employer as
of the date of Employee's termination. In the event Employee decides to leave on
his own accord after the first anniversary of this Agreement, but on or before
the second anniversary of this Agreement, Employee agrees to sell to the Company
250,000 shares of stock of Employer subject to an option(s) at the lower of (A)
$2.55 per share or (B) the market price of the stock of Employer as of the date
of Employee's termination.
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(c) BONUS. The Employer shall pay the Employee an annual bonus (the
"Bonus") from a bonus pool ("Bonus Pool") established by the Board of Directors
of Employer in the exercise of its sole discretion and judgment, based upon the
earnings before interest, taxes, depreciation and amortization ("EBITDA") of
Employer and distributed, in the sole discretion of the Board of Directors of
Employer, to Employee and certain other employees of the Company, including
without limitation, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇. EBITDA shall be determined in accordance with generally accepted
accounting principles. Any Bonus shall be payable within thirty (30) days after
completion and delivery of the audited financial statements of Employer to
Employer for the fiscal year to which the Bonus relates. Notwithstanding
anything contained herein to the contrary, any amounts payable by Employer to
Employee as a Bonus during the first two (2) years of this Agreement, shall be
applied by Employer as a payment, in whole or in part, as the case may be, of
the promissory note outstanding ($500,000) from the Employee to the Employer
plus any interest accrued and personal income taxes [INCLUDING AMOUNT] thereon,
until such promissory note, interest and taxes are paid in full. In the event
the Bonuses payable to Employee with respect to the first two (2) years of this
Agreement are insufficient to satisfy the balance of the promissory note,
interest and taxes in full, Employer agrees to forgive the promissory note,
interest and taxes thereon as of the end of the second year of the Term of this
Agreement.
(d) EXPENSES. Upon submission of a detailed statement and reasonable
documentation, Employer will reimburse Employee in the same manner as other
executive officers for all reasonable and necessary or appropriate out-of-pocket
travel and other expenses incurred by Employee in rendering services required
under this Agreement.
(e) BENEFITS, INSURANCE.
(i) MEDICAL, DENTAL AND VISION BENEFITS. During the Term of
this Agreement, whether or not Employee is employed by Employer, Employee and
his dependents will be entitled to receive such group medical, dental and vision
benefits as Employer may provide to its other employees, provided such coverage
is reasonably available, or be reimbursed if Employee is carrying or has to
carry his own similar insurance. Upon the death of Employee, these benefits will
continue for Employee's wife and family as currently provided until the
Employer's wife reaches age 65 or her death.
(ii) BENEFIT PLANS. The Employee will be entitled to
participate in any benefit plan or program of the Employer which may currently
be in place or implemented in the future, including any 401(k) plans.
(iii) OTHER BENEFITS. During the Term, Employee will be
entitled to receive, in addition to and not in lieu of base salary, bonus or
other compensation, such as other benefits as Employer may provide for its
officers in the future.
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(iv) DISABILITY INSURANCE. $60,000 disability benefit plus
group coverage.
(f) VACATION. Employee will be entitled to up to four (4) weeks of
paid vacation per year.
(g) AUTOMOBILE. The Employer shall provide an automobile to Employee
at approximately $1,000 per month plus normal gas, repairs and insurance.
(h) SALARY. Salary to be increased by minimum of CPI plus increases,
if any, based on performance, increase in earnings and revenues approved by the
Compensation Committee.
5. CONFIDENTIALITY. The terms of that certain NonCompete Agreement with
respect to matters of confidentiality are incorporated herein by this reference.
6. INDEMNIFICATION. The Employer shall to the full extent permitted by law
indemnify, defend and hold harmless Employer from and against any and all
claims, demands, liabilities, damages, losses and expenses (including reasonable
attorney's fees, court costs and disbursements) arising out of the performance
by him of his duties hereunder except in the case of his willful misconduct and
will carry directors and officers' insurance of $3,000,000 with $500,000
deductible.
7. TERMINATION. This Agreement and the employment relationship created
hereby will terminate upon the occurrence of any of the following events:
A. TERMINATION WITHOUT CAUSE BY THE COMPANY. The Company may terminate the
Employee's employment pursuant to the terms of this Agreement without cause by
written notice to the Employee. Such termination will become effective upon the
date specified in such notice, provided that such date is at least 60 days from
the date of such notice. In the event of such termination, the Company shall pay
the Employee all salary due for the remainder of the employment term and all
stock options shall vest immediately at the highest range (Section 20). The
Company shall pay the Employee an amount equal to a minimum of 24 months salary
plus vesting of all stock options. Such compensation shall be paid at the same
dates due to be paid as if this agreement were still in effect.
B. DEATH OR DISABILITY. This Agreement and the obligations hereunder will
terminate upon the death or disability of the Employee. For purposes of this
Section 7B, "Disability" shall mean for a period of six months in any twelve
month period the Employee is incapable of substantially fulfilling the duties
set forth in Section 2 of this Agreement because of physical, mental or
emotional incapacity resulting from an injury, sickness or disease. Upon any
such termination upon death or disability, the Employer will pay the Employee or
his legal
564394.7/08-18-98/11:52AM
-4-
representative, as the case may be, his annual salary to the end of the
agreement, but in no case less than one year, at such time pursuant to Section 4
through the date of such termination of employment all vested options become
exercised. Medical benefits will continue for Employee's wife and family (as
currently provided) until Employee's wife reaches age 65 or her death, whichever
first occurs.
C. TERMINATION FOR CAUSE. Termination for Cause means, for all purposes of
this Agreement, a termination of Employee's employment by Employer due to
Employee's ^ conviction of ^ a felony relating to the Company. In the event
Employee is Terminated for Cause, this Agreement and the obligations hereunder
shall terminate immediately. In the event that Employee is Terminated for Cause,
Employee shall not be entitled to continuation of any of the benefits specified
in this Agreement from and after the date of such termination.
D. CONTINUING EFFECT. Notwithstanding any termination of the Employee's
employment as provided in this Section 7, the provisions of Section 5 shall
remain in full force and effect.
E. CONSIDERATION. The payments (if any) required to be paid by the
Employer to Employee pursuant to Section 7 shall be in full and complete
satisfaction of any and all obligations owing to Employee under this Agreement.
8. WAIVER OF BREACH. The waiver by any party hereto of a breach of any
provision of this Agreement will not operate or be construed as a waiver of any
subsequent breach by any party.
9. COSTS. If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the prevailing party will be entitled to
reasonable attorney's fees, costs and necessary disbursements in addition to any
other relief to which he or it may be entitled.
10. NOTICES. Any notices, demands, requests, approvals and other
communications to be given under this agreement by either party to the other
will be deemed to have been duly given in writing and personally delivered or
within two (2) days if sent by mail, registered or certified, postage prepaid
with return receipt requested as follows:
If to Employer: ________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
If to Employee: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
564394.7/08-18-98/11:52AM
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Notices delivered personally will be deemed communicated as of actual receipt.
11. ENTIRE AGREEMENT. This Agreement and the agreements contemplated
hereby and referred to herein constitute the entire agreement of the parties
regarding the subject matter hereof, and supersede all prior agreements and
understanding, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof.
12. GOVERNING LAW. This Agreement and the rights and obligations of the
parties will be governed by and construed and enforced in accordance with the
substantive laws (but not the rules governing conflicts of laws) of the State of
Florida.
13. SEVERABILITY. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws effective during
this Agreement, such provision will be fully severable and this Agreement will
be construed and enforced as if such illegal, invalid or unenforceable provision
never comprised a part hereof; and the remaining provisions hereof will remain
in full force and effect and will not be affected by the illegal, invalid or
unenforceable provision or by its severance herefrom. Furthermore, in lieu of
such illegal, invalid or unenforceable provision there will be added
automatically as part of this Agreement a provision as may be possible and be
legal, valid and enforceable.
14. CAPTIONS. The captions in this Agreement are for convenience of
reference only and will not limit or otherwise affect any of the terms or
provisions hereof.
15. GENDER AND NUMBER. When the context requires the gender of all words
used herein will include the masculine, feminine and neuter and the number of
all words will include the singular and plural.
16. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument, but only one of which
need be produced.
17. OFFICER'S LIFE INSURANCE FOR BENEFIT OF COMPANY. Life insurance policy
for $1,000,000 with company as beneficiary. The company will also provide a
whole life insurance policy for the individual for his beneficiaries in the
amount of $1,000,000 (policies to be provided).
564394.7/08-18-98/11:52AM
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.
EMPLOYER:
-----------------------------------
BY:
Name:
Title:
EMPLOYEE:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
564394.7/08-18-98/11:52AM
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ADDENDUM A
It is specifically agreed and understood that Employee may continue as a
consultant with other companies and specifically Pershes & Company, P.A.
provided that the interests of Employer are not compromised.
----------------------------------------------
Agreed and Approved:
BY:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
564394.7/08-18-98/11:52AM
-8-
EXHIBIT A
STOCK AND OPTIONS
as of June 30, 19998
Common Shares owned 1,000,000
Options - Vested 437,500
Not Vested 512,500*
150,000 options to be forfeited at effective date of merger
* To be vested at time of merger
* To be vested at time of merger
-9-
EXHIBIT 4.1(A)
[FORM OF EMPLOYMENT AGREEMENT FOR ▇▇▇▇▇▇▇
SUBJECT TO FURTHER MODIFICATION BY AGREEMENT OF THE PARTIES]
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Amended and Restated Employment Agreement (the "Agreement"), entered
into as of the ____ day of _________, 1998 by and between __________________
(formerly Medical Industries of America, Inc.), a Florida corporation
(hereinafter referred to as "Employer"), and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ("Employee").
WITNESSETH:
WHEREAS, Employer and Employee entered into an employment agreement dated
June 6, 1996, which was amended and restated as of January 6, 1997, and February
11, 1998;
WHEREAS, Employer merged with Physician Health Corporation, a Delaware
corporation on ____________, 1998 with Employer being the surviving corporation;
and
WHEREAS, Employer and Employee entered into that certain
NonDisclosure/Non- Compete Agreement (the "NonCompete Agreement") simultaneously
herewith and attached hereto as EXHIBIT A; and
WHEREAS, the parties hereto desire to amend and restate said employment
agreement as set forth herein.
NOW THEREFORE, for and in consideration of the mutual covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. EMPLOYMENT. Employer hereby agrees to continue to employ Employee and
Employee hereby accepts employment with Employer upon the terms and conditions
hereinafter set forth.
2. DUTIES. Subject to the power of the Board of Directors of Employer to
elect and remove officers, Employee will serve as [Chief Executive Officer/Chief
Operating Officer] of the Medical Industries of America ancillary division of
Employer and as a Director and Executive Vice President of the Employer (Public
Holding Company) and will faithfully and diligently perform the services and
functions relating to such offices or otherwise reasonable incident to
564345.7/08-18-98/11:51AM
such offices, including, without limitation, the management of air ambulance,
pharmacy, pain rehabilitation, home infusion, sleep labs, cardiac cath labs and
other ancillary services, provided, however, that all such services and
functions will be reasonable and within Employee's area of expertise. Employee
will, during the term of this Agreement (or any extension thereof), devote his
full business time, attention and skills and best efforts to the promotion of
the business of Employer. Employee will be based out of the Palm Beach County,
Florida office of the Company and will not be required to relocate. The
foregoing will not be construed as preventing Employee from making investments
in other business or enterprises provided that (a) Employee agrees not to become
engaged in any other business activity that interferes with his ability to
discharge his duties and responsibilities to Employer and (b) Employee does not
violate any other provision of this Agreement.
3. TERM. The term of this Agreement will commence as of the date hereof
and will end on December 31, 2001, unless earlier terminated by either party
pursuant to the terms hereof (the "Term"). Assuming all conditions of this
Agreement have been satisfied and there has been no breach of the Agreement
during its initial term, Employer and Employee may mutually extend the Term for
an additional one (1) year term by their mutual agreement ("Extended Term").
4. COMPENSATION. As compensation for the services rendered under this
Agreement, Employee will be entitled to receive the following:
(a) SALARY. Commencing upon the date of this Agreement, Employee
will be paid an annual salary of $200,000 per year, payable in accordance with
the then current payroll policies of Employer or as otherwise agreed to by the
parties (the "Salary"), subject to adjustment in accordance with subparagraph
(h) hereof. At any time the Salary may be increased for the remaining portion of
the Term, if so determined by the Board of Directors of Employer after a review
of Employee's performance of his duties hereunder, but such decision shall be in
the sole discretion and judgment of the Compensation Committee and Board of
Directors of Employer.
(b) OPTIONS.
(i) Upon execution of this Agreement, Employee agrees to
return and 150,000 options at no further compensation to Employer.
(ii) In the event Employee decides to leave on his own accord
for any reason on or before the first anniversary of this Agreement, Employee
agrees to sell to the Company 400,000 shares of stock of Employer subject to an
option(s) at the lower of (A) $2.55 per share or (B) the market price of the
stock of Employer as of the date of Employee's termination. In the event
Employee decides to leave on his own accord after the first anniversary of this
Agreement, but on or before the second anniversary of this Agreement, Employee
agrees to sell to the Company 250,000 shares of stock of Employer subject to an
option(s) at the lower
564345.7/08-18-98/11:51AM
-2-
of (A) $2.55 per share or (B) the market price of the stock of Employer as of
the date of Employee's termination.
(c) BONUS. The Employer shall pay the Employee an annual bonus (the
"Bonus") from a bonus pool ("Bonus Pool") established by the Board of Directors
of Employer in the exercise of its sole discretion and judgment, based upon the
earnings before interest, taxes, depreciation and amortization ("EBITDA") of
Employer and distributed, in the sole discretion of the Board of Directors of
Employer, to Employee and certain other employees of the Company, including
without limitation, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇.
EBITDA shall be determined in accordance with generally accepted accounting
principles. Any Bonus shall be payable within thirty (30) days after completion
and delivery of the audited financial statements of Employer to Employer for the
fiscal year to which the Bonus relates. Notwithstanding anything contained
herein to the contrary, any amounts payable by Employer to Employee as a Bonus
during the first two (2) years of this Agreement, shall be applied by Employer
as a payment, in whole or in part, as the case may be, of the promissory note
outstanding ($500,000) from the Employee to the Employer plus any interest
accrued and personal income taxes (INCLUDING AMOUNT) thereon, until such
promissory note, interest and taxes are paid in full. In the event the Bonuses
payable to Employee with respect to the first two (2) years of this Agreement
are insufficient to satisfy the promissory note, interest and taxes in full,
Employer agrees to forgive the balance of the promissory note, interest and
taxes thereon as of the end of the second year of the Term of this Agreement.
(d) EXPENSES. Upon submission of a detailed statement and reasonable
documentation, Employer will reimburse Employee in the same manner as other
executive officers of Employer for all reasonable and necessary or appropriate
out-of-pocket travel and other expenses incurred by Employee is rendering
services required under this Agreement.
(e) BENEFITS, INSURANCE.
(i) MEDICAL DENTAL AND VISION BENEFITS. During the Term of
this Agreement, whether or not Employee is employed by Employer, Employee and
his dependents will be entitled to receive such group medical dental and vision
benefits as Employer may provide to its other employees, provided such coverage
is reasonably available, or be reimbursed if Employee is carrying or has to
carry his own similar insurance. Upon the death of Employee these benefits will
continue for Employee's wife and family as currently provided until the
Employer's wife reaches age 65 or her death, whichever first occurs.
(ii) BENEFIT PLANS. The Employee will be entitled to
participate in any benefit plan or program of the Employer which may currently
be in place or implemented in the future including any 401k plans.
