AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 17, 1998
REGISTRATION NO. 333-39441
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 3
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
AMERICAN MEDICAL PROVIDERS, INC.
ANKLE & FOOT CENTERS OF AMERICA, LLC
(EXACT NAME OF REGISTRANTS AS SPECIFIED IN ITS CHARTER)
DELAWARE 76-0530185
DELAWARE 8099 59-3357094
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NUMBERS)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
8043
(SECONDARY STANDARD
INDUSTRIAL
CLASSIFICATION CODE
NUMBER)
------------------------
JACK N. MCCRARY
AMERICAN MEDICAL PROVIDERS, INC. AMERICAN MEDICAL PROVIDERS, INC.
3555 TIMMONS LANE, SUITE 1550 3555 TIMMONS LANE, SUITE 1550
HOUSTON, TEXAS 77027 HOUSTON, TEXAS 77027
(713) 621-5500 (713) 621-5500
(ADDRESS, INCLUDING ZIP CODE, AND (NAME AND ADDRESS, INCLUDING ZIP
TELEPHONE NUMBER, CODE, AND TELEPHONE
INCLUDING AREA CODE, OF REGISTRANTS' NUMBER, INCLUDING AREA CODE, OF AGENT
PRINCIPAL EXECUTIVE OFFICES) FOR SERVICE)
------------------------
COPIES TO:
IVAN WOOD DAVID J. RINGELMAN MICHAEL L. BOYKINS
BAKER & HOSTETLER LLP BAKER & HOSTETLER LLP BERNARD S. KRAMER
1000 LOUISIANA, SUITE 303 EAST 17TH AVENUE, MCDERMOTT, WILL & EMERY
2000 SUITE 1100 227 WEST MONROE STREET,
HOUSTON, TEXAS 77002 DENVER, COLORADO 80203 SUITE 3100
(713) 751-1600 (303) 861-0600 CHICAGO, ILLINOIS
60606-5096
(312) 372-2000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this Registration Statement becomes effective.
------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
========================================================================================================================
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Common Stock................. 4,255,000(2) $12.00 $51,060,000 $6,382(3)
- ------------------------------------------------------------------------------------------------------------------------
Promissory Notes..................... $1,425,000 100% $1,425,000 $432
- ------------------------------------------------------------------------------------------------------------------------
Membership Interests................. 25,000 $5,000 $75,000(4) $23
- ------------------------------------------------------------------------------------------------------------------------
Total................................ $6,837
========================================================================================================================
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457.
(2) Includes 555,000 shares of Class A Common Stock which the Underwriter has
the option to purchase from the Company to cover over-allotments, if any.
(3) The total Amount of Registration Fee for Class A Common Stock is equal to
$15,473, $9,091 of which was previously paid by the Company in connection
with its initial filing on November 4, 1997.
(4) AFC sold 15 units, each consisting of a promissory note in the aggregate
amount of $95,000 and 1,667 membership interests in AFC for $5,000. Such
number is calculated by multiplying 15 units by $5,000.
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATES AS
MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE>
CROSS-REFERENCE SHEET PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
FORM S-1 ITEM
NUMBER AND CAPTION LOCATION IN PROSPECTUS
- ------------------------------------- --------------------------------------------------------
<S> <C>
1. Forepart of the Registration
Statement and Outside Front
Cover Page of Prospectus ....... Outside Front Cover Page
2. Inside Front and Outside Back
Cover Pages of Prospectus....... Inside and Outside Back Cover Pages
3. Summary Information, Risk
Factors and Ratio of Earnings
to Fixed Charges................ Prospectus Summary; Risk Factors
4. Use of Proceeds................. Use of Proceeds
5. Determination of Offering
Price .......................... Underwriting
6. Dilution........................ Dilution
7. Selling Security Holders........ *
8. Plan of Distribution............ Underwriting
9. Description of Securities to be
Registered...................... Description of Capital Stock
10. Interests of Named Experts and
Counsel ........................ Legal Matters
11. Information with Respect to the
Registrant ..................... Outside and Inside Front Cover Pages; Prospectus
Summary; Risk Factors; Use of Proceeds; Capitalization;
Selected Financial Data; Management's Discussion and
Analysis of Financial Condition and Results of
Operations; Business; Management; Certain Transactions;
Principal Stockholders; Description of Capital Stock;
Financial Statements
12. Disclosure of Commission
Position on Indemnification
for Securities Act
Liabilities..................... *
</TABLE>
- ------------
* Answer is negative or item is not applicable.
<PAGE>
EXPLANATORY NOTE
The form of Prospectus filed as a part of this Amendment contains three
alternative forms of cover page. The first form of cover page relates to an
offer of rescission (the "Units Rescission Offer") to be made to certain
holders of promissory notes and membership interests in Ankle & Foot Centers of
America, LLC ("AFC") (the "AFC Units") issued by AFC, a principal
stockholder of American Medical Providers, Inc. (the "Company"). Because the
AFC Units were issued after the Company's Registration Statement on Form S-1
(the "Registration Statement") was filed and because, as a condition to their
investment in the AFC Units, investors in the AFC Units were given the
opportunity by the Company to purchase shares of Class A Common Stock, par value
$.001 per share, of the Company (the "Class A Common Stock") in the Company's
underwritten initial public offering (the "Offering") at the initial public
offering price, an argument can be made that the consummation of the Offering
contemplated by the Registration Statement might cause the exemptions from
registration relied on in connection with the offer and sale of the AFC Units to
be made unavailable. It is contemplated that the Units Rescission Offer will be
completed after the closing of the Company's Offering. See "Units Rescission
Offer." The second form of cover page relates to an offer by the Company to
rescind a potential offer to sell Common Stock to certain persons (the
"Practice Owners") with whom the Company had entered into negotiations and
non-binding letters of intent, after the filing of the Registration Statement,
to purchase certain of the assets or stock of their podiatric practices (the
"Practice Rescission Offer"). None of those negotiations or letters of intent
involved the initial Affiliated Practices. Because the negotiations as to
valuation of the practices occurred after the Company filed the Registration
Statement, an argument can be made that the consummation of the Offering
contemplated by the Registration Statement will cause the potential offer of
Common Stock to the Practice Owners to have not been in compliance with federal
and state securities laws. It is contemplated that the Practice Rescission Offer
will be completed after the closing of the Company's Offering. The Underwriters
of the Offering are not parties to the Units Rescission Offer or the Practice
Rescission Offer and none of the legal matters relating thereto will be passed
upon by McDermott, Will & Emery, counsel to the Underwriters. The third form of
cover page is intended to be used in connection with the Offering.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. The securities offered hereby may not be
sold nor may offers to buy be accepted prior to the time the registration
statement becomes effective. This prospectus shall not constitute an offer to
sell or the solicitation of an offer to buy nor shall there be any sale of the
securities offered hereby in any state in which such offer, solicitation or sale
would be unlawful prior to registration or qualification under the securities
laws of any such state.
SUBJECT TO COMPLETION, DATED FEBRUARY 17, 1998
PROSPECTUS
$1,425,000 PRINCIPAL AMOUNT OF PROMISSORY NOTES
25,000 MEMBERSHIP INTERESTS
AMERICAN MEDICAL PROVIDERS, INC.
ANKLE & FOOT CENTERS OF AMERICA, LLC
------------------------
This Prospectus relates to a rescission offer (the "Units Rescission
Offer") with respect to $1.425 million principal amount of Promissory Notes
("AFC Promissory Notes") and 25,000 membership interests ("AFC Units") of
Ankle & Foot Centers of America, LLC ("AFC"). The AFC Units were offered and
sold by AFC, a principal stockholder of American Medical Providers, Inc. (the
"Company"), to 16 investors (the "Bridge Investors") in reliance on certain
exemptions from registration under the Securities Act of 1933 (the "Securities
Act"). The Company may have certain contingent liabilities with respect to the
Units Rescission Offer as described below. See "UNITS RESCISSION
OFFER -- Effect of the Units Rescission Offer."
The sections of this Prospectus entitled "Prospectus Summary -- The
Offering," "Dilution," "Use of Proceeds" and "Underwriting," as well as
portions of other sections of this Prospectus, relate to the Company's
underwritten public offering of Common Stock being made concurrently with the
Units Rescission Offer evidenced hereby and do not apply to the Units Rescission
Offer. The Underwriters of the public offering are not parties to the Units
Rescission Offer and none of the legal matters relating thereto will be passed
upon by McDermott, Will & Emery, counsel to the Underwriters.
UNITS RESCISSION OFFER
THE FOLLOWING INFORMATION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
ACCOMPANYING PROSPECTUS. THE BRIDGE INVESTORS ARE URGED TO READ THE PROSPECTUS
IN ITS ENTIRETY IN ORDER TO MAKE AN INDEPENDENT EVALUATION WITH RESPECT TO THIS
UNITS RESCISSION OFFER.
The Company hereby extends an offer (the "Units Rescission Offer") to
rescind the offer and sale of the AFC Units between October 1997 and February
1998. Because the AFC Units were offered and sold after the registration
statement of which this Prospectus is a part was filed with the Securities and
Exchange Commission (the "Commission") by AFC and because, as part of their
investment in the AFC Units, the Bridge Investors in the AFC Units were given
the option by the Company to purchase shares in the Company's underwritten
initial public offering at the initial public offering price, an argument can be
made that the consummation of the Company's public offering of Common Stock will
cause such exemptions to be retroactively unavailable. This Units Rescission
Offer applies only to the Bridge Investors.
To ACCEPT the Units Rescission Offer, a Bridge Investor is required to
complete and sign the section entitled "Acceptance of Rescission Offer" on the
enclosed Units Rescission Form and return it to AFC.
To REJECT the Units Rescission Offer, a Bridge Investor is required to
complete and sign the section entitled "Rejection of Rescission Offer" on the
enclosed Units Rescission Form and return it to AFC. AFC AND THE COMPANY WILL
REJECT THE UNITS RESCISSION OFFER ON BEHALF OF ANY BRIDGE INVESTORS WHO FAIL TO
RETURN A PROPERLY COMPLETED UNITS RESCISSION FORM PRIOR TO THE EXPIRATION OF THE
UNITS RESCISSION OFFER.
If this Units Rescission Offer is ACCEPTED by a Bridge Investor, the Bridge
Investor will be paid the purchase price of the AFC Units purchased by such
Bridge Investor, plus interest from the date of purchase at statutory rate of
interest. However, Bridge Investors will not retain the right to have any Common
Stock set aside to purchase at the initial public offering price. If this Units
Rescission Offer is REJECTED by a Bridge Investor, such Bridge Investor will
continue to hold the AFC Units. With respect to each AFC Unit, such AFC
Promissory Notes will be repurchased for $95,000 and the AFC membership
interests will be repurchased for $71,667 by AFC upon the consummation of the
Company's initial public offering. In either case, Bridge Investors will
continue to have certain rights of redress as permitted under the Securities Act
and its statute of limitations and applicable state securities laws. See "UNITS
RESCISSION OFFER -- Effect of the Units Rescission Offer" on page ii for a
description of the legal rights and obligations of accepting or rejecting the
Units Rescission Offer.
This Units Rescission Offer will expire at the close of business on the
earlier of (i) 30 days from the date of this Prospectus or (ii) the Company's
receipt of a properly completed Units Rescission Form from each Bridge Investor.
Bridge Investors are urged to read thoroughly this Units Rescission Offer and
the accompanying Prospectus. Bridge Investors may call Wayne A. Bertsch, a
Senior Vice President of the Company, at (713) 621-5500 if they have any
questions concerning the terms and conditions of the Units Rescission Offer.
NEITHER AFC, THE COMPANY NOR THEIR RESPECTIVE MANAGEMENT MAKES ANY
RECOMMENDATION TO THE BRIDGE INVESTORS AS TO WHETHER TO ACCEPT THE UNITS
RESCISSION OFFER OR TO REJECT THE UNITS RESCISSION OFFER. BRIDGE INVESTORS MUST
MAKE THEIR OWN DECISION AS TO WHETHER TO ACCEPT OR REJECT THE UNITS RESCISSION
OFFER.
THE DATE OF THIS PROSPECTUS IS FEBRUARY __, 1998
<PAGE>
THE UNITS RESCISSION FORM AND THE SECURITIES ACT
Between October 1997 and February 1998, AFC offered and sold the AFC Units
by which the Bridge Investors purchased an aggregate principal amount of
$1,425,000 AFC Promissory Notes and 25,000 membership interests in AFC. Because
some of the AFC Units were issued after the Company's Registration Statement on
Form S-1 (the "Registration Statement") was filed and because, as a condition
to their investment in the AFC Units, investors in the AFC Units were given the
option by the Company to purchase shares of Common Stock of the Company in the
Company's underwritten initial public offering at the initial public offering
price, an argument can be made that the consummation of the underwritten initial
public offering of Common Stock contemplated by the Registration Statement will
cause the exemptions from registration relied on in connection with the offer
and sale of the AFC Units to be made unavailable. In order to limit their
potential liability under the Securities Act, AFC and the Company are
undertaking this Units Rescission Offer with respect to the offer and sale of
the AFC Units.
EFFECTS OF THE UNITS RESCISSION OFFER
Bridge Investors may ACCEPT the Units Rescission Offer or REJECT the Units
Rescission Offer. There can be no assurance that the liability of the Company
and AFC based upon any possible failure of the Company or AFC to comply with
federal or state securities law in connection with the Bridge Financing will be
eliminated. If this Units Rescission Offer is ACCEPTED, Bridge Investors will be
paid the purchase price of the AFC Units, plus interest on the AFC Units from
the date of purchase at the statutory rate. If the Units Rescission Offer is
REJECTED, holders of the AFC Units will continue to hold AFC Units, such AFC
Promissory Notes will be repurchased for $95,000 in cash, and the AFC membership
interests will be repurchased for $71,667 in cash by AFC upon the successful
completion of the Company's initial public offering. However, the Bridge
Investors will not retain the right to have any Common Stock set aside for
purchase at the initial public offering price.
It is the position of the Staff of the Commission that any liability of the
Company or AFC under the Securities Act for the sale of AFC Units may survive
and not be barred by the Units Rescission Offer. However, it is possible that a
court would hold that the legal remedies available to the Bridge Investors are
diminished as a result of the Units Rescission Offer. Although the legal
principles applicable to a transaction such as the Units Rescission Offer are
not clear, among possible bases for such a determination are that any Bridge
Investor who accepts the Units Rescission Offer thereby will have entered into
an accord and satisfaction that moots any claim for damages and that any such
Bridge Investor who rejects the Units Rescission Offer may have waived or be
estopped from asserting his or her rights by failing to accept the Units
Rescission Offer.
STATE LAW CLAIMS
The Units Rescission Offer may have no effect on rights, if any, of Bridge
Investors under applicable state securities laws; however, AFC and the Company
do not believe that any such rights, if asserted and determined adversely to AFC
or the Company, would have a material adverse effect on AFC or the Company.
PROCEDURES FOR ACCEPTING THE UNITS RESCISSION OFFER
For a Bridge Investor to ACCEPT the Units Rescission Offer, a properly
completed section entitled "Acceptance of Rescission Offer" on the Units
Rescission Form, in the form attached hereto, evidencing such election must be
received by AFC prior to the expiration of the Units Rescission Offer.
A Bridge Investor may REJECT the Units Rescission Offer by executing the
section entitled "Rejection of Rescission Offer" on the Units Rescission Form
enclosed with this Prospectus prior to the expiration of the Rescission Offer."
AFC AND THE COMPANY WILL REJECT THE UNITS RESCISSION OFFER ON BEHALF OF ANY
BRIDGE INVESTOR WHO FAILS TO RETURN A PROPERLY COMPLETED UNITS RESCISSION FORM
PRIOR TO THE EXPIRATION OF THE UNITS RESCISSION OFFER. The Units Rescission Form
may be delivered by hand, courier service, facsimile or mail to AFC to the
attention of Wayne Bertsch, American Medical Providers, Inc., 3555 Timmons Lane,
Suite 1550, Houston, Texas 77027 (facsimile: (713) 621-4148). The method of
delivery of all documents is at the election of the Bridge Investors. A Units
Rescission Form will not be deemed to be delivered timely to AFC if AFC does not
actually receive the Units Rescission Form prior to expiration of the Units
Rescission Offer, although AFC reserves the right in its sole discretion to
accept a Units Rescission Form subsequent to the expiration date upon showing of
proper cause.
ii
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. The securities offered hereby may not be
sold nor may offers to buy be accepted prior to the time the registration
statement becomes effective. This prospectus shall not constitute an offer to
sell or the solicitation of an offer to buy nor shall there be any sale of the
securities offered hereby in any state in which such offer, solicitation or sale
would be unlawful prior to registration or qualification under the securities
laws of any such state.
SUBJECT TO COMPLETION, DATED FEBRUARY 17, 1998
PROSPECTUS
AMERICAN MEDICAL PROVIDERS, INC.
------------------------
This Prospectus relates to an offer by American Medical Providers, Inc.
(the "Company") and Ankle & Foot Centers of America, LLC to rescind (the
"Practice Rescission Offer") a potential non-binding offer to sell Class A
common stock, par value $.001 per share, of the Company ("Common Stock"), made
on certain dates between November 5, 1997 and February 11, 1998 to the 13
holders of certain operating assets of, or the stock of entities holding certain
operating assets of, twelve podiatric practices (the "Practice Owners"), as
described below and none of these negotiations or letters of intent involved the
initial Affiliated Practices (as defined herein). The Company may have certain
contingent liabilities with respect to the Practice Rescission Offer as
described below. See "PRACTICE RESCISSION OFFER -- Effect of the Practice
Rescission Offer."
The sections of this Prospectus entitled: "Prospectus Summary -- The
Offering," "Dilution," "Use of Proceeds" and "Underwriting," as well as
portions of other sections of this Prospectus, relate to the Company's
underwritten public offering of Common Stock being made concurrently with the
Practice Rescission Offer evidenced hereby, and do not apply to the Practice
Rescission Offer. The Underwriters of the public offering are not parties to the
Practice Rescission Offer and none of the legal matters relating thereto will be
passed upon by McDermott, Will & Emery, counsel to the Underwriters.
PRACTICE RESCISSION OFFER
THE FOLLOWING INFORMATION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
ACCOMPANYING PROSPECTUS. THE PRACTICE OWNERS ARE URGED TO READ THE PROSPECTUS IN
ITS ENTIRETY IN ORDER TO MAKE AN INDEPENDENT EVALUATION WITH RESPECT TO THIS
PRACTICE RESCISSION OFFER.
The Company hereby extends an offer to rescind a potential non-binding
offer to sell (the "Practice Offer") Common Stock to 13 Practice Owners on
certain dates between November 5, 1997 and February 11, 1998. The Company has
determined that the Practice Offer may not have satisfied the requirements of
the Securities Act of 1933, as amended (the "Securities Act"), because no
prospectus was distributed to the Practice Owners as required by the Securities
Act. This Practice Rescission Offer applies only to the Practice Owners.
To ACCEPT the Practice Rescission Offer, a Practice Owner is required to
complete and sign the section entitled "Acceptance of Rescission Offer" on the
enclosed Practice Owners Rescission Form and return it to the Company.
To REJECT the Practice Rescission Offer, a Practice Owner is required to
complete and sign the section entitled "Rejection of Rescission Offer" on the
enclosed Practice Owners Rescission Form and return it to the Company. THE
COMPANY WILL REJECT THE PRACTICE RESCISSION OFFER ON BEHALF OF ANY PRACTICE
OWNER WHO FAILS TO RETURN A PROPERLY COMPLETED PRACTICE OWNER RESCISSION FORM
PRIOR TO THE EXPIRATION OF THE PRACTICE RESCISSION OFFER.
If a Practice Rescission Offer is ACCEPTED by a Practice Owner, the
Practice Owner's non-binding letter of intent will be cancelled and rendered
null and void. If the Practice Rescission Offer is REJECTED by a Practice Owner,
the Company will deliver a prospectus from its Registration Statement on Form
S-4 to such Practice Owner and reopen negotiations with such Practice Owners
after the consummation of the Practice Rescission Offer. In either case,
Practice Owners will continue to have such rights of redress as permitted under
the Securities Act and its statute of limitations and applicable state
securities laws. See " PRACTICE RESCISSION OFFER -- Effect of the Practice
Rescission Offer" on page ii for a description of the legal consequences of
accepting or rejecting the Practice Rescission Offer.
This Practice Rescission Offer will expire at the close of business on the
earlier of (i) 30 days from the date of this Prospectus or (ii) the Company's
receipt of a properly completed Practice Rescission Form from each Practice
Owner. Practice Owners are urged to read thoroughly this Practice Rescission
Offer and the accompanying Prospectus. Practice Owners may call Wayne A.
Bertsch, a Senior Vice President of the Company, at (713) 621-5500 if they have
any questions concerning the terms and conditions of the Practice Rescission
Offer.
NEITHER AFC, THE COMPANY NOR THEIR RESPECTIVE MANAGEMENT MAKES ANY
RECOMMENDATION TO THE PRACTICE OWNERS AS TO WHETHER TO ACCEPT THE PRACTICE
RESCISSION OFFER OR TO REJECT THE PRACTICE RESCISSION OFFER. PRACTICE OWNERS
MUST MAKE THEIR OWN DECISION AS TO WHETHER TO ACCEPT OR REJECT THE PRACTICE
RESCISSION OFFER.
THE DATE OF THIS PROSPECTUS IS FEBRUARY __, 1998
<PAGE>
THE PRACTICE RESCISSION FORM AND THE SECURITIES ACT
Between November 5, 1997 and February 11, 1998, the Company entered into
negotiations with and delivered non-binding letters of intent to the Practice
Owners by which each Practice Owner was to come to an agreement with the Company
to sell certain operating assets of, or the stock of entities holding certain
operating assets of such, Practice Owner's podiatric practices (the "Letters of
Intent"). The Company has subsequently determined that its negotiations with
and deliveries of Letters of Intent to the Practice Owners may constitute an
offer to sell Common Stock inconsistent with the prospectus delivery
requirements of the Securities Act. In order to limit its potential liability
under the Securities Act (which liability the Company believes would be the
expense of defending such claim since no Practice Owner sustained damages), the
Company is undertaking this Practice Rescission Offer with respect to any
potential offer made within or outside of the Letters of Intent.
EFFECTS OF THE PRACTICE RESCISSION OFFER
Practice Owners may ACCEPT the Practice Rescission Offer or REJECT the
Practice Rescission Offer. To the extent that a Practice Owner accepts the
Practice Rescission Offer, the Company takes the position that its potential
liability based upon any possible failure of the Company to comply with the
Securities Act by negotiating and delivering the Letters of Intent without a
prospectus will be eliminated. If a Practice Owner accepts the Practice
Rescission Offer, the previous Letters of Intent will be deemed cancelled. A
Practice Owner will receive no other consideration by accepting the Practice
Rescission Offer. To the extent that a Practice Owner rejects the Practice
Rescission Offer, he or she will retain whatever rights he or she presently has
under the Securities Act in connection with the earlier Letter of Intent.
It is the position of the Staff of the Securities and Exchange Commission
that any liability of the Company under the Securities Act for the Practice
Offer may survive and not be barred by the Practice Rescission Offer. However,
it is possible that a court would hold that the legal remedies available to the
Practice Owners are diminished as a result of the Practice Rescission Offer.
Although the legal principles applicable to a transaction such as the Practice
Rescission Offer are not clear, among possible bases for such a determination
are that any Practice Owners who accept the Practice Rescission Offer thereby
will have entered into an accord and satisfaction that moots any claim for
damages and that any such Practice Owners who reject the Practice Rescission
Offer may have waived or be estopped from asserting his or her rights by failing
to accept the Practice Rescission Offer.
STATE LAW CLAIMS
The Practice Rescission Offer may have no effect on rights, if any, of
Practice Owners under applicable state securities laws; however, the Company
does not believe that any such rights, if asserted and determined adversely to
the Company, would have a material adverse effect on the Company.
PROCEDURES FOR ACCEPTING THE PRACTICE RESCISSION OFFER
For a Practice Owner to ACCEPT the Practice Rescission Offer, a properly
completed section entitled "Acceptance of Rescission Offer" of the Practice
Rescission Form, in the form attached hereto, evidencing such election must be
received by the Company prior to the expiration of the Practice Rescission
Offer.
A Practice Owner may REJECT the Practice Rescission Offer by properly
completing the section entitled "Rejection of Practice Rescission Offer" of
the Practice Rescission Form enclosed with this Prospectus prior to the
expiration of the Practice Rescission Offer. THE COMPANY WILL REJECT THE
PRACTICE RESCISSION OFFER ON BEHALF OF ANY PRACTICE OWNER WHO FAILS TO RETURN A
PROPERLY COMPLETED PRACTICE RESCISSION FORM PRIOR TO THE EXPIRATION OF THE
RESCISSION OFFER. The Practice Rescission Form may be delivered by hand, courier
service, facsimile or mail to the Company to the attention of Wayne A. Bertsch,
a Senior Vice President of the Company, American Medical Providers, Inc., 3555
Timmons Lane, Suite 1550, Houston, Texas 77027 (facsimile: (713) 621-4148). The
method of delivery of all documents is at the election of the Practice Owners. A
Practice Rescission Form will not be deemed to be delivered timely to the
Company if the Company does not actually receive the Practice Owner Rescission
Form prior to expiration of the Practice Rescission Offer, although the Company
reserves the right in its sole discretion to accept a Practice Rescission Form
subsequent to the expiration date upon showing of proper cause.
ii
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. The securities offered hereby may not be
sold nor may offers to buy be accepted prior to the time the registration
statement becomes effective. This prospectus shall not constitute an offer to
sell or the solicitation of an offer to buy nor shall there be any sale of the
securities offered hereby in any state in which such offer, solicitation or sale
would be unlawful prior to registration or qualification under the securities
laws of any such state.
SUBJECT TO COMPLETION, DATED FEBRUARY 17, 1998
3,700,000 SHARES
[AMERICAN MEDICAL PROVIDERS, INC. -- LOGO]
CLASS A COMMON STOCK
------------------------
All of the shares of class A common stock, par value $.001 per share,
offered hereby are being sold by American Medical Providers, Inc. (the
"Company" or "AMP"). Prior to the offering made hereby (the "Offering"),
there has been no public market for the class A common stock. The Company has
authorized two classes of common stock: the class A common stock, par value
$.001 per share (the "Common Stock"), and the class B common stock, par value
$.001 per share (the "Class B Common Stock"). Each holder of Common Stock is
entitled to one vote per share, and each holder of Class B Common Stock is
entitled to two-thirds ( 2/3) of a vote per share on all matters submitted to a
vote of stockholders. The Company's Board of Directors consists of seven
directors. Holders of Common Stock are entitled to elect as a class six members
of the Board of Directors and, subject to certain limitations, the holders of
the Class B Common Stock are entitled to elect as a class the remaining member
of the Board of Directors. Except in the election of the Board of Directors and
as required by law, holders of the Common Stock and the Class B Common Stock
vote together as a single class. Each share of Common Stock and Class B Common
Stock will share ratably in any dividends, or other distributions, including
upon the liquidation, dissolution or winding up of the Company. See
"Description of Capital Stock." It is currently estimated that the initial
public offering price will be between $10.00 and $12.00 per share. See
"Underwriting" for a discussion of the factors to be considered in determining
the initial public offering price. The Company has applied to have the shares of
Common Stock approved for quotation on the Nasdaq Stock Market under the symbol
"AMPZ." As a contingency, pending the receipt of certain waivers to the Nasdaq
Stock Market listing requirements, the Company has also applied to have the
shares of Common Stock approved for quotation on the American Stock Exchange
under the symbol "AMPZ."
The Company has filed a shelf registration statement with the Securities
and Exchange Commission relating to the separate offering of up to 2,000,000
shares of Common Stock to be used in connection with future affiliations with
Affiliated Practices (as defined herein) and providers of ancillary services and
facilities and resales of the shares issued thereunder by the recipients of such
shares.
SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR A DISCUSSION OF CERTAIN
MATTERS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK
OFFERED HEREBY.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
- ----------------------------------------------------------------------------
Per Share....... $ $ $
- ----------------------------------------------------------------------------
Total(3)........ $ $ $
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
(1) The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting estimated expenses of $4,300,000 payable by the Company.
(3) The Company has granted the Underwriters a 45-day option to purchase up to
555,000 additional shares of Common Stock on the same terms and conditions
as set forth above solely to cover over-allotments, if any. If such option
is exercised in full, the total Price to Public, Underwriting Discount and
Proceeds to Company will be $ , $ , and $ ,
respectively. See "Underwriting."
------------------------
The Common Stock is offered by the several Underwriters, subject to prior
sale, when, as and if issued to and accepted by them and subject to certain
conditions. The Underwriters reserve the right to withdraw, cancel or modify
such offer or to reject any orders in whole or in part without notice. It is
expected that delivery of the shares of Common Stock will be made on or about
, 1998.
A.G. EDWARDS & SONS, INC. J.C. BRADFORD & CO.
The date of this Prospectus is , 1998
<PAGE>
46 AFFILIATED PRACTICES SERVING 57 CITIES WITH 89 OFFICES
[MAP OF LOCATIONS OF AFFILIATED PRACTICES' OFFICES]
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MADE HEREBY MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE
COMMON STOCK. SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH
THIS OFFERING AND MAY BID FOR AND PURCHASE SHARES OF COMMON STOCK IN THE OPEN
MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND THE FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE
IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, ALL INFORMATION IN THIS
PROSPECTUS (I) ASSUMES NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION,
(II) ASSUMES THE MID-POINT OF THE INITIAL PUBLIC OFFERING PRICE RANGE, (III)
ASSUMES NO EXERCISE OF ANY OUTSTANDING OPTIONS TO PURCHASE COMMON STOCK, (IV)
ASSUMES THAT THE TRANSFERS (THE "TRANSFERS") TO THE COMPANY OF THE OPERATING
ASSETS AND RECEIVABLES OR STOCK OF 46 SEPARATE PODIATRIC PRACTICES (THESE
INITIAL PRACTICES AND ANY ADDITIONAL PRACTICES TRANSFERRED ARE COLLECTIVELY
REFERRED TO AS THE "AFFILIATED PRACTICES") IN EXCHANGE FOR SHARES OF THE
COMPANY'S COMMON STOCK, CASH AND/OR THE ASSUMPTION OF CERTAIN INDEBTEDNESS HAS
OCCURRED, (V) ASSUMES THAT THE ANESTHECARE ACQUISITION (AS DEFINED BELOW) HAS
OCCURRED, AND (VI) GIVES EFFECT TO CONVERSION OF AMP'S EXISTING COMMON STOCK,
WITHOUT CLASS, INTO CLASS B COMMON STOCK (THE "SHARE CONVERSION") AND A STOCK
SPLIT OF THE OUTSTANDING SHARES OF CLASS B COMMON STOCK EFFECTED IN CONNECTION
WITH THE OFFERING (THE "STOCK SPLIT"). THIS PROSPECTUS CONTAINS SUMMARIES WITH
RESPECT TO SELECTED TERMS OF CERTAIN DOCUMENTS. PROSPECTIVE INVESTORS SHOULD
REFER TO THE ACTUAL DOCUMENTS SUMMARIZED THAT ARE EXHIBITS TO THE COMPANY'S
REGISTRATION STATEMENT FOR COMPLETE INFORMATION CONCERNING THE DOCUMENTS. ALL
SUMMARIES HEREIN ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO THE COMPLETE
DOCUMENTS.
THE COMPANY
AMP was founded in August 1996 to provide practice management services and
comprehensive foot care delivery systems to podiatric practices throughout the
United States. AMP will generate revenue by providing to the Affiliated
Practices professional management, marketing expertise, equipment and facilities
often unavailable to podiatrists with small practices. The initial 46 Affiliated
Practices consist of 66 doctors of podiatric medicine ("DPMs") operating 89
offices located in 7 states serving 57 cities. The Company intends to grow
rapidly by affiliating with additional podiatric practices and by making
available to the Affiliated Practices services that are ancillary and directly
related to the Affiliated Practices' existing podiatric care.
The Company has entered into definitive agreements to transfer cash and
Common Stock and assume certain liabilities in exchange for stock or certain
operating assets and receivables of the Affiliated Practices simultaneous with
and as a condition to the closing of the Offering. The DPMs will join regional
group practices organized by geographic location (the "Regional Group
Practices") and will enter into physician engagement agreements with the
Regional Group Practices. AMP will enter into a long-term management agreement
with each Regional Group Practice under which AMP will receive fees for its
services. The Company will own the operating assets and receivables of the
Affiliated Practices, hire the non-physician employees, and otherwise assume the
management of each practice. The initial Affiliated Practices were selected
based upon their location, size, historical profitability and growth and
reputation for high quality care. Based on management's knowledge of the U.S.
podiatric industry gained from conversations with DPMs, surveys of the size of
other podiatric practice management companies, affiliations and groups, and
general industry research, management believes that the initial Affiliated
Practices are leading podiatric practices in their respective markets and that,
following the Transactions (as defined herein), AMP will be the largest provider
of comprehensive podiatric practice management services in the United States.
A key element of the Company's strategy is to provide ancillary services
and facilities to the Affiliated Practices. These ancillary services and
facilities are expected to include, among other things, ambulatory surgical
centers, anesthesiology, pathology, radiology, MRIs, EKGs, laboratory work,
pharmacy, physical history and exams, physical therapy, orthotics, pain
management, home care, diabetic wound care, specialty shoes and other retail
products. The Company intends to make available some or all of these ancillary
services on a regional basis. The Affiliated Practices in each region will
primarily or exclusively use AMP's ancillary services, enabling the Company to
control the cost, quality and other important aspects of these services.
Pursuant to this strategy, AMP has entered into a definitive agreement to
purchase certain assets (including the name "AnestheCare, Inc.") of Pyramid
Anesthesiology Group, Inc. (the "AnestheCare
3
<PAGE>
Acquisition"), an anesthesiology management services organization currently
servicing 15 locations in metropolitan Atlanta, Georgia ("AnestheCare").
AnestheCare's current operations and ongoing business relationships will
continue after the AnestheCare Acquisition. In addition, after the acquisition,
AnestheCare will provide anesthesiology management services to certain of the
Regional Group Practices. The Company is also acquiring Bellaire Surgicare, Inc.
and Clayton Outpatient Surgical Center, Inc. (the "Ambulatory Surgery Center
Acquisitions"), which own surgical centers.
Podiatry is the practice of medicine whereby DPMs provide preventative,
diagnostic, surgical and other foot care to patients. Podiatric care ranges from
relatively simple procedures, such as treating foot infections, to complex
surgeries, such as reconstructing the bones in the foot. Today, there are
approximately 10,700 active DPMs throughout the United States handling 55
million patient visits per year. According to the American Podiatric Medical
Association, billing receipts of all DPMs in the United States increased to
approximately $2.3 billion in 1995 from approximately $1.3 billion in 1987, a
compound annual growth rate of 7.7%.
AMP's objective is to be the nation's leading provider of management
services and comprehensive foot care delivery systems to podiatric practices. To
achieve its objective, AMP will employ the following operating strategies: (i)
enhance quality of DPM patient care, (ii) achieve operational efficiencies,
(iii) develop Regional Group Practice structure, (iv) provide effective
marketing, and (v) implement comprehensive foot care delivery systems. AMP
intends to grow rapidly by: (i) growing Affiliated Practices, (ii) developing
ancillary provider networks, and (iii) affiliating with new practices.
THE TRANSACTIONS
Of the 46 Transfers of the initial Affiliated Practices, 45 will be
accounted for by the Company under SEC Staff Accounting Bulletin No. 48,
"Transfers of Non-Monetary Assets by Promoters or Shareholders" ("SAB 48"),
such that the non-monetary assets of these initial Affiliated Practices will be
received by the Company at the transferor's historical cost basis for accounting
purposes. Following the SAB 48 transactions and the consummation of the
offering, AMP will consummate the AnestheCare Acquisition and AMP or a
subsidiary will acquire the stock of Dr. Jerald N. Kramer, D.P.M., P.C., one of
its Affiliated Practices (the "Kramer Transfer", and together with the other
Transfers and the AnestheCare Acquisition, the "Transactions"). Dr. Kramer
will receive cash in exchange for stock acquired by the Company in the Kramer
Transfer, but Dr. Kramer will not enter into a management services agreement or
a physician engagement agreement with a Regional Group Practice. The Ambulatory
Surgery Center Acquisitions included in the Transfers, the AnestheCare
Acquisition and the Kramer Transfer will not be accounted for under SAB 48.
Instead, these and all future individual practice affiliations will be accounted
for as purchases at fair market value and are expected to result in purchase
prices in excess of net assets acquired (goodwill) which will require subsequent
noncash amortization charges for intangible assets in the Company's statements
of operations.
The aggregate consideration to be paid by the Company in the Transfers is
approximately $34.5 million, consisting of (i) approximately $18.3 million
payable in shares of Common Stock at the initial public offering price
attributed to the net non-monetary assets, (ii) approximately $4.7 million in
cash and approximately $156,000 of assumed indebtedness attributed to the net
non-monetary assets of the SAB 48 Transfers, (iii) $4.3 million in cash
attributed to the net monetary assets of the SAB 48 Transfers, (iv)
approximately $4.1 million payable in shares of Common Stock at the initial
public offering price, approximately $1.0 million in cash, approximately
$500,000 of assumed indebtedness attributed to the Ambulatory Surgery Center
Acquisitions which are included in the Transfers but not accounted for under SAB
48, and (v) approximately $1.4 million in cash attributed to the Kramer
Transfer. The consideration to be paid by the Company to AnestheCare is
approximately $4.5 million in cash. Additional consideration of up to $1.5
million in cash and a number of shares of Common Stock equal to $500,000 valued
at the initial public offering price will be held in escrow and may be paid to
the owners of AnestheCare pending AnestheCare's achievement of certain
performance targets over a three-year period
4
<PAGE>
beginning January 1, 1998. Proceeds from the Offering will be used to pay the
cash portion of the consideration.
SHELF REGISTRATION
The Company may use shares subject to its shelf registration statement to
be filed with the Securities and Exchange Commission (the "Commission")
relating to the separate offering of up to 2,000,000 shares of Common Stock (the
"Shelf Registration") to acquire certain operating assets of, or the stock of
entities holding certain operating assets of, additional podiatric practices,
and to enter into management services agreements with these entities.
The Company's principal executive offices are located at 3555 Timmons Lane,
Suite 1550, Houston, Texas 77027, and its telephone number is (713) 621-5500.
5
<PAGE>
THE OFFERING
<TABLE>
<CAPTION>
<S> <C>
Common Stock offered by the Company..... 3,700,000 shares
Common Stock to be outstanding after the
Offering.............................. 5,778,322 shares(1)
Class B Common Stock to be outstanding
after the Offering.................... 650,000 shares(2)
Voting rights........................... Holders of Common Stock of the Company are entitled to one vote per share
and the holders of Class B Common Stock of the Company are entitled to
two-thirds ( 2/3) of a vote per share. The Company's Board of Directors
consists of seven directors. Holders of Common Stock are entitled to elect
as a class six members of the Board of Directors and the holders of the
Class B Common Stock are entitled to elect as a class the remaining member
of the Board of Directors; provided however, that if 65% or more of the
Class B Common Stock outstanding on the date of this Prospectus has been
converted into Common Stock, the Class B Common Stock shall no longer have
the ability to elect a director as a class. The Common Stock and Class B
Common Stock possess ordinary voting rights and vote together as a single
class in respect of all other corporate matters. See "Description of
Capital Stock."
Conversion of the Class B Common
Stock................................. CONVERSION RATIO. The Class B Common Stock is convertible into Common
Stock, at the option of the holder thereof, upon the occurrence of a
Conversion Event (as defined below). The maximum number of shares of Common
Stock that may be issued upon conversion of the Class B Common Stock is
1,950,000. The Class B Common Stock converts into Class A Common Stock on a
share-for-share basis, provided however, that if the Common Stock reaches
certain average closing prices over 15 consecutive trading days during the
next six years on the Nasdaq National Market, other over-the-counter market
or an exchange, as then applicable (the "Trading Market"), then, as set
forth below, the conversion ratio with respect to a certain number of
shares of Class B Common Stock will immediately change so that such shares
will thereafter be convertible into Common Stock at the ratio of three
shares of Common Stock for each share of Class B Common Stock (each such
share an "Adjusted Conversion Share").
CONVERSION ADJUSTMENT. On the date that the average closing price on the
Trading Market for the preceding 15 consecutive trading days (the "Average
Price") exceeds 150% of the price to the public in the Offering, 130,000
of the issued shares of Class B Common Stock will immediately become
Adjusted Conversion Shares (and subject to the new 3-for-1 conversion
ratio). Thereafter, the remaining 520,000 shares of Class B Common Stock
will become Adjusted Conversion Shares in four remaining increments of
130,000 shares of Class B
6
<PAGE>
Common Stock each (20% of the total number of shares of Class B Common
Stock issued) upon the attainment of new Average Prices. The Average Prices
applicable to each new 20% increment will equal 120% of each immediately
preceding Average Price applicable to the preceding 20% increment.