564345.7/08-18-98/11:51AM
-3-
(iii) OTHER BENEFITS. During the Term, Employee will be
entitled to participate, in addition to and not in lieu of base salary, in any
bonus or other compensation plans, as Employer may provide for its officers in
the future.
(iv) DISABILITY INSURANCE. $60,000 disability benefit plus
group coverage.
(f) VACATION. Employee will be entitled to up to (4) weeks of paid
vacation per year.
(g) AUTOMOBILE. The Employer shall provide an automobile to Employee
at approximately $1,000 per month plus normal gas, repairs and insurance.
(h) SALARY. Salary to be increased by minimum of CPI plus increases,
if any, based on performance, increase in earnings and revenues approved by the
Compensation Committee.
5. CONFIDENTIALITY. The terms of that certain NonCompete Agreement with
respect to matters of confidentiality are incorporated herein by this reference.
6. INDEMNIFICATION. The Employer shall to the full extent permitted by law
indemnify, defend and hold harmless Employee from and against any and all
claims, demands, liabilities, damages, losses and expenses (including reasonable
attorney's fees, court costs and disbursements) arising out of the performance
by him of his duties hereunder except in the case of his willful misconduct, and
will carry directors and officers' insurance of a minimum of $3,000,000 with
$500,000 deductible.
7. TERMINATION. This Agreement and the employment relationship created
hereby will terminate upon the occurrence of any of the following events:
A. TERMINATION WITHOUT CAUSE BY THE EMPLOYER. The Employer may
terminate the Employee's employment pursuant to the terms of this Agreement
without cause by written notice to the Employee. Such termination will become
effective upon the date specified in such notice, provided that such date is at
least 60 days from the date of such notice. In the event of such termination,
the Employer shall pay the Employee all salary due for the remainder of the
Term, but in no case for less than two (2) years. IN ADDITION, ALL OPTIONS VEST.
Such compensation shall be paid at the same dates due to be paid as if this
Agreement were still in effect.
B. DEATH OR DISABILITY. This Agreement and the obligations hereunder
will terminate upon the death or disability of the Employee. For purposes of
this Section 7(B), "disability" shall mean for a period of six months in any
twelve month period the Employee is
564345.7/08-18-98/11:51AM
-4-
incapable of substantially fulfilling the duties set forth in Section 2 of this
Agreement because of physical, mental or emotional incapacity resulting from an
injury, sickness or disease. Upon any such termination upon death or disability,
the Employer will pay the Employee or his legal representative, as the case may
be, his annual salary for the remainder of the Term, but in no case less than
one (1) year, pursuant to Section 4 hereof. Medical benefits will continue for
Employee's wife and family (as currently provided) until Employee's wife reaches
age 65 or her death, whichever first occurs.
C. TERMINATION FOR CAUSE. Termination for Cause means, for all purposes of
this Agreement, a termination of Employee's employment by Employer due to (i)
conviction of the Employee for a felony which in the reasonable judgment of the
Board materially affects Employee's ability to perform her duties pursuant to
this Agreement; and (ii) commission by Employee of an act of fraud,
embezzlement, or material dishonesty against the Employer or its affiliates. In
the event that Employee is Terminated for Cause, Employee shall not be entitled
to continuation of any of the benefits specified in this Agreement from and
after the date of such termination.
D. CONTINUING EFFECT. Notwithstanding any termination of the Employee's
employment as provided in this Section 7, the provisions of Section 5 shall
remain in full force and effect.
E. CONSIDERATION. The payments (if any) required to be paid by the
Employer to Employee pursuant to Section 7 shall be in full and complete
satisfaction of any and all obligations owing to Employee under this Agreement.
8. WAIVER OF BREACH. The waiver by any party hereto of a breach of any
provision of this Agreement will not operate or be construed as a waiver of any
subsequent breach by any party.
9. COSTS. If any action or law or inequity is necessary to enforce or
interpret the terms of this Agreement, the prevailing party will be entitled to
reasonable attorney's fees, costs and necessary disbursements in addition to any
other relief to which he or it may be entitled.
10. NOTICES. Any notices, demands, requests, approvals and other
communications to be given under this Agreement by either party to the other
will be deemed to have been duly given, if in writing and personally delivered,
or within two (2) days after being sent by mail, registered or certified,
postage prepaid with return receipt requested as follows:
564345.7/08-18-98/11:51AM
-5-
If to Employer: ________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
If to Employee: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Notices delivered personally will be deemed communicated as of actual receipt.
11. ENTIRE AGREEMENT. This Agreement and the agreements contemplated
hereby and referred to herein constitute the entire agreement of the parties
regarding the subject matter hereof, and supersede all prior agreements and
understandings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof.
12. GOVERNING LAW. This Agreement and the rights and obligations of the
parties will be governed by and construed and enforced in accordance with the
substantive laws (but not the rules governing conflicts of laws) of the State of
Florida.
13. SEVERABILITY. If any provisions of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws effective during
this Agreement, such provision will be fully severable and this Agreement will
be construed and enforced as if such legal, invalid or unenforceable provision
never comprised a part hereof; and the remaining provisions hereof will remain
in full force and effect and will not be affected by the illegal, invalid or
unenforceable provision or by its severance herefrom. Furthermore, in lieu of
such illegal, invalid or unenforceable provision there will be added
automatically as part of this Agreement a provision as similar in its terms to
such illegal, invalid or unenforceable provision as may be possible and be
legal, valid and enforceable.
14. CAPTIONS. The captions in this Agreement are for convenience of
reference only and will not limit or otherwise affect any of the terms or
provisions hereof.
15. GENDER AND NUMBER. When the context requires, the gender of all words
used herein will include the masculine, feminine and neuter and the number of
all words will include the singular and plural.
16. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instruments, but only one of which
need be produced.
17. OFFICER'S LIFE INSURANCE FOR BENEFIT OF EMPLOYER. The Employer will
provide a life insurance policy on the life of Employee for $1,000,000 with
Employer as beneficiary. The
564345.7/08-18-98/11:51AM
-6-
Employer will also provide a whole life insurance policy for the Employee for
his designated beneficiaries in the amount of $1,000,000 (policies to be
provided).
564345.7/08-18-98/11:51AM
-7-
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.
EMPLOYER:
-----------------------------
BY:
Name:
Title:
EMPLOYEE:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
564345.7/08-18-98/11:51AM
-8-
ADDENDUM A
It is specifically agreed and understood that Employee may continue as a
consultant with other companies provided that the interests of Employer are not
compromised. It is specifically agreed that Employee currently has a consulting
contract with Westmark Group Holdings and others may exist from time to time.
------------------------------
Agreed and Approved:
BY:
ITS:____________________________
564345.7/08-18-98/11:51AM
-9-
EXHIBIT A
STOCK AND OPTIONS
as of June 30, 1998
Common Shares Owned 1,000,000
Options - Vested 500,000
Not Vested 625,000*
150,000 options to be forfeited at effective date of merger
* To be vested at time of merger.
564345.7/08-18-98/11:51AM
-10-
EXHIBIT 4.1(B)
NONDISCLOSURE/NONCOMPETE AGREEMENT
THIS NONDISCLOSURE/NONCOMPETE AGREEMENT ("Agreement") is made and entered
into as of the ____ day of __________________, 1998, by and between
______________, a Florida corporation (the "Company"), and
______________________ ("Employee").
W I T N E S S E T H:
WHEREAS, Employee is an employee of the Company;
WHEREAS, as a condition to and in consideration of Employee's continued
employment as an employee, the Company and Employee are entering into this
Agreement.
NOW, THEREFORE, in consideration of the premises, the mutual covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms shall have the
following meaning:
(a) "BUSINESS OF THE COMPANY" means ___________________.
(b) "COMPETING BUSINESS" as used herein means any person or entity
which engages in a business substantially the same as the Business of the
Company.
(c) "CONFIDENTIAL INFORMATION" means information (in any form or
media) including but not limited to technical and nontechnical data, formulae,
patterns, compilations, programs, devices, methods, techniques, drawings,
processes and plans regarding the Company's customers, prospective customers,
methods of operation, billing rates, billing procedures, suppliers, business
methods, finances, management, or any other business information relating to the
Company (whether constituting a trade secret or proprietary or otherwise) which
has value to the Company and is treated by the Company as being confidential;
provided, however, that Confidential Information shall not include any
information that has been voluntarily disclosed to the public by the Company
(except where such public disclosure has been made by the Employee without
authorization) or that has been independently developed and disclosed by others,
or that otherwise enters the public
566896.4/08-18-98/11:56AM
domain through lawful means. Confidential Information also includes information
which has been disclosed to the Company or its affiliates by a third party and
which the Company or its affiliates are obligated to treat as confidential.
Confidential Information may or may not be marked by the Company or its
affiliates as "confidential" or "secret" or with other words or markings of
similar meaning, and the failure of the Company to make such notations upon the
physical embodiments of any Confidential Information shall not affect the status
of such information as Confidential Information.
(d) "TERRITORY" means that geographical area consisting of those
states within which Employee has performed services or supervised the provision
of services by other agents of the Company, in either case, at any time during
the twenty-four (24) month period immediately preceding Employee's termination
of employment with the Company (or such shorter period if Employee is employed
by the Company for less than twenty-four (24) months) and each state contiguous
to any of such states..
(e) "TRADE SECRET" means information not generally known about the
Company's business which is the subject of efforts that are reasonable under the
circumstances to maintain its secrecy or confidentiality and from which the
Company derives economic value from the fact that the information is not
generally known to other persons. Trade Secrets include, but are not limited to,
technical or non-technical data, compilations, programs and methods, techniques,
drawings, processes, financial data, financial plans, product plans, lists of
actual customers and potential customers, customer route books, cards or lists
containing the names, addresses, buying habits and business locations of past,
present and prospective customers of the Company, sales reports, service
reports, price lists, product formulae, computer programs and source codes,
merchandising practices, and methods and procedures relating to products
manufactured or sold by the Company.
2. ACKNOWLEDGMENTS; SURVIVAL OF PROVISIONS AFTER EMPLOYMENT
(a) Employee acknowledges that (i) the Company has expended and will
continue to expend substantial time, money, effort and other resources to
develop its goodwill, clients, business sources and relationships, (ii) the
Company has a legitimate business interest in protecting same, (iii) in
connection with Employee's employment by the Company as herein provided, the
Company will introduce Employee to its customers, business sources and
relationships and will expend considerable time, effort and capital to train
Employee in the Business of the Company, (iv) the knowledge and experience that
Employee will acquire while an employee of the Company and Employee's services
to be rendered to the Company are of special, unique and extraordinary
character, (v) by virtue of Employee's employment with the Company, Employee
will be in a position of substantial responsibility and authority and will have
frequent and substantial contact with certain of the Company's customers and
business sources and relationships, (vi) in Employee's capacity, Employee will
be privy to certain confidential information, Company secrets and proprietary
information not generally known or available to the Company's competitors or the
general
566896.4/08-18-98/11:56AM
-2-
public, (vii) the nature and periods of the restrictions imposed by the
covenants contained in this Agreement are fair, reasonable, and necessary to
protect and preserve for the Company the benefits of Employee's employment
hereunder and that such restrictions will not prevent Employee from earning a
livelihood, (viii) the Company would sustain great and irreparable loss and
damage if Employee were in any manner to breach any of such covenants, (ix) the
Company conducts its business actively in and throughout geographical areas
which include the entire Territory (as hereinafter defined) and that other
persons are engaged in like and similar business in the Territory, (x) the
Territory is reasonably sized because the Business of the Company is of a
limited and unusual nature, is scattered over a wide geographical area, and
requires the entire Territory for profitable operations, and (xi) Employee's
duties hereunder will include activities throughout the entire Territory on
behalf of the Company.
(b) The covenants of Employee under this Agreement shall survive
termination of employment. The date of termination of employment is hereinafter
referred to as the "Termination Date."
3. CONFIDENTIAL INFORMATION
Having acknowledged the foregoing, Employee covenants and agrees that all
Confidential Information and all physical embodiments thereof received or
developed by Employee or disclosed to Employee while employed by the Company is
confidential to and is and will remain the sole and exclusive property of the
Company. Employee further covenants and agrees that while Employee is in the
Company's employ and for a period ending eighteen (18) months after the
Termination Date for any reason so long as the Company is in full compliance
with Employee's Employment Agreement, of even date herewith ("Employment
Agreement"), Employee will hold such Confidential Information in trust and in
the strictest confidence, and will not use, reproduce, distribute, disclose or
otherwise disseminate the Confidential Information or any physical embodiments
thereof except to the extent necessary to perform the duties assigned to
Employee by the Company, and in no event shall Employee take any action causing
or fail to take any action necessary in order to prevent any Confidential
Information disclosed to or developed by Employee to lose its character or cease
to qualify as Confidential Information. Notwithstanding anything contained
herein to the contrary, this Paragraph shall not limit in any manner the
protection of the Company's Trade Secrets otherwise afforded by law. Upon
request by the Company, and in any event upon termination of Employee's
employment with the Company for any reason, Employee will promptly deliver to
the Company all property belonging to the Company, including without limitation
all Confidential Information (and all physical embodiments thereof) then in
Employee's custody, control, or possession.
4. COOPERATION
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Employee agrees to cooperate, to the extent and in the manner requested by
the Company and at the Company's expense, in the prosecution or defense of any
claims, litigation (other than litigation brought by the Company against
Employee) or other proceeding involving Company property, Confidential
Information or Trade Secrets.
5. AGREEMENT NOT TO COMPETE OR TO SOLICIT CUSTOMERS OR EMPLOYEES
(a) Employee covenants and agrees with the Company that Employee
will not, without the prior written consent of the Company signed by the
President (or if during the term of this Agreement and while Employee is serving
as President of the Company, signed by the Chairman of the Board of Directors of
the Company) of the Company, directly or indirectly, while in the Company's
employ and for a period of eighteen (18) months after the Termination Date
within the Territory, provide or perform services which are in competition with
the Business of the Company, either on Employee's own behalf or on behalf of any
other person, whether as an officer, director, shareholder, partner, proprietor,
employee, agent, consultant, independent contractor, lender or otherwise.
Employee further covenants and agrees with the Company that Employee will not,
without the prior written consent of the Company signed by the President (or if
during the term of this Agreement and while Employee is serving as President of
the Company, signed by the Chairman of the Board of Directors of the Company) of
the Company, directly or indirectly, while in the Company's employ and through
the period ending eighteen (18) months after termination of such employment for
any reason, provide or perform services which are in competition with the
Business of the Company either on Employee's own behalf or on behalf of any
other person, whether as an officer, director, shareholder, partner, proprietor,
employee, agent, consultant, independent contractor, lender or otherwise, for
any of the Company's customers for whom Employee performed services or
supervised the providing of services during Employee's employment with the
Company anywhere in the Territory.
(b) Employee covenants and agrees that during Employee's employment
by the Company and for a period of eighteen (18) months after the Termination
Date, Employee will not, without the prior written consent of the Company signed
by the President (or if during the term of this Agreement and while Employee is
serving as President of the Company, signed by the Chairman of the Board of
Directors of the Company) of the Company, directly or indirectly, on Employee's
behalf or on behalf of any other person, solicit or call upon any customer or
prospective customer of the Company with a view of selling or providing to such
customer or prospective customer any product, equipment or service, competitive
or potentially competitive with any service sold or provided or under
development by the Company during the twenty-four (24) month period immediately
preceding Employee's termination of employment with the Company, provided that
the restrictions set forth in this Paragraph shall apply only to customers or
prospective customers of the Company with whom Employee had Material Contact (as
hereinafter defined) during such twenty-four (24) month period (or such shorter
period if Employee is employed by the Company for less than twenty-four (24)
months). For purposes of this Agreement, "Material
566896.4/08-18-98/11:56AM
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Contact" shall mean contact between Employee and each customer or prospective
customer (A) with whom the Employee dealt; (B) whose dealings with the Company
were coordinated or supervised by Employee; (C) about whom Employee obtained
Confidential Information in the ordinary course of business as a result of
Employee's association with the Company; or (D) who receives services provided
by the Company, the sale or provision of which results or resulted in
compensation, commissions or earnings for Employee, in each of cases (A) through
(D) within twenty-four (24) months prior to the date of Employee's termination.
(c) Employee covenants and agrees that during Employee's employment
by the Company and for a period of eighteen (18) months after the Termination
Date, Employee will not, without the prior written consent of the Company signed
by the President (or if during the term of this Agreement and while Employee is
serving as President of the Company, signed by the Chairman of the Board of
Directors of the Company) of the Company, directly or indirectly, on Employee's
behalf or on behalf of others, solicit, entice, persuade or induce, or attempt
to solicit, entice, persuade or induce any person who is actively employed by,
or is performing services as an independent contractor for, the Company and (a)
who was employed by, or was performing services as an independent contractor
for, the Company at any time during which Employee was employed by the Company,
and (b) who reported to Employee or was within Employee's chain of
responsibility, or (c) who had regular contact with Employee, to terminate his
or her employment or contractual arrangement with the Company or to become
employed or engaged by any person, firm or entity other than the Company, or
approach any such person for any of the foregoing purposes or authorize or
assist in the taking of any such action by any third party.
6. REMEDIES
Employee acknowledges and agrees that, by virtue of the responsibilities
that are attendant to his employment and his special knowledge of the Company's
affairs, the covenants and obligations of Employee with respect to
noncompetition, nonsolicitation, confidentiality and Company property relate to
special, unique and extraordinary matters and that a violation of any of the
terms of such covenants and obligations will cause the Company irreparable
injury for which adequate remedies are not available at law. Therefore, Employee
agrees that the Company shall be entitled to an injunction, restraining order or
such other equitable relief (without the requirement to post bond) as a court of
competent jurisdiction may deem necessary or appropriate to restrain Employee
from committing any violation of the covenants and obligations contained in this
Paragraph 6. These injunctive remedies are cumulative and are in addition to any
other rights and remedies the Company may have at law or in equity. These rights
are only if the Company is in complete compliance with Employment Agreement.
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7. ABILITY TO PERFORM
Employee represents and warrants to the Company that he is not under any
obligation that would prevent or impair his performance under this Agreement.
8. NOTICES
Any notice required or desired to be delivered under this Agreement shall
be in writing and shall be delivered personally, by courier service, by
registered mail, return receipt requested, or by telecopy and shall be effective
upon dispatch to the party to whom such notice shall be directed, and shall be
addressed as follows (or to such other address as the party entitled to notice
shall hereafter designate in accordance with the terms hereof):
Employee: _____________________________
Company: ____________________
Attention: President
or at such other addresses as is designated in writing. Notices delivered in
person are effective upon delivery. Notices sent by United States mail are
effective upon the date of actual receipt. Notwithstanding the foregoing, in the
event that a notice is given at any time during the term of this Agreement and
the Employee is at that time serving as President of the Company, the notice to
the Company shall be sent to the attention of the Chairman of the Board of
Directors.
9. MISCELLANEOUS
(a) BINDING EFFECT. This Agreement shall be binding on the Company
and any person or entity which succeeds to the interest of the Company
(regardless of whether such succession occurs by operation of law) by reason of
the sale of all or a portion of the Company's stock or assets or any merger,
consolidation or reorganization involving the Company. This Agreement shall also
inure to the benefit of Employee's heirs, executors, administrators and legal
representatives.
(b) ASSIGNMENT. Neither this Agreement nor any of the rights or
obligations hereunder shall be assigned or delegated by Employee without the
prior written consent of the Company.
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(c) ENTIRE AGREEMENT. This Agreement supersedes any and all prior
agreements between the parties hereto and constitutes the entire agreement
between the parties hereto with respect to the matters referred to herein and no
subsequent agreement, oral or otherwise, shall be binding between the parties
unless it is in writing and signed by the party against whom enforcement is
sought. There are no promises, representations, inducements or statements
between the parties other than those that are expressly contained herein.
Employee acknowledges that he is entering into this Agreement of Employee's own
free will and accord, and with no duress, that he has read this Agreement and
that he understands it and its legal consequences. No parol or other evidence
may be admitted to alter, modify or construe this Agreement, which may be
changed only by a writing signed by the parties hereto. Employee and Company
acknowledge that Employee's required employment agreement must be current and
all payments to be made by Company are current.
(d) SEVERABILITY; REFORMATION. In the event that one or more of the
provisions of this Agreement shall become invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not be affected thereby. In the event any
subparagraph of Paragraph 5 hereof is not enforceable in accordance with its
terms, Employee and the Company agree that such subparagraph shall be reformed
to make such subparagraph enforceable in a manner which provides the Company the
maximum rights permitted at law.
(e) WAIVER. Waiver by any party hereto of any breach or default by
the other party of any of the terms of this Agreement shall not operate as a
waiver of any other breach or default, whether similar to or different from the
breach or default waived. No waiver of any provision of this Agreement shall be
implied from any course of dealing between the parties hereto or from any
failure by either party hereto to assert its or Employee's rights hereunder on
any occasion or series of occasions.
(f) AMENDMENTS. This Agreement may not be altered, modified or
amended except by a written instrument signed by each of the parties hereto.
(g) HEADINGS. Headings to paragraphs in this Agreement are for the
convenience of the parties only and are not intended to be part of or to affect
the meaning or interpretation hereof.
(h) COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.
(i) GOVERNING LAW. This Agreement shall be governed by the laws of
the State of Florida, without reference to principles of conflicts or choice of
law under which the law of any other jurisdiction would apply.
566896.4/08-18-98/11:56AM
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement and
have affixed their seals as of the date first above written.
By:__________________________________
Title:_______________________________
Employee:
_______________________________(SEAL)
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EXHIBIT 4.1(C)(I)
-----------------------
STOCKHOLDERS' AGREEMENT
This Stockholders' Agreement (this "Agreement"), dated as of _______,
1998, is entered into by and among_________________, a Florida corporation (the
"Company"); the holders of the Class B Preferred Stock of the Company identified
in SCHEDULE A (collectively, and together with their permitted successors and
assigns, the "Class B Investors"); the holders of the Class C Preferred Stock of
the Company identified in SCHEDULE B (collectively, and together with their
permitted successors and assigns, the "Class C Investors"); (the Class B
Investors and the Class C Investors and are together referred to as the
"Investors") and the other stockholders and stock option/warrant holders of the
Company listed from time to time in SCHEDULE D (collectively with the Investors,
the "Stockholders").
W I T N E S S E T H:
WHEREAS, the Class B Investors and the Class C Investors and certain of
the Stockholders were previously shareholders of Physician Health Corporation, a
Delaware corporation ("PHC"); and
WHEREAS, the Company is the surviving corporation of the merger of PHC and
Medical Industries of America, Inc. (" MIOA") and the parties hereto desire to
enter into this Agreement for the purposes of assuring each other of certain
restrictions on the stock of, and certain agreements with respect to, the
capital stock of the Company.
NOW, THEREFORE, the parties hereto agree as follows:
1. DEFINITIONS. Except as the context otherwise explicitly requires,
(a) the capitalized term "Section" refers to sections of this Agreement, (b) the
capitalized term "Exhibit" or "Schedule" refers to exhibits or schedules to this
Agreement, (c) references to a particular Section include all subsections
thereof and (d) the word "including" shall be construed as "including without
limitation". Accounting terms used in this Agreement and not otherwise defined
herein shall have the meanings provided in GAAP. Certain capitalized terms are
used in this Agreement as specifically defined in this Section 1 as follows:
1.1 "Charter" means the Articles of Incorporation of the
Company as from time to time in effect.
1.2 "Class A Preferred Stock" means the Class A Preferred
Stock, par value $.01 per share, of the Company.
566608.8/08-18-98/11:54AM
1.3 "Class B Preferred Stock" means the Class B Preferred
Stock, par value $.01 per share, of the Company.
1.4 "Class C Preferred Stock" means the Class C Preferred
Stock, par value $.01 per share, of the Company.
1.5 "Common Stock" means the Voting Common Stock, $0.0025 par
value per share, of the Company.
1.6 "Company" is defined in the preamble.
1.7 "Contingent Warrants" means contingent warrants to
purchase shares of Common Stock in the event the Class A Preferred Stock is
redeemed.
1.8 "Co-Sale Notice" is defined in Section 3.1.
1.9 "Co-Sale Shares" means all shares of any class of capital
stock of the Company issued to the Investors, and all shares of capital stock
issued with respect to, in exchange for or upon conversion of any such shares or
upon conversion of the Preferred Stock or the Class A Preferred Stock or upon
exercise or conversion of the Warrants, the Contingent Warrants or the EGL
Warrants; PROVIDED, HOWEVER, that once any such shares shall have been sold in a
sale that complies with Section 3, they shall cease to be Co-Sale Shares.
1.10 "EGL" means EGL Holdings, Inc.
1.11 "EGL Warrants" means the warrants to purchase Common
Stock issued to the EGL Investors.
1.12 "Healthmark" means Healthmark Partners, LLC.
1.13 "Investor" is defined in the preamble.
1.14 "Joint Director Designees" is defined in Section
4(b)(iv).
1.15 "Outside Offer" is defined in Section 2.1.1.
1.16 "Preferred Stock" means the Company's Class B Preferred
Stock and Class C Preferred Stock.
1.17 "Proportionate Share" with respect to a given Stockholder
means a fraction, the numerator of which is the number of shares of Common Stock
(on an as converted/exercised basis) owned by the subject Stockholder and the
denominator of which is
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the aggregate number of shares of Common Stock (on an as converted/exercised
basis) owned by all Stockholders.
1.18 "Proposed Buyer" is defined in Section 3.
1.19 "Proposed Sale" is defined in Section 3.1.
1.20 "Purchase Agreements" means, collectively, the Amended
and Restated Securities Purchase Agreement, dated as of June 26, 1998, among the
Company (as successor by merger to PHC) and certain of the Investors; the
Securities Purchase Agreement, dated as of October 27, 1997, between the Company
(as successor by merger to PHC) and Paribas Principal Incorporated; the Warrant
Purchase Agreement, dated as of October 27, 1997, between the Company (as
successor by merger to PHC) and Paribas Capital Funding LLC; the Warrant,
Preferred Stock and Investment Commitment, dated as of September 12, 1997, among
the Company (as successor by merger to PHC) and the Investors; and the Warrant,
Preferred Stock and Assets Commitment, dated as of April 27, 1998, among the
Company (as successor by merger to PHC), MIOA and certain of the Investors;,
each as from time to time in effect.
1.21 "Restricted Shares" or "Restricted Stock" means all
shares of any class of capital stock of the Company owned by any Restricted
Stockholder, and all shares of capital stock issued with respect to, in exchange
for or upon conversion of any such shares; PROVIDED, HOWEVER, that once any such
shares shall have been sold in a sale which complies with Sections 2.1, 2.2 or
2.3, they shall cease to be Restricted Shares.
1.22 "Restricted Stockholders" means all stockholders and
option holders of the Company listed from time to time as Restricted
Stockholders in SCHEDULE D and all other persons who become party to this
Agreement pursuant to Section 2.3, and their permitted successors and assigns,
but in no event including any Weston Investor.
1.23 "Selling Stockholder" means a Restricted Stockholder
selling Restricted Shares under Sections 2 or 3.
1.24 "Stockholders' is defined in the preamble.
1.25 "Transfer" means sell, assign, encumber, pledge,
hypothecate, give away or dispose of or transfer in any other manner, whether
voluntarily, involuntarily, by operation of law, pursuant to judicial process,
divorce decree, property settlement, bankruptcy or otherwise.
1.26 "Warrants" means the Warrants issuable to the Investors
pursuant to the Purchase Agreements in connection with the redemption of
Preferred Stock.
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1.27 "Weston Investor" means the Class B Investors and the
Class C Investors, collectively.
2. TRANSFER RESTRICTIONS AND PURCHASE RIGHTS.
2.1 TRANSFERS OF RESTRICTED SHARES. The Restricted
Stockholders will not Transfer Restricted Shares or allow the power to vote
Restricted Shares to be exercised by anyone else (except through ordinary
proxies, revocable at the option of such Restricted Stockholder) except that a
Restricted Stockholder may (a) make a Transfer permitted by Sections 2.2 or 2.3
or (b) make a sale on the following terms and in compliance with the co-sale
rights provisions in Section 3:
2.1.1 OUTSIDE OFFER. The Selling Stockholder
wishing to Transfer Restricted Shares shall prepare an offer (the "Outside
Offer") that sets forth the number of Restricted Shares proposed to be
sold, the minimum purchase price, the proposed method of sale and the
proposed purchase or type of purchaser.
2.1.2 COMPANY PURCHASE OFFER. The Selling
Stockholder shall offer to sell the Restricted Shares described in the
Outside Offer to the Company by delivering to the Company a copy of the
Outside Offer and a written offer to sell to the Company all of such
Restricted Shares on the terms contained in the Outside Offer. If the
Company elects to purchase Restricted Shares, it shall purchase such
shares in accordance with Section 2.4.
2.1.3 OTHER STOCKHOLDERS PURCHASE OFFER. If,
within twenty (20) days after receipt by the Company of the Outside Offer
from the Selling Stockholder, the Company does not elect to purchase all
of such Restricted Shares, then the Selling Stockholder shall offer to
sell the Restricted Shares not chosen for purchase by the Company to the
other Stockholders pro rata according to their Proportionate Shares by
delivering to each such other Stockholder a copy of the Outside Offer and
a written offer to sell to such other Stockholder all of such restricted
Shares on the terms contained in the Outside Offer. If any Stockholders
(other than the Selling Stockholder) elects to purchase Restricted Shares,
they shall purchase such shares in accordance with Section 2.4.
2.1.4 REMAINING SHARES. If, within twenty (20)
days after receipt by the other Stockholders of the Outside Offer to Sell
from the Selling Stockholder, the other Stockholders do not elect to
purchase all of such Restricted Shares, then the Selling Stockholder may
Transfer any remaining Restricted Shares in accordance with the terms of
the Outside Offer during the sixty (60) day period immediately following
the twenty (20) day period referred to above in Section 2.1.3, subject,
however, to the co-sale rights provided in Section 3 in favor of each
Investor
566608.8/08-18-98/11:54AM
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who has notified the Selling Stockholder in writing within such twenty
(20) day notice period of its interest in exercising its co-sale rights
with respect to any such sale. If such shares are not so purchased during
such sixty (60) day period, they shall again become subject to this
Section 2.1.
2.2 TRANSFERS BY OPERATION OF LAW OR IN VIOLATION OF
AGREEMENT. If a Restricted Stockholder is subject to a Transfer of Restricted
Shares by any bankruptcy or insolvency law or proceeding, any divorce
proceeding, pursuant to the death of a Restricted Stockholder or otherwise by
operation of law or court order or decree, or if any Transfer of Restricted
Shares is made or attempted contrary to this Agreement, or if an offer to sell
Restricted Shares is not delivered to the Company and the other Stockholders as
and when required by this Agreement, the Company and the other Stockholders
shall have the right to purchase any or all of such shares from such Restricted
Stockholder, such Restricted Stockholders' estate or legal representative or
such Restricted Stockholder's transferees at any time before or after the
Transfer, at book value.