Therefore, the five Average Prices at which each of the five total
increments shall automatically become Adjusted Conversion Shares are
$16.50, $19.80, $23.76, $28.51 and $34.21, respectively, based upon the
initial assumed offering price of $11.00 per share. Upon a Conversion
Event, each holder of Class B Common Stock will have the right to have each
share of Class B Common Stock converted into that number of shares of
Common Stock as each such share is entitled to based upon the Average
Prices achieved, if any. Any additional Average Price attained after the
occurrence of a Conversion Event will continue to act to create Adjusted
Conversion Shares, as applicable. If any shares of Class B Common Stock are
outstanding on the sixth anniversary of this Prospectus, such shares will
automatically convert into a number of shares of Common Stock based upon
the conversion ratio then applicable for such shares. Shares of Class B
Common Stock held by a holder shall automatically convert into Common Stock
immediately prior to the disposition of such shares of Class B Common Stock
by such holder.
CONVERSION EVENTS. A Conversion Event shall be deemed to have occurred (i)
in the event of a disposition of such share of Class B Common Stock by the
holder thereof (excluding dispositions to such holder's affiliates), (ii)
in the event any person not affiliated with the Company acquires beneficial
ownership of 15% or more of the outstanding shares of capital stock of the
Company, (iii) in the event any person not affiliated with the Company
offers to acquire 15% or more of the outstanding shares of capital stock of
the Company, (iv) in the event the holder of such shares elects to so
convert at any time after the second anniversary of the date of this
Prospectus, (v) on the sixth anniversary of the date of this Prospectus, or
(vi) in the event the holders of a majority of the outstanding shares of
Common Stock approve such conversion. In addition, the Company may elect to
convert any outstanding shares of Class B Common Stock into shares of
Common Stock in the event 95% or more of the outstanding shares of Class B
Common Stock as of the date of this Prospectus have previously been
converted into shares of Common Stock.
Use of proceeds......................... To fund the cash portion of the consideration to be paid in the
Transactions; to repay certain indebtedness and deferred expenses of the
Company; to complete the purchase of the Company's management information
system; and for general corporate purposes, which are expected to include
(among other things) future transfers of DPM practices and certain
development costs of ancillary services. See "Use of Proceeds."
</TABLE>
Proposed Nasdaq National Market
symbol(3)............................. "AMPZ"
7
<PAGE>
- ------------
(1) Includes 2,078,332 shares of Common Stock issued in connection with the
Transactions, but excludes 464,500 shares of Common Stock issuable upon
exercise of outstanding options issued pursuant to the Company's 1997
Incentive and Non-Qualified Stock Option Plan to purchase Common Stock at
the initial public offering price and 555,000 shares of Common Stock
issuable upon exercise of the Underwriters' over-allotment option. The
actual number of shares issued in connection with the Transactions will be
determined by dividing $22,861,652 by the initial public offering price. In
the event the price to the public is higher than the mid-point of the
estimated initial public offering price range, the aggregate number of
shares will be reduced accordingly, and in the event the price to the public
is lower, the aggregate number of shares will be increased accordingly. See
"Management_-- Incentive and Non-Qualified Stock Option Plan" and
"Certain Transactions -- Affiliated Practices."
(2) The Class B Common Stock may be convertible into an aggregate of 1,950,000
shares of Common Stock. See "The Offering -- Conversion of Class B Common
Stock".
(3) As a contingency, pending the receipt of certain waivers to the Nasdaq
Stock Market listing requirements, the Company has also applied to have the
shares of Common Stock approved for quotation on the American Stock
Exchange under the symbol "AMPZ".
FORWARD-LOOKING STATEMENTS
CERTAIN STATEMENTS CONTAINED IN THIS PROSPECTUS, INCLUDING STATEMENTS
CONTAINING THE WORDS "BELIEVES," "ANTICIPATES," "INTENDS," "EXPECTS" AND
WORDS OF SIMILAR IMPORT, CONSTITUTE "FORWARD-LOOKING STATEMENTS." THESE
FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND
OTHER FACTORS THAT MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF
THE COMPANY OR ITS INDUSTRY TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS,
PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY THESE FORWARD-LOOKING
STATEMENTS.
THESE RISK FACTORS INCLUDE, AMONG OTHERS, THE LIMITED COMPANY AND COMBINED
OPERATING HISTORY, DEPENDENCE ON CERTAIN OPERATIVE AGREEMENTS, DEPENDENCE ON
REGIONAL GROUP PRACTICES, DEPENDENCE ON IMPLEMENTATION AND INTEGRATION OF
INFORMATION SYSTEMS, DEPENDENCE UPON KEY PERSONNEL, DEPENDENCE ON IMPLEMENTATION
OF GROWTH STRATEGY, MOVEMENT TOWARD MANAGED CARE, CHANGES IN PAYMENT FOR MEDICAL
SERVICES, POTENTIAL ADVERSE CONSEQUENCES OF GOVERNMENT REGULATION, FUTURE HEALTH
CARE REFORM, COMPETITION, NEED FOR ADDITIONAL FUNDS, LIABILITY AND INSURANCE
RISKS ASSOCIATED WITH PODIATRIC PRACTICES, NO PRIOR PUBLIC MARKET FOR THE COMMON
STOCK, THE NUMBER OF SHARES ELIGIBLE FOR FUTURE SALE, SUBSTANTIAL PROCEEDS OF
THE OFFERING PAYABLE TO AFFILIATED PRACTICES AND AFFILIATES, CONTROL BY EXISTING
MANAGEMENT AND STOCKHOLDERS, CERTAIN ANTI-TAKEOVER PROVISIONS IN THE COMPANY'S
ARTICLES AND BYLAWS, IMMEDIATE AND SUBSTANTIAL DILUTION TO INVESTORS IN THE
COMMON STOCK, NO INTENT TO PAY DIVIDENDS, AND OTHER FACTORS REFERENCED IN THIS
PROSPECTUS. CERTAIN OF THESE FACTORS ARE DISCUSSED IN MORE DETAIL ELSEWHERE IN
THIS PROSPECTUS, INCLUDING UNDER THE CAPTIONS "PROSPECTUS SUMMARY" AND "RISK
FACTORS." GIVEN THESE UNCERTAINTIES, POTENTIAL INVESTORS ARE CAUTIONED NOT TO
PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS. THE COMPANY DISCLAIMS
ANY OBLIGATION TO UPDATE ANY OF THESE FACTORS OR TO PUBLICLY ANNOUNCE THE RESULT
OF ANY REVISIONS TO ANY OF THE FORWARD-LOOKING STATEMENTS CONTAINED HEREIN TO
REFLECT FUTURE EVENTS OR DEVELOPMENTS.
8
<PAGE>
SUMMARY FINANCIAL DATA
THE FOLLOWING INFORMATION IS DERIVED FROM THE FINANCIAL STATEMENTS OF THE
COMPANY INCLUDED ELSEWHERE IN THIS PROSPECTUS. EXCEPT AS INDICATED, THIS
INFORMATION DOES NOT REFLECT THE EFFECTS OF THE TRANSACTIONS OR THE OFFERING.
FOR CERTAIN INFORMATION CONCERNING THE TRANSACTIONS, SEE NOTE 4 OF NOTES TO
FINANCIAL STATEMENTS OF THE COMPANY AND UNAUDITED PRO FORMA COMBINED BALANCE
SHEET AND THE NOTES THERETO.
PERIOD FROM
INCEPTION (AUGUST FOR THE NINE
9, 1996) TO MONTHS ENDED
DECEMBER 31, 1996 SEPTEMBER 30, 1997
----------------- -------------------
(UNAUDITED)
STATEMENT OF OPERATIONS DATA(1):
Revenues............................. $ -- $ --
Expenses............................. 1,436,441 1,688,388
----------------- -------------------
Net loss............................. $(1,436,441) $(1,688,388)
================= ===================
SEPTEMBER 30, 1997
------------------------------
HISTORICAL AS ADJUSTED(2)
-------------- --------------
(UNAUDITED)
BALANCE SHEET DATA:
Cash and cash equivalents............... $ -- $ 14,054,000
Working capital (deficit)(3)............ (2,120,333) 17,037,000
Total assets(4)......................... 2,026,316 30,870,000
Long-term debt.......................... -- 656,000
Stockholders' equity (deficit).......... (1,911,119) 29,248,000
- ------------
(1) The Company has conducted no significant on-going, non-developmental
business operations to date and will not conduct significant business
operations until the affiliation of the Company with the initial Affiliated
Practices and the Offering are completed. Pursuant to a reimbursement and
assumption agreement (the "Reimbursement and Assumption Agreement") dated
January 20, 1998 between the Company and AFC, the Company will reimburse the
affiliation-related expenses incurred by AFC since May 1996, including AFC's
payroll, travel and entertainment, office equipment and professional fees.
AFC currently holds 365,625 shares of Class B Common Stock which management
plans to distribute to AFC members upon consummation of the Offering.
(2) As adjusted gives effect to the Transactions, the sale of 3,700,000 shares
of Common Stock offered by the Company, and the application of the estimated
net proceeds therefrom. See "Use of Proceeds."
(3) The historical balance includes $2.4 million due to AFC as of September 30,
1997, which will be repaid upon consummation of the Offering.
(4) The Company will record the non-monetary assets transferred to the Company
in connection with the Transfers, excluding the Ambulatory Surgery Center
Acquisitions and the Kramer Transfer, at the historical cost basis of the
transferors. Monetary assets transferred as well as the AnestheCare
Acquisition, the Kramer Transfer and the Ambulatory Surgery Center
Acquisitions will be accounted for in a method similar to purchase
accounting.
9
<PAGE>
RISK FACTORS
AN INVESTMENT IN THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVES A HIGH
DEGREE OF RISK. A PROSPECTIVE INVESTOR SHOULD CAREFULLY CONSIDER ALL OF THE
INFORMATION CONTAINED IN THIS PROSPECTUS BEFORE DECIDING WHETHER TO PURCHASE THE
COMMON STOCK OFFERED HEREBY AND, IN PARTICULAR, THE FOLLOWING FACTORS:
LIMITED COMPANY AND COMBINED OPERATING HISTORY. The Company was
incorporated in August 1996 and has no history of operations or earnings.
Certain members of the Company's management group have been assembled recently.
As a result of the Transfers, certain members of AMP expect to be responsible
for the management of all non-medical aspects of the operations and all
non-physician employees of the initial Affiliated Practices. There can be no
assurance that such persons will be able to effectively manage the initial
Affiliated Practices or oversee the implementation of the Company's operating,
growth and business strategies. Further, there can be no assurance that
management will be able to operate the Company successfully, manage the initial
Affiliated Practices' operations, achieve any cost savings as a result of the
Transactions or institute the necessary systems and procedures to manage the
Company on a profitable basis. The inability of the Company to successfully
integrate or operate the Affiliated Practices could have a material adverse
effect on the Company's business, financial condition and results of operations
and make it unlikely that the Company's affiliations with the Affiliated
Practices will be successful.
Prior to the Offering, the initial Affiliated Practices were not under
common control or management and have operated as separate, independent
entities. As a result, the financial results of the respective initial
Affiliated Practices prior to the Offering will not necessarily be similar to
the results of the initial Affiliated Practices after the Offering. The Company
may experience delays, complications and expenses in implementing, integrating
and operating such initial Affiliated Practices, any of which could have a
material adverse effect on the Company's business, financial condition and
results of operations.
DEPENDENCE ON OPERATIVE AGREEMENTS. To effect AMP's affiliation with the
Affiliated Practices, the following agreements have been entered into or will be
entered into (collectively, the "Operative Agreements"): (i) Business Purchase
Agreements and/or Stock Purchase Agreements by and between the Affiliated
Practices and the Company; (ii) Management Agreements by and between the
Regional Group Practices and the Company; (iii) Physician Engagement Agreements
by and between the Regional Group Practices and each owner of an Affiliated
Practice; and (iv) employment agreements between the Regional Group Practices
and each non-owner DPM. The consummation of the affiliations with the Affiliated
Practices and the subsequent viability of the Company are dependent on the
initial and continuing enforceability of the Operative Agreements. While the
Company has attempted to structure the Operative Agreements in accordance with
applicable law, there can be no assurance that the enforceability of certain
non-compete and other provisions contained in the Operative Agreements will not
be successfully challenged. Further, because each of the Physician Engagement
Agreements is between a Regional Group Practice and an owner of the Affiliated
Practices, there can be no assurance that the parties thereto will not terminate
or amend the terms and conditions of such agreements. See "Business -- Purchase
Agreements," " -- Management Agreements" and " -- Physician Engagement
Agreements."
DEPENDENCE ON REGIONAL GROUP PRACTICES. The Company's operations will be
entirely dependent upon its continued ability to negotiate and enter into
management services agreements (the "Management Agreements") with Regional
Group Practices and upon the success of such practices. The Company expects to
receive management fees for services provided to Regional Group Practices under
the Management Agreements, but will not employ podiatrists or control or own the
medical practice of Regional Group Practices. The Management Agreements have
40-year terms but are subject to prior termination by the Regional Group
Practice or the Company for, among other things, a default in the performance of
a material duty or obligation. There can be no assurance that the initial
Regional Group Practices will maintain successful practices, that Management
Agreements will not be terminated or that any of the key DPMs in a particular
Regional Group Practice will continue affiliation with any Regional Group
Practice. In addition, if the service fee varies by more than 5% over or under
the adjusted service fee, then the service fee may be adjusted quarterly upon
the mutual agreement of the Regional Group Practice and the Company, on a
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prospective basis only, (without a floor or ceiling on the adjustment) to
reflect the fair value of the management services provided. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Overview." Any termination of such Management Agreements or
affiliation, the inability of the Regional Group Practices to generate
sufficient patient revenue, or the downward adjustment of management fees to
reflect the fair value of services provided by the Company could have a material
adverse effect on the Company's business, financial condition and results of
operations.
Some of the initial Regional Group Practices will derive, and any
additional Regional Group Practices may derive, a significant portion of their
revenue from a limited number of DPMs. Particularly, because none of the DPMs in
the initial Regional Group Practices will have previously entered into
management arrangements similar to those embodied in the Company's Management
Agreements, there can be no assurance that the Company or the Regional Group
Practices will maintain cooperative relationships with these key DPMs. In
addition, there can be no assurance that key members of a Regional Group
Practice will not retire, become disabled or otherwise become unable or
unwilling to continue practicing their profession with a Regional Group
Practice. The loss by a Regional Group Practice of one or more key members would
have a material adverse effect on the revenue of such Regional Group Practice
and, thus, on the Company. The material loss of revenue by any Regional Group
Practice could have a material adverse effect on AMP.
Rates paid by private third party payors, including those that provide
Medicare supplemental insurance, are based on established health care provider
and hospital charges and are generally higher than Medicare payment rates. A
change in the patient mix of any Regional Group Practice that results in a
decrease in patients covered by private insurance could have a material adverse
effect on the Regional Group Practice and, as a result, on the Company.
DEPENDENCE ON IMPLEMENTATION AND INTEGRATION OF INFORMATION SYSTEMS. A key
element in the Company's business strategy is implementing new sophisticated
management information systems. The Company expects to have these systems
operating at the time of the Offering to perform billing and collection services
for all Affiliated Practices and to complete hardware and software deployment of
the systems to most Affiliated Practices within approximately 90 days after the
Offering. The Company's success is dependent upon its ability, within a
reasonable period of time, to implement its new management information systems
and to integrate these systems into the initial Regional Group Practices' and
the Affiliated Practices' existing operational, financial and clinical
information systems. In addition to their integral role in helping the Regional
Group Practices realize operating efficiencies, these systems are critical to
negotiating, pricing and managing managed care contracts. The Company will need
to continue to invest in and administer sophisticated management information
systems to support these activities. AMP may experience unanticipated delays,
complications and expenses in implementing, integrating and operating these
systems. Furthermore, these systems may require modifications, improvements or
replacements as the Company expands or if new technologies become available.
These modifications, improvements or replacements may require substantial
expenditures and may require interruptions in operations during periods of
implementation. The Company's failure to successfully implement and maintain
operational, financial and clinical information systems on a timely basis would
have a material adverse effect on the Company's business, financial condition
and results of operations.
DEPENDENCE UPON KEY PERSONNEL. The Company is highly dependent upon its
three executive officers, Jack McCrary, Wayne Bertsch, and Randy Johnson, and
other key personnel, for the management of the Company, the Affiliated Practices
and the implementation of its business strategy. The Company has entered into
employment contracts and non-compete agreements with these executive officers
and others. Due to the likely difficulty in finding suitable replacements for
these individuals, the loss of the services of any of these persons or the
Company's inability in the future to attract and retain management or other key
personnel could have a material adverse effect on the Company. AMP does not have
key man insurance for any of its executive officers or other key personnel.
DEPENDENCE ON IMPLEMENTATION OF GROWTH STRATEGY. One of the Company's
principal strategies is to acquire the operating assets and receivables or stock
of certain Affiliated Practices in targeted markets which meet its affiliation
criteria and to enter into management services contracts with the Regional Group
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Practices. The Company's growth strategy also involves expanding the Affiliated
Practices and, to the extent permitted by applicable law, contracting with or
acquiring ancillary facilities and providers, to provide services such as
ambulatory surgical centers, anesthesiology, pathology, radiology, MRIs, EKGs,
laboratory work, pharmacy, physical history and exams, physical therapy,
orthotics, pain management, home care, diabetic wound care, specialty shoes and
other related retail products. The process of (i) identifying appropriate DPM
group practices, DPMs and ancillary providers and facilities and (ii) proposing,
negotiating and implementing economically attractive affiliations with them is
lengthy, complex and costly. The failure of the Company to identify and effect
additional practice affiliations would have a material adverse effect on the
Company. Moreover, there can be no assurance that future practice affiliations,
if any, will contribute to the Company's profitability. Further, such
arrangements involve a number of risks, including diversion of management's
attention, dependence on hiring, training and retaining key personnel, and risks
associated with the assumption of certain contingent legal liabilities, some or
all of which could have a material adverse effect on the Company's business,
financial condition and results of operations. In addition, there can be no
assurance that the Affiliated Practices will achieve anticipated revenues and
earnings or that suitable additional practice affiliations can be accomplished
on terms favorable to the Company or that financing, if necessary, can be
obtained for such affiliations.
The Company's ability to implement its growth strategy is also dependent
upon the Company's and the Regional Group Practices' ability to (i) adapt the
Company's arrangements with the Regional Group Practices to comply with current
and future legal requirements, including state prohibitions on (a) fee-
splitting, (b) corporate practice of medicine, (c) referrals to facilities in
which physicians have a financial interest, and (d) kickbacks, (ii) obtain
regulatory approvals and certificates of need, where necessary, and (iii) comply
with licensing requirements applicable to physicians and to facilities operated,
and services offered, by physicians. There can be no assurance that application
of current laws or changes in legal requirements will not adversely affect the
Company or that the Company or its Regional Group Practices will be able to
obtain and maintain all necessary regulatory approvals and comply with
applicable laws, regulations and licensing requirements.
AMP is highly dependent upon the revenue stream, in the form of management
fees, that it expects to receive under the Management Agreements. In addition,
AMP will pay the liabilities of certain Affiliated Practices in connection with
the Transfers. Failure by the Regional Group Practices to generate sufficient
management fees to permit AMP to pay such liabilities could have a material
adverse effect on AMP's business, financial condition and results of operations.
In addition, failure by the Regional Group Practices to calculate or pay the
management fees required, whether by mistake, fraud or otherwise, would have a
material adverse effect on AMP.
In addition, AMP expects to make loans to the Regional Group Practices to
enable them to make loans to certain DPM owners in Affiliated Practices after
the date of this Offering in order to assist them in temporarily replacing any
earnings reductions incurred as a result of the Transfers. Such loans will not
affect the calculation and payment of the management fee and all rights and
claims by the Company with respect to its management fees and loans made by the
Company to the Regional Group Practices and/or owner DPMs on behalf of the
Regional Group Practices are secured by a perfected first lien security interest
in the accounts receivable of the Regional Group Practices. The loans to each of
the owner DPMs will be limited to an amount equal to (i) an advance on the first
monthly draw of such DPM, (ii) the difference between 90% of the average monthly
compensation of such DPM in the year prior to the Offering and the current
period's levels of distributions from the practice for the first three months
after the Offering, and (iii) the difference between 80% of the average monthly
compensation of such DPM in the year prior to the Offering and the current
period's level of distributions for the second three months after the Offering.
The loans will only be available to owner DPMs for the first six months of the
DPM's engagement by the Regional Group Practice. Funds advanced by the Company
to the Regional Group Practices to make such loans are required to be repaid to
the Company by the Regional Group Practice although there can be no assurance
such owner DPMs will repay any such loans or that the Regional Group Practices
will be able to repay funds advanced by the Company. See Unaudited Pro Forma
Combined Balance Sheet and the Notes
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thereto, "Certain Transactions," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Management."
MOVEMENT TOWARD MANAGED CARE. An increasing percentage of patients have
entered into health care coverage arrangements with managed care payors in
recent years. AMP believes that its success will be dependent upon its ability
to negotiate contracts on behalf of the Regional Group Practices with HMOs,
employer groups and other private third party payors. Many such managed care or
other third party payors already have existing provider structures in place and
may not be able or willing to change their provider networks. Managed care and
third party payors have established primary care providers who often have
considerable discretion over who delivers various medical services, including
the provision of podiatric services. Many such third party payors do not
recognize DPMs as primary care providers. Therefore, many non-DPM physicians,
acting as primary care providers, may elect to (i) perform podiatric services
themselves, (ii) contract with other podiatrists or podiatric practices which
are not Affiliated Practices, or (iii) contract with other providers, such as
orthopedists. The inability of AMP to establish or maintain arrangements on
behalf of the Regional Group Practices with third party providers could have a
material adverse effect on the Company.
CHANGES IN PAYMENT FOR MEDICAL SERVICES. The Company anticipates that the
Regional Group Practices will be licensed under applicable state law and
certified as providers under the federal Medicare program and state Medicaid
programs. These programs are highly regulated and subject to frequent and
substantial changes. In recent years, basic changes in Medicare reimbursement
programs have resulted, and are expected to continue to result, in reduced
levels of reimbursement for individuals covered by these programs. Changes in
Medicare and Medicaid reimbursement rates, policies or practices could adversely
affect the Company.
In certain instances, AMP may seek to negotiate special fee arrangements
with respect to third party payors on behalf of regional podiatric care networks
consisting of Regional Group Practices affiliated with the Company and other
physicians or group practices willing to permit the Company to negotiate on
their behalf. In these instances, the Company expects that future payor
contracts entered into on behalf of the Regional Group Practices and any related
physician networks may include capitated fee arrangements. Under these types of
contracts, a health care provider agrees either to accept a predetermined dollar
amount per member per month in exchange for undertaking to provide all covered
services to patients or to provide treatment on an episode-of-care basis. These
health care providers bear the risk, generally subject to certain loss limits,
that the aggregate costs of providing medical services will exceed the premiums
received. In these instances, agreements may also contain "shared risk"
provisions under which affiliated physicians may earn additional compensation
based on utilization control of institutional, ancillary and other services by
patients, and the Regional Group Practices may be required to bear a portion of
any loss in connection with these "shared risk" provisions. To the extent that
patients or enrollees covered by these contracts require more frequent or more
extensive care than anticipated, there could be a material adverse effect on a
Regional Group Practice and, therefore, on the Company. Any material reduction
or elimination of earnings to the Regional Group Practices could have a material
adverse effect on the Company.
If, as a result of special fee arrangements that the Company may negotiate
on behalf of the Regional Group Practices or may enter into in the future with
third-party payors, the Company is deemed to assume certain risks related to the
cost of services provided in connection with capitated fee arrangements,
episode-of-care treatment, shared risk agreements or the like, the Company could
be viewed by federal or state regulatory authorities to be engaged in the
business of insurance. If so, the Company might be required to obtain a license
to act as an insurer in certain states and to restructure some or all of its
operations to comply with the insurance laws of certain states.
POTENTIAL ADVERSE CONSEQUENCES OF GOVERNMENT REGULATION. The delivery of
podiatric care services and health care generally are subject to extensive
federal and state regulation. The Company believes that its operations are and
will be conducted in material compliance with applicable laws. However, the
Company has not received or applied for an opinion from any federal or state
judicial or regulatory authority to this effect, and many aspects of the
Company's business operations to date have not
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been the subject of state or federal regulatory interpretation. There can be no
assurance that a review of AMP's operations by federal or state judicial or
regulatory authorities will not result in a determination that AMP or one or
more of its Regional Group Practices have violated one or more provisions of
federal or state law. Any such determination could have a material adverse
effect on the Company.
The fraud and abuse provisions of the Social Security Act and anti-kickback
laws and regulations adopted by many states prohibit the solicitation, payment,
receipt or offering of any direct or indirect remuneration in return for, or as
an inducement to, certain referrals of patients, items or services. Provisions
of the Social Security Act impose significant penalties for false or improper
billings for services reimbursable by Medicare, Medicaid or other
federally-funded programs. In addition, the Stark amendments to the Social
Security Act impose specific restrictions on physicians' referrals for
designated health services reimbursable by Medicare, Medicaid or other
federally-funded programs to entities with which the physicians have financial
relationships. The federal government has also recently extended its statutory
prohibitions to include the relationship between health care providers and any
health care benefit programs, including non-governmental health care programs
(such as HMOs, PPOs or standard indemnity insurance).
Violations of any of these laws may result in substantial civil or criminal
penalties, including large civil monetary penalties and, in the case of
violations of certain federal laws, exclusion from participation in the
Medicare, Medicaid or other federally-funded programs. Such exclusion and
penalties, if applied to the Company or the Regional Group Practices, would have
a material adverse effect on the Company.
The laws of many states prohibit business corporations, such as the
Company, from practicing medicine or exercising control over the medical
judgments or decisions of physicians and from engaging in certain financial
arrangements, such as splitting fees with physicians. These laws and their
interpretations vary from state to state and are enforced by both the courts and
regulatory authorities, each with broad discretion. Violations of these laws
could result in censure or the revocation of the license of affiliated
physicians, civil or criminal penalties, including large civil monetary
penalties, or other sanctions. In addition, a determination in any state that
AMP is engaged in the corporate practice of medicine or any unlawful
fee-splitting arrangement could render any Management Agreement between AMP and
a Regional Group Practice located in such state unenforceable or subject to
modification, which could have a material adverse effect on AMP.
Expansion of the Company's operations into certain jurisdictions may
require modification of the Company's form of relationship with its Regional
Group Practices, which could have a material adverse effect on the Company.
Furthermore, the Company's ability to expand into, or to continue to operate
within, certain jurisdictions may depend on the Company's ability to modify its
operational structure to conform to such jurisdictions' regulatory framework or
to obtain necessary approvals, licenses and permits. Any such limitation on the
Company's ability to expand could have a material adverse effect on the Company.
See "Business -- Government Regulations."
FUTURE HEALTH CARE REFORM. In addition to extensive existing government
health care regulation, there are numerous initiatives on the federal and state
levels for comprehensive reforms affecting the payment for and availability of
health care services. These initiatives include reductions in Medicare and
Medicaid payments, trends in adopting managed care for Medicare and Medicaid
patients, regulation of entities that provide managed care and additional
prohibitions on ownership by health care providers, directly or indirectly, of
facilities to which they refer patients. It is uncertain what legislative
proposals will be adopted in the future or what actions federal or state
legislators or third party payors may take in anticipation of or in response to
any health care reform proposals or legislation. Aspects of certain of these
health care proposals, if adopted, could have a material adverse effect on the
Company.
COMPETITION. The business of providing podiatric services is highly
competitive in each of the Company's markets. The Company believes that changes
in governmental and private reimbursement policies, among other factors, have
resulted in increased competition among providers of medical services to
patients. Each of the Regional Group Practices faces competition from other
podiatrists in the communities served, some of which have more established
practices in the market. There can be no assurance that the Regional Group
Practices will be able to compete effectively in the markets they serve. In
addition, there is
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significant competition for the affiliation with podiatric practices and such
competition may limit the availability of suitable practices with which the
Company may be able to affiliate. Generally, there are no significant barriers
to potential competitors entering the industry or pursuing a business strategy
similar to the Company's. Several companies with established operating histories
and greater resources than the Company, including physician practice management
companies and some hospitals, clinics and HMOs, are pursuing activities similar
to those of the Company. There can be no assurance that the Company will be able
to compete effectively with these companies, that additional competitors will
not enter the market or that this competition will not make it more difficult
and costly to acquire the assets of, and provide management services to,
podiatric practices on terms beneficial to the Company. See "Business --
Competition."
NEED FOR ADDITIONAL FUNDS. The Company expects funds available to it from
the proceeds of the Offering, cash from operations and its expected credit line
to fund its operations for approximately twelve months, although this cannot be
assured. The Company has received from a major international financial
institution a commitment for a $30.0 million, three-year revolving credit
facility to help fund its working capital needs, capital expenditures and
practice affiliations. There can be no assurance that a definitive credit
agreement will be entered into, that funds will be immediately available to be
drawn under the credit agreement, or that amounts available under the credit
line will be adequate to meet the Company's needs for funds. The failure of the
Company to enter into the credit line or a similar credit line or to be able to
draw funds immediately thereunder could have a material adverse effect on the
Company's business, financial condition and results of operations. The Company's
growth strategy will require substantial capital. The Company intends to finance
future affiliations with cash, the issuance of debt or equity securities, or any
combination thereof. In the event that the Common Stock does not maintain a
sufficient market value, or potential affiliation candidates are unwilling to
accept debt or equity securities as partial consideration for their practices,
the Company may be required to use its cash resources, if available, to initiate
and maintain its affiliation program. As a result, the Company anticipates that
it will, in the future, seek to raise additional funds through debt financing or
the issuance of equity or debt securities. There can be no assurance that
sufficient funds will be available on terms acceptable to AMP, if at all. The
inability to obtain such financing could have a material adverse effect on the
Company's business, financial condition and results of operations. Furthermore,
issuing shares of Common Stock as consideration for (or in order to provide
financing for) future affiliations could result in significant dilution to
existing stockholders. If additional funds are raised through the incurrence of
debt, the Company may become subject to restrictions on its operations and
finances, including the ability to pay dividends on its capital stock. These
conditions may have an adverse effect on, among other things, the Company's
ability to pursue its affiliation strategy. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources" and "Business -- Strategy -- Growth Strategy."
RESCISSION OFFER.__The Company and AFC have determined that it is
appropriate to make a rescission offer to the holders of units ("AFC Units"),
consisting of an aggregate of $1,425,000 in principal amount of promissory notes
in AFC ("AFC Promissory Notes") and 25,000 of membership interests in AFC (the
"Units Rescission Offer"). See "Units Rescission Offer." There can be no
assurance that a substantial number of investors in such AFC financing will
reject the Units Rescission Offer, if any. Should the Units Rescission Offer be
accepted in total, the Company would be required to pay from the proceeds of the
Offering a total of $1.5 million, plus interest at a statutory rate accruing
from various issuance dates between October 1997 and February 1998. See "Use of
Proceeds." There can be no assurance that the liability of the Company based
upon any possible failure of the Company or AFC to comply with federal or state
securities laws in connection with the offering of the AFC Units will be
eliminated. See "Units Rescission Offer."
LIABILITY AND INSURANCE RISKS ASSOCIATED WITH PODIATRIC
PRACTICES. Providing health care services involves potential claims of medical
malpractice and similar claims. The Company does not, itself, engage in the
practice of medicine or have responsibility for compliance with regulatory
requirements directly applicable to physicians and requires affiliated
physicians performing medical services to maintain medical malpractice
insurance. Nonetheless, malpractice claims may be asserted against the Company
if services or procedures performed at one of the Affiliated Practices are
alleged to have resulted in injury or other
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adverse effects. Although the Company has obtained liability insurance that will
be effective concurrent with the closing of the Offering that it believes will
be adequate as to both risk and amounts, successful malpractice claims could
exceed the limits of the Company's insurance and could have a material adverse
effect on the Company's business, financial condition or operating results.
Moreover, a malpractice claim asserted against the Company could be costly to
defend, could consume management resources and could adversely affect the
Company's reputation and business, regardless of the merit or eventual outcome
of the claim. In addition, there can be no assurance that the Company will be
able to obtain insurance on commercially reasonable terms in the future or that
any insurance will provide adequate coverage against potential claims. AMP
requires each Regional Group Practice and Affiliated Practice to obtain and
maintain professional liability insurance. This insurance is expected to provide
insurance coverage, subject to policy limits, if the Company is held liable as a
co-defendant in a lawsuit for professional malpractice. In addition, the Company
is indemnified by the Regional Group Practices for liabilities resulting from
the Regional Group Practices' providing medical services.
NO PRIOR PUBLIC MARKET. Prior to this Offering, there has been no public
market for the Company's Common Stock. There can be no assurance that a public
market for the Common Stock will develop or continue after the Offering. The
Company has filed an application for the Common Stock to be approved for
quotation on the Nasdaq National Market, however, there can be no assurance
that, following the Offering, a regular trading market for the Common Stock will
develop or be sustained. The initial public offering price has been determined
by negotiation among the Company and the Underwriters and may bear no
relationship to the market price of the Common Stock after this Offering. See
"Underwriting."
If a public market for the Company's Common Stock develops, from time to
time, there may be significant volatility in the market price of the Common
Stock. Quarterly operating results of the Company, deviations in results of
operations from estimates of securities analysts, changes in general conditions
in the economy or the health care industry or other developments affecting the
Company or its competitors could cause the market price of the Common Stock to
fluctuate substantially. The equity markets have, on occasion, experienced
significant price and volume fluctuations that have altered the market prices
for many companies'securities and that have often been unrelated to the
operating performance of these companies. Concern about the potential effects of
health care reform measures has contributed to the volatility of stock prices of
companies in health care and related industries and may similarly affect the
price of the Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE. The market price of the Common Stock of
the Company could be adversely affected by the sale of substantial amounts of
the Common Stock in the public market following the Offering. After giving
effect to the sale of the shares of Common Stock offered hereby, the Company
will have 5,778,322 shares of Common Stock issued and outstanding (6,328,322
shares if the Underwriters' over-allotment option is exercised in full)
(assuming an initial public offering price of $11.00 per share). Of these
shares, 3,700,000 shares (4,255,000 shares if the Underwriters' over-allotment
option is exercised in full) of Common Stock sold in the Offering will be freely
tradable without restriction under the Securities Act of 1933, as amended (the
"Securities Act"), except for any shares exchanged by "affiliates" of the
Company as that term is defined under the Securities Act. None of the 2,078,322
remaining shares of Common Stock were acquired in a transaction registered under
the Securities Act. Such shares may not be sold except in transactions
registered under the Securities Act or pursuant to an exemption from
registration. All such 2,078,322 shares of Common Stock will be eligible for
sale pursuant to Rule 144 promulgated under the Securities Act in March 1999. In
addition, 598,807 shares of Class B Common Stock (as the same may be converted)
will be eligible for sale pursuant to Rule 144 promulgated under the Securities
Act and the balance of these shares will be eligible for sale at various times
from June of 1998 through October 1998. See "Shares Eligible For Future Sale."
In addition, AMP, its officers, directors, certain other stockholders of
the Company and the DPM owners have agreed that they will not offer, sell,
contract to sell, announce their intention to sell, pledge or otherwise dispose
of, directly or indirectly, or file with the Commission a registration statement
under the Securities Act relating to any additional shares of Common Stock or
securities convertible or exchangeable or exercisable for any shares of Common
Stock, without the prior written consent of the representative of the
Underwriters for a period of 180 days after the date of this Prospectus (the
"lock-up period"), except
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(i) subsequent sales of Common Stock offered in the Offering, (ii) issuances of
unregistered Common Stock by the Company in connection with affiliation with
additional practices, DPMs and ancillary providers (although persons receiving
such shares would be subject to such restrictions for the remainder of the
lock-up period), or (iii) issuances of Common Stock by the Company pursuant to
the exercise of employee stock options outstanding on the date of this
Prospectus.
The holders of certain shares of Common Stock outstanding on the date of
this Prospectus have certain registration rights with respect to such shares and
additional shares that may be issued to such persons upon exercise of options
(subject to certain limitations on the number of shares such holders are
entitled to have registered under any registration statement), although the
holders of at least 2,078,322 of these shares of Common Stock and all holders of
Class B Common Stock (including all AFC members to whom shares of Class B Common
Stock will be distributed) have agreed to refrain from selling their shares
during the lock-up period. Pursuant to certain registration rights agreements
with the DPMs (the "Registration Rights Agreements"), the Company has granted
certain registration rights to the DPMs permitting them to include their shares
of the Company's Common Stock on a registration statement filed by the Company
within one year of the date of such agreements. See "Description of Capital
Stock." AMP also intends to register an additional 1,157,098 shares of Common
Stock reserved for issuance under the Company's 1997 Incentive and Non-Qualified
Stock Option Plan as soon as practicable thereafter. See "Management" and
"Underwriting." In addition, the Company will register up to an additional
2,000,000 shares of Common Stock under a shelf registration, which, when
combined with the Company's cash resources, will be used to fund the Company's
planned practice affiliation program. These shares generally will be freely
tradable upon issuance to persons not deemed to be affiliates of the Company,
unless the Company contractually restricts the sale or other transfer of such
shares. Initially, the Company will issue such shares subject to a lock-up
period of up to 180 days from the date of this Prospectus.
SUBSTANTIAL PROCEEDS OF OFFERING PAYABLE TO AFFILIATED PRACTICES AND
AFFILIATES. Approximately $17.4 million of the net proceeds of this Offering
will be used to pay the cash portion of the price of the Transactions, $1.5
million of which will be placed in escrow in connection with the AnestheCare
Acquisition. Approximately $300,000 of the net proceeds of the Offering will be
used to pay the accrued salary of Jack N. McCrary. In addition, approximately
$5.3 million of the net proceeds from the Offering will be used to repay
indebtedness and interest assumed by the Company in connection with the
Transactions, including the reimbursement by AMP of certain expenses and debt
incurred by Ankle & Foot Centers of America, LLC ("AFC") to finance
organizational costs and working capital. See "Use of Proceeds" and "Certain
Transactions."
CONTROL BY EXISTING MANAGEMENT AND STOCKHOLDERS. Following the completion
of the Offering, officers, directors and employees of the Company and investors
in AFC (which financed the Company's initial organizational costs and working
capital) will beneficially own 100% of the outstanding shares of the Class B
Common Stock and the owners of the initial Affiliated Practices will
beneficially own approximately 35% of the outstanding shares of the Company's
Common Stock. Although, following the Offering, no arrangements or
understandings among such persons with respect to the voting of the shares of
Common Stock beneficially owned by such persons will remain in effect, such
persons may nevertheless effectively be able to control the affairs of the
Company. See "Principal Stockholders."
ANTI-TAKEOVER PROVISIONS. Certain provisions of Delaware law, the
Company's Amended and Restated Certificate of Incorporation and the Company's
Amended and Restated Bylaws, including the terms of conversion of the Class B
Common Stock, could delay or impede the removal of incumbent directors and could
make it more difficult for a third party to acquire, or could discourage a third
party from attempting to acquire, control of the Company. These provisions could
limit the price that investors might be willing to pay in the future for shares
of Common Stock. In addition, shares of preferred stock may be issued by AMP's
Board of Directors without stockholder approval on such terms and conditions,
and having such rights, privileges and preferences, as the Board of Directors
may determine. The rights of the holders of Common Stock will be subject to, and
may be adversely affected by, the rights of the holders of any preferred stock
that may be issued in the future. Under certain circumstances, the Company may
issue Series A Junior Participating Preferred Stock which may have an
anti-takeover effect. The Company has no other current plans to issue any shares
of preferred stock. See "Description of Capital Stock."
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IMMEDIATE AND SUBSTANTIAL DILUTION. The purchasers of the shares of Common
Stock offered hereby will experience immediate and substantial dilution in the
net tangible book value of their shares of Common Stock in the amount of $7.62
per share (after giving effect to underwriting discounts and commissions and
estimated Offering expenses). See "Dilution." If the Company issues Common
Stock in the future, including shares that may be issued in connection with
future practice affiliations, purchasers of Common Stock in the Offering may
experience further dilution in the net tangible book value per share of the
Company's Common Stock.
NO INTENT TO PAY DIVIDENDS. The Company has never paid or declared any
cash dividends and does not anticipate paying any cash dividends after
completion of the Offering and the Transactions. In addition, the Company has
entered into a commitment for a credit facility that will restrict the Company's
ability to pay dividends. See "Dividend Policy "and "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
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USE OF PROCEEDS
The net proceeds to the Company from the sale of Common Stock in the
Offering assuming an initial public offering price of $11.00 per share (after
deducting the underwriting discount and estimated Offering expenses of
approximately $4,300,000), are estimated to be approximately $33,551,000
($39,228,650 if the Underwriters' over-allotment option is exercised in full).
The Company intends to use the net proceeds from the Offering as follows:
(i) approximately $17.4 million is expected to be used to consummate the
Transactions, $1.5 million of which will be placed in escrow in connection with
the AnestheCare Acquisition, (ii) approximately $5.3 million (including any
amounts payable pursuant to the Units Rescission Offer) is expected to be paid
to AFC, which prior to the Offering owned 56.3% of the Company's outstanding
voting securities, to repay certain indebtedness and interest of AFC, $500,000
of which bears interest at 18% per annum and matures on the fifth day following
the Offering and the remainder of which bears no interest and has no maturity
date (including the reimbursement by the Company of expenses, debt and interest
incurred by AFC to finance the Company's organizational and affiliation costs
and initial working capital), (iii) approximately $3.4 million is expected to be
used to pay certain deferred expenses, (iv) approximately $1.0 million is
expected to be used to complete the purchase of the Company's management
information system, and (v) the balance is expected to be used for general
corporate purposes, including, among other things, making short-term loans of up
to $950,000 aggregate principal amount to DPM owners of Affiliated Practices as
discussed herein and executing the Company's business plan set forth herein. See
"Business -- Practice Affilations," "-- Services and Operations -- Management
Information Systems," "-- Operative Agreements -- Physician Engagement
Agreements" and "Certain Transactions -- Organization of the Company."
Pending such uses, the net proceeds will be invested in United States government
securities and in short-term, interest-bearing investment grade securities. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
As mentioned above, the Company may use up to $950,000 of the net proceeds
of the Offering to advance funds to the Regional Group Practices to make
short-term loans to their DPMs. Pursuant to the Physician Engagement Agreements,
an owner DPM may elect to receive an advance on his or her first monthly draw in
the form of a loan from the Regional Group Practice. Loans will be offered to
DPMs to provide short-term liquidity to such DPMs in the initial stages of the
Company's operations. Loans will be limited to an amount equal to (i) an advance
on the first monthly draw of such DPM, (ii) the difference between 90% of the
average monthly compensation of such DPM in the year prior to the Offering and
the current period's level of distributions from the practice for the first
three months after the Offering, and (iii) the difference between 80% of the
average monthly compensation of such DPM in the year prior to the Offering and
the current period's level of distribution for the second three months after the
Offering. Loans, if drawn, will be repayable over two years plus interest at an
annual rate equal to the prime rate, and installments will be withheld from the
DPM's monthly draw. Management will not be able to determine to whom loans will
be made until after the Transfers have been completed, DPMs begin receiving
distributions from the Regional Group Practices, and DPMs decide whether or not
to enter into such loans. Management has not evaluated the DPMs' ability to
repay these obligations, if they arise, but believes the DPMs' financial status
after the completion of the Offering and the expected aggregate amount of such
loans will prevent the loan program from having a materially adverse effect on
the Company.
AFC and the Company have made a Rescission Offer to the holders of AFC
Units. While AFC does not anticipate that any holders of AFC Units will accept
the offer of rescission, there can be no assurance that the Company will not be
required to repay all or a portion of the AFC Units out of the net proceeds of
the Offering. Should the Units Rescission Offer be accepted in total, the
Company would be required to pay from the proceeds of the Offering a total of
$1,500,000, plus a statutory rate of interest accruing from various issuance
dates between October 1997 and February 1998. However, should the Units
Rescission Offer be rejected in total, the Company would be required to pay from
the proceeds of the Offering a total of $2.5 million to such investors including
repaying $1,425,000 in aggregate principal amount of AFC Promissory Notes and
$1,075,000 to repurchase the AFC membership interests from such persons. See
"Risk Factors -- Units Rescission Offer" and "Units Rescission Offer."
19
<PAGE>
Although the estimates set forth above represent the Company's best
estimate of the intended use of proceeds from the Offering, the timing and
amount of funds required for specific uses by the Company
cannot be precisely determined. The use of proceeds from the Offering is subject
to change based on competitive conditions, unanticipated costs of expansion and
unexpected requirements in developing and operating the Company's business. The
rate of the Company's progress in developing its business, the availability of
alternate methods of financing, and other factors will affect the allocation and
timing of the Company's use of proceeds from the Offering.
DIVIDEND POLICY
The Company does not anticipate paying any cash dividends after completion
of the Offering and the Transactions. In addition, the Company has entered into
a commitment for a credit facility that will restrict the Company's ability to
pay dividends. The Company currently intends to retain any future earnings for
use in its business. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
20
<PAGE>
DILUTION
The deficit in pro forma net tangible book value of the Company at
September 30, 1997, after giving effect to the Transactions as if they had
occurred on that date, would have been $(11,795,000), or $(4.32) per share. Pro
forma net tangible book value per share represents the amount of pro forma total
tangible assets of the Company less pro forma total liabilities divided by the
number of shares of Common Stock and Class B Common Stock outstanding. After
giving effect to the sale by the Company of the 3,700,000 shares of Common Stock
offered hereby (after deducting the underwriting discounts and commissions and
estimated Offering expenses payable by the Company) and the application of the
net proceeds therefrom as discussed under "Use of Proceeds," the pro forma as
adjusted net tangible book value of the Company as of September 30, 1997 would
have been approximately $21,756,000, or $3.38 per share. This represents an
immediate increase in adjusted pro forma net tangible book value of
approximately $7.70 per share to existing stockholders and an immediate dilution
of approximately $7.62 per share to new investors purchasing Common Stock in
this Offering. The following table illustrates this per share dilution:
Assumed initial public offering price
per share............................. $ 11.00
Pro forma net tangible book value
per share as of September 30,
1997............................. $ (4.32)
Increase per share attributable to
new investors.................... 7.70
---------
Pro forma as adjusted net tangible book
value per share after the Offering.... 3.38
---------
Dilution per share to new investors of
Common Stock.......................... $ 7.62
=========
The following table sets forth on a pro forma basis, giving effect to (i)
the Transactions as of September 30, 1997, (ii) the number of shares of Common
Stock and Class B Common Stock held by existing stockholders, the total
consideration given for such shares and the average price per share paid or
invested in the Company for such shares, and (iii) the number of shares of
Common Stock to be purchased from the Company, the total consideration for such
shares and the average price per share to be paid by new investors purchasing
such shares in the Offering before deducting underwriting discounts and
commissions and estimated Offering expenses payable to the Company:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION(1) AVERAGE
---------------------- ------------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
----------- ------- --------------- ------- ---------
<S> <C> <C> <C> <C> <C>
Total existing stockholders.... 2,728,322(2) 42% $ (11,795,000) (41)% (4.32)
New investors.................. 3,700,000(3) 58 40,700,000 141 11.00
----------- ------- --------------- -------
Total(2).................. 6,428,322 100% $ 28,905,000 100%
=========== ======= =============== =======
</TABLE>
- ------------
(1) Total consideration paid by existing stockholders represents the pro forma
net tangible book value (combined stockholders' equity less goodwill) of the
Company, after giving effect to the Transactions and before the Offering.
See "Use of Proceeds", "Capitalization", and the Pro Forma Combined
Balance Sheet included elsewhere in this Prospectus.
(2) Includes 2,078,322 shares of Common Stock and 650,000 shares of Class B
Common Stock to be outstanding after giving effect to the Transactions.
(3) Does not include 464,500 shares of Common Stock issuable upon the exercise
of options for the purchase of Common Stock pursuant to the Company's stock
option plans.
21
<PAGE>
CAPITALIZATION
The following table sets forth the short-term obligations, long-term debt,
and the total capitalization of the Company (i) as of September 30, 1997, (ii)
on a pro forma basis to reflect the Transactions, and (iii) on a pro forma as
adjusted basis to reflect the Transactions, the Stock Split, the Share
Conversion, the sale by the Company of 3,700,000 shares of Common Stock offered
hereby and the application of the estimated net proceeds therefrom. See "Use of
Proceeds." This table should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations," the
Company's Financial Statements and Notes thereto and the Unaudited Pro Forma
Combined Balance Sheet appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1997
-----------------------------------------------
PRO FORMA
HISTORICAL PRO FORMA(1) AS ADJUSTED(1)(2)
---------- ------------ -----------------
(IN THOUSANDS)
<S> <C> <C> <C>
Current portion of long-term debt.... $ -- $ 656 $ 656
Due to stockholder(3)................ 2,426 2,426 --
Distribution liability(4)............ -- 8,989 --
Acquisition liability(5)............. -- 6,900 --
---------- ------------ -----------------
Total short-term
obligations.............. $ 2,426 $ 18,971 $ 656
========== ============ =================
Long-term debt, less current
portion............................ $ -- $ -- $--
---------- ------------ -----------------
Stockholders' deficit:
Preferred Stock, $.001 par value;
20,000,000 shares authorized; no
shares issued and outstanding,
pro forma or pro forma as
adjusted........................ -- -- --
Class A Common Stock, $.001 par
value; 20,000,000 shares
authorized(6); 2,078,322 shares
issued and outstanding, pro
forma, 5,778,322 shares issued
and outstanding pro forma as
adjusted(7)..................... -- 2 6
Class B Common Stock, $.001 par
value; 1,000,000 shares
authorized(6); 650,000 shares
issued and outstanding(7)....... 1 1 1
Additional paid-in capital......... 1,213 5,164 38,711
Accumulated deficit................ (3,125) (9,470) (9,470)
---------- ------------ -----------------
Total stockholders' equity
(deficit)................ (1,911) (4,303) 29,248
---------- ------------ -----------------
Total capitalization................. $ (1,911) $ (4,303) $ 29,248
========== ============ =================
</TABLE>
- ------------
(1) See Unaudited Pro Forma Combined Balance Sheet and the Notes thereto
included elsewhere in this Prospectus for a discussion of the assumptions
made and adjustments applied in preparation of this information.
(2) Gives effect to the Stock Split, the Share Conversion, and the sale of
3,700,000 shares of Common Stock offered by the Company at an assumed
initial public offering price of $11.00 per share and the application of the
estimated net proceeds therefrom. See "Use of Proceeds."
(3) Represents the expenses, debt and interest incurred by AFC to finance the
Company's organizational and affiliation costs and initial working capital.
Such amount plus any additional amounts incurred by AFC subsequent to
September 30, 1997 (which is expected to total $5.3 million) will be
reimbursed by the Company from the proceeds of the Offering.
(4) Represents the cash distribution to promoters in connection with the
Transfers (excluding the Ambulatory Surgery Center Acquisitions and the
Kramer Transfer), including the liability attributed to monetary assets
acquired of $4.3 million.
(5) Includes the $4.5 million payable in connection with the AnestheCare
Acquisition, $1.4 million payable in connection with the Kramer Transfer,
and $1.0 million payable in connection with the Ambulatory Surgery Center
Acquisitions.
(6) Reflects an amendment to the Company's Certificate of Incorporation filed
subsequent to September 30, 1997 to increase the authorized capital stock,
revise the par value to $.001 per share, and to designate classes of common
stock.
(7) Does not include 464,500 shares of Common Stock issuable upon the exercise
of outstanding options for the purchase of Common Stock pursuant to the
Company's stock option plans.
22
<PAGE>
SELECTED FINANCIAL DATA
THE FOLLOWING INFORMATION IS DERIVED FROM THE FINANCIAL STATEMENTS OF THE
COMPANY INCLUDED ELSEWHERE IN THIS PROSPECTUS. EXCEPT AS INDICATED, THIS
INFORMATION DOES NOT REFLECT THE EFFECTS OF THE TRANSACTIONS OR THE OFFERING.
FOR CERTAIN INFORMATION CONCERNING THE TRANSACTIONS, SEE NOTE 4 OF NOTES TO
FINANCIAL STATEMENTS OF THE COMPANY AND UNAUDITED PRO FORMA COMBINED BALANCE
SHEET AND THE NOTES THERETO.
PERIOD FROM
INCEPTION
(AUGUST 9, 1996) FOR THE NINE
TO MONTHS ENDED
DECEMBER 31, 1996 SEPTEMBER 30, 1997
------------------ ------------------
(UNAUDITED)
STATEMENT OF OPERATIONS DATA(1):
Revenues............................. $ -- $ --
Expenses............................. 1,436,441 1,688,388
------------------ ------------------
Net loss............................. $ (1,436,441) $(1,688,388)
================== ==================
SEPTEMBER 30, 1997
HISTORICAL AS ADJUSTED(2)
------------------ ------------------
(UNAUDITED)
BALANCE SHEET DATA:
Cash and cash equivalents............ $ -- $14,054,000
Working capital (deficit)(3)......... (2,120,333) 17,037,000
Total assets(4)...................... 2,026,316 30,870,000
Long-term debt....................... -- 656,000
Stockholders' equity (deficit)....... (1,911,119) 29,248,000
- ------------
(1) The Company has conducted no significant on-going, non-developmental
business operations to date and will not conduct significant business
operations until the affiliation of the Company with the initial Affiliated
Practices and the Offering are completed. Pursuant to the Reimbursement and
Assumption Agreement, the Company will reimburse the affiliation-related
expenses incurred by AFC since May 1996, including AFC's payroll, travel and
entertainment, office equipment and professional fees. AFC currently holds
365,625 shares of Class B Common Stock which management plans to distribute
to AFC members upon consummation of the Offering.
(2) As adjusted gives effect to the Transactions, the sale of 3,700,000 shares
of Common Stock offered by the Company, and the application of the estimated
net proceeds therefrom. See "Use of Proceeds."
(3) The historical balance includes $2.4 million due to AFC as of September 30,
1997 which will be repaid upon consummation of the Offering.
(4) The Company will record the non-monetary assets transferred to the Company
in connection with the Transfers at the historical cost basis of the
transferors, excluding the Ambulatory Surgery Center Acquisitions and the
Kramer Transfer. Monetary assets transferred as well as the AnestheCare
Acquisition, the Kramer Transfer and the Ambulatory Surgery Center
Acquisitions will be accounted for in a method similar to purchase
accounting.
23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS CONTAINS CERTAIN STATEMENTS OF A
FORWARD-LOOKING NATURE RELATING TO FUTURE EVENTS OR THE FUTURE FINANCIAL
PERFORMANCE OF THE COMPANY. SUCH STATEMENTS ARE ONLY FORECASTS, AND THE ACTUAL
EVENTS OR RESULTS MAY DIFFER MATERIALLY FROM THE RESULTS DISCUSSED IN THE
FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH
DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN "RISK
FACTORS," AS WELL AS THOSE DISCUSSED ELSEWHERE IN THIS PROSPECTUS. THE
HISTORICAL RESULTS SET FORTH IN THIS DISCUSSION AND ANALYSIS ARE NOT INDICATIVE
OF TRENDS WITH RESPECT TO ANY ACTUAL OR PROJECTED FUTURE FINANCIAL PERFORMANCE
OF THE COMPANY. THE FOLLOWING SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL
STATEMENTS AND RELATED NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS.
OVERVIEW
The Company's business operations since its incorporation in August 1996
have consisted solely of arranging the Transactions and preparing to implement
its related business plan described herein. At the time of the anticipated
initial Affiliated Practice affiliations, the predecessors of the initial
Affiliated Practices will have been separate businesses engaged in podiatric
care. In connection with the Transactions, the Company will receive certain
operating assets or receivables and stock and assume certain liabilities of the
Affiliated Practices, AnestheCare, and the Ambulatory Surgery Center
Acquisitions and enter into long-term management agreements with the Regional
Group Practices. Pursuant to the Management Agreements, the Company will
provide, among other things, facilities, management, administrative and
development services to the Regional Group Practices and employ non-physician
personnel, in each case in exchange for management fees, the Company's principal
anticipated source of revenues.
Management fees will be paid monthly to the Company by each Regional Group
Practice based upon the Regional Group Practice's adjusted patient revenues (the
Regional Group Practice's billings less contractual adjustments, including
adjustments for special third-party payor and private pay arrangements, and
adjustments for bad debts). The Company will be responsible for collecting the
billings of the Regional Group Practices. The Company will retain a service fee
ranging from 9% to 25% of the Regional Group Practice adjusted patient revenues
and an amount equal to the expenses of the Regional Group Practice advanced by
AMP pursuant to the Management Agreements. The expenses expected to be incurred
by AMP in fulfilling its obligations under the Management Agreements will be the
salaries, wages and benefits of personnel (other than DPM owners and certain
employed DPMs), supplies, expenses involved in administering the clinical
practices of the Regional Group Practices and general and administrative
expenses, including billing and collections services, as well as depreciation,
amortization and interest incurred in the acquisition of assets by the Company
in connection with the Transactions. The Company will seek to reduce these
operating expenses through purchase discounts, economies of scale,
standardization of best practices, and other operating efficiencies. If the
service fee varies by more than 5% over or under the adjusted service fee, then
the service fee may be adjusted quarterly by the Joint Planning Committee of the
Regional Group Practice (composed of Company and Affiliated Practice
representatives) on a prospective basis only (without a floor or ceiling on the
adjustment) upon the request of either party to the Management Agreement in
order to reflect the fair value of the management services provided, based upon
the nature and volume of services required, the risks assumed by the Company,
and the total revenues of the Regional Group Practice. Accordingly, the Company
will maintain a net revenue interest and not a net profits interest. The
compensation of each DPM in each Regional Group Practice will be determined
solely by the Joint Planning Committee of the Regional Group Practice and will
not include any guaranteed component. The amount of the management service fees
paid by the Regional Group Practices to AMP and the compensation of each
Regional Group Practice's DPMs will be directly affected by the amount of
patient revenue generated by each Regional Group Practice. The inability of the
Regional Group Practices to generate sufficient patient revenue could have a
material adverse effect on the Company's business, financial condition and
results of operations.
The Company will also generally be entitled to a fee of approximately 70%
of the adjusted ancillary revenues, net of related ancillary expenses, of each
Regional Group Practice. Ancillary revenues will be generated from services
provided by the Regional Group Practice to its patients that are ancillary to
DPM podiatric care (such as orthotics, ambulatory care, physical therapy and the
like). Ancillary expenses to be netted against ancillary revenues will generally
include, but not be limited to, costs for items such as personnel, facilities,
equipment, supplies and other such expenses directly attributable to the
generation of ancillary revenues. In connection with the AnestheCare
Acquisition, the Company will retain the existing financial and fee arrangements
of AnestheCare with its clients. Currently, AnestheCare generates revenue
24
<PAGE>
through both the provision of management and billing services as well through
various cost-sharing agreements with its clients. In exchange for these
services, AnestheCare typically is entitled to a fee equivalent to specified
percentages of gross revenues and collections it receives on behalf of its
clients. After the AnestheCare Acquisition, AnestheCare will provide services to
certain of the Regional Group Practices on a discounted basis. See
"Business -- Operative Agreements -- Management Agreements" for a complete
description of other material terms of the Management Agreements.
In addition to the expenses AMP will incur in fulfilling its obligations
under the Management Agreements and the ancillary expenses described above, AMP
will also incur personnel, rental and other typical expenses in connection with
its corporate management, which will provide management, administrative,
marketing, development, acquisition and other services to the Regional Group
Practices.
The Company may in the future negotiate on behalf of Regional Group
Practices and others capitated, episode-of-care, and shared risk fee
arrangements with third-party payors. These arrangements could result in patient
care in which the Regional Group Practices' costs of delivering care exceed the
amounts reimbursed by the applicable third-party payor. The Company intends to
help the Regional Group Practices manage these risks by establishing loss limits
with the third-party payors who are party to these arrangements and helping the
Regional Group Practices anticipate with reasonable accuracy the course of care
and related costs for specific conditions and diseases covered by the
arrangements with third-party payors.
RESULTS OF OPERATIONS
The Company has not conducted on-going, non-developmental business
operations and will not until the Transactions and the Offering are complete.
Consequently, AMP has generated no revenues. For a historical presentation of
the results of operations of the Affiliated Practices and AnestheCare, see Note
4 of the Notes to the Company's Financial Statements and the Financial
Statements of Pyramid Anesthesiology Group, Inc., respectively, appearing
elsewhere in this Prospectus.
The Company's principal stockholder, AFC, incurred a loss for the period
from the date of its organization in 1996 through September 30, 1997 of
approximately $3.1 million, reflecting principally salaries of AFC personnel
(including non-cash charges of $1.2 million) and office expenses since its
inception. The Company has agreed to reimburse AFC for these expenses upon
completion of the Offering.
LIQUIDITY AND CAPITAL RESOURCES
AFC, on the Company's behalf, has financed the Company's operations to date
from the proceeds of AFC's private placements of debt and equity. As of February
14, AFC has received net proceeds from private placements of debt and equity in
an aggregate amount of approximately $4.0 million. AMP has agreed to assume
AFC's obligations under such debt at and after the Offering and the existing
common stock, without class, will be converted into Class B Common Stock.
The Company intends to fund its future operations from the proceeds of the
Offering, cash generated from operations, monies drawn under the revolving
credit facility discussed below, and, if necessary, the proceeds of future
public or private financings. The Company intends to use the proceeds of the
Offering to consummate the Transactions, repay indebtedness of the Company and
AFC, pay certain deferred expenses, complete the purchase of the Company's
management information system, and fund general corporate operations. In
addition, the Company may advance funds from the Offering to the Regional Group
Practices in order for them to make loans to the owner DPMs. See "Use of
Proceeds."
If the Transactions had occurred on September 30, 1997, the Company would
have had a pro forma working capital deficit of approximately $15.0 million,
including the accrual of $15.9 million for cash consideration payable in the
Transactions.
In connection with certain of the Transactions, the Company will record
aggregate federal and state deferred tax liabilities of approximately $966,000.
These liabilities generally will become payable over an approximate three-year
period commencing on the date of the consummation of such Transfers.
AMP anticipates that its capital expenditures during 1998 will relate
primarily to affiliations with additional Affiliated Practices, if any,
development of the ancillary services network, and expenditures related to
expansion and purchase of equipment for the Affiliated Practices. The Company
anticipates that funding for these expenditures will be derived from the
proceeds of the Offering, funds borrowed under the Company's anticipated credit
facility, and cash flow from operations. Management believes that these sources
will be sufficient to fund the Company's capital needs for a period of
approximately twelve months following completion of the Offering. Thereafter, if
necessary, the Company will seek to raise additional funds for capital
expenditures through borrowings or the issuance of debt or equity securities.
There can be
25
<PAGE>
no assurance that sufficient funds will be available from sources other than the
Offering on terms acceptable to the Company, if at all.
The Company has received a commitment for a $30.0 million three-year
revolving credit facility with a major international financial institution which
is intended to be available to assist in funding the Company's working capital
needs, capital expenditures and anticipated future affiliations. The credit
facility will contain customary affirmative and negative covenants (including
prohibitions on the payment of dividends and capital expenditures) and events of
default customary to transactions of this type. The credit facility will bear
interest at a rate equal to the London Inter-Bank Offered Rate plus an
applicable margin of between 100-250 basis points based upon the Company's ratio
of Senior Debt (as defined) to EBITDA, or, at the Company's option, at such
financial institution's Base Rate plus a margin based on the ratio of the
Company's senior debt to earnings before interest, taxes, depreciation and
amortization. There can be no assurance that the Company will ultimately close
on the credit facility. In addition, the Company is, concurrently with the
Offering, registering 2,000,000 additional shares of Common Stock under the
Shelf Registration, which, when combined with the Company's cash resources, will
be used to fund the Company's planned practice affiliation program.
The success of AMP is directly dependent upon, among other things, the
ability of AMP to obtain funds by providing services to Regional Group
Practices. If funds from this principal source are unavailable or insufficient,
the Company will need to obtain financing from other sources, such as the
issuance of additional debt or equity securities or borrowings. There can be no
assurance that those alternative sources would be available, available on
favorable terms, or sufficient to meet the Company's capital requirements.
ACCOUNTING
Of the 46 Transfers of the initial Affiliated Practices, 45 will be
accounted for by the Company under SEC Staff Accounting Bulletin No. 48 ("SAB
48"), "Transfers of Non-Monetary Assets by Promoters or Shareholders," so
that the non-monetary assets and liabilities of these initial Affiliated
Practices will be received by the Company at the transferor's historical cost
basis for accounting purposes. The AnestheCare Acquisition, the Kramer Transfer
and the Ambulatory Surgery Center Acquisitions which are made following the SAB
48 transactions and the Offering, will not be accounted for under SAB 48.
Instead, these and all future individual practice affiliations will be accounted
for as purchases at fair market value and are expected to result in purchase
prices in excess of net assets acquired (goodwill) which will require subsequent
noncash amortization charges in the Company's statements of operations. Monetary
assets and liabilities of the initial Affiliated Practices, including cash,
billed and unbilled receivables and credit balances, payables and certain
miscellaneous accruals, will either be acquired by AMP at their fair market
value or retained by the Affiliated Practices, as agreed among the parties.
The aggregate consideration to be paid by the Company in the Transfers is
approximately $34.5 million, consisting of approximately $18.3 million payable
in shares of Common Stock at the initial public offering price attributed to the
net non-monetary assets, approximately $4.7 million in cash and $156,000 of
assumed indebtedness attributed to the net non-monetary assets of the SAB 48
Transfers, $4.3 million in cash attributed to the net monetary assets of the SAB
48 Transfers, $4.1 million payable in shares of Common Stock at the initial
public offering price, $1.0 million in cash and $500,000 of assumed indebtedness
attributed to the Ambulatory Surgery Center Acquisitions which are included in
the Transfers but not accounted for under SAB 48, and $1.4 million in cash
attributed to the Kramer Transfer. Of the total consideration attributed to the
non-monetary assets for each SAB 48 transfer, the Affiliated Practices could
elect to receive up to 25% in cash and the balance in shares of Common Stock.
The net non-monetary assets and liabilities of these Affiliated Practices will
carry over at their historical costs to AMP. The net non-monetary assets to be
transferred include billed and unbilled receivables, supplies inventory, other
receivables, prepaid expenses, net equipment and certain other current and
noncurrent assets. The liabilities to be transferred include credit balances of
accounts receivable, certain miscellaneous accruals and debt assumed. The cash
of approximately $4.7 million paid to the Affiliated Practices for the
non-monetary assets in the SAB 48 Transfers will be recorded as a dividend by
the Company. Consideration in the AnestheCare Acquisition will consist of
approximately $4.5 million in cash. Additional consideration of up to $1.5
million in cash and a number of Common Shares equal to $500,000 valued at the
initial public offering price will be held in escrow and may be paid to the
owners of AnestheCare pending AnestheCare's achievement of certain performance
targets over the three-year period beginning January 1, 1998.
26
<PAGE>
BUSINESS
THE COMPANY
AMP was founded in August 1996 to provide practice management services and
comprehensive foot care delivery systems to podiatric practices throughout the
United States. AMP will generate revenue by providing to the Affiliated
Practices professional management, marketing, expertise, equipment and
facilities often unavailable to podiatrists with small practices. The initial 46
Affiliated Practices consist of 66 doctors of podiatric medicine ("DPMs")
operating 89 offices located in 7 states serving 57 cities. The Company intends
to grow rapidly by affiliating with additional podiatric practices and by making
available to the Affiliated Practices services that are ancillary and directly
related to the Affiliated Practices' existing podiatric care.
The Company has entered into definitive agreements to transfer cash and
Common Stock and assume certain liabilities in exchange for stock or certain
operating assets and receivables of the Affiliated Practices simultaneous with
and as a condition to the closing of the Offering. The DPMs will join Regional
Group Practices organized by geographic location and will enter into physician
engagement agreements with the Regional Group Practices. AMP will enter into a
long-term management agreement with each Regional Group Practice under which AMP
will receive fees for its services. The Company will own the operating assets of
the Affiliated Practices, hire the non-physician employees, and otherwise assume
the management of each practice. The initial Affiliated Practices were selected
based upon their location, size, historical profitability and growth, and
reputation for high quality care. Based on management's knowledge of the U.S.
podiatric industry gained from conversations with DPMs, surveys of the size of
other podiatric practice management companies, affiliations and groups, and
industry research, management believes that the initial Affiliated Practices are
leading podiatric practices in their respective markets and that, following the
Transactions, AMP will be the largest provider of comprehensive podiatric
practice management services in the United States.
A key element of the Company's strategy is to provide ancillary services
and facilities to the Affiliated Practices. These ancillary services and
facilities are expected to include, among other things, ambulatory surgical
centers, anesthesiology, pathology, radiology, MRIs, EKGs, laboratory work,
pharmacy, physical history and exams, physical therapy, orthotics, pain
management, home care, diabetic wound care, specialty shoes and other retail
products. The Company intends to make available some or all of these ancillary
services on a regional basis. The Affiliated Practices in each region will
primarily or exclusively use AMP's ancillary services, enabling the Company to
control the cost, quality and other important aspects of these services.
Pursuant to this strategy, AMP has entered into a definitive agreement to
purchase certain assets of AnestheCare, an anesthesiology management services
organization currently servicing 15 locations in metropolitan Atlanta, Georgia.
AnestheCare provides billing and management services to anesthesiologists and
other providers of health care related services to local hospitals and others.
AnestheCare's current operations and ongoing business relationships will
continue after the AnestheCare Acquisition. In addition, after the acquisition,
AnestheCare will provide anesthesiology management services to certain of the
Regional Group Practices. The Company is also acquiring Bellaire Surgicare, Inc.
and Clayton Outpatient Surgical Center, Inc., which own surgical centers.
THE PODIATRIC INDUSTRY
Podiatry is the practice of medicine whereby DPMs provide preventative,
diagnostic, surgical and other foot care to patients. Podiatric care ranges from
relatively simple procedures, such as treating foot infections, to complex
surgeries, such as reconstructing the bones in the foot. According to the
American Podiatric Medical Association ("APMA"), 39% of all foot care is
provided by DPMs compared to 13% by orthopedic physicians, 37% by other
physicians and 11% by physical therapists and others. Today, there are
approximately 10,700 active DPMs throughout the United States handling 55
million patient visits per year. In 1995, active DPMs averaged 92 patient visits
per week and 80 bone surgeries for the year.
After finishing school at a College of Podiatric Medicine, DPMs are
required to pass rigorous state board examinations and complete at least one
year of residency before they are licensed to practice. Each
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state has somewhat different requirements for a DPM to become licensed although
there is reciprocity among many states. Most states also require continuing
educational programs for regular license renewal. In addition, DPMs may become
Board Certified by one of several national podiatric certification boards.
Generally, in order to become Board Certified a DPM must have completed three
years of practice and pass oral and written examinations. Many health
maintenance organizations require the DPMs in their provider network to be Board
Certified. According to the APMA, 99% of DPMs graduated from one of seven
Colleges of Podiatric Medicine, 87% completed residency programs, and 36% are
Board Certified. All of the owner DPMs at the Affiliated Practices have
completed residency programs and are licensed, approximately 94% are Board
Certified, and the remaining non-Board Certifed owner DPMs are Board Eligible
(that is, having passed the Board's written exam and are awaiting the Board's
oral examination).
According to the APMA, billing receipts of all DPMs in the United States
increased to approximately $2.3 billion in 1995 from approximately $1.3 billion
in 1987, a compound annual growth rate of 7.7%. The Company believes that the
historical growth in DPM revenues is due to a number of factors including the
following:
o AGING POPULATION. The Bureau of Census forecasts that the resident
population of the United States will increase between 1997 and 2010 by an
average annual rate of 0.8%. However, the number of persons age 65 and over
will increase by an average annual rate of 1.1% over the same period.
People age 65 and over experience foot problems at approximately twice the
rate of persons under the age of 65, and based on Medicare program studies,
older persons utilize DPMs at a higher rate than the remainder of the
population.
o INCREASING MANAGED CARE. As recently as 1988, only an approximate 25% of
all privately insured individuals were covered by managed care. By 1996,
over three-quarters of active employees in the private sector were enrolled
in some type of managed care arrangement. The Company believes that primary
care physicians are more likely to refer foot care patients covered by
managed care to DPMs, as a result of the lower reimbursement rates
anticipated for foot care under managed care programs relative to foot care
covered on a fee-for-service basis.
o INCREASED MEDICARE ENROLLMENT. Managed care enrollment in Medicare has
doubled in the last three years and is growing at an annual rate of
approximately 30%. Enrollees are generally older than the average
population, and consequently, incur a higher incidence of foot problems. In
addition, the Company believes that enrollees are more likely to visit a
podiatrist than non-insured individuals.
The podiatric industry in the United States is highly fragmented, dominated
by solo and small group practices. According to the APMA, 69% of the
approximately 14,000 total DPMs in the United States are sole practitioners with
the majority of the remaining DPMs in small or medium-sized practices, generally
consisting of two to four DPMs. In addition, there is an oversupply of podiatric
service providers in the United States that could exceed demand by as much as
27% in 2010. Finally, as with other areas of health care, there is a pronounced
trend toward managed care in the podiatric industry.
The Company believes that due to (i) the highly fragmented structure of the
podiatric industry, (ii) the growing surplus of DPMs, and (iii) the trend toward
managed care, the industry is ripe for a provider of comprehensive podiatric
practice management services such as AMP. The Company intends to pool the
resources of, and provide professional management to, some of the nation's
leading podiatrists in order to allow them to compete more effectively in the
current and anticipated podiatric industry environment. Management expects its
operating and growth strategies to attract third party payors, provide a strong
incentive for DPMs to affiliate with the Company, and allow practices affiliated
with the Company to be more successful than their primarily small practice
competitors in an environment of increased competition and over-supply.
OPERATING STRATEGY
The Company's objective is to be the nation's leading provider of
management services and comprehensive foot care delivery systems to podiatric
practices. To achieve this objective, the Company will employ the following
operating strategies:
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ENHANCING QUALITY OF DPM PATIENT CARE. Management believes that the
services and support it will provide the Affiliated Practices will positively
impact DPM patient care. The Company, through its Affiliated DPMs and its
Medical Policy Board is developing uniform standards of care for the Affiliated
Practices to ensure quality control and provide the opportunity to implement the
most current and effective podiatric treatments and techniques. The Company
believes that one of its most valuable practice management services will be its
ability to identify practice-level strategies that have proven successful for
individual Affiliated Practices and share these best practices with other
Affiliated Practices. The quality of patient care is also expected to improve as
a result of (i) treatment protocols and other important information being made
available to each Affiliated Practice by the Company's sophisticated management
information system, (ii) the peer review that will result from being affiliated
with other podiatrists, the Company's Medical Advisory Board and the respective
Boards of the Regional Group Practices, (iii) more time being made available to
DPMs for patient care rather than administrative duties, and (iv) the continuity
of care, including early disease detection and treatment, that will be afforded
by the Affiliated Practices and the Company's ancillary services.
ACHIEVING OPERATIONAL EFFICIENCIES. The Company intends to implement a
variety of operating procedures and systems to improve the productivity and
profitability of each Affiliated Practice. The Company is developing and
implementing a centralized management information system, uniform inventory
control procedures, and national group purchasing contracts. In addition, the
Company is installing a patient billing and collections system that is expected
to improve collections as a result of its ease of use, billing frequency, and
standardized procedures. Management also believes that physical improvements in
design to certain Affiliated Practices' facilities should result in an increase
in the volume of patients seen and an increase in employee and DPM productivity.
DEVELOPING REGIONAL GROUP PRACTICE STRUCTURE. AMP will use the Regional
Group Practices as an important mechanism to pool the Affiliated Practices'
resources and implement its other strategies. The Regional Group Practices, and
in particular the Boards thereof, will (i) collect from and disseminate to its
Affiliated Practice members best practices and standards of care, (ii) provide
the mechanism for peer review and quality control of the Affiliated Practices,
(iii) develop regional marketing and advertising programs, (iv) identify,
recruit, and integrate additional practice affiliations and ancillary services
acquisitions, and (v) coordinate the sharing of specialists' resources in each
region.
PROVIDING EFFECTIVE MARKETING. The Company intends to develop and
implement aggressive and innovative marketing and advertising plans to augment
each Affiliated Practice's existing referral and other marketing efforts.
Management believes that the podiatric industry has not taken advantage of the
gains that can be achieved through strategic direct and target marketing. In
particular, AMP plans to (i) target market to specific underserved market
segments, (ii) market and advertise in a manner designed to attract walk-in
patients for whom the DPMs would be the primary care provider for foot care,
(iii) market directly to payors in the managed care system, and (iv) develop and
market to payors disease-specific treatment programs for the early detection of
certain types of foot problems.
IMPLEMENTING COMPREHENSIVE FOOT CARE DELIVERY SYSTEMS. The Company plans
to make available ancillary care providers and their resources to work with DPMs
in individual practices within each Regional Group Practice. By making these
specialists and resources available to each Regional Group Practice, the Company
plans to create an integrated, comprehensive system of podiatric services that
management believes will exceed the capabilities of most traditional podiatric
practices operating on their own. The Company expects that making available
ancillary services and facilities, including, among others, ambulatory surgical
centers, anesthesiology, pathology, radiology, MRIs, EKGs, laboratory work,
pharmacy, physical history and exams, physical therapy, orthotics, pain
management, home care, diabetic wound care, specialty shoes and other retail
products, to its Affiliated Practices will promote better patient care and
provide patients with one-stop foot care services.
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GROWTH STRATEGY
Management believes the growth of the initial Affiliated Practices and the
development of new Affiliated Practices are key components of the future success
of the Company. Key elements of the Company's growth strategy include:
GROWING AFFILIATED PRACTICES. The Company will assist Affiliated Practices
in expansion through regionally-focused marketing and advertising and
improvements in operating efficiencies. The Company believes that such an
approach will increase the Affiliated Practices' market share and revenues. The
Company also intends to make available capital for practice expansion through
market research, site selection, office design, and marketing.
DEVELOPING ANCILLARY PROVIDER NETWORK. The Company intends to augment its
growth by adding a network of providers of ancillary products and services that
will complement the services provided by the Affiliated Practices. The Company
believes that, by acquiring or contracting with providers of ancillary services
on behalf of the Regional Group Practices, the Company will create a new
approach to the delivery of podiatric services and provide a menu of services
that is more comprehensive than that traditionally offered by individual
podiatric practices.
AFFILIATING WITH NEW PRACTICES. A core business strategy of the Company is
to affiliate with additional podiatric practices. Management believes that an
ample supply of candidates for podiatric practice affiliations exist among the
approximately 10,700 active podiatrists in the United States. The Company plans
to select additional practice affiliations from this pool based upon each
practice's location, size, historical profitability and growth, and reputation
for high quality care. Management believes that affiliation will be an
attractive option for many of these podiatrists because the Company intends to
(i) provide capital to open and integrate new offices into existing Affiliated
Practices, (ii) identify and recruit qualified DPMs for the Affiliated
Practices, (iii) design and offer business and operational, financial and
clinical systems for each Affiliated Practice, (iv) hire the necessary
administrative and non-physician personnel for each new Affiliated Practice, (v)
implement effective marketing and advertising strategies designed to help
increase each Affiliated Practice's market share and the number of new patients,
and (vi) reduce the time Affiliated Practices spend on administrative duties,
allowing them to focus on delivering quality patient care.
PRACTICE AFFILIATIONS
The Company has entered into definitive agreements, to be consummated
simultaneously with the closing of this Offering, to obtain certain operating
assets and receivables of or the stock of certain entities holding the assets of
the initial Affiliated Practices, which include 66 DPMs operating 89 offices
located in 7 states serving 57 cities. Management believes that the Affiliated
Practices are leading practices in their markets. The Affiliated Practices were
selected based upon a variety of factors, including location, size, historical
profitability and growth, and reputation for high quality care among local
consumers of podiatric services and within the podiatric services industry.
Management intends to capitalize on the reputations and relationships of the
Affiliated Practices and their DPMs to assist the Company in affiliating with
additional podiatric practices.
The aggregate consideration that will be paid by the Company to acquire the
operating assets, receivables or stock of the initial Affiliated Practices
consists of approximately (i) $11.5 million in cash (of which $4.7 million
represents payment for accounts receivable) and (ii) $22.4 million payable in
shares of Common Stock at the initial public offering price. The purchase prices
for the initial Affiliated Practices were determined by the practice's gross
revenue, growth potential, quality of patients, service delivery and depth of
presence in its local market. The Company will also assume certain indebtedness
of the initial Affiliated Practices and pursuant to the Ambulatory Surgery
Center Acquisitions totaling approximately $656,000. For a more detailed
discussion of amounts to be paid to and indebtedness assumed of each of the
initial Affiliated Practices, see "Certain Transactions."
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Upon consummation of the Transfers, the Company will provide management
services to the following Regional Group Practices:
<TABLE>
<CAPTION>
REGIONAL NUMBER OF NUMBER OF NUMBER OF
GROUP PRACTICE MARKET STATE PRACTICES PODIATRISTS OFFICES
- ------------------------------------- -------------- ---------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Atlanta.............................. Atlanta Georgia 2 5 7
Houston.............................. Houston Texas 16 22 33
Maryland............................. Hagerstown Maryland 4 8 3
Pennsylvania* -- -- 3
West Virginia* -- -- 1
Miami................................ Miami Florida 8 10 11
Middle Georgia....................... Macon Georgia 1 2 5
North Texas.......................... Amarillo Texas 1 1 1
Dallas Texas 5 7 8
Fort Worth Texas 4 4 3
South Texas.......................... San Antonio Texas 3 4 8
Brownsville Texas 1 1 1
St. Louis............................ St. Louis Missouri 1 2 5
-- -- --
Total........................... 46 66 89
== == ==
</TABLE>
- ------------
* One of the Affiliated Practices in Maryland has 3 offices in Pennsylvania and
another has an office in West Virginia.
The Company has also entered into a definitive agreement to acquire certain
assets of AnestheCare for approximately $4.5 million in cash. Additional
consideration of up to $1.5 million in cash and $500,000 payable in shares of
Common Stock valued at the initial public offering price will be held in escrow
and may be paid to the owners of AnestheCare pending AnestheCare's achievement
of certain performance targets over a three-year period beginning January 1,
1998. AnestheCare provides billing and management services to providers of
health care-related services to local hospitals and others.
SERVICES AND OPERATIONS
MANAGEMENT SERVICES
Simultaneous with the Offering, each Affiliated Practice will join a
Regional Group Practice which will, in turn, enter into a long-term Management
Agreement with the Company. Under the Management Agreement, the Company will
employ the Affiliated Practice's non-physician personnel, assume and enter into
leases for their facilities and provide services such as practice management,
information systems, marketing and negotiation of payor contracts.
The Company believes that its integrated care delivery network will give
the Regional Group Practices the ability to, among other things, reduce
overhead, engage in regional contracting with managed care payors, and expand
service offerings. Pursuant to the Management Agreements, the Company will
assist the Regional Group Practices in strategic planning, preparation of
operating budgets, and capital project analysis. The Company intends to
coordinate group purchasing of supplies, inventory, and insurance for the
practices. In addition, the Company will assist the Regional Group Practices in
physician recruitment by introducing physician candidates to the Regional Group
Practices and advising the Regional Group Practices in structuring employment
arrangements.