2.3 CERTAIN PERMITTED TRANSFERS.
2.3.1 TRANSFERS TO IMMEDIATE FAMILY. Any Restricted
Stockholder may Transfer any of such Restricted Stockholder's Restricted
Shares to members of such Restricted Stockholder's immediate family or a
trust for the benefit of members of such Restricted Stockholder's
immediate family so long as (a) each transferee executes a counterpart of
this Agreement as a Restricted Stockholder, and (b) Restricted Shares are
not held by more than ten (10) members (including trusts as members) of
the same immediate family.
2.3.2 PUBLIC OFFERING. A Selling Stockholder may sell
any Restricted Shares in a public offering registered under the federal
Securities Act of 1933, as amended, or in a transaction permitted by Rule
144 thereunder, whereupon such shares shall no longer be Restricted
Shares.
2.3.3 FUND INVESTORS. Any Stockholder that constitutes
an investment fund may transfer Restricted Shares to its limited partners,
members, stockholders or other investors so long as such transferee
executes a counterpart of this Agreement as a Stockholder.
2.4 PURCHASES OF RESTRICTED SHARES.
2.4.1 ELECTION BY COMPANY AND STOCKHOLDERS. In the event
of offers under Section 2.1 or 2.2, the Company shall have the right to
determine whether to purchase any or all shares of Restricted Shares
available for purchase by delivering written notice of the number of
shares to be purchased to the Selling Stockholder and the
566608.8/08-18-98/11:54AM
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other Stockholders within thirty (30) days after receipt of the offer by
the Company. If the Selling Stockholder is a member of the Board of
Directors of the Company, the Selling Stockholder shall not vote as a
director on the question of whether the Company should purchase such
Selling Stockholder's Restricted Shares or any matter relating thereto,
but for purposes of establishing a quorum such Selling Stockholder shall
attend any directors meetings at which such question or matter is
considered. Promptly after a determination by the Board of Directors of
the Company not to purchase all such shares, the Selling Stockholder shall
make the right to purchase any shares it does not purchase available to
the other Stockholders on the basis of their Proportionate Shares. The
other Stockholders may purchase any remaining Restricted Stock not
purchased by the Company and the other Stockholders pro rata based on the
respective Proportionate Shares of Stockholders wishing to purchase
additional shares, or as they may otherwise agree.
2.4.2 CLOSING ON STOCK SALES. The acceptance of any
offer or exercise of any right to purchase hereunder shall be by notice
given in accordance with Section 7.2 and shall specify a date of closing
not earlier than ten (10) business days nor later than fifteen (15)
business days after the receipt of such notice. At the closing, the
purchaser shall pay the purchase price by certified or bank check drawn on
immediately available funds and payable to the order of the Selling
Stockholder. Certificates for the Restricted Shares to be purchased, duly
endorsed or accompanied by duly executed stock powers, in each case with
signatures guaranteed, if reasonably requested by the purchaser, shall be
delivered at the closing by the Selling Stockholder. In addition, the
purchaser may reasonably request waivers of any tax liens and evidence of
good title and authority of any representative before tendering payment.
3. CO-SALE RESTRICTIONS. A Restricted Stockholder may sell any
Restricted Shares in accordance with Section 2.1 to any other person (the
"Proposed Buyer") only if the Investors who notified the Selling Stockholder of
their interest in exercising co-sale rights as contemplated by Section 2.1.4 are
offered the chance to participate in such sale in the manner and on the terms
set forth in this Section 3. Notwithstanding the foregoing, the provisions of
this Section 3 shall not be applicable to (i) any sale of Restricted Shares to a
Proposed Buyer that, when aggregated with the number of Restricted Shares sold
to the Proposed Buyer during the preceding twelve (12) month period, does not
exceed 1,000 (as presently constituted and subject to adjustment for subsequent
stock splits, combinations and dividends) shares and (ii) any sale of Restricted
Shares by a Stockholder required by the restrictions set forth in Regulation Y
under the Bank Holding Company Act of 1956, as amended.
3.1 OFFER. A notice (the "Co-Sale Notice") shall be delivered
by the Selling Stockholder to each such Investor at the time the Outside Offer
is delivered to the other Stockholders under Section 2.1.3. The Co-Sale Notice
shall include:
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(a) A copy of a bona fide offer from the Proposed Buyer,
which shall set forth the complete terms of the proposed sale, including
the number of Restricted Shares proposed to be purchased, the purchase
price, the name and address of the Proposed Buyer and the other principal
terms of the proposed transaction (the "Proposed Sale");
(b) An offer by the Selling Stockholder to include in
the Proposed Sale to the Proposed Buyer, at the option of such Investors,
that number of the Investors' Co-Sale Shares as is determined in
accordance with Section 3.2, on the same terms and conditions as the
Selling Stockholder shall sell the Restricted Shares; and
(c) An agreement from the Proposed Buyer to purchase
such number of the Investors' Co-Sale Shares as shall be includable in
such Proposed Sale pursuant to Section 3.2.
3.2 TIME AND MANNER OF EXERCISE. If any of the Investors desires to
accept the offer contained in the Co-Sale Notice, such Investor shall notify the
Selling Stockholder in writing within twenty (20) days after receipt of the
Co-Sale Notice. If none of the Investors shall have so accepted such offer in
writing, the Investors shall be deemed to have waived all of their rights with
respect to the Proposed Sale, and the Selling Stockholder shall thereafter be
free to sell the Restricted Shares specified in the Co-Sale Notice pursuant to
the Proposed Sale. Any acceptance by any Investor of the offer contained in the
Co-Sale Notice shall be irrevocable except as hereinafter provided. Each
Investor who has elected to participate in such Proposed Sale shall be entitled
to sell in the Proposed Sale, on the same terms and conditions as the Selling
Stockholder, such number of its Co-Sale Shares equal to the proportion (rounded
to the nearest whole share) of all shares to be included in the Proposed Sale
equal to a fraction, the numerator of which is the total number of Co-Sale
Shares of Investors who notified the Restricted Stockholder of their interest in
exercising co-sale rights as contemplated by Section 2.1.4 (on an as
converted/exercised basis) immediately before the Proposed Sale and the
denominator of which is the sum of the total number of Restricted Shares
immediately before the Proposed Sale plus the total number of Co-Sale Shares (on
an as converted/exercised basis) immediately before the Proposed Sale.
3.3 TIME AND MANNER OF CLOSING. Each of the Investors participating
in any Proposed Sale shall take such actions and execute such documents and
instruments as shall be reasonably necessary in order to consummate the Proposed
Sale expeditiously on the same terms as the Selling Stockholder. If at the end
of sixty (60) days following the date on which the Co- Sale Notice was given,
the Selling Stockholder has not completed the Proposed Sale in accordance with
the terms hereof, the Investors shall be released from their obligations
hereunder. All costs and expenses incurred by the Selling Stockholder in
connection with any sale, including without limitation all attorneys' fees and
disbursements or any finders or brokerage fees or commissions, shall be
allocated pro rata among the Selling Stockholder and
566608.8/08-18-98/11:54AM
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the Investors according to the number of shares sold by each. The portion of
such costs and expenses allocable to each Investor shall be remitted to the
Selling Stockholder promptly after notice thereof demonstrating reasonable
supporting calculations. At the closing of any sale under this Section 3.3, each
Investor shall deliver certificates representing the Co-Sale Shares to be sold
by it, duly endorsed for transfer and (if requested in writing by the Proposed
Buyer) with signature guaranteed, and with any stock transfer tax stamps
affixed, against delivery of the applicable purchase price. Any shares sold to
the Proposed Buyer in accordance with this Section 3.3 shall no longer be
subject to this Agreement.
4. VOTING AGREEMENT. Each party hereto agrees:
(a) to cause the Board of Directors to consist of eight
(8) directors until a Remedy Event (as defined in the Company's Charter)
occurs and thereafter to consist of the number of directors contemplated
by such Charter; and
(b) to vote all shares of the Company's capital stock
owned by such party, as the case may be,
(i) to refrain from violating the rights of the
Investors as set forth in the Purchase Agreements, the Investor
Agreements, the Material Agreements (each as defined in the Purchase
Agreement) or the Warrants;
(ii) to elect as directors one person nominated
by the Weston Investors and one person nominated by the holders of the
Class A Preferred Stock (who shall be ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ until such time
as ▇▇. ▇▇▇▇▇▇▇▇▇▇▇▇ is no longer willing or able to serve as a director);
(iii) to elect as directors three (3) persons
nominated by the Chief Executive Officer of the Company;
(iv) to elect as directors two persons (the "Joint
Director Designees") jointly nominated by the Chief Executive Officer of
the Company and EGL;
(v) to elect as two (2) of the directors
contemplated by this Section 4(b) ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇") and ▇▇▇▇
▇. ▇▇▇▇▇▇▇ ("Pershes"), so long as they are employed by the Company and
hold positions of executive officers of the Company.
(vi) to cause the Company to maintain three (3)
member Audit and Compensation Committees of the Company's Board of
Directors, each consisting of one executive director, one non-executive
director and one director who was either nominated by EGL or elected by
the holders of the Class A Preferred Stock; and
566608.8/08-18-98/11:54AM
-8-
(vii) after a Remedy Event has occurred, to elect
as additional directors of the Company such persons nominated by the
Investors as is contemplated by the Charter and to continue to vote for
such persons (or any successors nominated by the Investors, as the case
may be), as directors of the Company as is contemplated by the Charter;
PROVIDED, HOWEVER, that (1) the foregoing clause (b) shall not prevent any party
from voting on any other matter that may properly be taken up by the
Stockholders of the Company, including the election of directors that are not
the subject of this Agreement and (2) the foregoing provision of subsection (v)
is intended by the parties hereto as for the specific benefit of ▇▇▇▇▇▇▇ and
Pershes and they are intended to be third party beneficiaries of the obligations
set forth therein.
5. CLASS A STOCK CALL RIGHT. In the event that any Stockholder shall
cause the Company to redeem its shares of Class A Preferred Stock pursuant to
the provisions of Articles IV, Section C, subsection 3(a)(ii) of the Company's
Articles of Incorporation, the Company may, at its option, exercisable by
written notice delivered to such Stockholder, elect to purchase, and, upon the
giving of such notice, the Company shall be obligated to purchase within thirty
(30) days after giving such notice, all of the Contingent Warrants owned by such
Stockholder at a price equal to twenty percent (20%) of the price paid by such
Stockholder for the shares of Class A Preferred Stock being redeemed, compounded
at a rate of twenty percent (20%) per annum from December 29, 1995, until the
date of purchase. The rights of the Company under this Section may be exercised
only after payment in full has been made to the Stockholder for the redeemed
Class A Preferred Stock, and must be exercised, if at all, within one hundred
and twenty (120) days after the Stockholder notifies the Company of its election
to redeem its shares of Class A Preferred Stock.
6. LEGEND. Each certificate evidencing Restricted Shares that was
outstanding at the execution hereof shall contain the following legend:
THE SALE, TRANSFER, ASSIGNMENT, PLEDGE, OR ENCUMBRANCE OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS OF
A STOCKHOLDERS' AGREEMENT DATED ________________, 1998, AMONG
_________________ AND CERTAIN HOLDERS OF OUTSTANDING CAPITAL STOCK OF SUCH
CORPORATION, AS SUCH AGREEMENT MAY FROM TIME TO TIME BE AMENDED OR
RESTATED.
Each certificate evidencing Restricted Shares, whether outstanding at the
execution hereof or issued contemporaneously with or after the execution hereof,
shall contain the following legend:
566608.8/08-18-98/11:54AM
-9-
THE SALE, TRANSFER, ASSIGNMENT, PLEDGE, OR ENCUMBRANCE OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS OF
A STOCKHOLDERS' AGREEMENT DATED __________, 1998, AMONG
______________________ AND CERTAIN HOLDERS OF OUTSTANDING CAPITAL STOCK OF
SUCH CORPORATION, AS SUCH AGREEMENT MAY FROM TIME TO TIME BE AMENDED OR
RESTATED. A COPY OF THE STOCKHOLDERS' AGREEMENT AS AMENDED TO DATE IS ON
FILE IN THE OFFICES OF THE CORPORATION AND WILL BE FURNISHED TO THE HOLDER
HEREOF WITHOUT CHARGE UPON WRITTEN REQUEST.
7. GENERAL.
7.1 REMEDIES. The parties shall have all remedies for breach of this
Agreement available to them provided by law or equity. Without limiting the
generality of the foregoing, in addition to all other rights and remedies
available at law or in equity, the parties shall be entitled to obtain specific
performance of the obligations of each party to this Agreement and immediate
injunction relief. In the event any action or proceeding is brought in equity to
enforce the same, neither the Company or any party will urge, as a defense, that
an adequate remedy at law exists.
7.2 NOTICES. All notices or other communications required or
permitted to be delivered hereunder shall be in writing and shall be delivered
to each of the parties at their respective addresses as set forth in Schedules
A, B, C or D. Any party to this Agreement may at any time change the address to
which notice to such party shall be delivered by giving notice of such change to
the other parties and such notice shall be deemed given when received by the
other parties. Notices shall be deemed effectively given when personally
delivered or sent to the recipient at the address set forth above by telex or a
facsimile transmission, one business day after having been delivered to a
receipted, nationally recognized courier, properly addressed or five business
days after having been deposited into the United States mail, postage prepaid,
PROVIDED, that any notice to any party outside of the United States shall be
sent by telecopy and confirmed by overnight or two-day courier.
7.3 AMENDMENTS, WAIVER AND CONSENTS. Any provision in this Agreement
to the contrary notwithstanding, changes in or additions to this Agreement may
be made, and compliance with any covenant or provision herein set forth may be
omitted or waived, only by written agreement signed by (a) the Company and (b)
Stockholders holding an aggregate of at least a majority of the shares of Common
Stock held by the Stockholders, on an as converted/exercised basis and if, in
each such case, copies of such modification are delivered to any parties who did
not execute the same; PROVIDED, HOWEVER, that any such modification adversely
affecting the Restricted, Stockholders in a manner distinct from the effect of
such
566608.8/08-18-98/11:54AM
-10-
modification on the Investors shall require the written consent of the
Restricted Stockholders holding a majority of the Restricted Shares.
7.4 BINDING EFFECT, ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the personal representatives, successors and assigns
of the respective parties hereto. The Company shall not have the right to assign
its rights or obligations hereunder or any interest herein without obtaining the
prior written consent of the Stockholders holding an aggregate of at least a
majority of the shares of Common Stock held by the Stockholders, on an as
converted/exercised basis. The Stockholders and the Investors may assign or
transfer their rights under this Agreement to the extent permitted herein and by
the other agreements between the respective parties and the Company.
7.5 TERMINATION. This Agreement shall terminate at the time
immediately prior to the consummation of a Liquidity Event (as defined in the
Charter for the Preferred Stock).
7.6 SEVERABILITY. If any provision of this Agreement shall be found
by any court of competent jurisdiction to be invalid or unenforceable, the
parties waive such provision to the extent that it is found to be invalid or
unenforceable. Such provision shall, to the maximum extent allowable by law, be
modified by such court so that it becomes enforceable and, as modified, shall be
enforced as any other provision hereof, all the other provisions hereof
continuing in full force and effect.
7.7 HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
7.8 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement of the parties with respect to the subject matter hereof and
supersedes all prior and contemporaneous understandings, whether written or
oral.