The Company also will provide or arrange for a variety of additional
services relating to the day-to-day non-medical operations of the practices,
including (i) management and monitoring each practice's patient billings,
invoicing, and accounts receivable collection by payor type, (ii) accounting,
payroll, legal services and records, and (iii) cash management and centralized
disbursements. These services are designed to reduce the amount of time
physicians must spend on administrative duties, thereby enabling the physicians
to dedicate more of their efforts to the delivery of health care. The Company's
anticipated capital resources and assistance in budgeting and capital project
analysis are designed to assist the Regional Group Practices in establishing
facilities to provide ancillary footcare services.
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As a result of the Transfers, the Company will employ the Affiliated
Practices' non-physician personnel. These non-physician personnel, along with
additional personnel at the Company's headquarters, will manage the day-to-day
non-medical operations of each of the Regional Group Practices by, among other
things, providing secretarial, bookkeeping, scheduling, and other routine
services. Under the Management Agreements, the Company will provide facilities
and equipment to the Regional Group Practices, and, to this end, the Company
intends to enter into new lease agreements or assume existing lease agreements
for the facilities and assets utilized by each of the Regional Group Practices.
REGIONAL GROUP PRACTICES
At the closing of the Transactions, the DPM owners of Affiliated Practices
in a geographic area will become members of a Regional Group Practice. Each
Regional Group Practice will be a professional limited liability company
composed only of physician members who also enter into Physician Engagement
Agreements with the Regional Group Practice. Each Regional Group Practice will
be under one provider number for Medicare/Medicaid purposes. The Regional Group
Practices serve two principal purposes. First, they are designed to allow the
Company and the Affiliated Practices to work together in compliance with the
"group practice" exemption under the Stark amendments to the Social Security
Act. Second, the Regional Group Practice structure is an important mechanism
that allows the Company to achieve its business plan, as the Regional Group
Practices act as focal points for best practices, peer review, regional
marketing, practice expansions and additions, and resource exchanges.
Within the Regional Group Practices, individual DPMs will retain the
integrity of their practice revenues and expenses within that Regional Group
Practice. In addition, Regional Group Practices will separately determine
certain budget and personnel matters and each will have its own board of
managers elected by a majority of its members. Members will be subject to
certain standards for admission and may also be expelled in certain
circumstances. The member interests in the Regional Group Practice will be
subject to restrictions on transferability. The DPMs are subject to certain
restrictions on their ability to compete with the Regional Group Practices and
must pay certain liquidated damages upon their breach and/or termination of
their Physician Engagement Agreement. See "-- Operative Agreements -- Physician
Engagement Agreements."
The Company will enter into a 40-year Management Agreement with each
Regional Group Practice and, together, will establish a Joint Planning Committee
to develop long-term strategic objectives and management policies for the
operation of the Regional Group Practice and to facilitate communication and
interaction.
MANAGEMENT INFORMATION SYSTEMS
A key element in AMP's business strategy is implementing and using
sophisticated management information systems. The Company has developed a
comprehensive information systems plan that integrates a financial information
system (Lawson Software) and a physician practice management system (Medic
Vision). The Company expects to have these systems operating at the time of the
Offering to perform billing and collection services for all Affiliated
Practices. The Company's hardware platform will consist of two IBM RS 6000
minicomputers, running the financial and practice management software. If one
system fails, the other is expected to be used for both software applications.
Complete hardware and software deployment of the systems to most of the
Company's Affiliated Practices is expected to be completed within approximately
90 days after the Offering.
Billing and collections for the Regional Group Practices' services,
including financial accounting, accounts payable, other cash disbursements and
cash management will be performed centrally at the Company's headquarters in
Houston. Most of the Affiliated Practices will be networked to a central site
for billing, collections, and scheduling, assuring continuous communication,
through dedicated communication lines, among the Affiliated Practices and the
Company.
Most of the Affiliated Practices will have real time data access in order
to analyze on-going operations. Monthly financial data will also be available
through the network for most of the Affiliated Practices. In addition, the
Company intends to develop a data repository that will consolidate operational,
clinical,
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financial and outcomes data that will be used to develop pricing strategies and
to better report to and negotiate with managed care payors.
MANAGED CARE
The Company believes that podiatry, like many other medical specialties,
has been slow to achieve the integration and consolidation needed for survival
in the era of managed care. The rise of managed care and its emphasis on cost
containment and risk-sharing has placed podiatry's practitioners and small to
medium-size physician groups at a significant disadvantage. These practices
typically lack the capital to expand, develop or acquire information systems and
purchase new technologies, which often improve quality of care, reduce costs,
and increase profitability. These individual practices also tend to lack the
cost accounting and quality management systems necessary to allow physicians to
enter into sophisticated risk-sharing contracts with private and third-party
payors. Additionally, small to medium-size practices often do not have formal
ties with other providers, nor do they have the ability to offer a variety of
medical services, thus reducing their competitive position relative to larger
provider organizations. These smaller practices often have higher operating
costs because overhead must be spread over a relatively small revenue base and
have minimal purchasing power compared with suppliers.
A significant and increasing portion of the net revenues of podiatric
practices are expected to be derived from managed care payors. Although rates
paid by managed care payors are generally lower than commercial rates, managed
care payors provide access to large patient volumes. AMP intends to assist the
Affiliated Practices to compete effectively in the managed care framework and to
take advantage of the managed care payors' large patient volumes. To this end,
the Company plans to (i) perform analyses of the Regional Group Practices'
markets to develop managed care contracting strategies, (ii) meet with principal
payors in each market to enhance relationships between the Regional Group
Practices and the payors, (iii) negotiate attractive arrangements with managed
care payors leveraging the Affiliated Practices' combined size, and (iv) market
to managed care payors by emphasizing the Company's disease-specific treatment
programs, treatment protocols, ancillary services and information-sharing
capabilities.
GOVERNANCE
The Company's current governance structure promotes physician participation
in the management of the Company. Four physicians or medical experts will serve
on the Company's Board of Directors. In addition, each Regional Group Practice
will have a Joint Planning Committee whose membership will include an equal
number of representatives from the Regional Group Practice and the Company. The
Joint Planning Committee will have responsibilities that include developing
long-term strategic objectives, developing practice expansion and payor
contracting guidelines, promoting practice efficiencies, recommending
significant capital expenditures, and facilitating communication and information
exchange between the Company and each of the Regional Group Practices.
Concurrent with the Offering, the Company will create a Medical Policy
Board that will identify and communicate the best medical practices and
protocols through all the Regional Group Practices. This Medical Policy Board,
which will consist primarily of physicians from Regional Group Practices, will
receive managerial and information systems and administrative support from the
Company and develop patient outcome statistics. The Medical Policy Board will
initially consist of Stanley R. Kalish D.P.M., F.A.C.F.S., Chairman, Lawrence B.
Harkless D.P.M., Vice Chairman, Bernard J. Hersh, D.P.M., Vice Chairman, and
Robert G. Frykberg, D.P.M., M.P.H., Vice Chairman. See "Management -- Medical
Policy Board."
The Company will not exercise any responsibility on behalf of affiliated
physicians that could be construed as affecting the practice of medicine.
Accordingly, the Company believes that its operations do not violate applicable
state laws relating to the corporate practice of medicine. Such laws and legal
doctrines have been subjected to only limited judicial and regulatory
interpretation and there can be no assurance that, if challenged, the Company
would be considered in compliance with all such laws and doctrines. A
determination in any state that the Company is engaged in the corporate practice
of medicine could render
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any Management Agreement between the Company and a Regional Group Practice
located in such state unenforceable or subject to modification in a manner
adverse to the Company.
OPERATIVE AGREEMENTS
PURCHASE AGREEMENTS
The Purchase Agreements provide that the Company will acquire, and each DPM
will transfer to AMP, certain operating assets and receivables or stock of each
of the Affiliated Practices and AnestheCare, as the case may be. If the
conditions to closing in the Purchase Agreements are satisfied, the Company's
affiliations with the Affiliated Practices and the acquisition of AnestheCare
are expected to be consummated simultaneously with the closing of the Offering.
SAB 48 TRANSACTIONS
The Purchase Agreements with respect to the initial Affiliated Practices
accounted for under SAB 48 have the terms set forth below.
CONSIDERATION. The consideration to be paid by the Company for each of
these initial Affiliated Practices is being determined by arms-length
negotiations between the Company and a representative of each Affiliated
Practice. The aggregate consideration to be paid by the Company for these
initial Affiliated Practices is approximately $27.5 million, including the
assumption of $156,000 in indebtedness. The consideration is based upon the
Affiliated Practice's gross revenue, growth potential, quality of patients and
service delivery, and depth of presence in its local market.
The consideration to be paid for the initial Affiliated Practices will be
paid by a combination of cash, Common Stock of the Company, and the assumption
of certain debt.
COVENANTS. Each DPM agrees under their relevant Purchase Agreement that,
for a period of five years, he or she will not compete with the business of the
Affiliated Practice within 20 miles of any location of the Affiliated Practice's
Regional Group Practice at which the DPM has practiced podiatric medicine in the
prior year. Each DPM also will agree that during this time period, he or she
will not induce or attempt to induce any employee of the Regional Group Practice
or any of its affiliates to terminate his or her employment with the Regional
Practice Group. Additionally, the parties to the Purchase Agreement agree not to
disclose each other's confidential information.
INDEMNIFICATION. Under the Purchase Agreements, each DPM (to the extent of
their proportionate interest in the Affiliated Practice) and each Affiliated
Practice will be obligated to indemnify the Company and its subsidiaries for (i)
a breach of any representation, warranty or covenant of the Affiliated Practice
or any owner, (ii) any violation (or alleged violation) by the DPMs, the
Affiliated Practice or past or present affiliates of state or federal laws
governing healthcare fraud and abuse (including, but not limited to, fraud and
abuse in the Medicare and Medicaid programs) occurring on or before the Closing
or any overpayment or obligation (or alleged overpayment or obligation) arising
out of or resulting from claims submitted to any third party payor (including
the Medicare and Medicaid programs) on or before the Closing, or (iii) any
liability under any federal or state securities law or regulation arising out of
or based upon any untrue statement or alleged untrue statement of a material
fact relating to any DPM, the Affiliated Practice (including its subsidiaries),
or their Regional Group Practice and provided to the Company or its counsel by
the Affiliated Practice or its DPMs.
The Company will be obligated under the Purchase Agreements to indemnify
DPMs and the Affiliated Practices for (i) a breach by the Company of any of its
representations, warranties or covenants in the Purchase Agreement and (ii) any
liability under any federal or state securities law or regulation arising out of
or based upon an untrue statement or alleged untrue statement of a material fact
relative to the Company contained in this Prospectus, any preliminary
prospectus, the Registration Statement or any amendment or supplement arising
out of or based upon any omission or alleged omission to state a material fact
necessary to make the statements not misleading.
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ACCOUNTING TREATMENT. As a result of the transactions contemplated by the
Purchase Agreements, the historical balance sheet information of the Affiliated
Practices, excluding the Kramer Transfer and the Ambulatory Surgery Center
Acquisitions acquired in the Transfers, will be combined on a historical cost
basis in accordance with generally accepted accounting principles as if the
Affiliated Practices had always been members of the same group. Cash payments
attributed to non-monetary assets made to DPMs of Affiliated Practices under the
Purchase Agreements will be accounted for as a cash dividend. The net monetary
assets will be acquired at their fair market value which is expected to be
approximately $4.3 million.
CONDITIONS TO CONSUMMATION. The Company's obligation to consummate the
Closing under the Purchase Agreements is subject to a variety of conditions,
including, but not limited to, the following: (i) the formation of the Regional
Group Practice; (ii) the execution by the Regional Group Practice of a
management services agreement; (iii) the delivery of documents of conveyance;
(iv) the acquisition by the Company of all licenses, consents and permits, and
the provision of all notices, necessary for the Company and the Affiliated
Practices to continue their operations; (v) the absence of any injunction or
other proceeding to prohibit the Closing; and (vi) the satisfactory completion
by the Company of its due diligence investigation of the Affiliated Practices
through the Closing.
CONDUCT OF BUSINESS PENDING CLOSING. Pursuant to each Purchase Agreement,
each Affiliated Practice and its DPMs will agree that, until the Closing, the
Affiliated Practice will operate its business only in the usual, regular and
ordinary course, consistent with past practices, and will restrict certain
activities except with the prior written consent of the Company.
TERMINATION. Each Purchase Agreement and the transactions contemplated
thereby may be terminated prior to the Closing by the DPM or the Company if the
acquisition has not been consummated due to the failure of the Offering made
hereby.
RESALES. The Company's Common Stock to be delivered to DPMs under the
Purchase Agreements will not be registered under the Securities Act or any state
securities act and will be offered and sold in reliance upon exemptions from the
registration requirements of the Securities Act and such laws. Thus, Common
Stock issued pursuant to the Purchase Agreements will not be readily
transferable immediately. See "Shares Eligible for Future Sale."
Pursuant to each Purchase Agreement, each DPM receiving Common Stock has
agreed not to sell or otherwise dispose of any Common Stock during a 180-day
period after the Closing without the prior written consent of the underwriters
of the Offering made hereby.
NON-SAB 48 TRANSACTIONS
The Transfers from the Affiliated Practices will include the Ambulatory
Surgery Center Acquisitions. The acquisition of these assets will not qualify
for treatment under SAB 48 and will be accounted for as purchases for
consideration of $4.1 million payable in shares of Common Stock at the initial
public offering price, $1.0 million in cash, and $500,000 of assumed
indebtedness. The Purchase Agreement with respect to the AnestheCare Acquisition
and the Kramer Transfer are substantially similar to the Purchase Agreements
with respect to the Affiliated Practices, except for the differences noted
below.
ANESTHECARE AGREEMENT
The aggregate consideration to be paid for AnestheCare's assets is $4.5
million in cash. Additional consideration of up to $1.5 million in cash and
$500,000 payable in shares of Common Stock valued at the initial public offering
price will be held in escrow and may be paid to the owners of AnestheCare
pending AnestheCare's achievement of certain performance targets over a
three-year period beginning January 1, 1998. Pursuant to employment agreements
with each of Roger Bigham and David LaGuardia (each of whom owns 50% of
AnestheCare), in the event of the termination of the employment of Mr. Bigham or
Mr. LaGuardia by the Company without "Cause" or by such person for "Good
Reason," his options will immediately vest and he will be entitled to receive
an amount equal to the greater of (i) his base salary and an annual target bonus
payable over the remainder of his contract term or (ii) two times his annual
salary
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plus an annual target bonus. In addition, such person would be entitled to
receive a lump sum payment equal to the total amount of any excise taxes to
which such person may become subject under Section 4999 of the Internal Revenue
Code.
KRAMER AGREEMENT
The aggregate consideration to be paid for Dr. Kramer's stock in the Kramer
Transfer is $1,404,000, all of which will be paid in cash. In addition, unlike
other Affiliated Practice Transfers, AMP will have no on-going relationship with
Dr. Kramer, including no post-closing Management Agreement or Physician
Engagement Agreement.
MANAGEMENT AGREEMENTS
The following summary of the Management Agreements is a general summary of
the form of Management Agreement. The Company expects to enter into similar
agreements with the other Affiliated Practices. The terms of the individual
Management Agreements into which the Company may enter in the future may vary
from the description below as a result of negotiations with individual practices
and the requirements of local regulations.
Pursuant to the Management Agreements, the Company, among other things,
will (i) act as the exclusive manager and administrator of non-physician
services relating to the operation of the Regional Group Practices, subject to
matters for which the Regional Group Practices maintain responsibility or which
are referred to the board of managers of the Regional Group Practices, (ii) bill
patients, insurance companies and other third party payors and collect, on
behalf of the Regional Group Practices, the fees for professional medical and
other services rendered, including goods and supplies sold by the Regional Group
Practices, (iii) provide or arrange for, as necessary, clerical, accounting,
purchasing, payroll, legal, bookkeeping and computer services and personnel,
information management, preparation of certain tax returns, printing, postage
and duplication services, and medical transcribing services, (iv) maintain
custody of substantially all files and records relating to the operation of the
Regional Group Practices and supervise preparation of patient medical records
(medical records of the Regional Group Practices are confidential and remain the
property of the Regional Group Practices), (v) provide and maintain facilities
for the Regional Group Practices, and provide the Regional Group Practices with
the use of equipment, furniture, fixtures, furnishings, and other personal
property, (vi) prepare, in consultation with the Joint Planning Committee and
the Regional Group Practices, all annual and capital operating budgets, (vii)
order and purchase inventory and supplies as reasonably requested by the
Regional Group Practices, (viii) implement, in consultation with the Joint
Planning Committee and the Regional Group Practices, national and local
marketing or advertising programs, (ix) employ or otherwise retain all necessary
management, administrative, clerical, secretarial, bookkeeping, accounting,
payroll, billing and collections, and other personnel, (x) provide financial and
business assistance in the negotiation, establishment, supervision and
maintenance of contracts and relationships with managed care, and other similar
providers and payors, (xi) assist each Regional Group Practice in fulfilling its
obligations to its patients to maintain a high quality of medical and
professional services, and (xii) provide such consulting and other advisory
services as requested by each Regional Group Practice in all areas of the
respective Regional Group Practice's business functions, including, without
limitation, financial planning, acquisition and expansion strategies,
development of long-term business objectives and other related matters. The
Company expects that most employees of the Affiliated Practices will be retained
after the consummation of this Offering.
Under the Management Agreements, the Regional Group Practices will retain
the responsibility for, among other things, (i) hiring, compensating,
supervising, training, evaluating and terminating its physician employees and
certain other medical professionals, (ii) ensuring that physicians have the
required licenses, credentials, approvals and other certifications needed to
perform their duties, (iii) complying with certain federal and state laws and
regulations applicable to the practice of medicine, and (iv) matters involving
its corporate governance, employees and similar internal matters, including but
not limited to preparation and the contents of reports to regulatory authorities
and distribution of professional fee income. In addition, the
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Regional Group Practices will maintain exclusive control of all aspects of the
practice of medicine and the delivery of medical services.
The Management Agreement provides for the establishment of a Joint Planning
Committee which will consist of three members designated by the Company and
three members designated by the respective Regional Group Practice. The Joint
Planning Committee will be responsible for developing long-term strategic
planning objectives and management policies for the overall operation of each
Regional Group Practice and will have the authority to (i) develop and assist
each Regional Group Practice in implementing both long-term strategic objectives
and short-term operating plans, (ii) prepare proposals and make recommendations
to the Board of Directors of AMP regarding significant capital expenditures,
contractual arrangements, capital improvement and expansion projects on behalf
of each Regional Group Practice, (iii) with assistance of the Company, prepare
the annual capital and operating budgets of each Regional Group Practice, (iv)
consider and make recommendations regarding grievances pertaining to matters not
specifically addressed in the Management Ageeement if such matters are referred
to it by each Regional Group Practice or the Company, (v) make recommendations
to each Regional Group Practice regarding the performance, number and type of
physicians required for the efficient operation of each Regional Group Practice,
and (vi) make decisions and recommendations regarding the business plan of each
Regional Group Practice.
Management fees will be paid monthly to the Company by each Regional Group
Practice based upon the Regional Group Practice's adjusted patient revenues (the
Regional Group Practice's billings less contractual adjustments, including
adjustments for special third-party payor and private pay arrangements, and
adjustments for bad debts). The Company will be responsible for collecting the
billings of the Regional Group Practices. The Company will retain a service fee
ranging from 9% to 25% (with an initial average of approximately 18%) of the
Regional Group Practice adjusted patient revenues and an amount equal to the
expenses of the Regional Group Practice incurred by AMP pursuant to the
Management Agreements. The service fee may be adjusted (without a floor or
ceiling on the adjustment) by the Joint Planning Committee of the Regional Group
Practice (composed of Company and Affiliated Practice representatives) upon the
request of either party to the Management Agreement in order to reflect the fair
value of the management services provided, based upon the nature and volume of
services required, the risks assumed by the Company and the total revenues of
the Regional Group Practice. The amount of the management service fees paid by
the Regional Group Practices to AMP will be directly affected by the amount of
patient revenue generated by each Regional Group Practice.
The Company will also generally be entitled to a fee of approximately 70%
of the adjusted ancillary revenues, net of related ancillary expenses, of each
Regional Group Practice. Ancillary revenues will be generated from services
provided by the Regional Practice Group to its patients that are ancillary to
DPM podiatric care (such as orthopedics, ambulatory care, physical therapy and
the like). In connection with the AnestheCare Acquisition, the Company will
retain the existing financial and fee arrangements of AnestheCare with its
clients (other than the Regional Group Practices). After the AnestheCare
Acquisition, services provided by AnestheCare to the Regional Group Practices
will be delivered on a discounted basis, and AMP will receive a fee of
approximately 70% of AnestheCare's adjusted ancillary revenues net of related
ancillary expenses.
The Management Agreements will have initial terms of 40 years, with
automatic extensions (unless specified notice is given) of additional ten-year
terms. The Management Agreements may be terminated by either party if the other
party (i) files a petition in bankruptcy or other similar events occur or (ii)
defaults on the performance of a material duty or obligation, which default
continues for a specified term after notice, and, in the case of the Regional
Group Practice, has also been approved by 80% of the equity holders of the
Regional Group Practice. In addition, the Company may terminate the agreement if
the Regional Group Practice or any physician (i) engages in conduct or is
formally accused of conduct that would subject his or her license to practice
medicine to be revoked or (ii) is otherwise disciplined by any licensing,
regulatory or professional entity or institution, if the result of any event
described in clause (i) or (ii) reasonably would be expected to materially
adversely affect the Regional Group Practice.
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During the term of the Management Agreement and for a period of one year
thereafter, the Regional Group Practices agree not to compete with the Company
in providing services similar to those provided by the Company or by any
Regional Group Practice anywhere generally within 20 miles of any location at
which any physician of the Regional Group Practice has practiced medicine in the
last year. Each Regional Group Practice also agrees that any and all
confidential and proprietary information acquired by the Regional Group Practice
during the term of the Management Agreement is the property of the Company and
agrees to hold in strictest confidence such confidential and proprietary
information. In addition, the Physician Engagement Agreement makes the Company a
third party beneficiary of the Physician Engagement Agreement including
covenants not to compete with and not to divulge confidential and properietary
information of the Company and the Regional Group Practice and liquidated
damages provisions therein. The Physician Engagement Agreements generally
require the Regional Group Practices to pursue enforcement of these provisions
or to assign to the Company the right to pursue enforcement. Furthermore, the
Company may require the Group Practice to pay liquidated damages owed by a
departing physician before those damages are collected by the Regional Group
Practice.
The Regional Group Practices will be responsible for obtaining professional
liability and worker's compensation insurance for the physicians and other
medical employees of the Regional Group Practices, as well as general liability
umbrella coverage. The Company is responsible for obtaining professional
liability and worker's compensation insurance for employees of the Company and
arranging for general liability and property insurance for the Regional Group
Practices.
The Management Agreements contain indemnification provisions pursuant to
which the Company will indemnify the Regional Group Practices for damages
resulting from negligent acts or omissions by the Company and/or its
stockholders, employees and/or subcontractors (other than the Regional Group
Practice and its employees). In addition, the Regional Group Practices will
indemnify the Company for any damages resulting from any negligent act or
omissions by the Regional Group Practice and/or shareholders, employees and/or
subcontractors (other than the Company or its employees) of the Regional Group
Practices, resulting from claims arising from the performance of medical
services or other intentional or negligent acts or omissions to act. The Company
also agrees to indemnify the Regional Group Practices in connection with its
failure to perform its obligations under the Management Agreement.
PHYSICIAN ENGAGEMENT AGREEMENTS
In addition to becoming a member of a Regional Group Practice, each DPM
will enter into a Physician Engagement Agreement with that Regional Group
Practice. Pursuant to the Physician Engagement Agreements, the Regional Group
Practices will engage the DPMs to provide certain medical services to patients
at the Group Practices offices. During the term of engagement, the DPM will
practice medicine only as a participant in the Regional Group Practice, will
practice medicine on a full-time basis at the Regional Group Practice offices,
and will perform such other duties as are reasonably assigned to and accepted by
the DPM including, among other things (i) providing "on duty" and "on call"
services on an equal rotating basis with other physician members of the Regional
Group Practice, (ii) keeping and maintaining on a timely basis appropriate
records relating to all professional services rendered and attending to all
billing reports, claims and correspondence required in connection with services
rendered, and (iii) complying with reasonable and necessary policies and
procedures adopted by the Regional Group Practice. In addition, the DPM will
continue to be licensed to practice medicine, will be or will become Board
certified, will participate in continuing medical education programs and
seminars, and will obtain and maintain an American Podiatric Medical Association
C.M.E. certificate, or its equivalent. The DPM will also take any action
reasonably required to obtain key man life insurance covering the DPM and naming
the Regional Group Practice and/or its management services provider as exclusive
beneficiaries.
Each Physician Engagement Agreement has an initial term of five years
(unless terminated as set forth below) and is automatically renewed for
successive two-year periods unless terminated in accordance the agreement terms
(the "Term"). Termination occurs upon (i) the death of the DPM, (ii) the
disability of the DPM, or (iii) at the Regional Group Practice's option for
"cause," which term includes (a) the failure of the DPM to perform the duties
required in a reasonably satisfactory manner, (b) material dishonesty, fraud
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or gross negligence by the DPM, (c) the conviction of the DPM of a felony or
other crime involving moral turpitude, (d) violation of the non-competition or
non-disclosure provisions of the Physician Engagement Agreement, (e) unlawful
use or other misuse of drugs or alcohol by the DPM, (f) failure by the DPM to
maintain DPM's license to practice, (g) failure to obtain and/or maintain Board
certification in podiatric medicine by an acceptable certifying organization
within two years, or (h) the termination, cancellation or revocation of the
medical malpractice insurance due to an act or omission by the DPM.
For a period beginning at the beginning of the Term and ending one year
after the end of the Term, the DPM may not, without consent of the Regional
Group Practice, own an entity engaged in a business the same as or substantially
similar to the business of a Regional Group Practice or in a business that
competes in any manner with the business of the Regional Group Practice and that
is generally located or intended to be located within a radius of 20 miles of
the offices of the Regional Group Practice at which the DPM has practiced
podiatry in the last year. In addition, the DPM may not, during the same period,
disclose or use any confidential material relating to any aspect of the business
of the Regional Group Practice or any information regarding business methods,
policies, procedures, techniques or trade secrets of the Regional Group
Practice, its affiliates or entities in which the Regional Group Practices have
an interest. The DPM may not act for any person or entity which employs or
contracts with any person or entity employed by or an agent or consultant to the
Regional Group Practice. Finally, in the event that the DPM terminates the
Physician Engagement Agreement, the DPM must pay liquidated damages in an amount
approximately equal to the twelve months of the Affiliated Practice expenses
attributable to the DPM and agreed to by the Company at the time the Purchase
Agreement was executed.
In addition, the Company has agreed to make available to each DPM owner a
loan in an amount equal to (i) an advance on the first monthly draw of such DPM,
(ii) the difference between 90% of the prior year's level of distributions and
the current period's level of distributions from the practice for the first
three months, and (iii) the difference between 80% of the prior year's level of
distribution and the current period's level of distribution for the second three
months following the Offering. The loan, if drawn, is repayable over two years
and bears a market rate of interest.
COMPETITION
The Company competes with many other entities to affiliate with podiatric
practices. Several companies that have established operating histories and
greater resources than the Company are pursuing the acquisition of the assets of
general and specialty practices and the management of such practices. Physician
practice management companies and some hospitals, clinics and HMOs engage in
activities similar to the activities of the Company. There can be no assurance
that the Company will be able to compete effectively with these competitors,
that additional competitors will not enter the market, or that this competition
will not make it more difficult to affiliate with, and to enter into agreements
to provide management services to, practices on terms beneficial to the Company.
Regional Group Practices will compete with other local podiatric care
service providers, as well as some managed care organizations. The Company
believes that changes in government and private reimbursement policies and other
factors have resulted in increased competition for consumers of medical
services. The Company believes that the cost, accessibility and quality of
services provided are the principal factors that affect competition. There can
be no assurance that the Regional Group Practices will be able to compete
effectively in the markets that they serve. The inability of the Regional Group
Practices to compete effectively would materially adversely affect the Company.
Further, the Regional Group Practices compete with other providers for
managed care podiatric care contracts. The Company believes that trends toward
managed care have resulted in increased competition for these contracts. Other
practices and management service organizations may have more experience than the
Regional Group Practices and the Company in obtaining these contracts. There can
be no assurance that the Company or the Regional Group Practices will be able to
successfully acquire sufficient managed care contracts to compete effectively in
the markets they serve. The inability of the Regional Group Practices to compete
effectively for these contracts could materially adversely affect the Company.
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GOVERNMENT REGULATION
The delivery of health care services has become one of the most highly
regulated professional and business endeavors in the United States. Both the
federal government and the individual state governments are responsible for
overseeing the activities of individuals and businesses engaged in the delivery
of health care services. Federal law and regulations are based primarily upon
the Medicare program and the Medicaid program, each of which is financed, at
least in part, with federal funds. State jurisdiction is based upon the state's
interest in regulating the quality of health care in the state, regardless of
the source of payment.
The Company believes its operations will be in material compliance with
applicable laws; however, the Company has not received or applied for a ruling
from any federal or state judicial or regulatory authority to this effect, and
many aspects of the Company's business operations have not been the subject of
state or federal regulatory interpretation.
FEDERAL LAW
The federal health care laws apply in any case in which a Regional Group
Practice is providing an item or service that is reimbursable under Medicare or
Medicaid or other federal health care programs or in which the Company is
claiming reimbursement from Medicare, Medicaid, other federal health care
programs or, in some instances, other third party payors on behalf of physicians
with whom the Company has a Management Agreement. The principal federal laws
include those that prohibit the filing of false or improper claims, those that
prohibit unlawful inducements for the referral of business reimbursable under
Medicare, Medicaid or other federal healthcare programs and those that prohibit
the provision of certain services by (a) a provider to a patient if the patient
was referred by a physician with which the provider has certain types of
financial relationships or (b) a provider who is excluded from Medicare,
Medicaid or other federal health care programs.
FALSE AND OTHER IMPROPER CLAIMS. The federal government is authorized to
impose criminal, civil and administrative penalties and/or exclusions on any
health care provider and its officers, directors, and in certain limited
circumstances, its owners that files a false claim or a pattern of claims based
on a code that the provider has reason to know will result in greater payments
than appropriate, claims for items or services not medically necessary, or for
the offer, solicitation, payment or receipt of anything of value (direct or
indirect, overt or covert, in cash or in kind), that is intended to induce the
referral of federal health care program patients or the ordering of items or
services reimbursable under those programs or the recommendation of, or the
arranging for, the provision of items or services reimbursable under Medicare
and Medicaid. Civil monetary penalties can also be imposed if a person
"arranges or contracts" with a person excluded from a federally funded health
care program, if they knew or should have known such person was excluded for
reimbursement from Medicare or Medicaid. Criminal penalties are also available
in the case of claims filed with private insurers if the government can show
that the claims constitute mail fraud, wire fraud, health care fraud, theft, or
embezzlement in connection with health care or false statements relating to
healthcare matters. While the criminal statutes are generally reserved for
instances evincing an obviously fraudulent intent, the criminal and
administrative penalty statutes are being applied by the government in an
increasingly broad range of circumstances. The government has taken the
position, for example, that a pattern of claiming reimbursement for unnecessary
services violates these statutes if the claimant should have known that the
services were unnecessary. The government has also taken the position that
claiming reimbursement for services that are substandard is a violation of these
statutes if the claimant should have known that the care was substandard. The
government, in cases of suspected fraud, can freeze the assets of a health care
provider and in the case of a federal health care offense can order the
forfeiture of assets that constitute or are derived from proceeds traceable to
the offense.
The Company believes that its billing activities on behalf of the Regional
Group Practices will be in material compliance with these laws, but there can be
no assurance that the Company's activities will not be challenged or scrutinized
by government authorities. A determination that the Company had violated these
laws could have a material adverse effect on the Company.
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ANTI-KICKBACK LAW. A federal law commonly known as the "Anti-Kickback
Law" prohibits the offer, solicitation, payment or receipt of anything of value
(direct or indirect, overt or covert, in cash or in kind), that is intended to
induce the referral of federal health care program patients or the ordering of
items or services reimbursable under those programs. The law also prohibits
remuneration that is intended to induce the recommendation of, or the arranging
for, the provision of items or services reimbursable under Medicare and
Medicaid. The law has been broadly interpreted by a number of courts to prohibit
remuneration that is offered or paid for otherwise legitimate purposes if the
circumstances show that one purpose of the arrangement is to induce referrals.
Even bona fide investment interests in a health care provider may be questioned
under the Anti-Kickback Law if the government concludes that the opportunity to
invest was offered as an inducement for referrals. The penalties for violations
of this law include criminal sanctions and exclusion from the federal health
care program.
In part to address concerns regarding the implementation of the
Anti-Kickback Law, the federal government in 1991 published regulations that
provide exceptions or "safe harbors" for certain transactions that will not be
deemed to violate the Anti-Kickback Law. Among the safe harbors included in the
regulations were provisions relating to the sale of physician practices,
management and personal services agreements and employee relationships.
Subsequently, regulations were published offering safe harbor protection to
additional activities, including referrals within group practices consisting of
active investors. Proposed amendments clarifying the existing safe harbor
regulations were published in 1994. If any of the proposed regulations are
ultimately adopted, they would result in substantive changes to existing
regulations. The failure of an activity to qualify under a safe harbor
provision, while potentially leading to greater regulatory scrutiny, does not
render the activity illegal.
There are several aspects of the Company's relationships with physicians to
which the Anti-Kickback Law may be relevant. In some instances, for example, the
government may construe some of the marketing and managed care contracting
activities of the Company as arranging for the referral of patients to the
physicians with whom the Company has a Management Agreement.
Although neither the investments in the Company by physicians nor the
Management Agreements between the Company and the Regional Group Practices
qualify for protection under the safe harbor regulations, the Company does not
believe that these activities fall within the type of activities the Anti-
Kickback Law was intended to prohibit. A determination that the Company had
violated the Anti-Kickback Law would have a material adverse effect on the
Company.
The Civil Monetary Penalties law also prohibits offering remuneration
prohibited under the anti-kickback laws and offering remuneration to an
individual eligible for Medicare or Medicaid benefits to induce that person to
order or receive any reimbursable item or service from a particular person.
Violations of the Civil Monetary Penalties law can result in the imposition of
significant civil penalties.
STARK SELF-REFERRAL LAW. The Stark Self-Referral Law (the "Stark Law")
prohibits a physician from referring a patient to a health care provider for
certain designated health services reimbursable by Medicare or Medicaid if the
physician has a direct or indirect financial relationship with that provider,
including an investment interest, a loan or debt relationship or a compensation
relationship. In addition to the conduct directly prohibited by the law, the
statute also prohibits schemes that are designed to obtain referrals indirectly
that cannot be made directly. The penalties for violating the law include (i) a
refund of any Medicare or Medicaid payments for services that resulted from an
unlawful referral, (ii) civil fines, and (iii) exclusion from the Medicare and
Medicaid programs.
The Company will provide or arrange for the provision of designated health
service under the Stark Law. Because the Company will provide management
services related to those designated health services provided by physicians
affiliated with the Regional Group Practices, the Company will likely be deemed
the provider of those services for purposes of the Stark Law and, accordingly,
the recipient of referrals from physicians affiliated with the Regional Group
Practices. In that event, such referrals will be permissible only if (i) the
financial arrangements under the Management Agreements with the Regional Group
Practices meet certain exceptions in the Stark Law and (ii) the ownership of
stock in the Company by the referring physicians meets certain investment
exceptions under the Stark Law. The Company believes that the
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financial arrangements under the Management Agreements qualify for applicable
exceptions under the Stark Law. However, there can be no assurance that a review
by courts or regulatory authorities would not result in a contrary
determination. In addition, the Company will not meet the Stark Law exception
related to investment interest until the Company's stockholders' equity exceeds
$75 million.
On January 9, 1998, HCFA published proposed Stark rules to incorporate the
provisions of the Stark Law into the Regulations with respect to designated
health services other than Clinical Laboratory Services. These regulations
provide, in the case of designated health services provided by a group practice,
that the overhead expenses of and the income from the practice must be
distributed according to methods that indicate that the practice is a unified
business and not based on each satellite office operating as if it were a
separate enterprise. While management believes that the overhead expenses of and
the income from each Regional Group Practice will be distributed according to
methods that indicate that the practice is a unified business, there can be no
assurance that the Regional Group Practices' distribution methodology will not
be challenged or scrutinized by governmental authorities. A determination that
the Regional Group Practices sharing of overhead expenses and income did not
comply with Stark would preclude referrals to certain designated health services
operated by the Company and could have a material adverse effect on the Company.
STATE LAW
STATE ANTI-KICKBACK LAWS. Many states have laws that prohibit payment of
kickbacks in return for the referral of patients. Some of these laws apply only
to services reimbursable under state Medicaid programs. However, a number of
these laws apply to all health care services in the state, regardless of the
source of payment for the service. Based on court and administrative
interpretation of federal anti-kickback laws, the Company believes that these
laws prohibit payments to referral sources where a purpose for payment is for
the referral. However, the laws in most states regarding kickbacks have been
subjected to limited judicial and regulatory interpretation. Therefore, no
assurances can be given that the Company's activities will be found to be in
compliance. Noncompliance with these laws could have an adverse effect upon the
Company and subject it and physicians affiliated with the Regional Group
Practices to penalties and sanctions.
STATE SELF-REFERRAL LAWS. A number of states have enacted self-referral
laws that are similar in purpose to the Stark Law but which impose different
restrictions. Some states, for example, only prohibit referrals when the
physician's financial relationship with a health care provider is based upon an
investment interest. Other state laws apply only to a limited number of
designated health services. Some states do not prohibit referrals but require
only that a patient be informed of the financial relationship before the
referral is made. The Company believes that its operations are in material
compliance with the self-referral law of the states in which the Regional Group
Practices are located.
FEE-SPLITTING LAWS. Many states prohibit a physician from splitting with a
referral source the fees generated from physician services. Other states have a
broader prohibition against any splitting of a physician's fees, regardless of
whether the other party is a referral source. In most states, it is not
considered to be fee-splitting when the payment made by the physician is
reasonable reimbursement for services rendered on the physician's behalf.
The Company will be reimbursed by physicians on whose behalf the Company
provides management services. The compensation provisions of the Management
Agreements have been designed to comply with applicable state laws relating to
fee-splitting. There can be no certainty, however, that if challenged, the
Company and its Regional Group Practices will be found to be in compliance with
each state's fee-splitting laws. A determination in any state that the Company
is engaged in any unlawful fee-splitting arrangement could render any service
Management Agreement between the Company and a Regional Group Practice located
in such state unenforceable or subject to modification in a manner adverse to
the Company.
A recent decision by the Florida State Medical Board held that payments by
a physician to a non-physician practice management company which were based on a
percentage of the physician's income constituted fee splitting. While the
Company's Management Agreements are not based upon a percentage of any
physician's net income, there can be no assurance that the compensation
methodology will not be
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challenged or scrutinized by governmental authorities. A determination that the
Company's compensation methodology did not comply with applicable fee splitting
could have a material adverse effect on the Company. It must, however, be noted
that the Florida decision is under appeal and no prediction can be made as to
the outcome of the appeal.
CORPORATE PRACTICE OF MEDICINE. Most states prohibit corporations from
engaging in the practice of medicine. Many of these state doctrines prohibit a
business corporation from employing a physician. States differ, however, with
respect to the extent to which a licensed physician can affiliate with corporate
entities for the delivery of medical services. Some states interpret the
"practice of medicine" broadly to include activities of corporations such as
the Company that can have an indirect impact on the practice of medicine, even
where the physician rendering the medical services is not an employee of the
corporation and the corporation exercises no discretion with respect to the
diagnosis or treatment of a particular patient.
INSURANCE LAWS. Laws in all states regulate the business of insurance and
the operation of HMOs. Many states also regulate the establishment and operation
of networks of health care providers. While these laws do not generally apply to
companies that provide management services to networks of physicians, there can
be no assurance that regulatory authorities of the states in which the Company
operates would not apply these laws to require licensure of the Company's
operations as an insurer, as an HMO or as a provider network. The Company
believes that its proposed operations are in compliance with these laws in the
states in which it currently does business, but there can be no assurance that
future interpretations of insurance and health care network laws by regulatory
authorities in these states or in the states into which the Company may expand
will not require licensure or a restructuring of some or all of the Company's
operations.
EMPLOYEES AND AFFILIATED PERSONS
Upon the consummation of the Offering, the Company expects to employ about
175 staff personnel of the initial Affiliated Practices and 25 people at the
corporate headquarters in Houston, Texas. AMP intends to provide benefits, to
include health, life, disability and 401(k) components, to the employees of the
Regional Group Practices and to make available, at the Regional Group Practices'
own expense, to the approximately 66 DPMs similar benefits. The Company intends
to outsource the personnel administration function as well as the benefits
component to a Professional Employer Organization and is currently in the
process of evaluating and selecting a provider. The Company feels this will
enable it to more efficiently manage human resource risks, implement the
management of a geographically diversified workforce more quickly, offer a more
comprehensive benefits packages, and realize overall cost efficiencies. As the
Company grows, it will continually reevaluate this decision, and may eventually
decide to hire additional employees to perform these functions. The Company
believes that its relationship with its employees is good. None of the Company's
employees have entered into a collective bargaining agreement.