7.9 JOINDER OF ADDITIONAL PARTIES. Future holders of the Company's
capital stock (or of options, warrants, conversion rights or other rights to
acquire such capital stock) may become party hereto as a Stockholder by
executing a joinder hereto in a form reasonably satisfactory to the Company.
7.10 COUNTERPARTS. This Agreement may be executed in counterparts,
all of which together shall constitute the same instrument.
7.11 CHOICE OF LAW. This Agreement shall be governed by and
construed in accordance with the laws (other than the conflict of laws rules) of
the State of Florida.
566608.8/08-18-98/11:54AM
-11-
The parties hereto have executed this Agreement under seal as of the date
first above written.
By: __________________________________
▇▇▇▇▇ ▇▇▇▇▇▇, President
__________________________________
▇▇▇▇▇ ▇▇▇▇▇▇, Individually
WESTON PRESIDIO CAPITAL II, L.P.
By: WESTON PRESIDIO CAPITAL
MANAGEMENT II, L.P.
By: __________________________________
Title:
EGL HOLDINGS, INC.
By: __________________________________
Title: _______________________________
MERCURY ASSET MANAGEMENT plc
on behalf of ▇▇▇▇▇ Nominees Limited
By: __________________________________
Title: _______________________________
BANCBOSTON VENTURES, INC.
By: __________________________________
Title: _______________________________
566608.8/08-18-98/11:54AM
-12-
NATWEST VENTURES INVESTMENTS
LIMITED
By: __________________________________
Title: _______________________________
PARIBAS PRINCIPAL INCORPORATED
By: __________________________________
Title: _______________________________
PARIBAS CAPITAL FUNDING LLC
By: __________________________________
Title: _______________________________
PARTECH U.S. PARTNERS III C.V.
By: __________________________________
Title: _______________________________
U.S. GROWTH PARTNERS C.V.
By:___________________________________
Title:________________________________
566608.8/08-18-98/11:54AM
-13-
AXA U.S. GROWTH FUND LLC
By:___________________________________
Title:________________________________
DOUBLE BLACK DIAMOND II LLC
By:__________________________________
Title:________________________________
ALMANORI LIMITED
By:___________________________________
Title:________________________________
MULTINVEST LIMITED
By:___________________________________
Title:________________________________
ST. ▇▇▇▇ VENTURE CAPITAL IV, LLC
By:___________________________________
Title:________________________________
NATIONAL CITY VENTURE CORPORATION
By:___________________________________
Title:________________________________
566608.8/08-18-98/11:54AM
-▇▇-
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ INC.
By:___________________________________
Title:_________________________________
CEDAR EQUITIES, L.L.C.
BY:___________________________________
TITLE:_________________________________
GREAT LAKES CAPITAL INVESTMENTS I
BY:___________________________________
TITLE:_________________________________
_______________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Jr.
_______________________________________
▇▇▇▇▇▇ ▇▇▇▇
_______________________________________
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
_______________________________________
J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, M.D.
CEO, PHC MidWest, Inc.
566608.8/08-18-98/11:54AM
-15-
SCHEDULE A TO
STOCKHOLDERS' AGREEMENT
NUMBER OF PREFERRED STOCK SHARES
INVESTORS AND ADDRESS HELD ON DATE HEREOF
SERIES B VOTING PREFERRED STOCK
Weston Presidio Capital II, L.P. 2,072,431
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Almanori Limited 4,581
Axa U.S. Growth Fund LLC 90,425
Double Black Diamond II LLC 12,056
Mercury Asset Management plc, 414,433
on behalf of Rowan Nominees Limited
Multinvest Limited 2,170
NatWest Ventures Investments Limited 207,216
c/o EGL Holdings
Paribas Principal, Incorporated 750,001
Partech U.S. Partners III C.V. 331,564
St. ▇▇▇▇ Venture Capital IV, LLC 621,649
U.S. Growth Fund Partners C.V. 458,907
U.S. Growth Fund Partners C.V. 180,852
Total Class B Voting Preferred Stock 4,687,378
566608.8/08-18-98/11:54AM
SERIES B NON VOTING PREFERRED STOCK
BancBoston Investments, Inc. 621,649
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
National City Venture Corporation 621,649
Total Class B Non-Voting Preferred Stock 1,243,298
Total for Voting and Non-Voting Class B
Preferred Stock 5,930,676
566608.8/08-18-98/11:54AM
-17-
SCHEDULE B TO
STOCKHOLDERS' AGREEMENT
Class C Preferred Stock
NUMBER
OF PREFERRED STOCK SHARES
INVESTORS AND ADDRESS HELD ON DATE HEREOF
--------------------- -------------------
Weston Presidio Capital II, L.P. 1,050,000
566608.8/08-18-98/11:54AM
-18-
SCHEDULE C TO
STOCKHOLDERS' AGREEMENT
[FORMER MIOA PREFERRED STOCKHOLDERS]
566608.8/08-18-98/11:54AM
SCHEDULE D TO
STOCKHOLDERS' AGREEMENT
NUMBER
AND TYPE OF SHARES
RESTRICTED STOCKHOLDERS AND ADDRESS HELD ON DATE HEREOF
================================================================================
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 1,300,000 PHC Common Stock
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Jr. 137,648 PHC Common Stock; Options to
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ acquire 280,500 shares of PHC Common
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ Stock; Options to acquire 484,000 shares
of PHC Prime Common Stock
--------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇ 355,000 PHC Common Stock
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ 360,000 PHC Common Stock
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Ph.D. 330,000 PHC Common Stock
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------
H. ▇▇▇▇▇▇ ▇▇▇▇▇ 320,000 PHC Common
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------------------------------------------------------------
J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, M.D. 100,000 PHC Common Stock; 125,000
CEO, PHC MidWest, Inc. PHC Prime Common Stock; Options to
▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇ acquire 450,000 shares of ▇▇▇ ▇▇▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇ Stock
================================================================================
566608.8/08-18-98/11:54AM
-20-
EXHIBIT 4.1(C)(II)
STANDSTILL/VOTING AGREEMENT
THIS STANDSTILL/VOTING AGREEMENT (the "Agreement"), is entered into as of
the ___ day of _____, 1998, by and among Medical Industries of America, Inc., a
Florida corporation ("MIOA"), Physician Health Corporation, a Delaware
corporation ("PHC"), and the persons listed on SCHEDULE I annexed hereto and
incorporated herein by this reference, each with an address as set forth on
SCHEDULE I annexed hereto (such individuals being hereinafter referred to
individually as a "Stockholder" and collectively as "Stockholders").
WITNESSETH:
WHEREAS, MIOA and PHC have entered into an Agreement and Plan of Merger,
dated as of the date hereof and annexed hereto (the "Merger Agreement");
WHEREAS, initially capitalized terms not otherwise defined herein shall
have their respective meanings as set forth in the Merger Agreement, a copy of
which has been provided to each of the Stockholders;
WHEREAS, each of the Stockholders is familiar with the terms and
conditions of the Merger Agreement and the transactions referred to therein and
contemplated thereby ("Transactions");
WHEREAS, as of the date hereof, the Stockholders beneficially (as defined
in Rule 13-d promulgated under the Exchange Act) own that number of MIOA or PHC
Shares set forth opposite each Stockholder's name on SCHEDULE I; and
WHEREAS, as a condition to the willingness of MIOA and PHC to enter into
the Merger Agreement, and to induce MIOA and PHC to enter into the Merger
Agreement, MIOA and PHC have required that each of the Stockholders agree, and
the Stockholders have agreed, to take certain actions or refrain from taking
certain actions with respect to their stock of MIOA, PHC and/or the Surviving
Corporation, all upon the terms and subject to the conditions of this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained herein, and intending to be legally bound hereby, the
parties hereto agree as follows:
556911.4/08-18-98/11:49AM
ARTICLE 1.
AGREEMENT TO VOTE
SECTION 1.01. VOTING AGREEMENT. Each of the Stockholders agrees that he or
she shall vote, or cause to be voted, all of his or her MIOA and PHC shares, as
the case may be, and any other MIOA and PHC shares, as the case may be, that may
hereafter be acquired by such Stockholder ("Additional Shares"), in favor of the
Merger. In addition, from and after the Effective Time, each of the Stockholders
agrees that he or she shall vote, or cause to be voted, all of his or her shares
of the Surviving Corporation to elect each of the persons listed on SCHEDULE II,
annexed hereto and incorporated herein by this reference, to the Board of
Directors of the Surviving Corporation so long as each such person remains
employed by the Surviving Corporation.
SECTION 1.02. NO TRANSFER. No Stockholder shall transfer any interest in
any of his or her MIOA or PHC Shares prior to the Effective Time, or any
interest in his or her shares of the Surviving Corporation after the Effective
Time, create, suffer or permit to be created any security interest, lien, claim,
pledge, option, right of first refusal, agreement, charges or other encumbrances
of any nature whatsoever on or with respect to any such MIOA, PHC, Additional
Shares or shares of the Surviving Corporation, other than those arising under
the Securities Act and any applicable state securities or "Blue Sky" laws.
Notwithstanding the foregoing, any Stockholder may transfer his or her MIOA or
PHC shares, as the case may be, or shares of the Surviving Corporation to a
member of such Stockholder's immediate family or to a trust for the benefit of a
member of such Stockholder's immediate family; provided, however, that any such
transferee, as a condition to the effectiveness of such transfer, shall agree in
writing that all obligations of such transferring Stockholder shall apply
without limitation to such transferee.
ARTICLE 2
STANDSTILL AGREEMENT
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇") and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ("Pershes") agree that
they will not vote their shares of MIOA, whether owned on the date of this
Agreement or constituting Additional Shares, for, or tender any such shares in,
any type of takeover attempt of MIOA whether occurring prior to the Effective
Time unless such takeover has been approved by the Board of Directors of PHC.
Morrell, Pershes, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ agree that they will not
vote their shares of the Surviving Corporation, or tender any such shares in,
any type of takeover attempt of the Surviving Corporation after the Effective
Time unless such takeover has been approved by the Board of Directors of the
Surviving Corporation. From and after the date of this Agreement, ▇▇▇▇▇▇▇ and
Pershes shall use their best efforts to obtain standstill agreements comparable
to the obligations of ▇▇▇▇▇▇▇ and Pershes set forth in this Article 2 from other
stockholders of MIOA so that the total shares represented by all of said parties
executing standstill agreements will represent approximately 40% of the issued
and outstanding voting stock of MIOA at the time of the stockholder vote on the
Merger.
556911.4/08-18-98/11:49AM
-2-
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
Each of the Stockholders hereby represents and warrants to the other
Stockholders and to each of MIOA and PHC as follows:
SECTION 3.01 AUTHORITY RELATIVE TO THIS AGREEMENT. He or she has all
necessary power and authority to execute and deliver this Agreement and to
perform his or her obligations hereunder and to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by such Stockholder, constitutes a legal, valid and binding obligation
of such Stockholder, enforceable against him or her in accordance with its
terms, subject to applicable bankruptcy, reorganization, insolvency, moratorium
or other similar laws affecting the enforcement of creditors' rights generally
and general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
SECTION 3.02 NO CONFLICT. The execution and delivery of this Agreement by
the Stockholder does not, and the performance of this Agreement by the
Stockholder will not (i) require any consent, approval, authorization or permit
of, or filing with or notification to any governmental or regulatory authority,
domestic or foreign, (ii) conflict with or violate any law, rule, regulation,
order, judgment or decree applicable to the Stockholder or by which any property
or asset of the Stockholder is bound or affected, or (iii) result in any breach
of or constitute a default (or any event which with notice or lapse of time or
both would become a default) under, or give to others any right of termination,
amendment, acceleration or cancellation of, or result in the creation of a lien
or other encumbrance of any nature whatsoever on any property or asset of the
Stockholder or pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit franchise or other instrument or obligation to
which such Stockholder is a party or by which the Stockholder, MIOA or PHC or
any property or asset of the Stockholder or MIOA or PHC is bound or affected.
SECTION 3.03 TITLE TO THE SHARES. As of the date hereof, the Stockholder
has sole voting authority with respect to the MIOA and PHC shares, as the case
may be, set forth opposite his or her name on SCHEDULE I, which are all the
shares of MIOA and PHC Capital Stock owned, either of record or beneficially, by
such Stockholder. The Stockholder may vote such MIOA and PHC shares, as the case
may be, free and clear of all options, rights of first refusal, limitations on
the Stockholder's voting rights (other than those arising under the Securities
Act, and any applicable state securities or "blue sky" laws), and the
Stockholder has not appointed or granted any proxy which is still effective,
with respect to the MIOA and PHC shares, as the case may be, and, until the
Effective Time shall take all actions necessary to retain ownership of the MIOA
and PHC shares and to preserve his or her right to comply with the terms of this
Agreement.
556911.4/08-18-98/11:49AM
-3-
SECTION 3.04 NO OTHER REPRESENTATIONS OR WARRANTIES.
Notwithstanding the representations and warranties contained in this Article 3,
the Stockholders make none of the representations or warranties contained in the
Merger Agreement with respect to MIOA or PHC or with respect to any obligations,
property or assets of MIOA or PHC.
ARTICLE 4
MISCELLANEOUS
SECTION 4.01 FURTHER ASSURANCE. The parties will execute and deliver all
such further documents and instruments and take all such further action as may
be necessary in order to carry out the intentions of this Agreement.
SECTION 4.02 SPECIFIC PERFORMANCE. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
SECTION 4.03 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersedes all prior agreements and understandings, both written and oral,
between or among them with respect to the subject matter hereof.
SECTION 4.04 ASSIGNMENT; PARTIES IN INTEREST. This Agreement shall be
binding upon, inure solely to the benefit of, and be enforceable by, the parties
hereto and their successors and permitted assigns. Nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement.
SECTION 4.05 AMENDMENT; WAIVER. This Agreement may not be amended and no
term or condition hereof may be waived except by an instrument in writing
executed by the parties hereto.
SECTION 4.06 SEVERABILITY. If a court of competent jurisdiction shall
finally determine that any provision of this Agreement is invalid, illegal or
unenforceable, then all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect and such court shall modify such
invalid, illegal or unenforceable provision to the minimum extent necessary to
make same valid, legal and enforceable.
556911.4/08-18-98/11:49AM
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SECTION 4.07 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be delivered in person,
by telecopy, expedited delivery service (such as Federal Express) or by
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties as follows:
If to MIOA:
Medical Industries of America, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
with a copy to:
Mirkin & ▇▇▇▇▇, P.A.
South Trust Center
Suite 580
1700 Palm Beach ▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
If to PHC:
Physician Health Corporation
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
Arnall Golden & ▇▇▇▇▇▇▇, LLP
2800 One Atlantic Center
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Such notice shall be effective on the day following receipt of delivery in
person, by verified telecopy or by expedited delivery service, and shall be
effective four (4) days after mailing in accordance with the foregoing. The
person to whom notice is to be given, and any
556911.4/08-18-98/11:49AM
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address, may be changed from time to time in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
SECTION 4.08 JURY TRIAL WAIVER. All parties hereto hereby waive trial by
jury in any action, counterclaim or proceeding of any kind arising under or out
of or in connection with this Agreement, the negotiations leading thereto, the
inducements to the parties to enter into this Agreement and to the transactions
it contemplates.
SECTION 4.09 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with the laws of the State of Florida applicable to
contracts executed in and to be performed in that State, without regard to
conflict of law principles.
SECTION 4.10 HEADINGS. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
SECTION 4.11. TERMINATION. This Agreement shall terminate on the first
anniversary of the Merger, unless extended by the mutual agreement of all
parties to this Agreement (the "Termination Date"). In the event of the
termination of this Agreement, this Agreement shall forthwith become void and
there shall be no liability on the part of MIOA or PHC or any of the
Stockholders under this Agreement, except with regard to any breach of this
Agreement prior to such termination.
SECTION 4.12 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and the different parties hereto in separate counterparts, each of
which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
IN WITNESS WHEREOF, each of MIOA and PHC has caused this Agreement to be
executed by its officer thereunto duly authorized and each of the Stockholders
has duly executed this Agreement as of the date first written above.
MEDICAL INDUSTRIES OF AMERICA, INC.
By:
Name:
Title:
(Signatures continued on next page)
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(Signatures continued from previous page)
PHYSICIAN HEALTH CORPORATION
By:
Name:
Title:
STOCKHOLDERS:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
556911.4/08-18-98/11:49AM
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SCHEDULE I
SHAREHOLDER/ADDRESS NUMBER OF SHARES
MIOA PHC
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 0
===============
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 0
===============
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 0
===============
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 0
================
556911.4/08-18-98/11:49AM
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SCHEDULE II
NOMINEES FOR BOARD OF DIRECTORS OF SURVIVING CORPORATION
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
556911.4/08-18-98/11:49AM
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EXHIBIT 4.2
CONDUCT OF BUSINESS BY MIOA AND PHC PENDING MERGER
See Exhibits, 3.1(e), 4.2(b)(iv), 4.2(f) and 4.11 of this Agreement.
568147.3/08-18-98/11:56AM
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EXHIBIT 4.2(B)(IV)
AUTHORIZATION OF EXCESSIVE CAPITAL COMMITMENTS OR EXPENDITURES
Between the date of each party's Board Approval and the Closing, either
PHC or MIOA, as the case may be, may make a capital commitment or expenditure in
excess of $500,000 if (i) it delivers to the other party (the "Receiving Party")
a written notice (the "Proposed Capital Commitment Notice") describing in detail
such capital commitment or expenditure and (ii) the Receiving Party agrees in
writing to all of the terms and conditions of such capital commitment or
expenditure; provided, however, if the Receiving Party fails to object in
writing to such proposed capital commitment or expenditure within three (3)
Business Days after it has received the Proposed Capital Commitment Notice, the
Receiving Party shall be deemed to have approved of the capital commitment or
expenditure upon the terms and conditions contained in the Proposed Capital
Commitment Notice.
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EXHIBIT 4.2(F)
PERMITTED INDEBTEDNESS
Between the date of MIOA Board Approval and the Closing, MIOA and/or its
Subsidiaries may incur debt obligations for the purposes and on the terms and
conditions as follows:
1. A revolving line of credit provided by DVI Business Credit on terms and
conditions in accordance with the attached term sheet from DVI Business Credit
to MIOA, dated January 1, 1998.
2. A $2.4 million credit facility from Banque Paribas on terms and
conditions in accordance with the attached term sheet from Banque Paribas to
MIOA, dated [_________] [TO BE PROVIDED].
3. Debt obligations issued in accordance with the JWC Financing as set
forth in EXHIBIT 3.1(E).
Between the date of PHC Board Approval and the Closing, PHC and/or its
Subsidiaries may incur debt obligations for the purposes and on the terms and
conditions as follows:
1. An expansion of PHC's existing credit facility with Banque Paribas on
terms and conditions at least as favorable as PHC's existing credit facility.
568147.3/08-18-98/11:56AM
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EXHIBIT 4.11
MIOA TRANSACTIONS
Prior to Closing, MIOA shall use its reasonable efforts to close the
acquisition of the business of ▇▇▇▇▇ ▇. ▇▇▇▇▇, M.D.P.C.
All other MIOA acquisitions between the date hereof and the Closing must
have prior written approval from PHC prior to their consummation. As part of
such approval process, PHC shall be entitled to receive and review the
transaction documents related to any such MIOA acquisitions.
568147.3/08-18-98/11:56AM
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EXHIBIT 7.5(B)
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (the "Agreement"), is entered into as of
_________, 1998 , by and between Medical Industries of America, Inc., a Florida
corporation ("MIOA"), and Physician Health Corporation, a Delaware corporation
("PHC").
WITNESSETH:
WHEREAS, MIOA and PHC have entered into an Agreement and Plan of Merger,
dated as of even date herewith (the "Merger Agreement"), providing for, among
other things, the merger of PHC with and into MIOA, with MIOA as the surviving
corporation; and
WHEREAS, as a condition and inducement to PHC's execution of the Merger
Agreement, PHC has required that MIOA agree, and MIOA has so agreed, to grant
PHC the Option (as defined below);
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, and agreements set forth herein and in
the Merger Agreement, and intending to be legally bound hereby, MIOA and PHC
agree as follows:
1. DEFINED TERMS. Capitalized terms which are used but not defined herein
shall have the meanings ascribed to such terms in the Merger Agreement.
2. GRANT OF OPTION. Subject to the terms and conditions set forth herein,
MIOA hereby grants to PHC an irrevocable option (the "Option") to purchase from
time to time up to [____________] shares (as adjusted as set forth herein) (the
"Option Shares"), of Common Stock, no par value, of MIOA ("MIOA Common Stock")
at a purchase price equal to the twenty (20) day average closing sales price of
the MIOA Stock for the twenty (20) day period ending on the day preceding the
date of this Agreement, as the case may be (the "Purchase Price"); provided,
however, that in no event shall the number of shares for which this option is
exercisable exceed 19.9% of the outstanding shares of MIOA Common Stock.
3. EXERCISE OF OPTION.
(a) Provided that (i) PHC shall not be in material breach of the
agreements or covenants contained in this Agreement or the Merger Agreement, and
(ii) no preliminary or permanent injunction or other order against the delivery
of Option Shares issued by any court of competent jurisdiction in the United
States shall be in effect, PHC may exercise the Option, in whole or in part, at
any time and from time to time following the occurrence of a Purchase Event or a
Preliminary Purchase Event (as such terms are defined herein below); provided
that
552849.3/08-18-98/11:49AM
the Option shall terminate and be of no further force or effect upon the
earliest to occur of (A) the Effective Time, (B) [termination of the Merger
Agreement in accordance with the terms thereof prior to the occurrence of a
Purchase Event or Preliminary Purchase Event], or (C) eighteen (18) months after
termination of the Merger Agreement following a Purchase Event or Preliminary
Purchase Event. The rights of PHC to "put" the Option Shares to MIOA as set
forth in Section 8 hereof shall terminate when the right to exercise the Option
terminates (other than as a result of a complete exercise of the Option) as set
forth herein.
(b) As used herein, a "Purchase Event" means any of the following
events:
(i) termination of the Merger Agreement by MIOA pursuant to
Section 7.4(a) of the Merger Agreement; or
(ii) any person (other than PHC or any subsidiary of PHC)
shall have acquired beneficial ownership (as such term is defined in Rule
13d-3 promulgated under the Securities Exchange Act of 1934 (the "1934
Act")) of or the right to acquire beneficial ownership of, or any "group"
(as such term is defined under the ▇▇▇▇ ▇▇▇) shall have been formed which
beneficially owns or has the right to acquire beneficial ownership of, 25%
or more of the then outstanding shares of MIOA Common Stock.
(c) As used herein, a "Preliminary Purchase Event" means any of the
following events:
(i) any person (other than PHC or any subsidiary of PHC) shall
have "commenced" (as such term is defined in Rule 14d-2 under the 1934
Act), or shall have filed a registration statement under the Securities
Act of 1933 (the "1933 Act") with respect to, a tender offer or exchange
offer to purchase any shares of MIOA Common Stock such that, upon
consummation of such offer, such person would own or control 25% or more
of the then outstanding shares of MIOA Common Stock (such an offer being
referred to herein as a "Tender Offer" or an "Exchange Offer,"
respectively); or
(ii) (1) the holders of MIOA Common Stock shall not have
approved the Merger Agreement at the meeting of such stockholders held for
the purpose of voting on the Merger Agreement, (2) such meeting shall not
have been held or shall have been canceled prior to termination of the
Merger Agreement, (3) MIOA's Board of Directors or any person representing
such Board shall have commenced negotiations with any person other than
PHC regarding an Acquisition Proposal, or (4) MIOA's Board of Directors
shall have withdrawn or modified in a manner adverse to PHC the
recommendation of MIOA's Board of Directors with respect to the Merger
Agreement, in each case after it shall have been publicly announced (or
otherwise disclosed to MIOA prior to such public announcement) that any
person (other than PHC regarding an Acquisition Proposal, that any person
(other than PHC or any subsidiary of PHC) shall
552849.3/08-18-98/11:49AM
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have (A) made, or disclosed to MIOA an intention to make, a proposal to
engage in an Acquisition Proposal, or (B) commenced a Tender Offer or
filed a registration statement under the 1933 Act with respect to an
Exchange Offer.
As used in this Agreement, "person" shall have the meaning specified in Sections
3(a)(9) and 13(d)(3) of the 1934 Act.
(d) In the event PHC wishes to exercise the Option, it shall send to
MIOA a written notice (the date of which being herein referred to as the "Notice
Date") specifying (i) the total number of Option Shares it intends to purchase
pursuant to such exercise and (ii) a place and date not earlier than 3 business
days nor later than 15 business days from the Notice Date for the closing (the
"Closing") of such purchase (the "Closing Date"). If prior notification to or
approval of any regulatory authority is required in connection with such
purchase, MIOA shall cooperate with PHC in the filing of the required notice of
application for approval and the obtaining of such approval and the Closing
shall occur on the first Business Day following such regulatory approvals (and
any mandatory waiting periods).
4. PAYMENT AND DELIVERY OF CERTIFICATES.
(a) On each Closing Date, PHC shall (i) pay to MIOA, in immediately
available funds by wire transfer to a bank account designated by MIOA, an amount
equal to the Purchase Price multiplied by the number of Option Shares to be
purchased on such Closing Date, and (ii) present and surrender this Agreement to
MIOA at the address of MIOA specified in Section 11(f) hereof.
(b) At each Closing, simultaneously with the delivery of immediately
available funds and surrender of this Agreement as provided in Section 4(a), (i)
MIOA shall deliver to PHC (A) a certificate or certificates representing the
Option Shares to be purchased at such Closing, which Option Shares shall be free
and clear of all liens, claims, charges, and encumbrances of any kind whatsoever
and subject to no pre-emptive rights, and (B) if the Option is exercised in part
only, an executed new agreement with the same terms as this Agreement evidencing
the right to purchase the balance of the shares of MIOA Common Stock purchasable
hereunder, and (ii) PHC shall deliver to MIOA a letter agreeing that PHC shall
not offer to sell or otherwise dispose of such Option Shares in violation of
applicable federal and state law or the provisions of this Agreement.
(c) In addition to any other legend that is required by applicable
law, certificates for the Option Shares delivered at each Closing shall be
endorsed with a restrictive legend which shall read substantially as follows:
THE STOCK REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
552849.3/08-18-98/11:49AM
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LAW AND THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS
SUBJECT TO RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND PURSUANT TO THE TERMS OF A STOCK OPTION AGREEMENT DATED AS OF
______, 1998. A COPY OF SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER
HEREOF WITHOUT CHARGE UPON RECEIPT BY MIOA OF A WRITTEN REQUEST THEREFOR.
It is understood and agreed that: (i) the reference to restrictions arising
under the 1933 Act in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if PHC shall have delivered to
MIOA a copy of a letter from the staff of the United States Securities and
Exchange Commission ("SEC"), or an opinion of counsel in form and substance
reasonably satisfactory to MIOA and its counsel, to the effect that such legend
is not required for purposes of the 1933 Act; and (ii) the reference to
restrictions pursuant to this Agreement in the above legend shall be removed by
delivery of a substitute certificate without such reference if the Option Shares
evidenced by such certificate containing such reference have been sold or
transferred in compliance with the provisions of this Agreement under
circumstances that do not require the retention of such reference.
5. REPRESENTATIONS AND WARRANTIES OF MIOA. MIOA hereby represents and
warrants to PHC as follows:
(a) MIOA has all requisite corporate power and authority to enter
into this Agreement and, subject to any approvals referred to herein, to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly executed and delivered by MIOA.
(b) MIOA has taken all necessary corporate and other action to
authorize and reserve and to permit it to issue (and at all times from the date
hereof until the obligation to deliver MIOA Common Stock upon the exercise of
the Option terminates, will have reserved for issuance), upon exercise of the
Option, the number of shares of MIOA Common Stock necessary for PHC to exercise
the Option, and MIOA will take all necessary corporate action to authorize and
reserve for issuance all additional shares of MIOA Common Stock or other
securities which may be issued hereunder upon exercise of the Option. The shares
of MIOA Common Stock to be issued upon due exercise of the Option, including all
additional shares of MIOA Common Stock or other securities which may be issuable
hereunder, upon issuance pursuant hereto, shall be duly and validly issued,
fully paid and nonassessable, and shall be delivered free and clear of all
liens, claims, charges, and encumbrances of any kind or nature whatsoever,
including any statutory preemptive rights of any stockholder of MIOA.
6. REPRESENTATIONS AND WARRANTIES OF PHC. PHC hereby represents and
warrants to MIOA that:
552849.3/08-18-98/11:49AM
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(a) PHC has all requisite corporate power and authority to enter
into this Agreement and, subject to any approvals or consents referred to
herein, to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of PHC. This Agreement has been duly executed and delivered by PHC.
(b) This Option is not being, and any Option Shares or other
securities acquired by PHC upon exercise of the Option will not be, acquired
with a view to the public distribution thereof and will not be transferred or
otherwise disposed of except in a transaction registered or exempt from
registration under the 1933 Act.
7. ADJUSTMENT UPON CHANGES IN CAPITALIZATION, ETC.
(a) In the event of a change in MIOA Common Stock by reason of a
stock dividend, stock split, split-up, recapitalization, combination, exchange
of shares, or similar transaction, the type and number of shares or securities
subject to the Option, and the Purchase Price therefor, shall be adjusted
appropriately, subject to the limitation set forth in Section 2 hereof, and
proper provision shall be made in the agreements governing such transaction so
that PHC shall receive, upon exercise of the Option, the number and class of
shares or other securities or property that PHC would have received in respect
of MIOA Common Stock if the Option had been exercised immediately prior to such
event, or the record date therefor, as applicable. If any additional shares of
MIOA Common Stock are issued after the date of this Agreement (other than
pursuant to an event described in the first sentence of this Section 7(a) or a
sale of MIOA Common Stock for cash at its fair market value), the number of
Option Shares shall be adjusted so that, after such issuance, the shares of MIOA
Common Stock subject to the Option, together with any shares of MIOA Common
Stock previously issued pursuant hereto, equal 19.9% of the number of shares of
MIOA Common Stock then issued and outstanding.
(b) In the event that MIOA shall enter into an agreement: (i) to
consolidate with or merge into any person, other than PHC or one of its
subsidiaries, and shall not be the continuing or surviving corporation of such
consolidation or merger; (ii) to permit any person, other than PHC or one of its
subsidiaries, to merge into MIOA and MIOA shall be the continuing or surviving
corporation, but, in connection with such merger, the then-outstanding shares of
MIOA Common Stock shall be changed into or exchanged for stock or other
securities of MIOA or any other person or cash or any other property or the
outstanding shares of MIOA Common Stock immediately prior to such merger shall
after such merger represent less than 50% of the outstanding shares and share
equivalents of the merged company; or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than PHC or one of its
subsidiaries, then, and in each such case, the agreement governing such
transaction shall make proper provisions so that the Option shall, upon the
consummation of any such transaction
552849.3/08-18-98/11:49AM
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and upon the terms and conditions set forth herein, be converted into, or
exchanged for, an option (the "Substitute Option"), at the election of PHC, of
either (x) the Acquiring Corporation (as defined below), (y) any person that
controls the Acquiring Corporation, or (z) in the case of a merger described in
clause (ii), MIOA (in each case, such person being referred to as the
"Substitute Option Issuer").