LEGAL PROCEEDINGS AND INSURANCE
The Company is not party to any litigation. However, if the Regional Group
Practices become subject to litigation involving medical malpractice or any
other claims, the Company may become involved. The Company has acquired medical
malpractice insurance that will be effective upon consummation of the Offering.
See "Risk Factors -- Liability and Insurance Risks Associated with Podiatric
Practices." In addition, in connection with the purchase of the stock of
certain Affiliated Practices, the Company will assume certain liabilities of
such practices.
PROPERTIES
The Company leases approximately 16,000 square feet of office space at its
headquarters in Houston, Texas. In addition, in connection with the
Transactions, the Company will enter into leases for the facilities utilized by
the initial Affiliated Practices and AnestheCare, and will purchase certain real
estate from Dr. Kramer in Decatur, Georgia, as part of the Kramer Transfer.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The authorized number of directors on the Company's Board will be seven.
Immediately prior to the closing of the Offering, the Board will be divided into
three classes, as nearly equal in number as possible, with the initial term of
office of Class I directors to expire at the first annual meeting of
stockholders, the initial term of office of Class II directors to expire at the
second annual meeting of stockholders, and the initial term of office of Class
III directors to expire at the third annual meeting of stockholders, each class
of directors to hold office until their successors have been duly elected and
qualified. The Class III Directors will be Mr. McCrary, Mr. Bertsch, and Dr.
Kalish. The Class II Directors will be Dr. Hartley and Mr. Bace. The Class I
Directors will be Dr. Huge and another DPM to be elected by the holders of Class
B Common Stock.
The table below sets forth information with respect to those individuals
who are currently expected to serve as directors and executive officers of the
Company immediately following the Closing.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------------- --- ------------------------------------------------------------
<S> <C> <C>
Jack N. McCrary......................... 60 Chairman of the Board of Directors, President and Chief
Executive Officer
Wayne A. Bertsch........................ 55 Senior Vice President, Chief Financial Officer,
Treasurer and Director
Randy E. Johnson........................ 43 Senior Vice President -- Regional Operations Officer
Kenneth Arrowood........................ 59 Vice President -- Development
Roger Bigham............................ 46 Vice President of the Company and Chief Operating Officer of
AnestheCare
Joseph D. Grau.......................... 43 Vice President -- Regional Operations Officer
David LaGuardia......................... 37 Vice President -- Ancillary Support Services
Cecil R. Pickens........................ 33 Vice President and Chief Accounting Officer
John S. Bace, CFA....................... 66 Director
S.F. "Charley" Hartley, D.P.M.,
F.A.C.F.S............................. 53 Director
Donald S. Huge, M.D..................... 67 Director
Stanley R. Kalish, D.P.M., F.A.C.F.S.... 51 Director and Chairman, Medical Policy Board
</TABLE>
These directors and executive officers are considered "promoters" of the
Company. See "Certain Transactions."
JACK N. MCCRARY has been Chairman, President and Chief Executive Officer of
the Company since March 1996 and is a founder and organizer of the Company. Mr.
McCrary has been active in the executive management of entities involved in the
U.S. health care industry since 1970. Most recently, beginning in April 1984 he
co-founded five Houston, Texas medical facilities and has served as Vice
Chairman of Doctors Hospital Airline since April 1984, Vice Chairman and
President of Doctors Hospital East Loop since February 1987, Vice Chairman and
President of Kingwood Plaza Hospital since May 1990, Vice Chairman and President
of Plaza Rehabilitation Hospital at Kingwood since July 1991, and Vice Chairman
and President of Kingwood Medical Plaza since May 1990. Since 1995, these
organizations have been in the process of winding down/selling their operations
to Columbia/HCA. Prior to this, Mr. McCrary was with Lifemark Corporation as its
Chief Financial Officer, which included corporate development responsibilities.
During his years at Lifemark, Mr. McCrary served in the capacities of Director,
Member of the Executive Committee, Member of the Finance Committee, and
President of two of Lifemark's operating subsidiaries. Mr. McCrary has also been
responsible for developing 13 lithotripter centers, while serving as the
founding President of URO-Tech Corporation and has served as President of
Medi-Magnetics, Inc., a medical device company. Mr. McCrary also has served as
the Chairman of the Board of Trustees of the Texas A&M Research Foundation since
November 1989. Mr. McCrary received a B.S. in Mechanical Engineering from Texas
A&M University in 1959 and an M.B.A. from Harvard Graduate School of
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Business Administration in 1965 and completed the Executive Advanced Management
Program at the University of Texas in 1968.
WAYNE A. BERTSCH has been Senior Vice President, Chief Financial Officer
and Treasurer since October 1997. Mr. Bertsch was previously Vice
President -- Regional Operations Officer of the Company from August 1996 to
August 1997. From September 1995 to August 1996, Mr. Bertsch served as Business
Manager of Hermann Hospital Home Health, an agency based in a large,
not-for-profit, university-affiliated medical center. Mr. Bertsch was associated
with Medical Innovations, Inc. as a Director of its Hospital Home Care Division
from January 1993 to August 1995. He also served as Vice President-Finance for
Preferred Homecare, Inc. and a related entity, Preferred Pharmacy, Inc., from
April 1991 to December 1992. Mr. Bertsch has been active in the U.S. health care
industry in various capacities since 1970, including 14 years with Lifemark
Corporation where he had increasing roles of responsibility in the financial and
operational performance of Lifemark. He has been responsible for cash management
billing and collection of professional and management fees, and audited
financial and operational reporting, for partnerships and corporations. Mr.
Bertsch received a B.A. in Economics and Business Administration in 1965 and a
B.S. in Accounting in 1966 from Rice University and is a Certified Public
Accountant.
RANDY E. JOHNSON has been Senior Vice President-Regional Operations Officer
for the Regional Group Practices of Atlanta, Houston, Miami and South Texas
since October 1997 and was Vice President -- Regional Operations Officer of AMP
from August 1996 to August 1997. From February 1991 to August 1996, Mr. Johnson
held various senior operating management positions with Mid-America Health Care
Group and some of its affiliated hospital organizations, including serving as
the organizing and founding Administrator at Kingwood Plaza Rehabilitation
Hospital. He has held various senior management positions over entities involved
in the U.S. health care market since September 1979. Mr. Johnson received a
B.B.A. in Finance from the University of Texas in 1979 and an M.S. in Health
Service Administration from the University of Houston at Clear Lake in 1981.
KENNETH R. ARROWOOD joined the Company as Vice President-Development on
September 9, 1997. Prior to that he had been a consultant for the Company since
April 1997. Before joining the Company, Mr. Arrowood served for two years as the
Chief Executive Officer & Founder of Management Service Organization, Inc., a
physician practice management company. Prior to Management Services
Organization, Inc., Mr. Arrowood has served as the Chief Executive Officer &
Founder of Provider Management Services, Inc., an orthopedic, imaging and
physical therapy practice management company since 1989. Prior to 1989, Mr.
Arrowood served as the Chief Executive Officer & Founder for The Gains Group,
Inc., a physician recruiting and turn-key medical practice installation
consultant for hospitals from 1988 to 1989, and as Chief Executive Officer &
Founder for the Allenwood Group, Inc., a national executive recruitment and
Human Resource consulting firm from 1979 to 1986.
ROGER BIGHAM will serve as the Company's Vice President and as the Chief
Operating Officer of AnestheCare, Inc., which will become a wholly-owned
subsidiary of the Company upon its acquisition by the Company in connection with
the Offering. Mr. Bigham has been the President and CEO of Pyramid
Anesthesiology Group, Inc. and AnestheCare (collectively "AnestheCare") since
1984. In addition to serving as a certified registered nurse anesthetist, Mr.
Bigham has served as a clinical instructor at Mission Memorial Hospital from
1977-1982 and as a head of the Anesthetist Department for Humana Hospitals from
1984-1987. Mr. Bigham earned his Registered Nurse Associate Degree from Pima
College in Tucson, Arizona and in 1982 his B.S. in Nurse Anesthesiology at
Warren Wilson College in Swannanoa, North Carolina. Mr. Bigham is an active
member in the Anesthesia Administrators Assembly, the Ambulatory Surgery
Society, the Financial Management Society, the Healthcare Financial Management
Association, the American College of Healthcare Executives, and the American
Association of Nurse Anesthetists.
JOSEPH D. GRAU has served as the Vice President -- Regional Operations
Officer for the Regional Group Practices of North Texas, St. Louis, and Maryland
since October 1997. From February 1994 to the time of his joining the Company,
Mr. Grau was President, Southwest Region for Physician Management Group, Inc.
("Physician Management"). At Physician Management, Mr. Grau was responsible
for analyzing, evaluating, and providing creative solutions in connection with
his provision of practice management
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consultative services to numerous medical practices. From March 1989 to January
1994, Mr. Grau served as Vice President of Nix Healthcare System, a
multi-facility hospital management company. From April 1987 to February 1989,
Mr. Grau served as the Administrator of Willis-Knighton South Hospital, prior to
which Mr. Grau served from July 1985 to March 1987 as the Executive Director of
Riverside Community Hospital and Byrd Memorial Hospital, both hospitals being
owned by American Medical International, Inc. From March 1984 to July 1985, Mr.
Grau was the Administrator of Littlefield Medical Center. Mr. Grau has been
involved in healthcare since 1978. Mr. Grau received his B.A. in accounting in
1976 and his M.B.A. in 1979, both from Auburn University.
DAVID LAGUARDIA will join the Company upon the Offering as its Vice
President--Ancillary Support Services. In 1984, Mr. LaGuardia co-founded
AnestheCare, and has served as its Vice President and Chief Financial Officer
since its inception. In 1987, Mr. LaGuardia co-formed Professional Therapy
Service Incorporated, now Georgia Rehabilitation Corporation, Inc. and has
served as its President and Chairman since then. Mr. LaGuardia is a board
certified registered nurse anesthetist, having received his nurse anesthetist
certificate from Montgomery School of Anesthesia in Philadelphia in 1980 and his
board certification in 1983.
CECIL R. PICKENS has been the Company's Vice President and Chief Accounting
Officer since October 1997. From November 1995 to February 1997, Mr. Pickens
served as the Corporate Controller for American Ophthalmic, Inc., a physician
practice management company specializing in ophthalmology. Mr. Pickens'
responsibilities at American Ophthalmic included internal and external financial
reporting, budgeting and analysis, and the establishment of accounting policies
and procedures. Prior to American Ophthalmic, from May 1992 to October 1995, Mr.
Pickens was with OccuSystems, Inc., a physician practice management company,
specializing in occupational medicine, where he held the positions of Director
of Managed Care Information and Corporate Controller. From July 1986 to February
1992, Mr. Pickens was employed by KPMG Peat Marwick in various accounting
capacities resulting in his becoming an Audit Manager in 1991. Mr. Pickens
graduated from the University of Texas at Austin with a B.B.A. in accounting in
May 1986 and is a Certified Public Accountant.
JOHN S. BACE, CFA, has agreed to serve as a Director of the Company upon
consummation of the Offering. Mr. Bace has been a private investor since October
1994 and currently serves in the capacity of Chairman or Trustee of several
charitable trusts and foundations. Since 1994, Mr. Bace has taught at the
University of Texas Graduate School of Business. From 1976 until October 1994,
Mr. Bace served as Executive Vice President, Principal, and Director of Eagle
Management and Trust Company, an investment management firm with assets in
excess of $1 billion. Mr. Bace received his Masters of Business Administration
in 1959 from the University of Texas where he has for the last three years
served as Investment Counselor to the MBA Investment Fund, University of Texas
in Austin. Mr. Bace has been a member of the Association of Investment
Management and Research since 1970, and since 1974 has been a member of the
Institute of Chartered Financial Analysts.
S.F. "CHARLEY" HARTLEY, D.P.M., F.A.C.F.S. has agreed to become a
Director of the Company upon consummation of the Offering and has been a
practicing podiatrist in S.F. Hartley, D.P.M., P.C. since 1979. Dr. Hartley has
been a member of the Harris County Podiatry Association since 1979, having
served as its President in 1983-1984, has been a member of the Texas Podiatric
Medical Association since 1979, having served as its President in 1992-1993, has
been a member of the American Podiatry Medical Association since 1979, has
served as a Delegate of the American Podiatry Medical Association House of
Delegates since 1993 and, since 1987, has been a member of the Academy of
Podiatric Sports Medicine. Dr. Hartley graduated from the University of Houston
with a B.S. in Biology and from the Illinois College of Podiatric Medicine with
a Doctor of Podiatric Medicine. Dr. Hartley is Board Certified by the American
Board of Podiatric Surgery.
DONALD S. HUGE, M.D. has agreed to serve on the Board of Directors of AMP
upon consummation of the Offering. Dr. Huge has served as the National Medical
Director and Vice President of Chapman Schewe, Inc., a benefit consulting firm
since March 1997. From July 1995 to February 1997, he served as the Medical
Director for HMO Texas, where he was responsible for medical management,
utilization,
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<PAGE>
concurrent review and case management, quality assurance and quality
improvement. Dr. Huge served as Senior Medical Director for Sanus/NYL Care from
June 1993 to June 1995, and from March 1992 to May 1995 he worked with
MetLife/United where he served as both Network Director and Medical Director.
Prior to assuming his various medical directorship positions, Dr. Huge was a
practicing physician for 23 years. Dr. Huge has been a member of the American
College of Medical Quality since 1992 and served as its President from 1994 to
1996. Dr. Huge has served on the Board of Trustees of Park Plaza Hospital, and
the Visiting Nurses Association, and has served on the utilization committees of
Park Plaza Hospital, Hermann Hospital and Diagnostic Center Hospital. Dr. Huge
received his B.A. degree in 1953 from Southern Methodist University, Dallas,
Texas, and his Medical Degree from Baylor College of Medicine, Houston, Texas,
in 1957.
STANLEY R. KALISH, D.P.M., F.A.C.F.S. has agreed to become a Director of
the Company and the Chairman of the Medical Policy Board upon consummation of
the Offering. Dr. Kalish has been a practicing podiatrist in Atlanta Foot & Leg
Clinic, P.A. since 1974, is an accomplished author and lecturer and has designed
several surgical instruments. Dr. Kalish has been an active member and Diplomat
of the American Board of Podiatric Surgery since 1976, has been a Fellow of the
American College of Foot Surgery (F.A.C.F.S.) since 1976, has been a member of
the American College of Podiatrics and since 1980 has been a Fellow of the
American College of Podiatric Dermatology. Dr. Kalish graduated in 1967 with a
B.A. in Biology from Adelphi University and received his Doctor of Podiatric
Medicine in 1971 from the New York College of Podiatric Medicine.
MEDICAL POLICY BOARD
Concurrently with the Offering, the Company will create a Medical Policy
Board to identify and communicate the best medical practices and protocol. The
initial Medical Policy Board will consist of the following four members:
NAME AGE POSITION
- ---------------------------------------- --- ---------------
Stanley R. Kalish, D.P.M., F.A.C.F.S.... 51 Chairman
Lawrence B. Harkless, D.P.M............. 47 Vice Chairman
Bernard J. Hersh, D.P.M................. 62 Vice Chairman
Robert G. Frykberg, D.P.M., M.P.H....... 46 Vice Chairman
STANLEY R. KALISH, D.P.M., F.A.C.F.S. See "Management -- Directors and
Executive Officers."
LAWRENCE B. HARKLESS, D.P.M. will serve as a Vice Chairman on the Medical
Policy Board upon consummation of the Offering. Since September 1993, Dr.
Harkless has been a Professor in the Department of Orthopedics and a Director of
the Podiatry Residency Training Program (the "UT Program") at the University
of Texas Health Science Center at San Antonio. From September 1987 until
September 1993 he was a Clinical Professor and Director of the UT Program. Dr.
Harkless received his B.S. from California College of Podiatric Medicine in San
Francisco, California in 1973 and his D.P.M. from the same institution in 1975.
BERNARD J. HERSH, D.P.M. has agreed to serve as a Vice Chairman of the
Medical Policy Board upon consummation of the Offering. Dr. Hersh was National
President of the American Association of Hospital Podiatrists and has been
involved in the American Academy of Podiatric Sports Medicine and the Texas
Podiatric Medical Association, among other professional associations. Since
1959, Dr. Hersh has been in private practice in Bernard J. Hersh, D.P.M., a sole
proprietorship. Dr. Hersh received his D.P.M. in 1959 from Temple University
College of Podiatric Medicine.
ROBERT G. FRYKBERG, D.P.M., M.P.H. will serve as a Vice Chairman of the
Medical Policy Board upon consummation of the Offering. Since 1978, Dr. Frykberg
has been in private practice at Boston Foot Care Group. Since 1996, he has been
a Clinical Instructor in Surgery at Harvard Medical School. Dr. Frykberg
received his B.S. in Zoology from the University of Rhode Island in 1973, his
D.P.M. from the California College of Podiatric Medicine in 1976, and his M.P.H.
from Harvard University in 1994.
47
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BOARD OF DIRECTORS, MEDICAL POLICY BOARD AND COMMITTEES
DIRECTOR COMPENSATION
Following the closing of the Offering, it is anticipated that non-employee
directors of the Company will receive a fee of $2,000 for each meeting of the
Board attended in person and $500 for each Board meeting attended
telephonically. For each committee meeting not held in conjunction with a Board
meeting, each non-employee director will receive a fee of $1,000 for each such
meeting attended in person. All directors will be reimbursed for expenses
incurred in the performance of their duties. Each non-employee director will
receive a non-qualified option to purchase 5,000 shares of Common Stock
exercisable at the Offering price, upon being elected a director.
MEDICAL POLICY BOARD
Following the closing of the Offering, it is anticipated that those serving
in the capacity of Chairman or Vice Chairman of the Medical Policy Board will
receive a fee of $2,000 for each Medical Policy Board meeting attended in person
and $500 for each Medical Policy Board meeting attended telephonically. All
members of the Medical Policy Board will be reimbursed for expenses incurred in
the performance of their duties. Each member of the Medical Policy Board will
receive a non-qualified option to purchase 4,000 shares of Common Stock
exercisable at the Offering price, upon joining the Medical Policy Board.
EXECUTIVE COMMITTEE
Under the Company's Articles and Bylaws, the Board may by resolution
appoint from its membership, annually, an executive committee of two or more
directors, which shall include the Chief Executive Officer and the Chief
Financial Officer of the Company. The Board may designate in such resolution one
or more directors as alternate members of the Executive Committee, who may
replace any absent or disqualified member at any meeting of the committee. The
Executive Committee, during the intervals between meetings of the Board, will
have authority and power to act on behalf of the Board as provided in the
Bylaws. After the Offering, the initial members of the Executive Committee are
expected to be Messrs. McCrary and Bertsch.
OTHER COMMITTEES
The Board may, by resolution adopted by a majority of the authorized number
of directors, designate one or more other committees, each consisting of two or
more directors, to serve at the pleasure of the Board. The Board may designate
one or more directors as alternate members of any committee, who may replace any
absent member at any meeting of the committee. Any such committee shall have
authority to act in the manner and to the extent provided in the resolution of
the Board and may have all the authority of the Board, except with respect to
the limitations as set forth in the Bylaws.
Following the Closing, the Board is expected to have the following
committees, in addition to the Executive Committee, and the following respective
initial members (i) the Audit Committee (Mr. Bace and Dr. Huge), (ii) the
Finance and Strategic Planning Committee (Messrs. McCrary, Bertsch and one
independent director, and (iii) the Compensation Committee (Mr. McCrary, Mr.
Bace and Dr. Huge).
EXECUTIVE COMPENSATION
AMP has not conducted and will not conduct on-going non-developmental
business activities until the initial Affiliated Practice affiliations and the
Offering are complete. Until the Offering, AFC has paid the salaries of persons
who are executive officers and employees of AMP. Prior to the Offering, Jack N.
McCrary, Chairman, Chief Executive Officer and President of AMP, accrued salary
of $150,000 for each of the fiscal years ended December 31, 1996 and 1997. In
addition, Wayne A. Bertsch, Senior Vice President, Chief Financial Officer,
Treasurer and Director and Randy E. Johnson, Senior Vice President-Regional
Operation Officer were each paid salaries of $120,000 for the fiscal year ended
December 31, 1997. These salaries were incurred by AFC in connection with the
affiliations and will be assumed by AMP under the Reimbursement and Assumption
Agreement. Mr. McCrary's accrued salary for 1996 and 1997 will be paid with a
portion of the proceeds of the Offering and, in addition, Mr. McCrary has
received 52,500
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<PAGE>
membership interests of AFC. Other than Mr. McCrary, Mr. Bertsch and Mr. Johnson
there have been no executive officers who have earned $100,000 in any single
completed fiscal year since the Company's inception.
The Company has entered into employment agreements with Mr. McCrary, Wayne
A. Bertsch, Randy E. Johnson, Roger Bigham and David LaGuardia pursuant to which
these officers will be paid annual salaries of $300,000, $180,000, $180,000,
$150,000 and $150,000, respectively.
INCENTIVE AND NON-QUALIFIED STOCK OPTION PLAN
The Company has adopted the 1997 Incentive and Non-Qualified Stock Option
Plan (the "1997 Plan") to provide incentives to attract and retain directors,
officers, advisors, consultants and key employees. After the Offering, the 1997
Plan will be administered by the Company's Board of Directors or a committee
composed of members of the board (the "Plan Administrator"). Officers,
directors, employees of the Company, consultants and advisors to the Company are
eligible to receive awards under the 1997 Plan, at the Plan Administrator's
discretion.
Awards available under the 1997 Plan include: (i) Common Stock purchase
options; (ii) stock appreciation rights; (iii) restricted stock; (iv) deferred
stock; (v) performance shares and (vi) other stock-based awards. The Company has
reserved 1,157,098 of the shares of its Common Stock for granting of awards
under the 1997 Plan. Under the terms of the 1997 Plan, the Plan Administrator
retains discretion, subject to plan limits, to modify the terms of outstanding
awards and to reprice awards.
The Company has granted 464,500 options to purchase shares of Common Stock
upon consummation of the Offering at a purchase price equal to the initial
public offering price. Pursuant to their Employment Agreements (as defined
below), the Company has granted options to Messrs. McCrary, Bertsch, Johnson,
Bigham and LaGuardia under the 1997 Plan, representing the right to purchase
125,000, 65,000, 65,000, 15,000 and 15,000 shares of Common Stock, respectively.
PERFORMANCE BONUS PLAN
The Board has adopted the American Medical Providers, Inc. Executive
Officer Performance Bonus Plan (the "Performance Bonus Plan") covering
eligible officers of the Company. The Performance Bonus Plan will be
administered by the Compensation Committee, which each year, beginning on
January 1, 1998 will select the officers of the Company who will be eligible to
receive awards under the Performance Bonus Plan. Upon achievement by the Company
of certain targeted operating results or other performance goals, such as
operating income, pre-tax income or earnings per share, the Company will pay
performance bonuses, the aggregate amounts of which will be determined annually
based upon an objective formula. The Employment Agreements (as defined below)
provide for the payment of certain minimum bonuses upon the achievement of
targeted performance criteria under the Performance Bonus Plan. See
" -- Employment Agreements."
EMPLOYMENT AGREEMENTS
In connection with the Offering, Messrs. McCrary, Bertsch, Johnson, Bigham
and LaGuardia's employment agreements with AFC will be terminated and replaced
with new employment agreements (the "Employment Agreements") with the Company
described below.
These officers' Employment Agreements provide that they will serve in the
following capacities: Mr. McCrary as President, Chief Executive Officer,
Chairman of the Board and Chairman of the Executive Committee; Mr. Bertsch as
Senior Vice President, Chief Financial Officer and a Director and, for as long
as he is a Director, a member of the Executive Committee; Mr. Johnson as Sr.
Vice President -- Regional Operations Officer; Mr. Bigham as Vice President of
the Company and Chief Operating Officer of AnestheCare, Inc.; and Mr. LaGuardia
as Vice President -- Ancillary Support Services.
The Employment Agreement of Mr. McCrary will have an initial term of five
years, and each of the Employment Agreements of Messrs. Bertsch, Johnson, Bigham
and LaGuardia will have an initial term of three years. The Employment Agreement
of Mr. McCrary will be renewed automatically upon expiration of
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<PAGE>
its initial term and any subsequent five year term, unless the Company or Mr.
McCrary gives 12 months prior notice that such Agreement will not be renewed.
Upon expiration of their initial terms, each of the Employment Agreements of
Messrs. Bertsch, Johnson, Bigham and LaGuardia will be renewed automatically one
time only for two additional years, unless the Company or any of Messrs.
Bertsch, Johnson, Bigham and LaGuardia as applicable, gives 12 months prior
notice that such Agreement will not be renewed.
Under the Employment Agreements, each officer will be entitled to receive a
base salary and an annual bonus to be determined by the AMP Board of Directors
and will be entitled to participate in the stock option plans of the Company
that are generally available to executives of the Company. The initial base
salaries for Messrs. McCrary, Bertsch, Johnson, Bigham and LaGuardia under their
respective Employment Agreements are $300,000, $180,000, $180,000, $150,000 and
$150,000, respectively. The total number of shares of Common Stock of the
Company that will be permitted to be distributed under the 1997 Plan will be
1,157,098 shares. Of this total, pursuant to the Employment Agreements, the
Company has granted to Messrs. McCrary, Bertsch, Johnson, Bigham and LaGuardia
options under the 1997 Plan to purchase 125,000, 65,000, 65,000, 15,000 and
15,000 shares of Common Stock, respectively.
Each of Messrs. McCrary, Bertsch, Johnson, Bigham and LaGuardia is
prohibited from competing with the Company while employed by the Company. In
certain circumstances, each of Messrs. McCrary, Bertsch, Johnson, Bigham and
LaGuardia will be prohibited from competing for two years following termination
of his Employment Agreement during the initial term of his Employment Agreement
and for one year following termination during successive terms.
The Employment Agreement of Mr. McCrary cannot be terminated by the Company
without the prior approval of two-thirds of the Board. If Mr. McCrary is
terminated by the Company without "Cause" or resigns for "Good Reason" (each
as defined in his Employment Agreement), his outstanding options will
immediately vest and become exercisable and he will be entitled to receive a
lump sum payment equal to the greater of (i) his current base salary and annual
target bonus payable over the remainder of his contract term or (ii) 3.0 times
his current annual salary plus annual target bonus. If Messrs. Bertsch, Johnson,
Bigham or LaGuardia is terminated by the Company without "Cause" or by such
officer for "Good Reason" (each as defined in their respective Employment
Agreement), his respective outstanding options will immediately vest and become
exercisable and he will be entitled to receive a lump sum payment equal to the
greater of (i) his current base salary and annual target bonus payable over the
remainder of his contract term or (ii) two times his current annual salary plus
annual target bonus.
Upon termination of the employment of any of Messrs. McCrary, Bertsch,
Johnson, Bigham or LaGuardia by the Company without "Cause" or by such officer
for "Good Reason," such officer would be entitled to receive a lump sum
payment equal to the total amount of any excise taxes to which such officer may
become subject under Section 4999 of the Internal Revenue Code.
CERTAIN TRANSACTIONS
AFFILIATED PRACTICES
The consideration paid by the Company for the initial Affiliated Practices
is based upon the practices' gross revenue, growth potential, quality of
patients, location and service delivery and depth of presence in its local
market. All of the Transfers of the initial Affiliated Practices, except for the
Kramer Transfer and the Ambulatory Surgery Center Acquisitions, will be
accounted for by the Company under SAB 48, such that the non-monetary assets and
liabilities of these initial Affiliated Practices will be received by the
Company at the transferor's historical cost basis for accounting purposes. The
Company's management coordinated the valuation of these Affiliated Practices.
The methodology for valuing the non-monetary assets was primarily based upon a
multiple of the projected earning's contribution to AMP utilizing adjusted
historical financial information of the respective Affiliated Practices. Once
the total consideration was determined, the Affiliated Practices could elect to
receive a maximum of 25% in cash and the balance in shares of Common Stock
valued at the initial public offering price. The balance of net assets acquired
or net liabilities assumed did not weigh significantly in the allocation.
Appraisals of the practices were not
50
<PAGE>
obtained and if received would have no impact on the non-monetary transfers.
Monetary assets and liabilities, including billed and unbilled receivables and
credit balances, payables and certain miscellaneous accruals will either be
acquired by AMP at their fair market value or retained by the Affiliated
Practices, as agreed among the parties.
The AnestheCare Acquisition, the Kramer Transfer, the Ambulatory Surgery
Center Acquisitions, and all future practice affiliations will not be accounted
for under SAB 48. Instead these practice affiliations will be accounted for as
purchases at fair market value and are expected to result in purchase prices in
excess of net assets acquired (goodwill). Each owner DPM of the Affiliated
Practices and AnestheCare is considered a "promoter" of the Company. The
following table provides certain information concerning the Transfers:
<TABLE>
<CAPTION>
CONSIDERATION TO BE RECEIVED
-----------------------------------------------------
ASSETS TO BE CASH VALUE NUMBER OF DEBT
SAB 48 TRANSACTIONS(1) CONTRIBUTED(2) OF SHARES SHARES(3) CASH PAID(4) ASSUMED(4)
- ------------------------------------- -------------- ---------- --------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Louis M. Antahades, D.P.M............ $ 6,000 $ 41,324 3,757 $ 10,331 $ --
Stephan Bard, D.P.M.................. 28,218 122,919 11,174 53,572 --
Douglas M. Beek, D.P.M............... 21,600 299,735 27,249 141,716 --
David L. Blumfield, D.P.M.(5)........ 128,119 523,493 47,591 260,847 --
William B. Bradbury, D.P.M.(5)....... 62,318 122,645 11,150 82,539 --
Karen E. Brooks, D.P.M............... 119,469 336,862 30,624 154,140 --
David K. Cantor, D.P.M............... 91,345 375,946 34,177 173,981 --
Armida deBelvill, D.P.M.............. -- 80,652 7,332 20,163 --
Peter R. DeFrank, D.P.M.............. 17,108 206,115 18,738 93,200 --
Salvatore DeFrank, D.P.M............. 21,063 405,786 36,890 165,882 --
Kenrick J. Dennis, D.P.M............. 207,259 217,978 19,816 108,444 --
Stephen R. Densen, D.P.M............. 51,197 161,800 14,709 81,252 --
Laurence I. Dorman, D.P.M............ 6,323 145,102 13,191 72,277 --
Alan I. Ettinger, D.P.M.............. 24,554 172,956 15,723 77,174 --
Gerald I. Falke, D.P.M............... 177,929 724,420 65,856 306,806 --
Thomas S. Garrison, D.P.M............ 66,873 413,185 37,562 185,588 --
Norman W. Goldman, D.P.M............. 63,060 328,354 29,850 151,636 --
Anthony Halinski, D.P.M.............. 323,870 982,655 89,332 395,183 --
Todd Harrison, D.P.M................. 117,646 482,946 43,904 204,537 --
S.F. Hartley, D.P.M.................. 65,263 675,226 61,384 311,343 --
Dale S. Herman, D.P.M................ 227,228 309,197 28,109 150,429 --
Bernard J. Hersh, D.P.M.............. 225,605 501,275 45,570 224,125 --
Richard Hochman, D.P.M............... 22,717 98,095 8,918 52,906 --
Stanley R. Kalish, D.P.M.(6)......... 252,735 685,261 62,296 378,888 --
Michael W. Kendall, D.P.M............ 193,804 551,148 50,104 351,094 --
Kirk Koepsel, D.P.M.................. 66,872 413,185 37,562 185,588 --
Paul D. Leon, D.P.M.................. 21,465 250,558 22,778 106,806 --
Gregory L. Mangum, D.P.M.(5)......... 71,384 290,725 26,430 158,195 --
Bruce Miller, D.P.M.(5).............. 102,433 432,301 39,300 200,162 --
James E. Miller, D.P.M............... 74,770 93,260 8,478 53,940 --
Michael Mineo, D.P.M.(5)............. 128,119 523,493 47,591 260,847 --
Robert J. Morris, D.P.M.............. 63,447 121,539 11,049 120,385 --
Steven A. Moskowitz, D.P.M.(5)....... 127,402 484,944 44,086 234,417 --
Jeffrey R. Murray, D.P.M............. 28,566 519,187 47,199 267,882 --
Sherman Nagler, D.P.M.(5)............ 91,237 325,276 29,571 163,707 --
Robert G. Parker, D.P.M.(5).......... 181,471 324,522 29,502 169,290 56,000
Steven P. Richman, D.P.M............. 97,454 481,189 43,744 219,001 --
Donald E. Robinson, D.P.M............ 75,207 275,064 25,006 143,108 --
Mark R. Sands, D.P.M................. 163,897 822,300 74,755 367,588 --
Charles P. Sanicola, D.P.M........... 45,066 278,863 25,351 136,204 --
Jerry S. Silverman, D.P.M............ 180,865 394,267 35,842 106,422 100,000
Donald C. Stran, D.P.M............... 108,420 760,575 69,143 330,922 --
Barry M. Tuvel, D.P.M................ 62,037 471,119 42,829 211,706 --
George R. Vito, D.P.M................ 268,885 1,734,362 157,669 1,278,121 --
Richard A. Weissman, D.P.M........... 21,600 299,735 27,249 141,716 --
-------------- ---------- --------- ------------ ----------
Subtotal......................... $4,501,900 $18,261,539 1,660,140 $9,064,060 $156,000
-------------- ---------- --------- ------------ ----------
NON SAB 48 TRANSACTIONS
- -------------------------------------
Jerald N. Kramer, D.P.M.(7).......... $ 63,365 $ -- -- $1,404,000 $ --
Bellaire Surgicare, Inc.(5).......... 724,980 3,840,000 349,091 960,000 500,000
Clayton Outpatient Surgical Center,
Inc.(6)............................ 227,000 260,000 23,636 65,000 --
-------------- ---------- --------- ------------ ----------
Subtotal......................... $1,015,345 $4,100,000 372,727 $2,429,000 $500,000
-------------- ---------- --------- ------------ ----------
Total............................ $5,517,245 $22,361,539 2,032,867 $11,493,060 $656,000
============== ========== ========= ============ ==========
</TABLE>
(FOOTNOTES ON FOLLOWING PAGE)
51
<PAGE>
- ------------
(1) The DPMs who own the initial Affiliated Practices are considered
"promoters" for purposes of Rule 405 promulgated under the Securities Act
of 1933, as amended.
(2) Assets to be contributed include approximately $4.4 million of current
assets and $1.1 million of property and equipment.
(3) Assumes the midpoint of the range for the initial public offering price.
(4) Cash Paid includes consideration attributable to $4.3 million of monetary
assets acquired in the SAB 48 Transactions. Under SAB 48, the cash portion
of the purchase price attributable to the non-monetary assets of $4.7
million will be treated as a cash dividend to the DPM owners of the
Affiliated Practices.
(5) As part of the transfers of the assets of certain promoters, AMP will
acquire a 100% interest in Bellaire Surgicare, Inc., a free-standing
ambulatory center. This component of the transfers does not qualify for the
accounting treatment pursuant to SAB 48 and accordingly will be recorded as
a purchase pursuant to the requirements of APB16.
(6) Clayton Outpatient Surgical Center, Inc. is an ambulatory surgery center
being acquired as part of the transfers of Stanley R. Kalish, D.P.M. This
component of the transfers does not qualify for the accounting treatment
pursuant to SAB 48 and accordingly will be recorded as a purchase pursuant
to the requirements of APB 16.
(7) Although Dr. Kramer is considered a "promoter" under Rule 405 for
purposes of complying with certain SEC disclosure requirements, he is not
considered a "promoter" for purposes of SAB 48 and the Company's
affiliation with Dr. Kramer's practice will not be accounted for under SAB
48.
DISTRIBUTION OF CLASS B COMMON STOCK TO PROMOTERS PARTICIPATING IN AFC
FINANCINGS
Certain promoters of the Company have participated in financings of Ankle &
Foot Centers of America, LLC ("AFC") and own membership interests of AFC
directly or indirectly which were purchased in connection with such financings.
In addition, certain promoter members of management were issued membership
interests in AFC as founders of AFC or in consideration of contributions to AFC
as members of AFC's management. AFC issued membership interests to each of these
individuals in connection with AFC's ongoing efforts to fund the organization
and development of AMP.
Shares of AMP Class B Common Stock were issued to AFC as part of AFC's
formation efforts on behalf of AMP. About the time of the consummation of the
Offering, AFC will distribute these shares of Class B Common Stock to its
members. The number of shares distributable to each member will be based upon
the number of membership interests such member holds. Such AFC investors
invested in AFC in order to ultimately obtain an ownership interest in AMP. Upon
consummation of the Offering, there will be no business purpose to AFC
continuing to hold shares of AMP and so such shares will be distributed to
members of AFC. The following lists the approximate number of shares
distributable to these promoters:
DISTRIBUTABLE SHARES
OF CASH VALUE
PROMOTERS CLASS B COMMON STOCK OF CLASS B
- ------------------------- --------------------- ----------
Jack N. McCrary.......... 45,354 $ 498,894
John S. Bace (1)......... 11,964 131,604
Wayne A. Bertsch......... 2,991 32,901
S. F. Hartley, D.P.M..... 15,443 169,873
Randy Johnson............ 598 6,578
Stanley R. Kalish,
D.P.M.................... 21,426 235,686
David LaGuardia.......... 29,909 328,999
Sherman Nagler, D.P.M.... 5,982 65,802
Robert G. Parker,
D.P.M.................... 11,964 131,604
Steven P. Richman,
D.P.M.................... 5,982 65,802
Jerry S. Silverman,
D.P.M.................... 5,982 65,802
Texas Podiatry
Group-Houston (2)........ 11,964 131,604
George R. Vito, D.P.M.... 5,982 65,802
Bellaire Surgicare, IPA
(3)...................... 11,964 131,604
Bay Area Podiatry (4).... 8,973 98,703
Thomas S. Garrison,
D.P.M.................... 2,991 32,901
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
52
<PAGE>
- ------------
(1) Membership interests were originally issued to J.M. Partners, Ltd., an
affiliate of John S. Bace. Subsequently, J.M. Partners, Ltd. transferred
its membership interests to Mr. Bace and trusts controlled by Mr. Bace.
(2) Drs. Dennis, Garrison, Hartley, Koepsel and Parker are among the principals
of Texas Podiatry Group-Houston and are owner DPMs involved in the
Transfers.
(3) Drs. Blumfield, Bradbury, Mangun, Bruce Miller, Mineo, Moskowitz and Parker
are among the principals of Bellaire Surgicare, IPA and are owner DPMs
involved in the Transfers.
(4) Drs. Garrison and Koepsel are among the principals of Bay Area Podiatry
Association and are owner DPMs involved in the Transfers.
SEED CAPITAL FINANCING TRANSACTION WITH PROMOTERS
Of the promoters discussed above under the caption "-- Distribution of
Class B Common Stock to Promoters Participating in AFC Financings," certain of
such promoter owner DPMs from whom the Company is acquiring assets or stock in
connection with the Transfers and certain members of management own membership
interests of AFC directly or indirectly purchased in connection with an early
seed capital financing transaction (the "Seed Capital Financing"). As
described above, about the time of the consummation of the Offering, AFC will
distribute shares of Class B Common Stock it currently holds to its members,
including such promoters.
After giving effect to the consummation of the Stock Split, the maximum
number of shares of Class B Common Stock distributable to these promoters, in
connection with the Seed Capital Financing, totaled 171,084 shares. In
connection with the Seed Capital Financing, such promoters were given the option
of exchanging one-seventh of such shares of Class B Common Stock distributable
to them for one-half of the amount loaned to AFC by such promoter. The following
lists the approximate number of shares distributable to each of the promoters or
their related entities, in connection with the Seed Capital Financing, and the
amount each promoter or entity loaned to AFC:
DISTRIBUTABLE SHARES
OF
CLASS B COMMON STOCK
PURSUANT TO
SEED CAPITAL LOAN
PROMOTER OR ENTITY FINANCING AMOUNT
- ------------------------------------- --------------------- --------
Jack N. McCrary...................... 35,892 (1)
John S. Bace (2)..................... 11,964 $ 95,000
David LaGuardia...................... 29,909 237,500
Randy Johnson........................ 598 4,750
Wayne A. Bertsch..................... 2,991 23,750
Stanley R. Kalish, D.P.M............. 11,964 95,000
S. F. Hartley, D.P.M................. 5,982 47,500
Sherman Nagler, D.P.M................ 5,982 47,500
Robert G. Parker, D.P.M.............. 11,964 95,000
Steven P. Richman, D.P.M............. 5,982 47,500
Jerry S. Silverman, D.P.M............ 5,982 47,500
Texas Podiatry Group-Houston (3)..... 11,964 95,000
George R. Vito, D.P.M................ 5,982 47,500
Bellaire Surgicare, IPA (4).......... 11,964 95,000
Bay Area Podiatry (5)................ 8,973 71,250
Thomas S. Garrison, D.P.M............ 2,991 23,750
- ------------
(1) Mr. McCrary's membership interest in AFC was issued to him in exchange for
his agreement to defer compensation of $300,000 until successful completion
of the Offering. See "-- Deferred Salary Payment for Promoter Officer."
(2) Membership interests were originally issued to J. M. Partners, Ltd., an
affiliate of John S. Bace. Subsequently, J. M. Partners, Ltd. transferred
its membership interests to Mr. Bace and trusts controlled by Mr. Bace.