(c) The Substitute Option shall have the same terms as the Option,
provided that, if the terms of the Substitute Option cannot, for legal reasons,
be the same as the Option, such terms shall be as similar as possible and in no
event less advantageous to PHC. The Substitute Option Issuer shall also enter
into an agreement with the then-holder or holders of the Substitute Option in
substantially the same form as this Agreement, which shall be applicable to the
Substitute Option.
(d) The Substitute Option shall be exercisable for such number of
shares of the Substitute Common Stock (as defined below) as is equal to the
Assigned Value (as defined below) multiplied by the number of shares of MIOA
Common Stock for which the Option was theretofore exercisable, divided by the
Average Price (as defined below). The exercise price of the Substitute Option
per share of the Substitute Common Stock (the "Substitute Purchase Price") shall
then be equal to the Purchase Price multiplied by a fraction in which the
numerator is the number of shares of MIOA Common Stock for which the Option was
theretofore exercisable and the denominator is the number of shares for which
the Substitute Option is exercisable.
(e) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (x) the continuing or
surviving corporation of a consolidation or merger with MIOA (if other
than MIOA), (y) MIOA in a merger in which MIOA is the continuing or
surviving person, and (z) the transferee of all or substantially all of
MIOA's assets.
(ii) "Substitute Common Stock" shall mean the common stock issued by
the Substitute Option Issuer upon exercise of the Substitute Option.
(iii) "Assigned Value" shall mean the highest of (x) the price per
share of MIOA Common Stock at which a Tender Offer or Exchange Offer
therefor has been made by any person after the date hereof (other than
PHC), (y) the price per share of MIOA Common Stock to be paid by any
person (other than PHC) pursuant to an agreement with MIOA, or (z) the
highest closing sales price per share of MIOA Common Stock quoted on the
National Association of Securities Dealers Automated Quotation System
("NASDAQ") (or if MIOA Common Stock is not quoted on the NASDAQ, the
highest bid price per share on any day as quoted on the principal trading
market or securities exchange on which such shares are traded as reported
by a
552849.3/08-18-98/11:49AM
-6-
recognized source chosen by PHC or, if there is no such information
available, the value of such shares as determined by a nationally
recognized investment banking firm compensated and selected by PHC) within
the six-month period immediately preceding this Agreement; PROVIDED,
HOWEVER, that in the event of a sale of all or substantially all of MIOA's
assets, the Assigned Value shall be the sum of the price paid in such sale
for such assets and the current market value of the remaining assets of
MIOA as determined by a nationally recognized investment banking firm
selected by PHC, divided by the number of shares of MIOA Common Stock
outstanding at the time of such sale.
(iv) "Average Price" shall mean the average closing price of a share
of the Substitute Common Stock for the one year immediately preceding the
consolidation, merger or sale in question, but in no event higher than the
closing price of the shares of the Substitute Common Stock on the day
preceding such consolidation, merger, or sale; provided that if MIOA is
the Substitute Option Issuer, the Average Price shall be computed with
respect to a share of common stock issued by MIOA, the person merging into
MIOA or by any company which controls or is controlled by such merging
person, as PHC may elect, and provided further that if there is no such
trading information available, the price of such shares shall be
determined by a nationally recognized investment banking firm selected by
PHC.
(f) In no event pursuant to any of the foregoing paragraphs shall
the Substitute Option be exercisable for more than 19.9% of the aggregate of the
shares of the Substitute Common Stock outstanding prior to exercise of the
Substitute Option. In the event that the Substitute Option would be exercisable
for more than 19.9% of the aggregate of the shares of Substitute Common Stock
but for this clause (f), the Substitute Option Issuer shall make a cash payment
to PHC equal to the excess of (i) the value of the Substitute Option without
giving effect to the limitation in this clause (f) over (ii) the value of the
Substitute Option after giving effect to the limitation in this clause (f). This
difference in value shall be determined by a nationally recognized investment
banking firm selected by PHC.
(g) MIOA shall not enter into any transaction described in
subsection (b) of this Section 7 unless the Acquiring Corporation and any person
that controls the Acquiring Corporation assumes in writing all the obligations
of MIOA hereunder and takes all other actions that may be necessary so that the
provisions of this Section 7 are given full force and effect (including, without
limitation, any action that may be necessary so that the shares of Substitute
Common Stock are in no way distinguishable from or have lesser economic value
than other shares of common stock issued by the Substitute Option Issuer) (other
than any diminution in value resulting from the fact that the shares of
Substitute Common Stock are restricted securities as defined in Rule 144 under
the 1933 Act or any successor provision).
(h) The provisions of Section 8, 9, and 10 shall apply, with
appropriate adjustments, to any securities for which the Option becomes
exercisable pursuant to this Section
552849.3/08-18-98/11:49AM
-7-
7 and, as applicable, references in such sections to "MIOA," "Option," "Purchase
Price," and "MIOA Common Stock" shall be deemed to be references to "Substitute
Option Issuer," "Substitute Option," "Substitute Purchase Price," and
"Substitute Common Stock," respectively.
8. REPURCHASE AT THE OPTION OF PHC.
(a) Subject to the last sentence of Section 3(a), at the request of
PHC at any time commencing upon the first occurrence of a Repurchase Event (as
defined below) and ending 30 days immediately thereafter, MIOA shall, to the
extent permitted by applicable law, repurchase from PHC the Option and all
shares of MIOA Common Stock purchased by PHC pursuant hereto with respect to
which PHC then has beneficial ownership. The date on which PHC exercises its
right under this Section 8 is referred to as the "Request Date". Such repurchase
shall be at an aggregate price (the "Section 8 Repurchase Consideration") equal
to the sum of:
(i) the aggregate Purchase Price paid by PHC for any shares of MIOA
Common Stock acquired pursuant to the Option with respect to which PHC
then has beneficial ownership;
(ii) the excess, if any, of (x) the Applicable Price (as defined
below) for each share of MIOA Common Stock over (y) the Purchase Price
(subject to adjustment pursuant to Section 7), multiplied by the number of
shares of MIOA Common Stock with respect to which the Option has not been
exercised; and
(iii) the excess, if any, of the Applicable Price over the Purchase
Price (subject to adjustment pursuant to Section 7) paid (or, in the case
of Option Shares with respect to which the Option has been exercised but
the Closing Date has not occurred, payable) by PHC for each share of MIOA
Common Stock with respect to which the Option has been exercised and with
respect to which PHC then has beneficial ownership, multiplied by the
number of such shares.
(b) If PHC exercises its right under this Section 8, MIOA shall, to
the extent permitted by applicable law, within 10 Business Days after the
Request Date, pay the Section 8 Repurchase Consideration to PHC in immediately
available funds, and contemporaneously with such payment PHC shall surrender to
MIOA the Option and the certificates evidencing the shares of MIOA Common Stock
purchased thereunder with respect to which PHC then has beneficial ownership,
and PHC shall warrant that it has sole record and beneficial ownership of such
shares and that the same are then free and clear of all liens, claims, charges,
and encumbrances of any kind whatsoever. Notwithstanding the foregoing, to the
extent that prior notification to or approval of any regulatory authority is
required in connection with the payment of all or any portion of the Section 8
Repurchase Consideration, PHC shall have the ongoing right to revoke its request
for repurchase pursuant to this Section 8, in whole or in part, or to require
that
552849.3/08-18-98/11:49AM
-8-
MIOA deliver from time to time that portion of the Section 8 Repurchase
Consideration that it is not then so prohibited from paying and promptly file
the required notice or application for approval and expeditiously process the
same (and each party shall cooperate with the other in the filing of any such
notice or application and the obtaining of any such approval). If any regulatory
authority disapproves of any part of MIOA's proposed repurchase pursuant to this
Section 8, MIOA shall promptly give notice of such fact to PHC. If any agency
prohibits the repurchase in part but not in whole, then PHC shall have the right
(i) to revoke the repurchase request, or (ii) to the extent permitted by the
agency, determine whether the repurchase should apply to the Option and/or
Option Shares and to what extent to each, and PHC shall thereupon have the right
to exercise the Option as to the number of Options Shares for which the Option
was exercisable at the Request Date less the sum of the number of shares covered
by the Option in respect of which payment has been made pursuant to Section
8(a)(ii) and the number of shares covered by the portion of the Option (if any)
that has been repurchased. PHC shall notify MIOA of its determination under the
preceding sentence within five (5) days of receipt of notice of disapproval of
the repurchase by any such applicable agency.
Notwithstanding anything herein to the contrary, all of PHC's rights under
this Section 8 shall terminate on the date of termination of this Option
pursuant to Section 3(a).
(c) For purposes of this Agreement, the "Applicable Price" means the
highest of (i) the highest price per share of MIOA Common Stock paid for any
such share by the person or groups described in Section 8(d)(i); (ii) the price
per share of MIOA Common Stock received by holders of MIOA Common Stock in
connection with any merger or other business combination transaction described
in Section 7(b)(i), 7(b)(ii) or 7(b)(iii); or (iii) the highest closing sales
price per share of MIOA Common Stock quoted on the NASDAQ (or if MIOA Common
Stock is not quoted on the market or securities exchange on which such shares
are traded as reported by a recognized source chosen by PHC and reasonably
acceptable to MIOA) during the 60 Business Days preceding the Request Date;
PROVIDED, HOWEVER, that in the event of a sale of less than all of MIOA's
assets, the Applicable Price shall be the sum of the price paid in such sale for
such assets and the current market value of the remaining assets of MIOA as
determined by a nationally recognized investment banking firm selected by PHC,
divided by the number of shares of MIOA Common Stock outstanding at the time of
such sale. If the consideration to be offered, paid or received pursuant to
either of the foregoing clauses (i) or (ii) shall be other than in cash, the
value of such consideration shall be determined in good faith by an independent
nationally recognized investment banking firm selected by PHC and reasonably
acceptable to MIOA, which determination shall be conclusive for all purposes of
this Agreement.
(d) As used herein, "Repurchase Event" shall occur if (i) any person
(other than PHC or any subsidiary of PHC) shall have acquired beneficial
ownership of (as such term is defined in Rule 13d-3 promulgated under the 1934
Act), or the right to acquire beneficial ownership of, or any "group" (as such
term is defined under the ▇▇▇▇ ▇▇▇) shall have been
552849.3/08-18-98/11:49AM
-9-
formed which beneficially owns or has the right to acquire beneficial ownership
of, 50% or more or the then outstanding shares of MIOA Common Stock, or (ii) any
of the transactions described in Section 7(b)(i), 7(b)(ii), or 7(b)(iii) shall
be consummated.
9. QUOTATION; LISTING. If MIOA Common Stock or any other securities to be
acquired upon exercise of the Option are then authorized for quotation or
trading or listing on the NASDAQ or any securities exchange, MIOA, upon the
request of PHC, will promptly file an application, if required, to authorize for
quotation or trading or listing shares of MIOA Common Stock or other securities
to be acquired upon exercise of the Option on the NASDAQ or such other
securities exchange and will use its best efforts to obtain approval, if
required, of such quotation or listing as soon as practicable.
10. DIVISION OF OPTION. This Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of the PHC, upon presentation and
surrender of this Agreement at the principal office of MIOA for other agreements
providing for Options of different denominations entitling the holder thereof to
purchase in the aggregate the same number of shares of MIOA Common Stock
purchasable hereunder. The terms "Agreement" and "Option" as used herein include
any other agreements and related options for which this Agreement (and the
Option granted hereby) may be exchanged. Upon receipt by MIOA of evidence
reasonably satisfactory to it of the loss, theft, destruction, or mutilation of
this Agreement, and (in the case of loss, theft, or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, MIOA will execute and deliver a new agreement of like
tenor and date. Any such new agreement executed and delivered shall constitute
an additional contractual obligation on the part of MIOA, whether or not the
agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
11. MISCELLANEOUS.
(a) EXPENSES. Each of the parties hereto shall bear and pay all
costs and expenses incurred by it or on its behalf in connection with the
transactions contemplated hereunder, including fees and expenses of its own
financial consultants, investment bankers, accountants and counsel.
(b) WAIVER AND AMENDMENTS. Any provision of this Agreement may be
waived at any time in writing by the party that is entitled to the benefits of
such provision. This Agreement may not be modified, amended, altered, or
supplemented except upon the execution and delivery of a written agreement
executed by the parties hereto.
(c) ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARY; SEVERABILITY. This
Agreement, together with the Merger Agreement and the other documents and
instruments referred to herein and therein, between PHC and MIOA (a) constitutes
the entire agreement and
552849.3/08-18-98/11:49AM
-10-
supersedes all prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof and (b) is not
intended to confer upon any person other than the parties hereto (other than any
transferee of the Option Shares or any permitted transferee of this Agreement
pursuant to Section 11(h)) any rights or remedies hereunder. If any terms,
provision, covenant, or restriction of this Agreement is held by a court of
competent jurisdiction or a federal or state regulatory agency to be invalid,
void or unenforceable, the remainder of the terms, provisions, covenants, and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired, or invalidated. If for any reason such court or
regulatory agency determines that the Option does not permit PHC to acquire, or
does not require MIOA to repurchase, the full number of shares of MIOA Common
Stock as provided in Sections 3 and 8 (as adjusted pursuant to Section 7), it is
the express intention of MIOA to allow PHC to acquire or to require MIOA to
repurchase such lesser number of shares as may be permissible without any
amendment or modification hereof.
(d) GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Florida without regard to any
applicable conflicts of law rules.
(e) DESCRIPTIVE HEADINGS. The description headings contained herein
are for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
(f) NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally, telecopied (with
confirmation), or mailed by registered or certified mail (return receipt
requested) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
If to MIOA to: Medical Industries of America, Inc.
▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy Number: ▇▇▇-▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
If to PHC to: Physician Health Corporation
One Lakeside Commons
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy Number: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
552849.3/08-18-98/11:49AM
-11-
(g) COUNTERPARTS. This Agreement and all amendments hereto may be
executed in two counterparts, each of which shall be considered one and the same
agreement and shall become effective when both counterparts have been signed, it
being understood that both parties need not sign the same counterpart.
(h) ASSIGNMENT. Neither this Agreement nor any of the rights,
interests, or obligations hereunder or under the Option shall be assigned by any
of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other party, except that PHC may assign this
Agreement to a wholly owned subsidiary of PHC. Subject to the preceding
sentence, this Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns.
(i) FURTHER ASSURANCES. In the event of any exercise of the Option
by PHC, MIOA and PHC shall execute and deliver all other documents and
instruments to take all other action that may be reasonably necessary in order
to consummate the transactions provided for by such exercise.
(j) SPECIFIC PERFORMANCE. The parties hereto agree that this
Agreement may be enforced by either party through specific performance,
injunctive relief, and other equitable relief. Both parties further agree to
waive any requirement for the securing or posting of any bond in connection with
the obtaining of any such equitable relief and that this provision is without
prejudice to any other rights that the parties hereto may have for any failure
to perform this Agreement.
IN WITNESS WHEREOF, MIOA and PHC have caused this agreement to be signed
by their respective officers thereunto duly authorized, all as of the day and
year first written above.
ATTEST: MEDICAL INDUSTRIES OF AMERICA,
INC.
By: By:
--------------------------------- ------------------------------------
Its: Its:
--------------------------------- ------------------------------------
(CORPORATE SEAL)
552849.3/08-18-98/11:49AM
-12-
ATTEST: PHYSICIAN HEALTH CORPORATION
By: By:
--------------------------------- ------------------------------------
Its: ______________________________ Its:__________________________________
(CORPORATE SEAL)
552849.3/08-18-98/11:49AM
-13-
EXHIBIT 7.6
Medical Industries of America, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Physician Health Corporation
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
The undersigned has been advised that as of the date hereof he, she or it may be
deemed to be an "affiliate" of Physician Health Corporation ("PHC"), as that
term is defined for purposes of Rule 145 under the Securities Act of 1933, as
amended (the "Securities Act"). PHC and Medical Industries of America, Inc.
("MIOA"), have entered into an Agreement and Plan of Merger dated as of
____________, 1998 (the "Merger Agreement"). The Merger Agreement provides,
among other things, for the merger of PHC with and into MIOA (the "Merger") and,
in accordance therewith, the shares of capital stock of PHC owned by the
undersigned at the Effective Time (as defined in the Merger Agreement) will be
converted into rights to receive shares of capital stock of MIOA, as the
Surviving Corporation ("Surviving Corporation Capital Stock") on the terms set
forth therein.
With respect to Surviving Corporation Capital Stock to be received by the
undersigned in the Merger, the undersigned represents, warrants, understands and
agrees as follows:
1. The undersigned has been advised that the issuance of Surviving
Corporation Capital Stock to it pursuant to the Merger Agreement will have been
registered with the Securities and Exchange Commission (the "Commission") under
the Securities Act on a Registration Statement on Form S-4. However, the
undersigned has also been advised that any offer, sale, transfer or disposition
by the undersigned of any of Surviving Corporation Capital Stock received by the
undersigned in the Merger may, under current law, be made only in accordance
with the provisions of Rule 145 under the Securities Act, pursuant to an
effective registration statement under the Securities Act or pursuant to an
exemption provided thereunder.
2. The undersigned understands that, as an affiliate of PHC, the
provisions of Rule 145 permit sales, in general, while the Surviving Corporation
is a Reporting Company (as defined below), only in "brokers transactions" within
the meaning of Section 4(4) of the Securities Act and paragraph (g) of Rule 144
thereunder or transactions directly with a "market
563978.1
Parent
Company
, 1998
------------------
Page 2
maker", as defined in Section 3(a)(38) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), where the aggregate number of shares of the
Surviving Corporation Capital Stock sold at any time, together with all sales of
restricted the Surviving Corporation Common Stock sold for the undersigned's
account during the preceding three-month period, does not exceed the greater of
(i) one percent of such the Surviving Corporation Capital Stock outstanding or
(ii) the average weekly volume of trading in the Surviving Corporation Capital
Stock on all national securities exchanges and/or reported through the automated
quotation system of a registered securities association during the four-week
period preceding any such sale. For purposes of determining the amount of
securities specified in clauses (i) and (ii) above, the provisions of paragraph
(e)(3) of Rule 144 shall apply. A "Reporting Company" means a company that is
subject to the requirements to file, and is filing, periodic reports under
Section 13 or 15(d) of the Exchange Act.
3. The undersigned further understands that Rule 145 permits sales of the
Surviving Corporation Capital Stock without the restrictions set forth in
paragraph 2 above if (i) at the time of sale, the undersigned is not an
affiliate of the Surviving Corporation, the shares of the Surviving Corporation
Capital Stock have been held for a minimum period of one year after the
"Effective Time" and the Surviving Corporation is a Reporting Company or (ii) if
the Surviving Corporation is not a Reporting Company, such shares have been held
for a minimum period of two years after the Effective Time and the undersigned
has not been an affiliate of the Surviving Corporation for at least three months
prior to the sale.
4. The undersigned hereby represents and warrants to the Surviving
Corporation that the undersigned will not offer, sell, transfer or otherwise
dispose of any Surviving Corporation Capital Stock received by the undersigned
in the Merger, except pursuant to (i) the provisions of Rule 145 under the
Securities Act, (ii) an effective registration statement under the Securities
Act or (iii) in a transaction that, in the opinion of legal counsel reasonably
satisfactory to the Surviving Corporation, is exempt from registration under the
Securities Act. In the event of a sale or other disposition pursuant to Rule
145, the undersigned will, upon request of the Surviving Corporation, supply
evidence reasonably satisfactory to the Surviving Corporation of compliance with
such Rule.
5. The undersigned has carefully read this letter and the Merger Agreement
and has discussed their requirements and other applicable limitations upon the
offer, sale, transfer or other disposition of Surviving Corporation Capital
Stock to be acquired by the undersigned in the Merger, to the extent the
undersigned believed necessary, with the undersigned's counsel or counsel for
PHC.
563978.1
Parent
Company
, 1998
------------------
Page 3
6. The undersigned understands that, except to the extent provided in the
Merger Agreement, the Surviving Corporation is under no obligation to register
the offer, sale, transfer or other disposition of Surviving Corporation Capital
Stock by the undersigned or on the undersigned's behalf or to take any other
action necessary in order to make compliance with an exemption from registration
available.
7. The undersigned understands and agrees that stop transfer instructions
may be given to the Surviving Corporation's transfer agents with respect to
Surviving Corporation Capital Stock to be acquired by the undersigned in the
Merger and that there may be placed on the certificates for such shares, and any
certificates issued in exchange or substitution therefor, a legend stating:
"The shares represented by this certificate were issued in a
transaction to which Rule 145 promulgated under the Securities Act
of 1933 applies. The shares represented by this certificate may only
be transferred in accordance with the terms of an Agreement dated
1998 among the registered holder hereof, Medical Industries of
America, Inc. (now known as _____________________) and Physician
Health Corporation, a copy of which Agreement is on file at the
principal offices of
----------------------."
The undersigned understands and agrees that, upon the undersigned's request or
the request of the undersigned's transferee, the legend set forth in this
paragraph 7 shall be removed by delivery of substitute certificates without such
legend (a) if the transfer to the transferee was effected in accordance with
clause (i) or (ii) of paragraph 4 and the conditions of paragraph 4 were
complied with or (b) upon delivery to the Surviving Corporation of an opinion of
counsel reasonably satisfactory to the Surviving Corporation or other evidence
reasonably satisfactory to the Surviving Corporation to the effect that such
legend is not required for purposes of the Securities Act.
8. The undersigned also understands that unless the transfer by the
undersigned of Surviving Corporation Capital Stock acquired in the Merger has
been registered under the Securities Act or is a sale made in conformity with
the provisions of Rule 145, the Surviving Corporation reserves the right to put
the following legend on the certificates issued to the transferee:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933 and were acquired from a person
563978.1
Parent
Company
, 1998
------------------
Page 4
who received such shares in a transaction to which Rule 145
promulgated under the Securities Act of 1933 applies. The shares
have been acquired by the holder not with a view to, or for resale
in connection,with, any distribution of such shares, and such shares
may not be sold or otherwise transferred except in accordance with
an exemption from the registration requirements of the Securities
Act of 1933."
In addition, the undersigned understands and agrees that, upon the undersigned's
request or the request of the undersigned's transferee, the legend set forth in
this paragraph 8 shall be removed by delivery of substitute certificates without
such legend upon delivery to the Surviving Corporation of an opinion of counsel
reasonably satisfactory to the Surviving Corporation or other evidence
reasonably satisfactory to the Surviving Corporation to the effect that such
legend is not required for purposes of the Securities Act.
Very truly yours,
Accepted this day
of 1998.
MIOA:
MEDICAL INDUSTRIES OF AMERICA, INC.
By:
Name:
Title:
Accepted this day
of 1998.
Parent
Company
, 1998
------------------
PHC:
PHYSICIAN HEALTH CORPORATION
By:
Name:
Title:
563978.1
Page 5
EXHIBIT 7.8
ASSIGNMENT, AMENDMENT AND JOINDER AGREEMENT
FOR AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
This Assignment, Amendment and Joinder Agreement for Amended and Restated
Registration Rights Agreement (the "Agreement") is entered into as of this _____
day of July, 1998, among PHYSICIAN HEALTH CORPORATION, a Delaware corporation
(the "Company"); [INSERT NAMES], (collectively, the "New Stockholders"); MEDICAL
INDUSTRIES OF AMERICA, INC., a Florida Corporation ("MIOA") and the parties
(other than the Company, MIOA and the New Stockholders) listed on the signature
page attached hereto (collectively, the "Existing Parties").
W I T N E S S E T H:
WHEREAS, the Existing Parties are either (a) holders of shares of the
Company's Common Stock or Convertible Preferred Stock or (b) holders of warrants
or options to acquire shares of the Company's Common Stock; and
WHEREAS, the Company and the Existing Parties entered into that certain
Amended and Restated Registration Rights Agreement (the "Registration Rights
Agreement") dated October 27, 1997, pursuant to which the Existing Parties were
granted certain rights with respect to the registration of (a) the shares of the
Company's Common Stock and (b) the shares underlying the Convertible Preferred
Stock or the warrants or options to acquire shares of the Company's Common Stock
held by them; and
WHEREAS, pursuant to an Agreement and Plan of Merger ("Merger Agreement")
dated ______________, 1998, by and among the Company and MIOA, the Company is
being merged (the "Merger") with and into MIOA, and the Existing Parties are
receiving shares (collectively, the "New Shares") of MIOA's Common Stock in
exchange for their capital stock of the Company; and
WHEREAS, in connection with the Merger, all of the outstanding Common
Stock of the Company shall be converted ("Conversion") into Common Stock of
MIOA, in accordance with Article 3 of the Merger Agreement; and
WHEREAS, the parties desire to amend the Registration Rights Agreement by
adding the New Stockholders as parties, and to reflect the terms of the Merger,
and the New Stockholders desire to formally join in and adopt the Registration
Rights Agreement, in accordance with the terms set forth below.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. ADDITION OF NEW STOCKHOLDERS AS PARTIES. The New Stockholders hereby
formally join in, adopt and agree to execute the Registration Rights Agreement,
a copy of which is attached hereto. The Existing Parties agree that the New
Stockholders are hereby added as
566766.3/08-18-98/11:55AM
parties to the Registration Rights Agreement with all rights and obligations
assigned to a "Stockholder" as set forth and defined in the Registration Rights
Agreement.
2. CONVERSION OF COMMON STOCK. From and after the date of the Conversion,
all references in the Registration Rights Agreement to (a) "Common Stock" shall
refer to the Common Stock, no par value, of MIOA ("MIOA Common Stock"); and (b)
"PHC" shall refer to MIOA. In addition, "Registrable Common" as defined in
Section 1(c) of the Registration Rights Agreement shall include, without
limitation, the shares of MIOA Common Stock issuable upon the conversion,
exercise or exchange of the applicable securities of MIOA which shall be issued
in the Merger to the Existing Parties in respect of the Company's Non-Voting
Common Stock, the Subordinated Warrants, the Company's Series 1 Class A Stock,
Series 2 Class A Stock, Series B Redeemable Convertible Preferred Stock (whether
voting or non-voting), the Company's Series C Redeemable Convertible Preferred
Stock (whether voting or non-voting) and the Weston Warrants, all as described
in said Section 1(c) of the Registration Rights Agreement. In addition,
Registrable Common shall also include shares of MIOA Common Stock issuable upon
the conversion of a stockholder's interest in MHOA Texas I, LLC, Eye Care
services of Missouri, Inc., PHC Acquisition Subsidiary VII, Inc. (which
Stockholders hereby agree that this Agreement supercedes the provisions of any
other agreement previously entered into which purports to grant registration
rights with respect to such interests or shares of stock into which such
interests may be convertible) and any other interests in MIOA subsidiaries that
are convertible into shares of MIOA Common Stock and with respect to which MIOA
agrees to grant registration rights pursuant to this Agreement.
3. ASSIGNMENT AND ASSUMPTION OF THE COMPANY'S OBLIGATIONS. The Company,
for good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, does hereby assign, transfer, and deliver (the
"Assignment") unto MIOA all right, title, and interest of the Company in, to,
and under the Registration Rights Agreement, which MIOA agrees to assume.
4. CONSENT TO ASSIGNMENT AND RELEASE. The Existing Parties hereby consent
to the Assignment contained in Section 3 hereof, and agree to rely solely upon
MIOA to fulfill the obligations of the Company under the Registration Rights
Agreement, and to release the Company from any duties and liabilities under the
Registration Rights Agreement. The Existing Parties acknowledge that there are
no breaches or violations of the Registration Rights Agreement as of the date
hereof.
5. RATIFICATION. Except to the extent amended hereby the Registration
Rights Agreement shall remain in full force and effect.
6. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument.
(Signatures begin on following page)
566766.3/08-18-98/11:55AM
-2-
IN WITNESS WHEREOF, the undersigned have executed this Assignment,
Amendment and Joinder Agreement for Amended and Restated Registration Rights
Agreement as of the date set forth above.
THE COMPANY:
PHYSICIAN HEALTH CORPORATION
By: ______________________________________
Title:
MIOA:
MEDICAL INDUSTRIES OF AMERICA, INC.
By: ______________________________________
Title:
EXISTING PARTIES:
Date Executed:__________ By: ______________________________________
Date Executed:__________ By: ______________________________________
Date Executed:__________ By: ______________________________________
Date Executed:__________ By: ______________________________________
Date Executed:__________ By: ______________________________________
Date Executed:__________ By: ______________________________________
Date Executed:__________ By: ______________________________________
[Signatures continued on next page]
[Signatures continued from prior page]
WESTON PRESIDIO CAPITAL II, L.P.
-3-
BY: WESTON PRESIDIO CAPITAL
MANAGEMENT II, L.P.
By:____________________________________
Title:
BANCBOSTON INVESTMENTS, INC.
By:_________________________________________
Title:
EGL HOLDINGS, INC.
By:_________________________________________
Title:
MERCURY ASSET MANAGEMENT plc,
on behalf of ROWAN NOMINEES LIMITED
By:_________________________________________
Title:
NATWEST VENTURES INVESTMENTS
LIMITED
By:_________________________________________
Title:
NATIONAL CITY VENTURE CORPORATION
BY:_________________________________________
TITLE:
ST. ▇▇▇▇ VENTURE CAPITAL IV, LLC
By:_________________________________________
Title:
PARTECH U.S. PARTNERS III C.V.
By:_________________________________________
Title:
566766.3/08-18-98/11:55AM
-4-
U.S. GROWTH FUND PARTNERS C.V.
By:_________________________________________
Title:
AXA U.S. GROWTH FUND LLC
By:_________________________________________
Title:
DOUBLE BLACK DIAMOND II LLC
By:_________________________________________
Title:
ALMANORI LIMITED
By:_________________________________________
Title:
MULTINVEST LIMITED
By:_________________________________________
Title:
PARIBAS PRINCIPAL INCORPORATED
By:_________________________________________
Title:
PARIBAS CAPITAL FUNDING LLC
By:_________________________________________
Title:
[CEDAR EQUITIES]
566766.3/08-18-98/11:55AM
-5-
By:_________________________________________
Title:
[GREAT LAKES CAPITAL INVESTMENTS I]
By:_________________________________________
Title:
NEW STOCKHOLDERS:
Date Executed:__________ By: ______________________________________
Date Executed:__________ By: ______________________________________
566766.3/08-18-98/11:55AM
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