53
<PAGE>
(3) Drs. Dennis Garrison, Hartley, Koepsel and Parker are among the principals
of Texas Podiatry Group-Houston and are owner DPMs involved in the
Transfers.
(4) Drs. Blumfield, Bradbury Mangum, Bruce Miller, Mineo, Moskowitz and Parker
are among the principals of Bellaire Surgicare, IPA and are owner DPMs
involved in the Transfers.
(5) Drs. Garrison and Koepsel are among the principals of Bay Area Podiatry
Association and are owner DPMs involved in the Transfers.
PROMOTER MANAGEMENT AND DIRECTOR PARTICIPATION IN BRIDGE FINANCING
During the first quarter of 1998, AFC completed a financing consisting of
15 units in AFC (the "AFC Units") for $1,500,000, representing $1,425,000 in
non-interest bearing loans and $75,000 representing 25,000 membership interests
in AFC to fund certain expenses on behalf of AMP, in connection with the
Offering (the "Bridge Financing"). The Bridge Financing provided for the loans
to be repaid by AFC from funds it will receive from the Offering. Additionally,
AFC is required to repurchase each of the 15 units in AFC for $71,667 in cash.
In connection with the Offering, each investor was to be given the opportunity
to purchase $71,667 worth of Common Stock offered in the Offering valued at the
initial public offering price. Upon the closing of the Offering, AMP will assume
this obligation of AFC in satisfaction of amounts due to AFC. The Company and
AFC has offered to rescind the investment of the investors in the Bridge
Financing and the opportunity to purchase Common Stock at the initial offering
price. See "Description of Capital Stock -- Units Rescission Offer."
Certain members of management and directors have participated in this
financing by loaning funds to AFC and making such equity investments. The
following lists the promoter who is an officer or director and made such
investment in AFC, the equity investment made, the amount of the loan to be
repaid, and the additional amount of cash (or cash value of the shares of Common
Stock) to be received by such persons upon the repurchase by AFC of the
membership units:
EQUITY LOAN EQUITY
OFFICER/DIRECTOR INVESTMENT AMOUNT REDEMPTION
- ------------------------------------- ----------- ------- -----------
Jack N. McCrary...................... $ 5,000 $95,000 $71,667
Wayne A. Bertsch(1).................. 5,000 95,000 71,667
John S. Bace, CFA.................... 5,000 95,000 71,667
George Vito.......................... 5,000 95,000 71,667
- ------------
(1) Of this investment, 20% was invested by Mr. Bertsch directly and the
remaining 80% was invested by persons or entities related to Mr. Bertsch,
with respect to which Mr. Bertsch expressly disclaims any beneficial
ownership.
REIMBURSEMENT OF AFC EXPENSES BY THE COMPANY
Pursuant to the Reimbursement and Assumption Agreement between AFC and the
Company, the Company has agreed to reimburse AFC approximately $5.3 million
(including any amounts payable pursuant to the Units Rescission Offer) for
expenses, debt and interest incurred by AFC relating to AMP's organizational and
development costs and working capital in connection with the Transfers and the
Offering. AFC owns, prior to the Offering, 56.3% of the outstanding voting
securities of the Company. AFC will provide AMP with assets upon consummation of
the Offering including the assets necessary for certain of AMP's operations
after the completion of the Transactions and primarily including computer
equipment, furniture and office equipment. These assets will be acquired by AMP
with a portion of the proceeds of the Offering at AFC's historical cost basis of
approximately $400,000, which method was approved by the management of both AFC
and AMP.
In addition, AMP will reimburse AFC for the Company's organizational and
affiliation costs incurred by AFC on behalf of AMP. These costs include costs
associated with the Offering consisting principally of professional fees and
expenses which have been or will be paid to AFC's and the Company's attorneys
and independent public accountants, aggregating approximately $4.3 million, as
well as salaries of AFC employees and general office expenses. Those items paid
by AFC on behalf of AMP will be reimbursed with a portion of the proceeds of the
Offering at the cost originally incurred by AFC, which was the then fair market
value of the service provided or property leased. This method for determining
the amount to be reimbursed was approved by management of the Company and AFC.
See "Use of Proceeds."
54
<PAGE>
ACQUISITION OF PRACTICES OF FUTURE MEMBERS OF BOARD AND OFFICERS
The Company is acquiring practices of certain promoters who will be members
of the Company's Board of Directors or executive officers of the Company upon
consummation of the Offering. The Company will acquire the assets and stock of
the practices of S.F. Hartley, D.P.M. and Stanley Kalish, D.P.M., each of whom
will become a member of the Company's Board of Directors upon consummation of
the Offering. Dr. Kalish is also the Chairman of the Company's Medical Policy
Board.
In addition, David LaGuardia and Roger Bigham, both of whom are executive
officers of AMP, each own 50% of AnestheCare. Pursuant to the AnestheCare
Acquisition, Messrs. LaGuardia and Bigham will each receive (i) $2.25 million in
cash and (ii) additional consideration of up to $750,000 in cash and $250,000
payable in shares of Common Stock (valued at the initial public offering price),
which will be held in escrow and may be paid to each pending AnestheCare's
achievement of certain performance targets over a three-year period beginning
January 1, 1998, in exchange for the assets of AnestheCare. The purchase price
of AnestheCare was determined by the Company's management based on a multiple of
the operating income of AnestheCare for the most recent twelve month period. The
AnestheCare Acquisition will not be accounted for under SAB No. 48. Instead,
this transaction will be accounted for as a purchase at fair market value, as
agreed among the parties.
CERTAIN LEASE ARRANGEMENTS WITH PROMOTER OFFICER
The Company currently occupies corporate offices consisting of 16,000
square feet of office space located at 3555 Timmons Lane, Houston, Texas. The
original lease for 7,544 square feet of such space between Mid-America
Hospitals, Inc., ("Mid-America") and M & J Wilkow, Ltd., as prime landlord
(subsequently assigned to Timmons Texas, Ltd. ("Landlord")), was originally
dated November 14, 1988, was amended by Amendment of Lease dated May 10, 1994,
and a Second Amendment of Lease dated February 22, 1995, (collectively the Prime
Lease, the Amendment of Lease and the Second Amendment of Lease being referred
to as the "Lease"). Pursuant to an Assignments of Lease entered into on
December 17, 1997 by and between Mid-America, as Assignor, Landlord AFC and the
Company as Assignees, Mid-America assigned its rights to lease such corporate
offices to AFC as of December 1, 1997 and AFC agreed to assign its rights to the
lease to the Company upon the closing of the Offering. Jack N. McCrary, the
Company's Chairman, President and Chief Executive Officer and a promoter of the
Company, founded and served as Vice Chairman and President of Mid-America. The
Lease currently expires March 31, 2000, and requires a monthly base rental of
$7,060.
DEFERRED SALARY PAYMENT FOR PROMOTER OFFICER
Mr. McCrary has served as the Director, President and Chief Executive
Officer of AFC and is a promoter of the Company. As such, he has managed and
supervised the organizational efforts of AFC. Mr. McCrary has agreed to accept
deferred compensation of $300,000 payable upon successful completion of the
Offering. In exchange for Mr. McCrary agreeing to defer his compensation earned
prior to the Offering, Mr. McCrary has received 52,500 membership interests of
AFC's outstanding and issued membership interests.
CONSULTING ARRANGEMENTS WITH CERTAIN PROMOTER DPMS
Drs. Garrison and Dennis, from whom the Company is acquiring assets in
connection with the Transfers, have entered into consulting arrangements with
AFC. Pursuant to his consulting agreement, Dr. Garrison will be paid
approximately $4,000 per month over the eighteen months following the IPO and
Dr. Dennis will be paid approximately $1,750 per month over the same period.
Both agreements are cancelable by either party with 60 days notice.
55
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information as of February 17, 1998
regarding the beneficial ownership of the Company's Common Stock and Class B
Common Stock and as adjusted to reflect the sale of the shares offered pursuant
to this Prospectus, by (i) each person known to the Company to own beneficially
more than 5% of the Company's Common Stock and Class B Common Stock, (ii) each
Named Executive Officer of the Company, (iii) each director of the Company, and
(iv) all directors, nominees and executive officers as a group.
<TABLE>
<CAPTION>
PERCENT
OF
PERCENT OF SHARES OF COMMON
CLASS B COMMON STOCK STOCK
SHARES OF COMMON STOCK BENEFICIALLY BENEFICIALLY
CLASS B BENEFICIALLY OWNED OWNED OWNED
COMMON STOCK ----------------------- ----------------------- --------
BENEFICIALLY PRIOR TO AFTER PRIOR TO AFTER PRIOR TO
NAME OF BENEFICIAL OWNER OWNED(1)(2) OFFERING(2) OFFERING OFFERING OFFERING(3) OFFERING
- ---------------------------------------- ------------ ----------- -------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Ankle & Foot Centers of America,
LLC(4)................................ 365,625 56.3% 56.3 % -- -- --
John S. Bace, CFA(5).................... 11,960 1.8 1.8 -- -- --
Wayne A. Bertsch........................ 21,028 3.2 3.2 -- -- --
S. F. Hartley, D.P.M., F.A.C.F.S.(6).... 15,438 2.4 2.4 -- 61,384 --
Donald S. Huge, M.D.(7)................. -- * * -- -- --
Randy Johnson........................... 18,623 2.9 2.9 -- -- --
Stanley Kalish, D.P.M., F.A.C.F.S.(8)... 21,418 3.3 3.3 -- 85,932 --
Jack N. McCrary......................... 256,588 39.5 39.5 -- -- --
All Directors and Executive Officers as
a Group............................... 381,518 58.7 58.7 -- 147,316 --
</TABLE>
AFTER
NAME OF BENEFICIAL OWNER OFFERING(3)
- ---------------------------------------- -----------
Ankle & Foot Centers of America,
LLC(4)................................ --
John S. Bace, CFA(5).................... --
Wayne A. Bertsch........................ --
S. F. Hartley, D.P.M., F.A.C.F.S.(6).... 1.1%
Donald S. Huge, M.D.(7)................. --
Randy Johnson........................... --
Stanley Kalish, D.P.M., F.A.C.F.S.(8)... 1.5
Jack N. McCrary......................... --
All Directors and Executive Officers as
a Group............................... 2.5
- ------------
* Less than one percent.
(1) Unless otherwise indicated, each of the individual stockholders listed above
has, through the Offering date, granted all of his or her voting power with
respect to the shares of Common Stock or Class B Common Stock beneficially
owned by such stockholder to Jack N. McCrary. Shares of Common Stock subject
to options exercisable within 60 days, of which there are none, would be
deemed outstanding for purposes of computing the percentage of ownership of
the holder. The address of all persons listed except for Mr. Bace, and Drs.
Hartley, Huge and Kalish is 3555 Timmons Lane, Suite 1550, Houston, Texas
77027.
(2) The shares of Class B Common Stock listed as beneficially owned by each
stockholder assumes the distribution of AMP shares held by AFC to its
respective members in accordance with the member ownership percentages. The
following table lists the appropriate number of shares and percent of Class
B Common Stock of the Company giving effect to the Stock Split,
distributable by AFC to the named Principal Stockholders.
SHARES OF PERCENT OF
CLASS B CLASS B
COMMON STOCK COMMON STOCK
------------ ------------
John S. Bace, CFA.................... 11,960 1.8%
Wayne A. Bertsch..................... 2,990 0.5%
S.F. Hartley, D.P.M., F.A.C.F.S...... 15,438 2.4%
Donald S. Huge, M.D.................. -- --
Randy Johnson........................ 585 0.1%
Stanley Kalish, D.P.M., F.A.C.F.S.... 21,418 3.3%
Jack N. McCrary...................... 45,338 7.0%
All Directors and Executive Officers
as a Group......................... 127,693 19.6%
(3) Assumes the mid-point of the initial offering price range.
(4) Messrs. Bace, Bertsch, Johnson and McCrary and Drs. Hartley and Kalish are
investors in and owners of AFC and will be entitled to distribution of the
Company's Class B Common Stock held by AFC in proportion to their ownership
of membership interests. See footnote number 2 above.
(5) The business address of Mr. Bace is 3730 Del Monte, Houston, Texas 77019.
(6) The business address of Dr. Hartley is 112 W. Pasadena Blvd., Deer Park,
Texas 77536. Dr. Hartley is an owner DPM of one of the Affiliated Practices
and will, upon consummation of the transactions, receive Common Stock having
an equivalent value of $675,226 valued at the Offering price.
(7) Dr. Huge's business address is 1177 W. Loop South, Suite 700, Houston, Texas
77027.
(8) Dr. Kalish's business address is 6911 Tara Blvd., Jonesboro, GA 30236. Dr.
Kalish is an owner DPM of one of the Affiliated Practices and will receive
Common Stock having an equivalent value of $945,261 valued at the Offering
price.
56
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The Company has authorized 20,000,000 shares of Class A Common Stock, $.001
par value per share ("Common Stock"), 1,000,000 shares of Class B Common
Stock, par value $.001 per share ("Class B Common Stock"), and 20,000,000
shares of preferred stock, $.001 par value per share. As of February 17, 1998,
no shares of Common Stock or Preferred Stock were issued and outstanding and
650,000 shares of Class B Common Stock were outstanding and held of record by
fourteen stockholders.
COMMON STOCK AND CLASS B COMMON STOCK
Upon consummation of the Offering, holders of the Class B Common Stock will
have the ability to elect as a class one member of the Board of Directors and
the holders of the Common Stock will have the ability to elect as a class all
other members of the Board of Directors. The Common Stock and Class B Common
Stock possess ordinary voting rights and vote together as a single class in
respect of all other corporate matters, and, in connection therewith, holders of
shares of Common Stock are entitled to one vote per share and holders of shares
of Class B Common Stock are entitled to 2/3 of a vote per share. The Common
Stock and Class B Common Stock afford no cumulative voting rights, and the
holders of a majority of the shares voting for the election of directors can
elect all the directors if they choose to do so. Except for the conversion
rights of the Class B Common Stock described below, the Common Stock and Class B
Common Stock carry no preemptive rights, are not convertible, redeemable,
assessable or entitled to the benefits of any sinking fund. The holders of
Common Stock and Class B Common Stock are entitled to dividends in such amounts
and at such times as may be declared by the Board of Directors out of funds
legally available therefor. The Company intends that, after completion of the
Offering, all future dividends, if any, declared on, or distributions with
respect to, its shares of Common Stock and Class B Common Stock will be paid on
a pro rata basis to the holders of such shares. See "Dividend Policy" for
information regarding the Company's dividend policy.
Directors may be removed, with or without cause, by the holders of the
class or classes of stock that elected them. Directors may be removed by the
Board of Directors only for cause. Vacancies in a directorship may be filled by
the vote of the class or classes of shares that had previously filled that
vacancy, or by the remaining directors or director elected by such class or
classes; however, if there are no such directors, the vacancy may be filled by
the other directors.
Holders of Common Stock of the Company are entitled to one vote per share
and the holders of Class B Common Stock of the Company are entitled to
two-thirds ( 2/3) of a vote per share. The Company's Board of Directors consists
of seven directors. Holders of Common Stock are entitled to elect as a class six
members of the Board of Directors and the holders of the Class B Common Stock
are entitled to elect as a class the remaining member of the Board of Directors;
provided however, that if 65% or more of the Class B Common Stock outstanding on
the date of this Prospectus has been converted into Common Stock, the Class B
Common Stock shall no longer have the ability to elect a director as a class.
The Common Stock and Class B Common Stock possess ordinary voting rights and
vote together as a single class in respect of all other corporate matters. See
"Description of Capital Stock."
The Class B Common Stock is convertible into Common Stock, at the option of
the holder thereof, upon the occurrence of a Conversion Event (as defined
below). The maximum number of shares of Common Stock that may be issued upon
conversion of the Class B Common Stock is 1,950,000. The Class B Common Stock
converts into Class A Common Stock on a share-for-share basis, provided however,
that if the Common Stock reaches certain average closing prices for 15
consecutive trading days during the next six years on the Nasdaq National
Market, other over-the-counter market or an exchange, as then applicable (the
"Trading Market") then, as set forth below, the conversion ratio with respect
to a certain number of shares of Class B Common Stock will immediately change so
that such shares will thereafter be convertible into Common Stock at the ratio
of three shares of Common Stock for each share of Class B Common Stock (each
such share an "Adjusted Conversion Share").
On the date that the average closing price on the Trading Market for the
preceding 15 consecutive trading days (the "Average Price") exceeds 150% of
the price to the public in the Offering, 130,000 of the issued shares of Class B
Common Stock will immediately become Adjusted Conversion Shares (and subject to
the new 3-for-1 conversion ratio). Thereafter, the remaining 520,000 shares of
Class B Common Stock will become Adjusted Conversion Shares in four remaining
increments of 130,000 shares of Class B Common Stock each (20% of the total
number of shares of Class B Common Stock issued) upon the attainment of new
Average Prices. The Average Prices applicable to each new 20% increment will
equal
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120% of each preceding Average Price applicable to the preceding 20% increment.
Therefore, the five Average Prices at which each of the five total increments
shall automatically become Adjusted Conversion Shares are $16.50, $19.80,
$23.76, $28.51 and $34.21. Upon a Conversion Event, each holder of Class B
Common Stock will have the right to have each share of Class B Common Stock
converted into that number of shares of Common Stock as each such share is
entitled to based upon the Average Prices achieved, if any. Any additional
Average Price attained after the occurrence of a Conversion Event will continue
to act to create Adjusted Conversion Shares, as applicable. If any shares of
Class B Common Stock are outstanding on the sixth anniversary of this
Prospectus, such shares will automatically convert into a number of shares of
Common Stock based upon the conversion ratio then applicable to such shares.
Shares of Class B Common Stock held by a holder shall automatically convert into
Common Stock immediately prior to the disposition of such shares of Class B
Common Stock by such holder.
A Conversion Event shall be deemed to have occurred (i) in the event of a
disposition of such share of Class B Common Stock by the holder thereof
(excluding dispositions to such holder's affiliates), (ii) in the event any
person not affiliated with the Company acquires beneficial ownership of 15% or
more of the outstanding shares of capital stock of the Company, (iii) in the
event any person not affiliated with the Company offers to acquire 15% or more
of the outstanding shares of capital stock of the Company, (iv) in the event the
holder of such shares elects to so convert at any time after the second
anniversary of the date of this Prospectus, (v) on the sixth anniversary of the
date of this Prospectus, or (vi) in the event the holders of a majority of the
outstanding shares of Common Stock approve such conversion. In addition, the
Company may elect to convert any outstanding shares of Class B Common Stock into
shares of Common Stock in the event 80% or more of the outstanding shares of
Class B Common Stock as of the date of this Prospectus have previously been
converted into shares of Common Stock.
PREFERRED STOCK
The Board of Directors is authorized, without further action by the
stockholders, to provide for the issuance of shares of Preferred Stock as a
class without series or in one or more series, to establish the number of shares
in each class or series and to fix the designation, powers, preferences and
rights of each such class or series and the qualifications, limitations or
restrictions thereof. Because the Board of Directors has the power to establish
the preferences and rights of each class or series of Preferred Stock, the Board
of Directors may afford the holders of any class or series of Preferred Stock
preferences, powers and rights, voting or otherwise, senior to the rights of
holders of Common Stock or the Class B Common Stock. The issuance of Preferred
Stock could have the effect of delaying or preventing a change in control of the
Company. As of the date of this Prospectus, the Company has not issued any
Preferred Stock but the Board has authorized the issuance of the Series A Junior
Participating Preferred Stock of the Company (the "Series A Preferred Stock").
See--"Certain Anti-Takeover and Other Provisions of Delaware Law and the
Company's Certificate of Incorporation and Bylaws." Other than the foregoing,
there are no plans, agreements or understandings for the issuance of any shares
of Preferred Stock.
UNITS RESCISSION OFFER
During the first quarter of 1998, AFC completed a financing of $1.5 million
representing 15 units (the "AFC Units"), consisting of $1,425,000 in
non-interest bearing loans (the "AFC Promissory Notes") and 25,000 membership
interests in AFC to fund certain expenses on behalf of AMP in connection with
the Offering (the "Bridge Financing"). The Bridge Financing provided for the
loans to be repaid by AFC from funds it will receive from the Offering.
Additionally, AFC is required to repurchase each of the 15 AFC Units for $71,667
in cash. In connection with the Bridge Financing, each investor was to be given
the opportunity to notify the Company that he or she would prefer to purchase
$71,667 worth of Common Stock offered in the Offering valued at the initial
public offering price. Upon the closing of the Offering, AMP will assume this
obligation of AFC in satisfaction of amounts due to AFC.
The Company has been advised that the Bridge Financing of AFC may be
integrated for securities laws purposes with the Offering under this Prospectus
and that the 15 AFC Units sold pursuant to the Bridge Financing for $1.5 million
may not have been sold in compliance with the registration provisions of the
Securities Act. All of these AFC Units were sold at a price of $100,000 per AFC
Unit. Concurrently with the Offering, the Company and AFC are conducting a Units
Rescission Offer with respect to the Bridge
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Financing. If the Units Rescission Offer is accepted, the Bridge Financing
investors will be paid only the purchase price of the AFC Units equal to $1.5
million plus statutory interest on the AFC Units from the date of issuance
through the date of purchase. If the Units Rescission Offer is rejected in full,
holders of the AFC Units will continue to hold AFC Units, the AFC Promissory
Notes will be repurchased by AFC for $1,425,000 in cash and the AFC membership
interests will be repurchased by AFC for $1,075,000 in cash, or a total of $2.5
million, upon the successful completion of the Company's Offering. In either
case, the Bridge Investors will no longer have the opportunity to purchase
shares of Common Stock set aside by the Company at the initial public offering
price. There can be no assurance that the liability of the Company based upon
any possible failure of the Company or AFC to comply with federal or state
securities law in connection with the Bridge Financing will be eliminated. Upon
the conclusion of this Offering, management does not believe that any of the
persons who acquired the AFC Units will assert any claim with respect thereto,
notwithstanding any potential continuing liability. For the aforementioned
reasons, the Company does not believe that the Units Rescission Offer or any
continuing liability under the Securities Act will have a material adverse
effect on the Company.
CERTAIN ANTI-TAKEOVER AND OTHER PROVISIONS OF DELAWARE LAW AND THE COMPANY'S
CERTIFICATE OF INCORPORATION AND BYLAWS
The Company has authorized a dividend distribution of rights (each, a
"Right") to purchase a certain number of units (determined by a formula
described herein) at a price of $33, subject to adjustment (the "Exercise
Price"). Each unit is equal to one one-hundredth of a share of a newly
authorized Series A Preferred Stock. One Right will be distributed per share of
Common Stock and Class B Common Stock of the Company on the record date (the
"Record Date"). Rights will also be distributed in connection with the future
issuance of shares of Common Stock and Class B Common Stock. The description and
terms of the Rights are set forth in a Stockholder Protection Agreement (the
"Agreement") between the Company and a rights agent (the "Rights Agent").
Until the Separation Time (as defined below), the Rights are not
exercisable and certificates for the Rights will not be sent to stockholders.
Subject to certain exceptions described in the Agreement, the Rights will
separate from the Common Stock and the Class B Common Stock, separate
certificates evidencing the Rights (the "Rights Certificates") will be issued
and the Rights will become exercisable 10 business days (the "Separation
Time") following the date on which a person (including its affiliates and
associates) (i) acquires, (ii) obtains the right to acquire or (iii) announces
or commences a tender or exchange offer to acquire beneficial ownership of 15%
or more (or in the case of certain institutional investors, more than 20% of the
outstanding Common Stock (such person thereby becoming an "Acquiring
Person")).
Following the Separation Time, holders of the Rights (the "Rights
Holders") (other than Rights beneficially owned by the Acquiring Person or its
affiliates or associates, which will thereafter be void) will be entitled to
receive upon exercise and payment of the Exercise Price that number of units of
Series A Preferred Stock which equals the result obtained by dividing the
Exercise Price by 50% of the Market Price (as defined in the Agreement) per
share of Common Stock and Class B Common Stock at the Separation Time (subject
to adjustment, if applicable). Each unit of Series A Preferred Stock will be
entitled to one vote on all matters on which share of Common Stock and Class B
Common Stock may vote.
If, after the Separation Time, (i) the Company were to be acquired in a
merger or other business combination transaction in which the Company was not
the surviving corporation nor in which the Company's outstanding Common Stock
were changed or exchanged for cash, stock or assets of another person or (ii)
50% or more of the Company's consolidated assets or earning power were to be
sold (other than in transactions in the ordinary course of business), then
proper provision would be made so that each Rights Holder who has not
theretofore exercised his Rights (other than Rights beneficially owned by the
Acquiring Person or its affiliates or associates, which will thereafter be void)
will thereafter have the right to receive, upon exercise, a number of shares of
common stock of the acquiring entity having a value equal to two times the
Exercise Price.
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Each share of Series A Preferred Stock for which Rights had been exercised
prior to a business combination or other transaction of the type referred to in
clause (i) in the immediately preceding paragraph would be entitled to receive
upon consummation thereof 100 times the consideration (cash, securities or other
property, or a combination thereof) that one share of Common Stock would
receive. At any time on or prior to the earlier of (i) the Separation Time or
(ii) the Expiration Date of the Rights, the Company may redeem the Rights in
whole, but not in part, at a price of $.01 per Right (the "Redemption Price").
Immediately upon the action of the Board of Directors authorizing redemption of
the Rights, the right to exercise the Rights will terminate and the only right
of the Rights Holders will be to receive the Redemption Price.
At any time following the Separation Time but before the Expiration Date,
the Company may, at its option, exchange all or any portion of the Rights for
shares of Common Stock at an exchange ratio which equals the Exercise Price
divided by the Market Price per share of Common Stock. The Company, however, may
not effect such an exchange if an Acquiring Person become the owner of 50% or
more of the then outstanding Common Stock.
The Company is subject to the provisions of Section 203 of the General
Corporation Law of the State of Delaware (the "DGCL"). Section 203 prohibits a
publicly held Delaware corporation from engaging in a "business combination"
with an "interested stockholder" for a period of three years after the date of
the transaction in which the person became an interested stockholder, unless the
business combination is approved in a prescribed manner. A "business
combination" includes a merger, asset sale or other transaction resulting in a
financial benefit to the interested stockholder. Subject to certain exceptions,
an "interested stockholder" is a person who, together with affiliates and
associates, owns, or within three years prior to the proposed business
combination, has owned 15% or more of the corporation's voting stock.
The Company's Certificate of Incorporation provides that liability of
directors of the Company is eliminated to the fullest extent permitted under the
DGCL. As a result, no director of the Company will be liable to the Company or
its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability: (i) for any breach of the director's duty of
loyalty to the Company or its stockholders; (ii) for acts omissions not in good
faith or which involve intentional misconduct or a knowing violation of law;
(iii) for any willful or negligent payment of an unlawful dividend, stock
purchase or redemption; or (iv) for any transaction from which the director
derived an improper personal benefit. The Company's Bylaws generally provide
that the Company shall indemnify its directors, employees and other agents to
the fullest extent provided by Delaware law.
In addition, the Company's Certificate of Incorporation requires the vote
of 60% of the Board of Directors to effect certain actions, including a sale of
substantially all of the assets of the Company, certain mergers and
combinations, and the acquisition of securities representing a majority of the
voting power of the Company. The "supermajority" voting rights could have the
effect of making it more difficult for a third party to acquire, or discouraging
a third party from seeking to acquire, control of the Company.
The Bylaws of the Company provide that stockholders must follow an advance
notification procedure for certain stockholder nominations of candidates for the
Board of Directors and for certain other stockholder business to be conducted at
an annual meeting. These provisions could, under certain circumstances, operate
to delay, defer or prevent a change in control of the Company. The Transfer
Agent and Registrar for the Common Stock is American Securities Transfer &
Trust, Inc.
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SHARES ELIGIBLE FOR FUTURE SALE
The market price of the Common Stock of the Company could be adversely
affected by the sale of substantial amounts of the Common Stock in the public
market following the Offering. After giving effect to the sale of the shares of
Common Stock offered hereby, the Company will have 5,778,322 shares of Common
Stock issued and outstanding (6,328,322 shares if the Underwriters'
over-allotment option is exercised in full) (assuming an initial public offering
price of $11.00 per share). Of these shares, 3,700,000 shares (4,255,000 shares
if the Underwriters' over-allotment option is exercised in full) of Common Stock
sold in the Offering will be freely tradable without restriction under the
Securities Act, except for any shares exchanged by "affiliates" of the Company
as that term is defined under the Securities Act. None of the 2,078,322
remaining shares of Common Stock were acquired in a transaction registered under
the Securities Act. Such shares may not be sold except in transactions
registered under the Securities Act or pursuant to an exemption from
registration. All such 2,078,322 shares of Class A Common Stock will be eligible
for sale pursuant to Rule 144 promulgated under the Securities Act in March
1999. In addition, 598,807 shares of Class B Common Stock will be eligible for
sale pursuant to Rule 144 promulgated under the Securities Act and the balance
of these shares will be eligible for sale at various times from June 1998
through October 1998.
In general, under Rule 144 as currently in effect, a person who has (or
persons whose shares are aggregated who have) beneficially owned "restricted"
shares for at least one year, including an "affiliate" of the Company, as that
term is defined in the Securities Act, is entitled to sell within any
three-month period a number of shares of Common Stock that does not exceed the
greater of 1% of the then outstanding shares of Common Stock or the average
weekly trading volume during the four calendar weeks preceding the date on which
notice of the sale is filed with the Commission. Sales under Rule 144 are also
subject to certain manner of sale provisions and the availability of current
public information about the Company. A person who is not an affiliate of the
Company at any time during the three months preceding a sale, and who has
beneficially owned shares for at least two years, would be entitled to sell such
shares without regard to the volume limitations, manner of sale provisions or
notice or other requirements of Rule 144.
In addition, the Company, its officers and directors and certain other
stockholders of the Company have agreed that they will not offer, contract to
sell, announce their intention to sell, pledge or otherwise dispose of, directly
or indirectly, or file with the Commission a registration statement under the
Securities Act relating to any additional shares of Common Stock or securities
convertible or exchangeable or exercisable for any shares of Common Stock
without the prior written consent of the Representative for a period of days
after the date of this Prospectus (the "lock-up period"), except (i)
subsequent sales of Common Stock offered in the Offering, (ii) issuances of
unregistered Common Stock by the Company in connection with affiliation with
practices, physicians and ancillary providers (although persons receiving such
shares would be subject to such restrictions for the remainder of the lock-up
period) or (iii) issuances of Common Stock by the Company pursuant to the
exercise of employee stock options outstanding on the date of this Prospectus.
Pursuant to an agreement with the Company, the holders of all shares of
Common Stock outstanding on the date of this prospectus have certain
registration rights with respect to such shares and additional shares that may
be issued to such persons upon exercise of options (subject to certain
limitations on the number of shares such holders are entitled to have registered
under any registration statement), although the holders of at least 2,078,322 of
these shares of Class A Common Stock and all holders of Class B Common Stock
(including all AFC members to whom shares of Class B Common Stock will be
distributed) have agreed to refrain from selling their shares during the lock-up
period. Pursuant to the Registration Rights Agreements, the Company has granted
certain registration rights to the DPMs permitting them to include their shares
of Common Stock on a registration statement filed by the Company within one year
of the date of such agreements. The Company intends to register an additional
1,157,098 shares of Common Stock reserved for issuance under the 1997 Plan as
soon as practicable after expiration of the lock-up period. In addition, the
Company will register up to an additional 2,000,000 shares of Common Stock under
a shelf registration, which, when combined with the Company's cash resources,
will be used to fund the Company's planned practice affiliation program. These
shares generally will be freely tradable upon issuance to persons not deemed to
be affiliates of the Company, unless the Company contractually restricts the
sale or other transfer of such shares. Initially, the Company will issue such
shares subject to a lock-up period of up to 180 days from the date of this
Prospectus. See "Underwriting."
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UNDERWRITING
The Underwriters named below have severally agreed with the Company,
subject to the terms and conditions of the Underwriting Agreement, to purchase
the respective number of shares of Common Stock set forth opposite their names
below:
UNDERWRITER NUMBER OF SHARES
- ------------------------------------- -----------------
A.G. Edwards & Sons, Inc.............
J.C. Bradford & Co. .................
-----------------
Total......................... 3,700,000
=================
In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all of the shares of Common
Stock offered hereby, if any of such shares are purchased.
The Company has been advised by the Underwriters that the Underwriters
propose to offer the shares of Common Stock to the public at the offering price
set forth on the cover page of this Prospectus and to certain dealers at such
price less a concession not in excess of $ per share. The Underwriters and
such dealers may reallow a discount of not in excess of $.10 per share to
certain other dealers. The public offering price and the concession and discount
to dealers may be changed by the Underwriters after the Offering.
The Offering of the shares of Common Stock is made for delivery when, as
and if accepted by the Underwriters and subject to prior sale and to withdrawal,
cancellation or modification of the offer without notice. The Underwriters
reserve the right to reject any offer for the purchase of shares.
The Company has granted the Underwriters an option, expiring at the close
of business on the 45th day subsequent to the date of the Underwriting
Agreement, to purchase up to 555,000 additional shares of Common Stock at the
public offering price, less the underwriting discount set forth on the cover
page of this Prospectus. The Underwriters may exercise such option solely to
cover over-allotments, if any, in the sale of the shares. To the extent the
Underwriters exercise such option, each of them will have a firm commitment,
subject to certain conditions, to purchase approximately the same percentage of
the option shares as the number of shares set forth opposite each Underwriter's
name in the preceding table bears to 3,700,000, and the Company will be
obligated to sell such shares to the Underwriters.
The Underwriting Agreement provides that the Company will indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act, or will contribute to payments that the Underwriters may be
required to make in respect thereof.
The Company, all Directors and Executive Officers of the Company and
certain other holders of Common Stock prior to the Offering have agreed that
they will not, directly or indirectly, offer, sell or otherwise dispose of any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for, or any rights to purchase or acquire, Common Stock for a
period of 180 days after the date of this Prospectus without the prior written
consent of A.G. Edwards & Sons, Inc. other than the exercise of options
previously granted under the Company's director and employee benefit plans and
agreements. See "Shares Eligible for Future Sale."
The Underwriters have advised the Company that they do not intend to
confirm sales to any account over which they exercise discretionary authority.
In connection with this Offering, certain Underwriters and selling group
members (if any) who in the past have acted as market makers in the Common Stock
may engage in passive market making activities in
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the Common Stock on the Nasdaq National Market or the American Stock Exchange,
as applicable, in accordance with Rule 103 of Regulation M under the Exchange
Act. Underwriters and other participants in the distribution of the Common Stock
generally are prohibited during a specified time period (the "qualifying
period"), determined in light of the timing of the Offering, from bidding for
or purchasing the Common Stock or a related security except to the extent
permitted under the applicable rules of Regulation M. Rule 103 allows, among
other things, an Underwriter or member of the selling group (if any) for the
Common Stock to effect "passive market making" transactions on the Nasdaq
National Market or the American Stock Exchange, as applicable, in the Common
Stock during the qualifying period at a price that does not exceed the highest
independent bid for that security at the time of the transaction. Such a passive
market maker must not display a bid for the subject security at a price in
excess of the highest independent bid, and generally must lower its bid if all
independent bids are lowered. Moreover, the passive market maker's net purchases
of such security on each day of the qualifying period shall not exceed 30.0% of
its average daily trading volume during a reference period preceding the
distribution.
In connection with the Offering, the Underwriters and other persons
participating in the Offering may engage in transactions that stabilize,
maintain or otherwise affect the price of the Common Stock. Specifically, the
Underwriters may over-allot in connection with the Offering, creating a short
position in the Common Stock for their own account. To cover over-allotments or
to stabilize the price of the Common Stock, the Underwriters may bid for, and
purchase, shares of the Common Stock in the open market. The Underwriters may
also impose a penalty bid whereby they may reclaim selling concessions allowed
to an underwriter or dealer for distributing the Common Stock in the Offering,
if the Underwriters repurchase previously distributed Common Stock in
transactions to cover their short position, in stabilization transaction or
otherwise. Finally, the Underwriters may bid for, and purchase, shares of the
Common Stock in market making transactions. These activities may stabilize or
maintain the market price of the Common Stock above market levels that may
otherwise prevail. The Underwriters are not required to engage in these
activities and may end any of these activities at any time. See "Principal
Stockholders."
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Baker & Hostetler LLP. As a result of his membership in AFC, a
partner of Baker & Hostetler LLP will be distributed approximately 4,273 shares
of Class B Common Stock and one of counsel attorney at Baker & Hostetler LLP
holds 18,038 shares of Class B Common Stock and will be distributed
approximately 2,991 shares of Class B Common Stock as a result of his membership
in AFC. In addition, such of counsel attorney is participating in the Bridge
Financing and will receive repayment of the $95,000 AFC Promissory Note issued
to him by AFC, and AFC will repurchase his membership interests for $71,667 in
cash. Certain legal matters in connection with the Offering made hereby will be
passed upon for the Underwriters by McDermott, Will & Emery, Chicago, Illinois.
The Underwriters are not parties to the Units Rescission Offer and none of the
legal matters relating thereto shall be passed upon by McDermott, Will & Emery.
EXPERTS
The financial statements of American Medical Providers, Inc., Pyramid
Anesthesiology Group, Inc. and Bellaire Surgicare, Inc. appearing in this
Prospectus and Registration Statement have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of such firm as
experts in giving said reports.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-1 under the Securities Act (the "Registration Statement") with respect to
the shares of Common Stock offered hereby. This Prospectus, which constitutes a
part of the Registration Statement, does not contain all of the information set
forth in the Registration Statement, including the exhibits and schedules
thereto. For further information with respect to the Company and the shares of
Common Stock, reference is made to the Registration Statement. Statements
contained in this Prospectus as to the contents of any contract or other
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document are not necessarily complete and in each instance reference is made to
the copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference. The Registration Statement, including the exhibits and schedules
thereto, may be inspected without charge at the principal office of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
and the Commission's Regional Offices at Seven World Trade Center, Suite 1300,
New York, New York 10048, and Northwest Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661, and copies may be obtained at prescribed
rates from the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549. In addition, the Registration Statement and
certain other filings made with the Commission through its Electronic Data
Gathering Analysis and Retrieval ("EDGAR") system are publicly available
through the Commission's site on the Internet's World Wide Web, located at
http://www.sec.gov. The Registration Statement, including all exhibits thereto
and amendments thereof, has been filed with the Commission through EDGAR.
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INDEX TO FINANCIAL STATEMENTS
PAGE
----
AMERICAN MEDICAL PROVIDERS, INC.
Report of Independent Public
Accountants....................... F-2
Balance Sheets..................... F-3
Statements of Operations........... F-4
Statements of Stockholders'
Deficit........................... F-5
Statements of Cash Flows........... F-6
Notes to Financial Statements...... F-7
PYRAMID ANESTHESIOLOGY GROUP, INC.
Report of Independent Public
Accountants....................... F-18
Balance Sheets..................... F-19
Statements of Operations........... F-20
Statements of Stockholders'
Equity............................ F-21
Statements of Cash Flows........... F-22
Notes to Financial Statements...... F-23
BELLAIRE SURGICARE, INC.
Report of Independent Public
Accountants....................... F-26
Balance Sheets..................... F-27
Statements of Operations........... F-28
Statements of Shareholders'
Equity............................ F-29
Statements of Cash Flows........... F-30
Notes to Financial Statements...... F-31
UNAUDITED PRO FORMA COMBINED BALANCE
SHEET
Introduction to Unaudited Pro Forma
Combined Balance Sheet............ F-35
Unaudited Pro Forma Combined
Balance Sheet..................... F-36
Notes to Unaudited Pro Forma
Combined Balance Sheet............ F-37
F-1
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To American Medical Providers, Inc.:
We have audited the accompanying balance sheet of American Medical
Providers, Inc., a development-stage enterprise and a Delaware corporation (the
"Company"), as of December 31, 1996, and the related statement of operations,
stockholders' deficit and cash flows for the period from inception (August 9,
1996) to December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of American Medical Providers,
Inc. as of December 31, 1996, and the results of its operations and its cash
flows for the period from inception (August 9, 1996) to December 31, 1996, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
October 16, 1997
F-2
<PAGE>
AMERICAN MEDICAL PROVIDERS, INC.
(A DEVELOPMENT-STAGE ENTERPRISE)
BALANCE SHEETS
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash............................ $ -- $ --
Deferred issuance costs......... 404,622 1,791,902
Other current assets............ 12,092 25,200
------------ -------------
Total current assets....... 416,714 1,817,102
EQUIPMENT, at cost................... 116,648 234,314
Less - Accumulated
depreciation................... (5,258) (25,100)
------------ -------------
Equipment, net............. 111,390 209,214
------------ -------------
Total assets............... $ 528,104 $ 2,026,316
============ =============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable................ $ 262,806 $ 1,208,533
Accrued salaries................ 166,970 303,210
Due to stockholder.............. 612,269 2,425,692
------------ -------------
Total current
liabilities............ 1,042,045 3,937,435
------------ -------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT:
Preferred Stock, $.001 par
value; 20,000,000 shares
authorized, no shares issued
and outstanding................ -- --
Class A Common Stock, $.001 par
value; 20,000,000 shares
authorized, no shares issued
and outstanding................ -- --
Class B Common Stock, $.001 par
value; 1,000,000 shares
authorized, 650,000 shares
issued and outstanding......... 650 650
Additional paid-in capital...... 921,850 1,213,060
Deficit accumulated during the
development stage.............. (1,436,441) (3,124,829)
------------ -------------
Total stockholders'
deficit................ (513,941) (1,911,119)
------------ -------------
Total liabilities and
stockholders'
deficit................ $ 528,104 $ 2,026,316
============ =============
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
AMERICAN MEDICAL PROVIDERS, INC.
(A DEVELOPMENT-STAGE ENTERPRISE)
STATEMENTS OF OPERATIONS
FOR THE PERIOD
FROM INCEPTION
(AUGUST 9, NINE MONTHS
1996) TO ENDED
DECEMBER 31, SEPTEMBER 30,
1996 1997
--------------- -------------
(UNAUDITED)
REVENUES............................. $ -- $ --
EXPENSES:
Salaries, wages and benefits.... 1,323,618 797,166
General and administrative...... 112,823 891,222
--------------- -------------
Total expenses........ 1,436,441 1,688,388
--------------- -------------
LOSS BEFORE INCOME TAXES............. (1,436,441) (1,688,388)
INCOME TAX BENEFIT................... -- --
--------------- -------------
NET LOSS............................. $(1,436,441) $ (1,688,388)
=============== =============
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
AMERICAN MEDICAL PROVIDERS, INC.
(A DEVELOPMENT-STAGE ENTERPRISE)
STATEMENTS OF STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
DEFICIT
CLASS A CLASS B ACCUMULATED
PREFERRED STOCK COMMON STOCK COMMON STOCK ADDITIONAL DURING THE
--------------- --------------- ---------------- PAID-IN DEVELOPMENT
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL STAGE
------ ------ ------ ------ ------- ------ ---------- -----------
INITIAL CAPITALIZATION
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AUGUST 9, 1996 (Inception)......... -- $-- -- $-- 650,000 $650 $ -- $ --
Non-cash compensation charge..... -- -- -- -- -- -- 921,850 --
Net loss......................... -- -- -- -- -- -- -- (1,436,441)
------ ------ ------ ------ ------- ------ ---------- -----------
BALANCE AT DECEMBER 31, 1996......... -- -- -- -- 650,000 650 921,850 (1,436,441)
Non-cash compensation charge..... -- -- -- -- -- -- 291,210 --
Net loss (Unaudited)............. -- -- -- -- -- -- -- (1,688,388)
------ ------ ------ ------ ------- ------ ---------- -----------
BALANCE AT SEPTEMBER 30, 1997
(Unaudited)........................ -- $-- -- $-- 650,000 $650 $1,213,060 $(3,124,829)
====== ====== ====== ====== ======= ====== ========== ===========
</TABLE>
STOCKHOLDERS'
DEFICIT
-------------
INITIAL CAPITALIZATION
AUGUST 9, 1996 (Inception)......... $ 650
Non-cash compensation charge..... 921,850
Net loss......................... (1,436,441)
-------------
BALANCE AT DECEMBER 31, 1996......... (513,941)
Non-cash compensation charge..... 291,210
Net loss (Unaudited)............. (1,688,388)
-------------
BALANCE AT SEPTEMBER 30, 1997
(Unaudited)........................ $(1,911,119)
=============
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
AMERICAN MEDICAL PROVIDERS, INC.
(A DEVELOPMENT-STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS
FOR THE PERIOD
FROM INCEPTION
(AUGUST 9, NINE MONTHS
1996) TO ENDED
DECEMBER 31, SEPTEMBER 30,
1996 1997
-------------- -------------
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss........................... $ (1,436,441) $ (1,688,388)
Adjustments to reconcile net loss
to net cash used in operating
activities --
Non-cash compensation and
consulting expense............. 921,850 291,210
Depreciation.................... 5,258 19,842
Changes in assets and
liabilities --
Deferred issuance costs....... (404,622) (1,387,280)
Other current assets.......... (11,442) (13,108)
Accounts payable.............. 262,806 945,727
Accrued salaries.............. 166,970 136,240
-------------- -------------
Net cash used in
operating
activities......... (495,621) (1,695,757)
-------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment............. (116,648) (117,666)
-------------- -------------
Net cash used in
investing
activities......... (116,648) (117,666)
-------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from stockholder.......... 612,269 1,813,423
-------------- -------------
Net cash provided by
financing
activities......... 612,269 1,813,423
-------------- -------------
NET CHANGE IN CASH................... -- --
CASH, beginning of period............ -- --
-------------- -------------
CASH, end of period.................. $ -- $ --
============== =============
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
AMERICAN MEDICAL PROVIDERS, INC.
(A DEVELOPMENT-STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION
American Medical Providers, Inc. (the "Company" or "AMP") was founded
in August 1996 to provide physician practice management services and
comprehensive foot care delivery systems to podiatric practices throughout the
United States. Simultaneously with, and as a condition to the closing of an
initial public offering (the "Offering"), 46 separate podiatric practices will
transfer (the "Transfers") either certain of their operating assets and
accounts receivable or stock to the Company in exchange for cash, shares of
class A common stock (the "Common Stock") and the assumption of certain
indebtedness (these practices, including the practice relating to the Kramer
Transfer and the Ambulatory Surgery Center Acquisitions discussed below,
collectively referred to as the "Affiliated Practices"). The Company will own
the operating assets and receivables of the Affiliated Practices, hire their
non-physician employees and otherwise assume the management of each practice.
The doctors of podiatric medicine ("DPMs") will join regional group practices
organized by geographic location (the "Regional Group Practices"). The Company
will enter into a long-term management agreement with each Regional Group
Practice under which AMP will receive fees for its services. At the time of the
Offering, AMP will acquire in a purchase accounting transaction Pyramid
Anesthesiology Group, Inc. ("AnestheCare") (the "AnestheCare Acquisition"),
an anesthesiology management services organization. The Company will also
acquire the stock of one of the Affiliated Practices in a transaction to be
accounted for as a purchase (the "Kramer Transfer"). The Transfers, the
AnestheCare Acquisition and the Kramer Transfer are collectively referred to as
the "Transactions." Each owner DPM of the Affiliated Practices and AnestheCare
is considered a "promoter" of the Company.
The Company has had no on-going, non-developmental business operations to
date, and the financial statements have been prepared on the basis that the
proposed Transactions will occur, although no assurance can be made that the
proposed Transactions will be completed or that the Company will be successful
in completing planned future acquisitions. If the Company is unable to
successfully complete the Offering, the Company will be unable to satisfy its
obligations. The Company intends to expand by affiliating with additional
podiatric practices throughout the United States. In order to expand, the
Company will need additional capital in the form of debt or equity financing.
There can be no assurance that such capital will be available.
Ankle & Foot Centers of America, LLC ("AFC") was formed to fund the
organization and development of AMP through the date of the Offering. Thus, for
purposes of these financial statements, costs and expenses incurred by AFC are
treated as transactions of AMP. Upon the Offering's consummation, AMP will
reimburse AFC for all costs and expenses that AFC has incurred to the Offering
date and will assume all liabilities of AFC with respect to AMP. Accordingly,
all amounts actually incurred by AFC on behalf of AMP with respect to such
costs, expenses and liabilities are reflected in these financial statements of
AMP as amounts due to stockholder.
During August 1996, the Company authorized for issuance 1,000,000 shares of
AMP Common Stock, $.01 par value, and approved the issuance of 20,000 shares of
AMP Common Stock, of which 16,500 were issued to AFC and 3,500 to a founder of
AFC who is also a member of AFC management. In addition, certain members of
management and consultants to the Company received 440,250 and 51,000 membership
interests in AFC, during 1996 and the nine months ended September 30, 1997,
respectively. AFC management plans to distribute the AMP shares held by AFC to
AFC members and to certain members of AFC management as determined by AFC. As of
December 31, 1996 and September 30, 1997, 5,250 shares of the AMP Common Stock
received by AFC had been issued to members of AFC management and consultants.
The Company has recognized a non-cash compensation charge of $921,850 and
$291,210 during 1996 and the nine months ended September 30, 1997, respectively,
representing the difference between the amount paid for these interests and the
estimated fair value of these interests and the AMP shares issued. In addition,
management plans to distribute the amounts payable to AFC by AMP at closing.
Certain of the Promoter DPMs (defined below) have made investments in AFC
either individually or participate in organizations which have invested in AFC.
Consequently, it is anticipated that certain of these Promoters will be
distributed shares of AMP as a result of their ownership in AFC. In addition,
certain Promoter DPMs who are also directors of AMP will participate in the
directors stock option plan. See
F-7
<PAGE>
AMERICAN MEDICAL PROVIDERS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
"Distribution of Class B Common Stock to Certain Promoters" included on page
48 of this Registration Statement for further discussion.
THE TRANSACTIONS
All of the Transfers of the initial Affiliated Practices (together with
AMP, "the Promoters"), except for the acquisition of two ambulatory surgery
centers included in the Transfers (collectively, the "Ambulatory Surgery Center
Acquisitions") and the Kramer Transfer, will be accounted for by the Company
under Securities and Exchange Commission Staff Accounting Bulletin ("SAB") No.
48, "Transfers of Non-Monetary Assets by Promoters or Shareholders," such that
the non-monetary assets and liabilities of these initial Affiliated Practices
will be received by the Company at the transferor's historical cost basis for
accounting purposes. The Ambulatory Surgery Center Acquisitions, the AnestheCare
Acquisition, in which the Company will acquire assets of an anesthesiology
management services organization located in Georgia, and the Kramer Transfer, in
which the Company will acquire the stock of Dr. Kramer's podiatric practice in
Georgia, will not be accounted for under SAB 48. Instead, these and all future
individual practice affiliations will be accounted for as purchases at fair
market value and are expected to result in purchase prices in excess of net
assets acquired (goodwill) which will require subsequent annual noncash
amortization charges in the Company's statements of operations. Monetary assets
and liabilities, including billed and unbilled receivables and credit balances,
payables and certain miscellaneous accruals will either be acquired by AMP at
their fair market value or retained by the Affiliated Practices, as agreed among
the parties.
In connection with the Transfers, AMP will acquire certain operating
assets, accounts receivable or the stock of entities holding the non-monetary
assets of the 46 separate Affiliated Practices in exchange for a combination of
cash, shares of Common Stock and assumed liabilities, and will enter into
long-term management agreements with the Regional Group Practices. The aggregate
consideration to be paid by the Company in the Transfers is approximately $34.5
million, consisting of approximately $18.3 million payable in shares of Common
Stock at the initial public offering price attributed to the net non-monetary
assets, approximately $4.7 million in cash and $156,000 of assumed indebtedness
attributed to the net non-monetary assets of the SAB 48 Transfers, $4.3 million
in cash attributed to the net monetary assets of the SAB 48 Transfers, $4.1
million payable in shares of Common Stock at the initial public offering price,
$1.0 million in cash and $500,000 of assumed indebtedness attributed to the
Ambulatory Surgery Center Acquisitions which are included in the Transfers but
not accounted for under SAB 48, and $1.4 million in cash attributed to the
Kramer Transfer. Of the total consideration attributed to the non-monetary
assets for each SAB 48 transaction, the Affiliated Practices could elect to
receive up to 25% in cash and the balance in shares of Common Stock based on the
initial offering price. The non-monetary assets and liabilities of these
Affiliated Practices excluding the Ambulatory Surgery Center Acquisitions and
the Kramer Transfer, will carry over at their historical costs to AMP. The
number of shares to be issued is contingent upon the Offering price and will not
be determined until the Offering date. The assets to be transferred include
cash, billed and unbilled receivables, supplies inventory, other receivables,
prepaid expenses, net equipment and certain other current and noncurrent assets.
The liabilities to be transferred include credit balances of accounts
receivable, certain miscellaneous accruals and debt assumed. Consideration in
the AnestheCare Acquisition will consist of approximately $4.5 million in cash.
Additional consideration of up to $1.5 million in cash and a number of shares of
Common Stock equal to $500,000 valued at the initial offering price, may be paid
to the owners of AnestheCare pending AnestheCare's achievement of certain
performance targets over a three-year period beginning January 1, 1998. Cash and
liabilities assumed totaling approximately $4.7 million paid to the Affiliated
Practices for the non-monetary assets will be recorded as a dividend by the
Company.
The Company's methodology for valuing the non-monetary assets in the
Transfers was primarily based upon a multiple of the projected earnings
contribution to AMP utilizing adjusted historical financial information of the
respective Affiliated Practices.
F-8
<PAGE>
AMERICAN MEDICAL PROVIDERS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DEFERRED ISSUANCE COSTS
The Company has incurred certain costs including legal, accounting and
other professional services associated with the Transactions and the Offering.
These costs have been deferred pending the consummation of the Transactions and
the Offering.
REVENUE RECOGNITION
Revenues from managing the practices and ancillary operations will be
recognized on a monthly basis as the services are provided. The revenue of AMP
will consist of the sum of the management fees and such amounts equal to the
operating expenses of the podiatric practice assumed by AMP under the management
agreements and owned ancillary operations. In general, the management agreements
provide for the payment of fees to the Company based on a negotiated percentage
of the adjusted patient revenue of the podiatric practice and ancillary
operations. Adjusted patient revenue is net patient revenue, as determined under
generally accepted accounting principles, including adjustments for contractual
allowances and other discounts, plus an adjustment for uncollectible accounts.
Expenses not required to be paid by AMP pursuant to the agreements primarily
consist of certain professional expenses of the podiatrist.
INCOME TAXES
The Company follows the liability method of accounting for income taxes in
accordance with Statement of Financial Accounting Standards (SFAS) No. 109.
Under this method, deferred income taxes are recorded based upon the differences
between the financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
underlying assets or liabilities are recovered or settled.
Since inception, the Company has incurred losses and is dependent upon the
consummation of the Transactions and the Offering to generate future income.
Accordingly, a full valuation allowance has been provided on tax benefits
generated during the development stage.
STOCK OPTIONS
The Company anticipates accounting for the issuance of options to employees
in accordance with Accounting Principles Board (APB) Opinion No. 25,
"Accounting for Stock Issued to Employees." Options issued to employees at an
exercise price at or above fair value at the date of grant would require no
compensation expense to be recorded under APB Opinion No. 25. In addition,
Statement of Financial Accounting Standards (SFAS) No. 123 "Accounting for
Stock-Based Compensation"(SFAS 123) will require pro forma disclosure
reflecting the effect of recording the employee stock options under SFAS 123
which would require compensation expense based upon the fair value of the equity
instrument granted over the expected vesting period. Options issued to
non-employees will be accounted for under SFAS No. 123. Options issued to
non-employees require compensation expense to be recorded for the fair value of
the equity instrument granted over the expected vesting period.
EARNINGS PER SHARE
Earnings per share has been excluded from the financial statements because
the Company has limited historical operations and does not have a significant
operating history. Accordingly, earnings per share is less meaningful.
USE OF ESTIMATES AND ASSUMPTIONS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Accordingly, actual results could differ from those estimates.
INTERIM UNAUDITED FINANCIAL INFORMATION
The interim financial statements as of and for the nine months ended
September 30, 1997 are unaudited and certain information and footnote
disclosures normally included in financial statements prepared in
F-9
<PAGE>
AMERICAN MEDICAL PROVIDERS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
accordance with generally accepted accounting principles, have been omitted. In
the opinion of management, they include all adjustments (consisting solely of
normal recurring adjustments) necessary for a fair presentation of the unaudited
financial statements for this interim period have been included. Accounting
measurements at interim dates inherently involve greater reliance on estimates
than at year end. The results of interim periods are not necessarily indicative
of the results to be obtained for a full year.
ACCOUNTING PRONOUNCEMENTS
In November 1997, the Emerging Issues Task Force (EITF) of the Financial
Accounting Standards Board issued EITF Consensus 97-2 regarding various
accounting matters relating to the physician practice management industry. This
pronouncement, which was along expected guidelines published during the
deliberation period, did not negatively impact the planned transaction or the
proposed accounting for the transactions and future accounting for AMP. The
pronouncement clarifies that stock options issued to non-employees of the
Company, such as the DPM's in the Regional Group Practices, do not qualify for
employee stock option accounting. Thus any such options issued to non employee
DPM's will be charged to the income statement. As expected, further affiliations
with podiatric practices will need to be accounted for as a contractual
relationship with the excess of purchase price paid over net assets acquired
being assigned to an intangible asset and amortized over future periods.
3. COMMITMENTS AND CONTINGENCIES
The Company will be subject to certain government regulations at the
federal and state levels. In compliance with certain regulatory requirements,
the Company will not control the practice of podiatry. There can be no assurance
that the legality of any long-term management services agreements that will be
entered into will not be successfully challenged. There also can be no assurance
that the laws and regulations of states in which the Company will maintain
operations will not change or be interpreted in the future to restrict or
further restrict the Company's relationship with podiatrists.
Podiatrists may be subject to legal liability suits while under management
or physician engagement agreements with the Company. The Company will not
control or employ the podiatrists; however, the Company intends to acquire
certain liability insurance.
4. TRANSACTIONS WITH AFFILIATED PRACTICES
As discussed in Note 1, the Company plans to complete the Transfers through
a series of stock and asset exchanges, the acquisition of certain monetary
assets and assumption of certain liabilities of the Affiliated Practices
concurrently with an initial public offering of shares of its Common Stock.
AGREEMENTS WITH AFFILIATED PRACTICES AND REGIONAL GROUP PRACTICES
The Company is party to management agreements with each Regional Group
Practice. The owners of the Affiliated Practices (promoters of the Company),
except Dr. Kramer, will enter into five-year DPM engagement agreements with the
Regional Group Practices. Additionally, the non-owner employee podiatrists at
the Affiliated Practices will enter into employment and noncompete agreements
with the Regional Group Practices.
MANAGEMENT AGREEMENTS
The following summary of the management agreements is a general summary of
the form of the management agreements. The Company expects to enter into similar
agreements with other affiliated practices. The terms of the individual
management agreements into which the Company may enter in the future may vary
from the description below as a result of negotiations with individual practices
and the requirements of local laws and regulations.
Pursuant to the management agreements, the Company, among other things,
will (a) act as the exclusive manager and administrator of non-physician
services related to the operation of the Regional Group Practices, subject to
matters for which the Regional Group Practices maintain responsibility or which
are referred to the board of managers of the Regional Group Practices, (b) bill
patients, insurance companies and other third-party payors and collect, on
behalf of the Regional Group Practices, the fees for professional medical and
other services rendered (as allowed by local regulations), including goods and
supplies sold by the Regional Group Practices, (c) provide or arrange for, as
necessary, clerical, accounting, purchasing, payroll, legal, bookkeeping and
computer services and personnel, information management, preparation of
F-10
<PAGE>
AMERICAN MEDICAL PROVIDERS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
certain tax returns, printing, postage and duplication services and medical
transcribing services, (d) supervise and maintain custody of substantially all
files and records (medical records of the Regional Group Practices remain the
property of the Regional Group Practices), (e) provide facilities for the
Regional Group Practices, (f) prepare, in consultation with the policy boards
and the Regional Group Practices, all annual and capital operating budgets, (g)
order and purchase inventory and supplies as reasonably requested by the
Regional Group Practices, (h) implement, in consultation with the policy boards
and the Regional Group Practices, national and local public relations or
advertising programs, and (i) provide financial and business assistance in the
negotiation, establishment, supervision and maintenance of contracts and
relationships with managed-care and other similar providers and payors. Most of
the services described above are expected to be provided by employees previously
employed by the Affiliated Practices.
Under the management agreements, the Regional Group Practices will retain
the responsibility for, among other things, (a) hiring and compensating
physician employees and certain other medical professionals, (b) ensuring that
physicians have the required licenses, credentials, approvals and other
certifications needed to perform their duties and (c) complying with certain
federal and state laws and regulations applicable to the practice of podiatric
medicine and (d) matters involving its corporate governance, employees and
similar internal matters, including but not limited to preparation and the
contents of reports to regulatory authorities and distribution of professional
fee income. In addition, the Regional Group Practices will maintain exclusive
control of all aspects of the practice of medicine and the delivery of medical
services.
Under the management agreements, the Company will earn fees from the
Regional Group Practices on a monthly basis. The Company will be entitled to
retain a service fee equal to the Regional Group Practice expenses and ancillary
expenses plus approximately 9% to 25% of the Regional Group Practice adjusted
patient revenues, subject to quarterly adjustment to reflect the fair value of
the management services provided considering the nature and volume of services
required and risks assumed by the Company. Adjustments to reflect the fair value
of the management services may occur for a variety of reasons including
unexpected variations in revenues or expenses of the Regional Group Practice.
Any adjustments to the service fee percentage would be made on a prospective
basis. Accordingly, the Company will maintain a net revenue interest and not a
net profits interest. In addition, the Company will generally be entitled to a
fee of approximately 70% of the ancillary revenues, net of certain operating
expenses, of the Regional Group Practice.
The management agreements between the Company and the Regional Group
Practices will have initial terms of 40 years, with automatic extensions (unless
specified notice is given) of additional 10-year terms. The management
agreements may be terminated by either party if the other party (a) files a
petition in bankruptcy or other similar events occur or (b) defaults on the
performance of a material duty or obligation, which default continues for a
specified term after notice and, in the case of the Regional Group Practice, has
also been approved by 80% of the equity holders of the Regional Group Practice.
In addition, the Company may terminate the agreement if the Regional Group
Practice or any DPM (a) engages in conduct or is formally accused of conduct
that would subject his or her license to practice medicine to be revoked or (b)
is otherwise disciplined by any licensing, regulatory or professional entity or
institution, if the result of any event described in clause (a) or (b)
reasonably would be expected to materially adversely affect the group practice.
During the term of the management agreement and for a period of one year
thereafter, the Regional Group Practices agree not to compete with the Company
in providing services similar to those provided by the Company or by any
Regional Group Practice anywhere within 20 miles of any location at which any
DPM of the Regional Group Practice has practiced medicine in the last year. In
addition, the initial management agreement makes the Company a third-party
beneficiary of the physician engagement agreement including the noncompetition
and liquidated damages provisions therein. The management agreements generally
require the Regional Group Practices to pursue enforcement of these provisions
or to assign to the Company the right to pursue enforcement. Furthermore, the
Company may require the Regional Group Practice to pay liquidated damages owed
by a departing DPM before those damages are collected by the Regional Group
Practice.
F-11
<PAGE>
AMERICAN MEDICAL PROVIDERS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The Regional Group Practices will be responsible for obtaining professional
liability and workers' compensation insurance for the DPMs and other medical
employees of the Regional Group Practices, as well as general liability umbrella
coverage. The Company is responsible for obtaining professional liability and
workers' compensation insurance for employees of the Company and arranging for
general liability and property insurance for the Regional Group Practices.
The management agreements will contain indemnification provisions pursuant
to which the Company will indemnify the Regional Group Practices for damages
resulting from negligent acts or omissions by the Company or its agents,
employees or stockholders. In addition, the Regional Group Practices indemnify
the Company for any damages resulting from any negligent act or omission by any
affiliated DPM, agent or employee of the Regional Group Practices, other than
damages resulting from claims arising from the performance or nonperformance of
medical services.
PHYSICIAN ENGAGEMENT AGREEMENTS
In addition to becoming a member of a Regional Group Practice, each
affiliated DPM will enter into an engagement agreement with that Regional Group
Practice (the "Physician Engagement Agreement").
The Physician Engagement Agreements are for a period of five years with
successive two-year renewal periods thereafter. DPMs entering into Physician
Engagement Agreements agree to practice podiatric medicine on a full-time basis
for the Regional Group Practice in return for a percentage of the earnings
before taxes of and certain ancillary revenues related to that Regional Group
Practice. A Physician Engagement Agreement terminates (a) upon the death of the
DPM, (b) upon the DPM's "disability" or (c) at the Regional Group Practice's
option, for "cause," as defined in the Physician Engagement Agreement. If the
Physician Engagement Agreement terminates, other than at the normal expiration
of its term or as a result of a violation by the Regional Group Practice, the
DPM agrees to pay an amount of liquidated damages to the Regional Group Practice
approximately equal to the twelve months of the Affiliated Practice expenses
attributable to that DPM and agreed to by the Company at the time the Purchase
Agreement was executed. Furthermore, during the term of the Physician Engagement
Agreement and for a period of one year commencing upon expiration or termination
of the agreement, the DPM will not compete with the Regional Group Practice
within a radius of 20 miles of the offices at which that DPM practiced podiatry
in the last year.
The management fees earned by the Company will be in accordance with a
standard management agreement which calls for a calculation of the monthly
management fee based primarily on the total revenues earned by the Regional
Group Practices. There are adjustments to the management fees designed to both
provide incentives for the DPMs to provide efficient patient treatment and to
increase the number of patients treated, as well as to ensure that the DPMs
retain a minimum amount for payment of their compensation from their respective
Regional Group Practice on a monthly basis. The Company believes the fees to be
generated by these formulas will be reflective of the fair market value of the
services provided and will be comparable to the fees earned by other management
companies in the respective jurisdictions where these arrangements will exist.
HISTORICAL INFORMATION OF AFFILIATED PRACTICES
The combined historical financial information of the Affiliated Practices
presented herein is not related to the financial position or results of
operations of AMP. This information is presented solely for the purpose of
providing disclosures to potential investors regarding the group of entities
with which AMP will be contracting to provide future services due to the
significant relationships between AMP and the Affiliated Practices. The
Affiliated Practices' financial information is presented on a combined
historical basis due to the fact that their service and engagement agreements
with the Company will be effective on the completion of the Offering. The
Affiliated Practices were not operated under common control or management during
the fiscal year ended December 31, 1996, or during the nine months ended
September 30, 1997.
F-12
<PAGE>
AMERICAN MEDICAL PROVIDERS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
COMBINED ADJUSTED REVENUES
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -----------
(UNAUDITED)
Affiliated Practices' net patient
revenues........................... $ 21,238,392 $15,847,767
Ancillary service revenues of
Affiliated Practices............... 2,486,220 1,716,494
AnestheCare.......................... 1,867,646 1,662,522
------------ -----------
Total combined adjusted
revenues................ $ 25,592,258 $19,226,783
============ ===========
OPERATING EXPENSES
Subsequent to the Transfers, substantially all of the operating expenses of
the Affiliated Practices will be the responsibility of AMP through the Regional
Group Practices to be formed. The Company shall be responsible for the payment
of all operating expenses incurred by the Regional Group Practice as required to
operate a podiatric office. These expenses will include the following:
a. Salaries, benefits, payroll taxes, workers' compensation, health
insurance and other benefit plans, and other direct expenses of all
employees of the Regional Group Practices, excluding those costs
associated with AMP and any other classification of employee which AMP
is prohibited from employing by law.
b. Direct costs of all employees or consultants that provide services to
each Regional Group Practice.
c. Office supplies as permitted by law.
d. Lease or rent payments as permitted by law, depreciation, principal and
other debt service, utilities, telephone and maintenance expenses for
practice facilities.
e. Property taxes on AMP assets located at Regional Group Practice
offices.
f. Property, casualty, liability and malpractice insurance premiums.
g. Recruiting expenses.
h. Interest on advances to Regional Group Practice bank accounts.
i. Advertising and other marketing expenses attributable to the promotion
of Regional Group Practice offices.
All of the above expenses will be incurred by AMP and be paid directly to
the third-party provider of the goods or services indicated.
The Regional Group Practices will assume responsibility for the payment of
any and all direct employment expenses, including benefits, for any DPM or other
employee that AMP is prohibited by law from employing. In addition, the Regional
Group Practices will retain responsibility for the payment of continuing
education expenses, seminars, professional licenses, professional membership
dues and all other expenses of any DPM.
The combined historical expenses of the Affiliated Practices, ancillary
services of the Affiliated Practices and AnestheCare for the year ended December
31, 1996, and the nine months ended September 30, 1997, were as follows:
COMBINED DETAIL OF EXPENSES
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
(UNAUDITED)
Salaries, wages and benefits of
employees, excluding the DPMs...... $ 4,188,504 $ 3,049,196
Supplies............................. 1,552,930 1,184,584
Rent................................. 1,728,239 1,210,081
Advertising and marketing............ 520,945 388,983
General and administrative........... 7,006,604 5,919,435
Depreciation and amortization on
acquired assets.................... 592,823 314,873
------------ -------------
Total expenses............. $ 15,590,045 $ 12,067,152
============ =============
F-13
<PAGE>
AMERICAN MEDICAL PROVIDERS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The DPM's received $6,535,071 and $4,425,287 as compensation expense
leaving $3,873,967 and $3,105,621 as distributable earnings during the year
ended December 31, 1996 and the nine months ended September 30, 1997
(unaudited), respectively.
The above presentation of the combined expenses of the Affiliated
Practices, ancillary services of the Affiliated Practices and AnestheCare is
presented solely for the purpose of providing disclosure to potential investors
regarding the group of entities with which AMP will be contracting to provide
future services. All of the historical expenses incurred (as noted above) will
not be assumed by AMP and are not necessarily indicative of the expenses to be
incurred by the Company in the future.
RECEIVABLES OF AFFILIATED PRACTICES
The following table presents the combined uncollected patient receivables
of the Affiliated Practices and AnestheCare affiliate receivables, net of
allowance for bad debts and contractual allowances.
COMBINED NET RECEIVABLES
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ --------------
(UNAUDITED)
Patient receivables, net of
contractual and bad debt allowances
of $4,356,060 and $4,390,398,
respectively....................... $4,117,057 $3,883,231
AnestheCare affiliate receivables.... 386,970 216,412
------------ --------------
$4,504,027 $4,099,643
============ ==============
5. SUBSEQUENT EVENTS (UNAUDITED)
On February 17, 1998 the Company authorized 20,000,000 shares of Class A
Common Stock, par value $.001 per share ("Common Stock"), 1,000,000 shares of
Class B Common Stock, par value $.001 per share ("Class B Common Stock") and
20,000,000 shares of preferred stock, par value $.001 per share. Immediately
thereafter, the Company converted each share of its existing 20,000 shares of
common stock, par value $.01 per share, into 32.5 shares of the Company's Class
B Common Stock. Accordingly, the historical share data has been restated for all
periods presented. The Class B Common Stock is convertible into Common Stock, at
the option of the holder thereof, upon the occurrence of a Conversion Event (as
defined). The maximum number of shares of Common Stock that may be issued upon
conversion of the Class B Common Stock is 1,950,000. The Class B Common Stock
converts into Class A Common Stock on a share-for-share basis, provided however,
that if the Common Stock reaches certain average closing prices over a 15-day
period during the next six years on the Nasdaq National Market, other
over-the-counter market or an exchange, as then applicable (the "Trading
Market") then the conversion ratio with respect to a certain number of shares
of Class B Common Stock will immediately change so that such shares will
thereafter be convertible into Common Stock at the ratio of three shares of
Common Stock for each share of Class B Common Stock (each such share an
"Adjusted Conversion Share").
On the date that the average closing price on the Trading Market for the
preceding 15 consecutive trading days (the "Average Price") exceeds 150% of
the price to the public in the Offering, 130,000 of the issued shares of Class B
Common Stock will immediately become Adjusted Conversion Shares (and subject to
the new 3-for-1 conversion ratio). Thereafter, the remaining 520,000 shares of
Class B Common Stock will become Adjusted Conversion Shares in four remaining
increments of 130,000 shares of Class B Common Stock each (20% of the total
number of shares of Class B Common Stock issued) upon the attainment of new
Average Prices. The Average Prices applicable to each new 20% increment will
equal 120% of each preceding Average Price applicable to the preceding 20%
increment.
A Conversion Event shall be deemed to have occurred (i) in the event of a
disposition of such share of Class B Common Stock by the holder thereof
(excluding dispositions to such holder's affiliates), (ii) in the event any
person not affiliated with the Company acquires beneficial ownership of 15% or
more of the outstanding shares of capital stock of the Company, (iii) in the
event any person not affiliated with the Company offers to acquire 15% or more
of the outstanding shares of capital stock of the Company, (iv) in the event the
holder of such shares elects to so convert at any time after the second
anniversary of the date of this Prospectus, (v) on the sixth anniversary of the
date of this Prospectus or (vi) in the event the holders of a majority of the
outstanding shares of Common Stock approve such conversion. In addition, the
F-14
<PAGE>
AMERICAN MEDICAL PROVIDERS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Company may elect to convert any outstanding shares of Class B stock into shares
of Common Stock in the event 95% or more of the outstanding shares of Class B
Common Stock as of the date of this Prospectus have previously been converted
into shares of Common Stock.
Upon consummation of the Offering, holders of the Class B Common Stock will
have the ability to elect as a class one member of the Board of Directors and
the holders of the Common Stock will have the ability to elect as a class all
other members of the Board of Directors provided however that if 65% or more of
the Class B Common Stock outstanding on the date of this Prospectus have been
converted into Common Stock, the Class B Common Stock shall no longer have the
ability to elect directors as a class. The Common Stock and Class B Common Stock
possess ordinary voting rights and vote together as a single class in respect of
all other corporate matters, and, in connection therewith, holders of shares of
Common Stock are entitled to one vote per share and holders of shares of Class B
Common Stock are entitled to 2/3 of a vote per share. The Common Stock and Class
B Common Stock afford no cumulative voting rights, and the holders of a majority
of the shares voting for the election of directors can elect all the directors
if they choose to do so. Except for the conversion rights of the Class B Common
Stock described below, the Common Stock and Class B Common Stock carry no
preemptive rights, are not convertible, redeemable, assessable or entitled to
the benefits of any sinking fund. The holders of Common Stock and Class B Common
Stock are entitled to dividends in such amounts and at such times as may be
declared by the Board of Directors out of funds legally available therefore.
The Board of Directors is authorized, without further action by the
stockholders, to provide for the issuance of shares of Preferred Stock as a
class without series or in one or more series, to establish the number of shares
in each class or series and to fix the designation, powers, preferences and
rights of each such class or series and the qualifications, limitations or
restrictions thereof. Because the Board of Directors has the power to establish
the preferences and rights of each class or series of Preferred Stock, the Board
of Directors may afford the holders of any class or series of Preferred Stock
preferences, powers and rights, voting or otherwise, senior to the rights of
holders of Common Stock or the Class B Common Stock. The issuance of Preferred
Stock could have the effect of delaying or preventing a change in control of the
Company. To date, the Company has not issued any Preferred Stock but the Board
has authorized the issuance of the Series A Junior Participating Preferred Stock
of the Company.
Subsequent to September 30, 1997, the Company adopted the 1997 Incentive
and Non-Qualified Stock Option Plan (the "1997 Plan") to provide incentives to
attract and retain directors, officers, advisors, consultants and key employees.
Officers, directors, employees of the Company, consultants and advisors to the
Company are eligible to receive awards under the 1997 Plan, at the Plan
Administrator's discretion. Awards available under the 1997 Plan include: (i)
common stock purchase options; (ii) stock appreciation rights; (iii) restricted
stock; (iv) deferred stock; (v) performance shares and (vi) other stock based
awards. The Company has reserved up to 1,157,098 of the shares of its Common
Stock for granting of options under the 1997 Plan. Under the terms of the 1997
Plan, the Plan Administrator retains discretion, subject to plan limits, to
modify the terms of outstanding awards and to reprice awards. Subsequent to
September 30, 1997, options to purchase 464,500 of the shares of Common Stock
were granted all at an exercise price equal to the initial public offering price
vesting over a period of four years. The Company anticipates granting options to
purchase additional shares of Common Stock to employees of AMP and the Regional
Group Practices, prior to or contemporaneous with the closing of the Offering,
at a purchase price equal to the initial public offering price.
During September 1997, AFC entered into a loan and security agreement which
resulted in borrowings of $500,000 from a third party. The borrowings bear
interest at an annual rate of 18%, payable quarterly, and are due March 31, 1998
or the fifth day following the date of the initial public offering of AMP.
Proceeds under the loan are being used by AFC to fund certain expenses on behalf
of AMP in conjunction with AMP's proposed initial public offering. Upon the
closing of the Offering, AMP will assume this obligation of AFC in satisfaction
of amounts due to AFC. The agreement provides for, at the lenders' option
exercised by notice prior to the initial public offering pricing, the conversion
of any or all of the outstanding principal and accrued interest on the loan into
shares of AMP Common Stock offered in the Offering valued at the initial public
offering price.
During the first quarter of 1998, AFC intends to complete a financing of
$1.5 million (the "Bridge Financing"), representing $1.425 million in
non-interest bearing loans and $75,000 representing 15
F-15
<PAGE>
AMERICAN MEDICAL PROVIDERS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
membership units in AFC to fund certain expenses on behalf of AMP, in
conjunction with AMP's proposed initial public offering. The financing provides
for the loans to be repaid by AFC from funds it will receive from AMP's initial
public offering. Additionally, AFC is required to repurchase each of the 15
membership units in AFC for $71,667 in cash. In connection with the Offering
each investor was given the opportunity to keep such cash or purchase $71,667
worth of AMP Common Stock offered in the Offering valued at the initial public
offering price. Upon the closing of the Offering, AMP will assume this
obligation of AFC in satisfaction of amounts due to AFC. AMP will recognize an
interest charge totaling $1.0 million during the period through settlement of
this obligation representing the difference between the $1.5 million face value
of the obligation and the $2.5 million settlement value.
The Bridge Financing was offered and sold by AFC in reliance on certain
exemptions from registration under the Securities Act of 1993 (the "Act").
Because the Bridge Financing was not completed when the Company filed a
registration statement with the Securities and Exchange Commission (the
"Commission") pursuant to a public offering of the Company's stock, an
argument could be made that the consummation of the Company's public offering
caused such exemptions to be unavailable retroactively. Consequently, the
Company has registered the Bridge Financing and is offering the investors
thereof the opportunity to rescind their investment (the "Bridge Financing
Rescission Offer"). If this rescission offer is accepted, the investors in the
Bridge Financing will be repaid the amount of their original $1.5 million
investment, plus interest at the applicable statutory rate from the date of
issuance. If the rescission offer is rejected, the investors in the Bridge
Financing will be repaid a total of $2.5 million.
The Company has received from a major international financial institution a
commitment for a $30.0 million, three-year revolving credit facility that is
expected to be available to help fund the Company's working capital needs,
capital expenditures and anticipated future affiliations. The credit facility is
expected to contain customary affirmative and negative covenants (including
proscriptions on the payment of dividends and capital expenditures.) The credit
facility is expected to bear interest at either the London Inter-Bank Offered
Rate or, at the Company's option, the lender's base rate, plus a margin based on
the ratio of the Company's senior debt to earnings before interest, taxes,
depreciation and amortization. There can be no assurance that the Company will
ultimately close on the credit facility.
The Board of Directors is authorized without further action by the
stockholders to provide for the issuance of shares of Preferred Stock as a class
without series or in one or more series, to establish the number of shares in
each class or series and to fix the designation, powers, preferences, powers and
rights, of each such class or series and the qualifications, limitations or
restrictions thereof. The issuance of Preferred Stock could have the effect of
delaying or preventing a change in control of the Company.
Between November 5, 1997 and February 11, 1998, the Company entered into
negotiations with and delivered non-binding letters of intent to 13 holders of
certain operating assets of, or the stock of entities holding certain operating
assets of, twelve podiatric practices (the Practice Owners) by which each
Practice Owner was to come to an agreement with the Company to dispose of
certain operating assets of, or the stock of entities holding certain operating
assets of such Practice Owner's podiatric practices (the "Letters of Intent").
The Company has subsequently determined that its negotiations with and
deliveries of Letters of Intent to the Practice Owners may constitute an offer
to sell Common Stock inconsistent with the prospectus delivery requirements of
the Securities Act. In order to limit its potential liability under the Act, the
Company is undertaking a rescission offer (the"Practice Rescission Offer")
with respect to any potential offer made within or outside of the Letters of
Intent.
Practice Owners may accept the Practice Rescission Offer or reject the
Practice Rescission Offer. To the extent that a Practice Owner accepts the
Practice Rescission Offer, the Company takes the position that its potential
liability based upon any possible failure of the Company to comply with the
Securities Act by negotiating and delivering the Letters of Intent without a
prospectus will be eliminated. If a Practice Owner accepts the Practice
Rescission Offer, the previous Letters of Intent will be deemed canceled. A
Practice Owner will receive no other consideration by accepting the Practice
Rescission Offer. To the extent that a Practice Owner rejects the Practice
Rescission Offer he or she will retain whatever rights he or she presently has
under the Securities Act in connection with the earlier Letter of Intent.
F-16
<PAGE>
AMERICAN MEDICAL PROVIDERS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
It is the position of the Staff of the Securities and Exchange Commission
that any liability of the Company under the Securities Act for the Practice
Rescission Offer may survive and not be barred by the Practice Rescission Offer.
However, it is possible that a court would hold that the legal remedies
available to the Practice Owners are diminished as a result of the Practice
Rescission Offer. Although the legal principles applicable to a transaction such
as the Practice Rescission Offer are not clear, among possible bases for such a
determination are that any Practice Owners who accept the Rescission Offer
thereby will have entered into an accord and satisfaction that moots any claim
for damages and that any such Practice Owners who reject the Practice Rescission
Offer may have waived or be estopped from asserting his or her rights by failing
to accept the Practice Rescission Offer.
As discussed in Note 1, pursuant to a reimbursement and assumption
agreement with AFC, the Company will reimburse the affiliation-related expenses
incurred by AFC since May 1996, including AFC's payroll, travel and
entertainment and professional fees. In addition, the Company will assume
certain lease obligations of AFC for office space, and has entered into recent
lease obligations for additional office space.
In the first quarter of 1998, AMP intends to complete its initial public
offering of its Common Stock and intends to simultaneously exchange cash and
shares of its Common Stock for certain assets and liabilities of the founding
practices upon consummation of the Offering. An investment in shares of Common
Stock offered by this prospectus involves a high degree of risk, including,
among others, limited operating history of the Company and combined practices,
dependence on operative agreements, dependence on Regional Group Practices,
implementation of information systems, dependence upon key personnel, growth
strategy, managed care, future health care reform, competition and the need for
additional funds. For a more thorough discussion of risk factors, see "Risk
Factors" included elsewhere in this prospectus.
F-17
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Pyramid Anesthesiology Group, Inc.:
We have audited the accompanying balance sheets of Pyramid Anesthesiology
Group, Inc. (the "Company" or "AnestheCare"), a Georgia S Corporation, as of
December 31, 1995 and 1996, and September 30, 1997, and the related statements
of operations, stockholders' equity and cash flows for the years ended December
31, 1995 and 1996, and the nine months ended September 30, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Pyramid Anesthesiology
Group, Inc., as of December 31, 1995 and 1996, and September 30, 1997, and the
results of its operations and its cash flows for the years ended December 31,
1995 and 1996, and the nine months ended September 30, 1997, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
December 15, 1997
F-18
<PAGE>
PYRAMID ANESTHESIOLOGY GROUP, INC.
BALANCE SHEETS
DECEMBER 31,
---------------------- SEPTEMBER 30,
1995 1996 1997
---------- ---------- --------------
ASSETS
CURRENT ASSETS:
Cash............................ $ 5 $ 42,464 $ 36,947
Accounts receivable............. 31,970 -- --
Accounts receivable from
affiliates.................... 550,525 386,970 216,412
Other current assets............ 3,980 1,183 --
---------- ---------- --------------
Total current assets....... 586,480 430,617 253,359
---------- ---------- --------------
EQUIPMENT, at cost
Computers and equipment......... 88,960 132,029 151,867
Furniture and fixtures.......... 97,575 115,860 115,860
---------- ---------- --------------
186,535 247,889 267,727
Less-Accumulated depreciation... (26,373) (86,775) (118,440)
---------- ---------- --------------
160,162 161,114 149,287
---------- ---------- --------------
OTHER ASSETS:
Investment...................... 18,000 7,200 7,200
---------- ---------- --------------
$ 764,642 $ 598,931 $ 409,846
========== ========== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable................ $ 13,726 $ 20,904 $ 58,390
Due to affiliates............... 250,770 260,504 30,984
Accrued expenses................ 15,122 41,543 55,931
Note payable to related party... 26,438 74,776 59,484
---------- ---------- --------------
Total current
liabilities............. 306,056 397,727 204,789
---------- ---------- --------------
STOCKHOLDERS' EQUITY:
Common stock.................... 2,000 2,000 2,000
Retained earnings............... 456,586 199,204 203,057
---------- ---------- --------------
Total stockholders'
equity.................. 458,586 201,204 205,057
---------- ---------- --------------
$ 764,642 $ 598,931 $ 409,846
========== ========== ==============
The accompanying notes are an integral part of these financial statements.
F-19
<PAGE>
PYRAMID ANESTHESIOLOGY GROUP, INC.
STATEMENTS OF OPERATIONS
YEARS ENDED NINE MONTHS
DECEMBER 31, ENDED
-------------------------- SEPTEMBER 30,
1995 1996 1997
------------ ------------ -------------
REVENUES............................ $ 1,009,017 $ 1,867,646 $ 1,662,522
OPERATING EXPENSES.................. 495,960 763,825 705,765
------------ ------------ -------------
Income from operations.... 513,057 1,103,821 956,757
------------ ------------ -------------
OTHER INCOME:
Interest income................ 3,851 1,719 1,540
Gain on sale of investment to
affiliate.................... -- 196,875 --
Other.......................... 16,558 11,203 50,253
------------ ------------ -------------
Total other income........ 20,409 209,797 51,793
------------ ------------ -------------
NET INCOME.......................... $ 533,466 $ 1,313,618 $ 1,008,550
============ ============ =============
PRO FORMA DATA (unaudited):
Historical net income.......... $ 533,466 $ 1,313,618 $ 1,008,550
Pro forma owners'
compensation................. 300,000 300,000 175,000
Pro forma income taxes......... 93,386 405,447 333,420
------------ ------------ -------------
Pro forma net income...... $ 140,080 $ 608,171 $ 500,130
============ ============ =============
The accompanying notes are an integral part of these financial statements.
F-20
<PAGE>
PYRAMID ANESTHESIOLOGY GROUP, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
------------------- RETAINED
SHARES AMOUNT EARNINGS TOTAL
------- ------- ----------- --------------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1994........... 2,000 $ 2,000 $ 45,341 $ 47,341
Stockholder distributions....... -- -- (122,221) (122,221)
Net income...................... -- -- 533,466 533,466
------- ------- ----------- --------------
BALANCE, December 31, 1995........... 2,000 2,000 456,586 458,586
Stockholder distributions....... -- -- (1,571,000) (1,571,000)
Net income...................... -- -- 1,313,618 1,313,618
------- ------- ----------- --------------
BALANCE, December 31, 1996........... 2,000 2,000 199,204 201,204
Stockholder distributions....... -- -- (1,004,697) (1,004,697)
Net income...................... -- -- 1,008,550 1,008,550
------- ------- ----------- --------------
BALANCE, September 30, 1997.......... 2,000 $ 2,000 $ 203,057 $ 205,057
======= ======= =========== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-21
<PAGE>
PYRAMID ANESTHESIOLOGY GROUP, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED NINE MONTHS
DECEMBER 31, ENDED
---------------------------- SEPTEMBER 30,
1995 1996 1997
------------ -------------- --------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income......................... $ 533,466 $ 1,313,618 $ 1,008,550
Adjustments to reconcile net income
to net cash provided by
operating activities --
Depreciation.................... 26,373 60,402 31,664
Gain on sale of investments..... -- (196,875) --
Changes in assets and
liabilities --
Accounts receivable........... 3,030 31,970 --
Accounts receivable from
affiliates................. 926,388 163,555 170,550
Other current assets.......... (3,980) 2,797 1,183
Accounts payable.............. (13,486) 7,178 37,486
Due to affiliates............. (1,186,590) 9,734 (229,520)
Accrued expenses.............. 15,122 26,421 14,388
------------ -------------- --------------
Net cash provided by operating
activities.................... 300,323 1,418,800 1,034,301
------------ -------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and
equipment....................... (186,535) (61,354) (19,829)
Purchase of investment............. (18,000) -- --
Proceeds from sale of investment... -- 207,675 --
------------ -------------- --------------
Net cash provided by (used in)
investing activities.......... (204,535) 146,321 (19,829)
------------ -------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to shareholders...... (122,221) (1,571,000) (1,004,697)
Note payable to related party...... 26,438 48,338 (15,292)
------------ -------------- --------------
Net cash used in financing
activities.................... (95,783) (1,522,662) (1,019,989)
------------ -------------- --------------
NET INCREASE (DECREASE) IN CASH...... 5 42,459 (5,517)
CASH, beginning of period............ -- 5 42,464
------------ -------------- --------------
CASH, end of period.................. $ 5 $ 42,464 $ 36,947
============ ============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-22
<PAGE>
PYRAMID ANESTHESIOLOGY GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Pyramid Anesthesiology Group, Inc. (the "Company"), a Georgia S
Corporation, was incorporated on February 1, 1993, for the purpose of providing
billing and management services for entities that provide health care-related
services for local hospitals and to members of the community. The Company began
generating revenues from its primary operations in March 1995.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Accordingly, actual results could differ from those estimates.
INVESTMENT
The Company maintains an ownership interest in a partnership. Since the
Company's ownership does not represent a significant influence, the investment
is accounted for under the cost method.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of cash, receivables and accounts payable approximates
fair value due to the short maturity of these instruments.
PROPERTY AND DEPRECIATION
Property and equipment are stated at cost. Depreciation is provided on the
straight-line method over the estimated useful lives of the respective assets.
Those lives are as follows:
Computers and equipment.............. 5 years
Furniture and fixtures............... 7 years
Maintenance and repairs are charged to expense as incurred whereas major
renewals and betterments are capitalized. When items of property or equipment
are sold or retired, the related cost and accumulated depreciation are removed
from the accounts and any gain or loss is included in income.
REVENUE RECOGNITION
The Company earns revenues under various cost-sharing agreements which are
based upon a percentage of revenues of the customer. Accordingly, the Company
recognizes revenues under the cost-sharing agreements based upon the accrual
basis revenues of the respective customer.
Additionally, the Company earns revenues from SCNA for providing consulting
services as the service is provided (see Note 2).
The Company also earns revenues through the provision of management and
billing services (see Note 2). The Company's management agreements primarily
provide that revenues are earned based upon a percentage of cash collected by
the respective business. Accordingly, the Company recognizes management fee
revenues as cash is collected by the customer.
INCOME TAXES
The Company, with the consent of its stockholders, has elected under the
Internal Revenue Code to be an S Corporation for tax purposes. In lieu of
corporation income taxes, the stockholders of an S Corporation
F-23
<PAGE>
PYRAMID ANESTHESIOLOGY GROUP, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
are taxed on their proportionate share of the Company's taxable income.
Therefore, no provisions or liability for income taxes has been included in the
financial statements.
The Company's S-Corporation status will terminate effective with the
acquisition by AMP as further discussed in Note 4. The deferred taxes estimated
upon conversion to C-Corporation status are not expected to be material. The
unaudited pro forma data presents the incremental provision for income taxes as
if the Company had been subject to federal and state income taxes, assuming a
blended rate of 40%.
OWNERS' COMPENSATION
Effective July 1, 1997, the shareholders began to receive salaries of
$25,000 each per quarter. Prior to July 1, 1997, the shareholders had not
historically received a salary for their services, but received distributions as
S-Corporation shareholders. All earnings of the Company are available for
distribution to the shareholders. The pro forma owners' compensation reflects
the compensation the shareholders will receive prospectively under the terms of
the employment agreements with AMP as further discussed in Note 4.
SIGNIFICANT CONCENTRATIONS
Substantially all of the Company's revenue is from services performed
through affiliates of the Company (see Note 2). The Company's parent has signed
a professional services agreement with one hospital which expires September 30,
1999, with continuing one-year renewal options thereafter. Approximately 32% and
47% of the Company's revenues were from services associated with this contract
during the years ended December 31, 1995 and 1996, respectively. Effective
January 1, 1997, the Company restructured the professional services agreements.
The Company began processing the billing of patients directly at this time for
affiliates of the Company (as described in Note 2) and the revenues generated
associated with this contract were intermingled with the revenues from
affiliates of the Company.
2. RELATED-PARTY TRANSACTIONS
The Company provides services to a group of affiliated companies (the
"Affiliates"). As of December 31, 1995 and 1996, and September 30, 1997 the
Affiliates with some common owners are Georgia Rehabilitation Center ("GRC"),
Southern Crescent Nurse Anesthesia, LLC, ("SCNA") and Cell Saver, Inc.
Southern Crescent Anesthesiology, Inc. ("SCA"), is also an affiliate but is
not under common control.
The Company earns 7 to 10 percent of all revenues collected on behalf of
the Affiliates. In addition, revenues from services provided to three hospitals
are earned through affiliates of the Company, primarily through a professional
services agreement between the parent company, AnestheCare, Inc. (the
"Parent"), and one hospital. Accounts receivable from these affiliated
entities as of December 31, 1995 and 1996, and September 30, 1997, were
$550,525, $386,970, and $216,412, respectively. Revenues from these affiliated
entities for the years ended December 31, 1995 and 1996, and the nine months
ended September 30, 1997 under these collections agreements were $1,006,035,
$1,632,125, and $500,626, respectively. Based upon contractual arrangements
between the Company and the Affiliates through December 31, 1996, certain
general and administrative costs which benefit all the entities are shared
amongst all entities. The contractual arrangements provided that these
indentified costs, primarily payroll costs of certain personnel, would be
allocated evenly among Pyramid, GRC, SCNA and SCA. Expenses allocated to the
Affiliates for the years ended December 31, 1995 and 1996, were $57,500 and
$230,728, respectively. As of December 31, 1996, one of the Affiliates had
prepaid $17,166 of these expenses, which is shown as due to affiliates in the
accompanying financial statements. Management believes that the methods used to
allocate these expenses are reasonable. Effective January 1, 1997, the
agreements with Affiliates were restructured and the Company now earns 6 to 12
percent of revenues of the Affiliates as a charge for general and administrative
costs. Revenues earned under this cost-sharing agreement were $825,507 for the
nine months ended September 30, 1997.
F-24
<PAGE>
PYRAMID ANESTHESIOLOGY GROUP, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
In January of 1996, the Company sold its 60% interest in Peachtree
Lithotripsy to an affiliate, SCA, for approximately $208,000 resulting in a gain
on the sale of approximately $197,000.
During 1997, two owners of the Company, who were previously member owners
in SCNA, withdrew their membership from SCNA. Additionally, the Company entered
into an agreement whereby it would act as consultant on behalf of SCNA. Included
in 1997 revenues are $274,075 of consulting revenues related to these
agreements. Effective January 1, 1997, the terms of this agreement specified
that the consulting fee would be $25,000 per month, plus 15% of SCNA's taxable
income, as defined.
3. COMMITMENTS AND CONTINGENCIES
The Company rents office space from one of the Affiliates for $5,166 per
month through August 2005. Rent expense for 1996 was $61,992. The Company
additionally leases a light truck and an office copier.
Future minimum payments under these leases are as follows:
Year ending September 30 --
1998............................ $ 74,647
1999............................ 75,024
2000............................ 72,444
2001............................ 69,261
2002............................ 62,532
Thereafter...................... 177,264
----------
$ 531,172
==========
The Company has a defined contribution 401(k) plan. Eligible employees can
contribute up to 15 percent of their compensation, and the Company may make a
discretionary matching contribution. For 1996, the Company contributed $8,625.
No matching contributions have been approved for 1997.
4. SUBSEQUENT EVENTS
In October 1997, the Company entered into an agreement with American
Medical Providers, Inc. ("AMP"), pursuant to which AMP or a designated
subsidiary will acquire substantially all of the assets and operations of the
Company. The scope of the ongoing operations of Pyramid will be significantly
reduced as a result of the sale as AMP will assume substantially all operations
from Pyramid.
F-25
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Bellaire Surgicare, Inc.
We have audited the accompanying balance sheets of Bellaire Surgicare,
Inc., as of December 31, 1995 and 1996, and the related statements of
operations, shareholders' equity and cash flows for the period from the date of
inception (March 15, 1995) to December 31, 1995, and for the year ended December
31, 1996. These financial statements are the responsibility of Bellaire
Surgicare, Inc.'s management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Bellaire Surgicare, Inc., as
of December 31, 1995 and 1996, and the results of its operations and its cash
flows for the period from the date of inception (March 15, 1995) to December 31,
1995, and for the year ended December 31, 1996, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
January 19, 1998
F-26
<PAGE>
BELLAIRE SURGICARE, INC.
BALANCE SHEETS
DECEMBER 31,
-------------------------- SEPTEMBER 30,
1995 1996 1997
------------ ------------ -------------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.......... $ 45,201 $ 130,001 $139,045
Accounts receivable, net of
allowance for contractual
adjustments and bad debts of
$690,878, $466,415 and $416,770
(unaudited)..................... 558,608 394,670 320,156
Due from related parties........... -- 28,000 20,500
Prepaid expenses and other current
assets.......................... 64,799 80,889 92,041
------------ ------------ -------------
Total current assets....... 668,608 633,560 571,742
PROPERTY AND EQUIPMENT, net.......... 492,090 445,574 351,872
OTHER NONCURRENT ASSETS, net......... 18,750 3,750 --
------------ ------------ -------------
Total assets............... $ 1,179,448 $ 1,082,884 $923,614
============ ============ =============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term
debt ........................... $ 132,023 $ 597,216 $594,876
Current portion of obligations
under capital leases............ 22,740 25,014 16,698
Accounts payable and accrued
expenses........................ 133,539 142,255 137,004
Due to related parties............. -- 12,119 10,401
------------ ------------ -------------
Total current
liabilities.............. 288,302 776,604 758,979
LONG-TERM DEBT, net of current
portion............................ 549,476 26,653 --
LONG-TERM OBLIGATIONS UNDER CAPITAL
LEASES, net of current portion..... 51,184 26,170 13,035
------------ ------------ -------------
Total liabilities.......... 888,962 829,427 772,014
SHAREHOLDERS' EQUITY:
Common stock, $.10 par value;
1,000,000 shares authorized and
140,000 shares issued and
outstanding..................... 14,000 14,000 14,000
Retained earnings.................. 276,486 239,457 137,600
------------ ------------ -------------
Total shareholders'
equity.................. 290,486 253,457 151,600
------------ ------------ -------------
Total liabilities and
shareholders' equity.... $ 1,179,448 $ 1,082,884 $923,614
============ ============ =============
The accompanying notes are an integral part of these financial statements.
F-27
<PAGE>
BELLAIRE SURGICARE, INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD
FROM INCEPTION
(MARCH 15, NINE MONTHS ENDED
1995) TO YEAR ENDED SEPTEMBER 30,
DECEMBER 31, DECEMBER 31, --------------------------
1995 1996 1996 1997
--------------- ------------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUES............................. $ 1,922,496 $ 2,486,220 $ 1,755,781 $ 1,716,494
COSTS AND EXPENSES:
Surgical costs..................... 404,481 444,939 313,187 364,996
Salaries, wages and benefits....... 232,989 359,325 252,619 284,645
Management and professional fees... 242,030 340,064 241,203 253,103
General and administrative
expenses........................ 298,392 392,125 296,906 318,217
Depreciation and amortization...... 89,287 143,677 104,729 107,091
Interest expense................... 49,831 68,011 48,776 43,606
--------------- ------------- ------------ ------------
Total costs and expenses...... 1,317,010 1,748,141 1,257,420 1,371,658
--------------- ------------- ------------ ------------
Income from operations............. 605,486 738,079 498,361 344,836
OTHER INCOME......................... -- 2,392 1,304 1,304
--------------- ------------- ------------ ------------
NET EARNINGS......................... $ 605,486 $ 740,471 $ 499,665 $ 346,140
=============== ============= ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-28
<PAGE>
BELLAIRE SURGICARE, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
COMMON STOCK
------------------- RETAINED
SHARES AMOUNT EARNINGS
--------- ------- ---------
INITIAL CAPITALIZATION, March 15,
1995.................................. 140,000 $14,000 $ --
Net earnings....................... -- -- 605,486
Dividends to shareholders.......... -- -- (329,000)
--------- ------- ---------
BALANCE, December 31, 1995.............. 140,000 14,000 276,486
Net earnings....................... -- -- 740,471
Dividends to shareholders.......... -- -- (777,500)
--------- ------- ---------
BALANCE, December 31, 1996.............. 140,000 14,000 239,457
Net earnings (unaudited)........... -- -- 346,140
Dividends to shareholders
(unaudited)...................... -- -- (447,997)
--------- ------- ---------
BALANCE, September 30, 1997
(unaudited)........................... 140,000 $14,000 $ 137,600
========= ======= =========
The accompanying notes are an integral part of these financial statements.
F-29
<PAGE>
BELLAIRE SURGICARE, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION NINE MONTHS
(MARCH 15, ENDED
1995) TO YEAR ENDED SEPTEMBER 30
DECEMBER 31, DECEMBER 31, --------------------------
1995 1996 1996 1997
------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings....................... $ 605,486 $ 740,471 $ 499,665 $ 346,140
------------ ------------ ------------ ------------
Adjustments to reconcile net
earnings to net cash provided by
operating activities --
Depreciation and amortization... 89,287 143,677 104,729 107,091
Changes in assets and
liabilities --
(Increase) decrease in --
Accounts receivable, net... (559,326) 163,938 131,033 74,514
Due from (to) related
parties................. -- (28,000) -- 7,500
Prepaid expenses and other
current assets.......... (64,081) (16,090) (21,272) (11,152)
Increase (decrease) in --
Accounts payable and
accrued expenses........ 133,539 20,835 75,832 (6,969)
------------ ------------ ------------ ------------
(400,581) 284,360 290,322 170,984
------------ ------------ ------------ ------------
Net cash provided by
operating activities.... 204,905 1,024,831 789,987 517,124
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of non-compete
agreement....................... (30,000) -- -- --
Purchase of property and
equipment....................... (482,532) (82,161) (81,730) (9,639)
------------ ------------ ------------ ------------
Net cash used in investing
activities.............. (512,532) (82,161) (81,730) (9,639)
------------ ------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common
stock........................... 14,000 -- -- --
Proceeds from long-term
obligations..................... 738,543 566,731 49,465 98,000
Payment of long-term obligations... (57,044) (624,361) (101,763) (126,993)
Payment of obligations under
capital leases.................. (13,671) (22,740) (18,866) (21,451)
Dividends to shareholders.......... (329,000) (777,500) (523,906) (447,997)
------------ ------------ ------------ ------------
Net cash provided by (used
in) financing
activities.............. 352,828 (857,870) (595,070) (498,441)
------------ ------------ ------------ ------------
NET INCREASE IN CASH AND CASH
EQUIVALENTS........................ 45,201 84,800 113,187 9,044
CASH AND CASH EQUIVALENTS, beginning
of period.......................... 0 45,201 45,201 130,001
------------ ------------ ------------ ------------
CASH AND CASH EQUIVALENTS, end of
period............................. $ 45,201 $ 130,001 $ 158,388 $ 139,045
============ ============ ============ ============
SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTMENT ACTIVITIES:
Capital lease obligations incurred
to acquire equipment............ $ 87,595 $ -- $ -- $ --
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-30
<PAGE>
BELLAIRE SURGICARE, INC.
NOTES TO FINANCIAL STATEMENTS
1. BUSINESS, ORGANIZATION AND BASIS OF PRESENTATION:
Bellaire Surgicare, Inc. (the Center), is a free-standing ambulatory
surgery center which services Houston, Texas, and its surrounding communities.
The Center is organized as an S Corporation under the laws of the state of
Texas.
The Center's financial statements have been prepared on the accrual basis
of accounting. As the Center is organized as an S Corporation for federal income
tax reporting purposes, all tax liability is reported on the personal returns of
the shareholders. Upon acquisition by AMP as further discussed in Note 7, the
Company will record a deferred tax liability of approximately $75,000
representing the tax effect of differences between the book and tax bases of
assets and liabilities existing as of the acquisition date.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
INTERIM FINANCIAL INFORMATION
The interim financial statements as of September 30, 1997, and for the nine
months ended September 30, 1996 and 1997, are unaudited, and certain information
and footnote disclosures, normally included in financial statements prepared in
accordance with generally accepted accounting principles, have been omitted. In
the opinion of management, all adjustments, consisting only of normal recurring
adjustments, necessary to fairly present the financial position, results of
operations and cash flows with respect to the interim financial statements, have
been included. The results of operations for the interim periods are not
necessarily indicative of the results for the entire fiscal year.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Center believes that the fair value of their financial instruments
approximates their carrying amounts. Financial instruments include cash and cash
equivalents, accounts receivable and certain current and long-term debt.
CASH AND CASH EQUIVALENTS
The Center considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
ACCOUNTS RECEIVABLE
Accounts receivable primarily consist of receivables from patients,
insurers, government programs and other third-party payors for medical services
provided by the Center. Such amounts are reduced by an allowance for contractual
adjustments and other uncollectible amounts. Contractual adjustments result from
the differences between the rates charged by the Center for services performed
and the amounts allowed by the Medicare and Medicaid programs and other
govenmental and private insurers.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Equipment under capital leases
is stated at the net present value of the future minimum lease payments at the
inception of the related leases. Depreciation of property and equipment is
calculated using the straight-line method over the estimated useful lives of the
assets. Routine maintenance and repairs are charged to expense as incurred,
while costs of betterments and renewals are capitalized.
OTHER NONCURRENT ASSETS
Other noncurrent assets consist of a noncompete agreement. The noncompete
agreement was amortized on the straight-line basis over two years, which was the
term of the agreement.
F-31
<PAGE>
BELLAIRE SURGICARE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
REVENUES
Medical service revenues are accounted for in the period the services are
provided. The revenues are reported at the estimated realizable amounts from
patients, third-party payors and others. Provisions for estimated third-party
payor adjustments are estimated in the period the related services are provided.
Any adjustment to the amounts recorded will be recorded in the period in which
the revised amount is determined. Medicare and other governmental programs
reimburse based on fee schedules which are determined by the related
governmental agency. Additionally, the Center participates in agreements with
managed-care organizations to provide services at negotiated rates or for
capitated payments. Any differences between estimated contractual adjustments
and actual final settlements under reimbursement contracts are recognized when
the final settlements are made.
CONCENTRATION OF CREDIT RISK
The Center extends credit to patients covered by insurance programs such as
governmental programs like Medicare and Medicaid and private insurers. The
Center manages credit risk with the various public and private insurance
providers, as appropriate. Allowances for doubtful accounts have been made for
potential losses, where appropriate.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
3. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1995 and 1996, consist of the
following:
ESTIMATED DECEMBER 31,
USEFUL LIVES ----------------------
(YEARS) 1995 1996
------------ ---------- ----------
Equipment.............................. 5 $ 459,262 $ 538,521
Leasehold improvements................. 5 4,513 4,512
Furniture and fixtures................. 7 18,757 21,660
Equipment under capital leases......... 3-5 87,595 87,595
---------- ----------
570,127 652,288
Less -- Accumulated depreciation....... (78,037) (206,714)
---------- ----------
Net property and equipment........ $ 492,090 $ 445,574
========== ==========
4. OTHER NONCURRENT ASSETS:
Other noncurrent assets at December 31, 1995 and 1996, consist of the
following:
DECEMBER 31,
--------------------
1995 1996
--------- ---------
Noncompete agreements................... $ 30,000 $ 30,000
Less -- Accumulated amortization... 11,250 26,250
--------- ---------
$ 18,750 $ 3,750
========= =========
F-32
<PAGE>
BELLAIRE SURGICARE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
5. LONG-TERM OBLIGATIONS
LONG-TERM DEBT
Long-term debt at December 31, 1995 and 1996, consists of the following:
DECEMBER 31,
----------------------
1995 1996
---------- ----------
Note payable to Southwest Bank of Texas,
bearing interest at prime,
collateralized by accounts receivable,
equipment and inventory............... $ -- $ 566,731
Notes payable to Stillwater National
Bank, bearing interest at prime plus
1%, collateralized by accounts
receivable, equipment and inventory... 598,516 --
Notes payable to Alcon Surgical, bearing
interest at 8%, collateralized by
equipment............................. 82,983 57,138
---------- ----------
Total long-term debt............... 681,499 623,869
Less -- Current portion................. 132,023 597,216
---------- ----------
Long-term debt, excluding current
portion.......................... $ 549,476 $ 26,653
========== ==========
Certain debt obligations contain covenants that require maintenance of
certain financial ratios. Default of any covenant could affect the ability of
individual entities to borrow under the agreements and, if not waived or
corrected, could accelerate the maturity of any borrowings outstanding under the
agreements. As of December 31, 1996, the Center has complied with existing loan
covenants.
As of December 31, 1996, the aggregate amounts of annual principal
maturities of long-term debt (excluding capital lease obligations) are as
follows:
1997................................. $ 597,216
1998................................. 26,653
1999................................. --
2000................................. --
2001................................. --
Thereafter........................... --
----------
Total........................... $ 623,869
==========
The Center leases office space as well as certain equipment under capital
leases. Additionally, the Center has certain commitments under noncancelable
operating lease agreements. At December 31, 1996, minimum annual rental
comitments under capital leases and noncancelable operating leases with terms in
excess of one year are as follows:
CAPITAL OPERATING
LEASES LEASES
--------- ---------
1997................................. $ 30,000 $ 168,000
1998................................. 15,000 168,000
1999................................. 8,000 168,000
2000................................. 7,000 168,000
2001................................. -- 168,000
Thereafter........................... -- 55,000
--------- ---------
Total minimum lease
payments................. 60,000 $ 895,000
=========
Less -- Amounts representing
interest........................... 8,816
---------
Present value of minimum capital
lease payments................ 51,184
Less -- Current portion of
obligations under capital leases... 25,014
---------
Long-term obligations under
capital leases, net of current
portion....................... $ 26,170
=========
F-33
<PAGE>
BELLAIRE SURGICARE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Rent expense related to operating leases amounted to approximately $58,000
and $140,000 for 1995 and 1996. Cash interest paid related to all obligations
was approximately $50,000 and $68,000 in 1995 and 1996, respectively.
6. COMMITTMENTS AND CONTINGENCIES:
The Center is insured with respect to medical malpractice risks on a
claims-made basis. In the normal course of business, the Center has been named
in various lawsuits, primarily alleging medical malpractice. In the opinion of
the Center's management, the ultimate liability, if any, will not exceed the
insurance coverages carried by the Center and will not impact the operating
results or results of financial condition of the Center.
Surgery Centers of America (SCOA) provides management services for the
Center under a management contract expiring January 12, 2000. Fees under the
contract are based on 5 percent of accrual basis revenues plus 10 percent of any
distributions. Additionally, the Center reimburses SCOA for the salary paid to a
SCOA employee who acts as an office administrator of the Center. Expenses under
this arrangement totaled $200,623 and $272,091 for 1995 and 1996, respectively.
7. SUBSEQUENT EVENTS
A majority of the owners of the Center are doctors of podiatry medicine
(DPM's). Eight of these owner/DPMs have agreed to acquire the remaining minority
interests, and will then transfer their respective interests in the Center along
with other non-monetary assets of their practice to American Medical Providers,
Inc. (AMP) in exchange for stock of AMP and cash. The Center is expected to
continue similar operations under the AMP ownership.
F-34
<PAGE>
AMERICAN MEDICAL PROVIDERS, INC.
INTRODUCTION TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
Simultaneously with and as a condition to the closing of the initial public
offering (the "Offering"), American Medical Providers, Inc. (the "Company"
or "AMP") will acquire certain operating assets and accounts receivable or
stock of 46 separate podiatric practices (these practices, including the
practice acquired in the Kramer Transfer (defined below), the "Affiliated
Practices") (the "Transfers") in exchange for cash, shares of class A common
stock, $.01 par value per share (the "Common Stock") and the assumption of
certain indebtedness. The aggregate consideration to be paid by the Company to
the initial Affiliated Practices is approximately $27.5 million, excluding the
Ambulatory Surgery Center Acquisitions (defined below) and the Kramer Transfer
which will be accounted for as purchases. AMP will also acquire through a
transaction to be accounted for as a purchase, certain assets of Pyramid
Anesthesiology Group, Inc. (the "AnestheCare Acquisition"), an anesthesiology
management services organization ("AnestheCare" for consideration of
approximately $4.5 million in cash. Additional consideration of up to $1.5
million in cash and $500,000 payable in shares of Common Stock at the initial
public offering price may be paid in the AnestheCare Acquisition pending
AnestheCare's achievement of certain performance targets over a three-year
period beginning January 1, 1998. In addition, AMP will acquire the stock of the
podiatric practice of Dr. Jerald N. Kramer ("Dr. Kramer"), one of the
affiliated practices (the "Kramer Transfer", and together with the Transfers
and the AnestheCare Acquisition, "the Transactions"). Dr. Kramer will receive
cash of $1.4 million in exchange for assets acquired by the Company, but Dr.
Kramer will not enter into a management services agreement or a physician
engagement agreement with a Regional Group Practice. The Company will also
acquire two surgery centers through the transfers (collectively the "Ambulatory
Surgery Center Acquisitions") for consideration of $5.1 million in cash and
Common Stock plus assumed indebtedness of $500,000. The Transfers, except for
the Ambulatory Surgery Center Acquisitions and the Kramer Transfer, will be
accounted for pursuant to Staff Accounting Bulletin No. 48, "Transfers of
Non-monetary Assets by Promoters and Shareholders" ("SAB No. 48"). As a
result, these transactions will result in the carryover basis of non-monetary
assets of the Affiliated Practices. Each owner doctor of podiatry medicine
("DPM") of the Affiliated Practices and AnestheCare is considered a
"promoter" of the Company.
The following unaudited pro forma combined balance sheet gives effect to
the Transactions and the Offering, and is based upon the historical financial
statements of AMP, the Affiliated Practices as a group, and AnestheCare.
The unaudited pro forma combined balance sheet gives effect as if such
events had occurred on September 30, 1997. The unaudited pro forma combined
balance sheet should be read in conjunction with other financial information,
including the financial statements of AMP included elsewhere in this Prospectus.
The unaudited pro forma combined balance sheet does not give effect to the
Practice Rescission Offer or the Bridge Financing Rescission Offer discussed
further in Note 5 to the financial statements of AMP.
The Company will not employ podiatrists or control the practice of
podiatry. As the Company will not be acquiring the future patient revenues
earned by the Affiliated Practices, the Transfers are not deemed to be business
combinations. In accordance with SAB No. 48, the Transfers will be accounted for
at the historical cost basis with the shares of common stock to be issued in
those transactions being valued at the historical cost of the net non-monetary
assets acquired.
The unaudited pro forma combined balance sheet is presented for
illustrative purposes only and is not necessarily indicative of the financial
position that would have been achieved if the Transactions and Offering had been
consummated on the date indicated, nor is it necessarily indicative of the
future operating results of the Company. The pro forma adjustments are based
upon estimates, available information and certain assumptions and may be revised
as additional information becomes available. Any variance between the estimated
offering price and actual offering price will directly impact the net proceeds
from the Offering. The preliminary allocations of the purchase prices are not
expected to materially differ from the final results.
F-35
<PAGE>
AMERICAN MEDICAL PROVIDERS, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
SEPTEMBER 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
AMERICAN COMBINED BELLAIRE PRO
MEDICAL AFFILIATED SURGICARE, PRO FORMA FORMA
PROVIDERS, INC. PRACTICES ANESTHECARE INC. ADJUSTMENTS COMBINED
--------------- -------- ----------- ---------- ----------- --------
ASSETS
CURRENT ASSETS:
<S> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents............ $-- $ 952 $ 37 $139 $ (912)(1) $ 37
(179)(3)
Patient receivables, net............. -- 3,840 -- 320 -- 4,160
Affiliate receivables................ -- -- 217 -- -- 217
Deferred issuance costs.............. 1,792 -- -- -- -- 1,792
Other current assets................. 25 221 -- 113 (131)(1) 228
--------------- -------- --- --- ----------- --------
Total current assets............. 1,817 5,013 254 572 (1,222) 6,434
Equipment, net....................... 209 802 149 352 500(3) 2,012
Other assets......................... -- 389 7 -- (389)(1) 1,207
1,200(2)
Goodwill............................. -- -- -- -- 2,890(2) 7,492
651(3)
3,824(5)
127(6)
Restricted cash held in escrow....... -- -- -- -- -- --
--------------- -------- --- --- ----------- --------
Total assets..................... $ 2,026 $ 6,204 $ 410 $924 $ 7,581 $17,145
=============== ======== === === =========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
CURRENT LIABILITIES:
Accounts payable and other current
liabilities........................ $ 1,511 $ 1,163 $ 205 $147 $ (1,305)(1) $ 1,511
(205)(2)
(5)(3)
Due to stockholders.................. 2,426 -- -- -- -- 2,426
Payable to Affiliated Practices...... -- -- -- -- 8,989(1) 8,989
Payable to AnestheCare............... -- -- -- -- 4,500(2) 4,500
Payable to Kramer.................... -- -- -- -- 1,400(3) 1,400
Payable for Ambulatory Surgery Center
Acquisitions....................... -- -- -- -- 1,000(1) 1,000
Deferred income taxes................ -- -- -- -- 966(4) 966
Current portion of long-term debt.... -- 284 -- 612 (240)(1) 656
--------------- -------- --- --- ----------- --------
Total current liabilities........ 3,937 1,447 205 759 15,100 21,448
--------------- -------- --- --- ----------- --------
Long-term debt, less current
portion............................ -- 1,103 -- 13 (1,116)(1) --
--------------- -------- --- --- ----------- --------
Total liabilities................ 3,937 2,550 205 772 13,984 21,448
--------------- -------- --- --- ----------- --------
STOCKHOLDERS' EQUITY (DEFICIT):
American Medical Providers, Inc.
Class A Common Stock............. -- -- -- -- 2(1) 2
Class B Common Stock............. 1 -- -- -- -- 1
Accumulated deficit.............. (3,125) -- -- -- (5,204)(1) (9,470)
(175)(3)
(966)(4)
Additional paid-in capital....... 1,213 -- -- -- 3,824(5) 5,164
127(6)
AnestheCare
Common Stock..................... -- -- 2 -- (2)(2) --
Retained earnings................ -- -- 203 -- (203)(2) --
Affiliated Practices' combined
equity............................. -- 3,654 -- 152 (3,558)(1) --
(248)(3)
--------------- -------- --- --- ----------- --------
Total stockholders' equity
(deficit)...................... (1,911) 3,654 205 152 (6,403) (4,303)
--------------- -------- --- --- ----------- --------
Total liablities and
stockholders' equity........... $ 2,026 $ 6,204 $ 410 $924 $ 7,581 $17,145
=============== ======== === === =========== ========
</TABLE>
POST
OFFERING PRO FORMA
ADJUSTMENTS AS ADJUSTED
----------- -----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............ 14,017(7) $14,054
Patient receivables, net............. -- 4,160
Affiliate receivables................ -- 217
Deferred issuance costs.............. (1,792)(7) --
Other current assets................. -- 228
----------- -----------
Total current assets............. 12,225 18,659
Equipment, net....................... -- 2,012
Other assets......................... -- 1,207
Goodwill............................. -- 7,492
Restricted cash held in escrow....... 1,500(7) 1,500
----------- -----------
Total assets..................... $13,725 $30,870
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
CURRENT LIABILITIES:
Accounts payable and other current
liabilities........................ (1,511)(7) $--
Due to stockholders.................. (2,426)(7) --
Payable to Affiliated Practices...... (8,989)(7) --
Payable to AnestheCare............... (4,500)(7) --
Payable to Kramer.................... (1,400)(7) --
Payable for Ambulatory Surgery Center
Acquisitions....................... (1,000)(7) --
Deferred income taxes................ -- 966
Current portion of long-term debt.... -- 656
----------- -----------
Total current liabilities........ (19,826) 1,622
----------- -----------
Long-term debt, less current
portion............................ -- --
----------- -----------
Total liabilities................ (19,826) 1,622
----------- -----------
STOCKHOLDERS' EQUITY (DEFICIT):
American Medical Providers, Inc.
Class A Common Stock............. 4(7) 6
Class B Common Stock............. -- (7) 1
Accumulated deficit.............. (9,470)
Additional paid-in capital....... 33,547(7) 38,711
AnestheCare
Common Stock..................... -- --
Retained earnings................ -- --
Affiliated Practices' combined
equity............................. -- --
----------- -----------
Total stockholders' equity
(deficit)...................... 33,551 29,248
----------- -----------
Total liablities and
stockholders' equity........... $13,725 $30,870
=========== ===========
The accompanying notes to the unaudited pro forma combined balance sheet
are an integral part of this financial statement.
F-36
<PAGE>
AMERICAN MEDICAL PROVIDERS, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
The following is a summary of the adjustments reflected in the unaudited
combined pro forma balance sheet:
(1) Reflects the issuance of 2,032,867 shares of Common Stock of the
Company and cash of approximately $10.1 million in exchange for
certain operating assets and accounts receivable or stock and
assumption of certain liabilities of the Affiliated Practices and the
Ambulatory Surgery Centers. Assets not acquired include cash, prepaid
assets, and other non current assets. Liabilities not assumed include
accounts payable, accrued liabilities, and a portion of long-term
debt. The Affiliated Practices and the Ambulatory Surgery Centers will
receive up to twenty five percent of the consideration in cash and the
remainder in Common Stock.
(2) Reflects the AnestheCare Acquisition for a cash purchase price of $4.5
million. Additional consideration of up to $1.5 million in cash and
$500,000 payable in shares of Common Stock valued at the initial
public offering price will be held in escrow and may be paid to the
owners of AnestheCare pending AnestheCare's achievement of certain
performance targets over a three-year period beginning January 1,
1998. All assets of AnestheCare have been acquired and the owners
assumed the liabilities, thus eliminating any liabilities acquired.
The goodwill of $2.9 million will be amortized on a straight line
basis over the estimated life of 25 years. The other intangible assets
relate to customer contracts for which purchase price will be
allocated and amortized on a straight line basis over their estimated
lives ranging from 10 to 15 years.
(3) Reflects the issuance of cash in exchange for stock and property in
the Kramer Transfer. The goodwill of $651,000 will be amortized on a
straight line basis over the estimated life of 25 years.
(4) Reflects the deferred income tax liability attributable to the
temporary differences between financial reporting and income tax bases
of assets and liabilities currently being acquired by AMP through the
Transactions.
(5) Reflects the step-up in the historical basis of Bellaire Surgicare,
Inc. ("Bellaire") which will be acquired by the Company in the
Transfers, but will be accounted for as a purchase business
combination in accordance with APB No. 16. The goodwill of $3.8
million will be amortized on a straight line basis over the estimated
life of 25 years.
(6) Reflects the step-up in the historical basis of the surgical care
center of Dr. Kalish which will be acquired by the Company in the
Transfers, but will be accounted for as a purchase business
combination in accordance with APB No. 16.
(CONTINUED ON FOLLOWING PAGE)
F-37
<PAGE>
AMERICAN MEDICAL PROVIDERS, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET -- (CONTINUED)
(7) Reflects the issuance of 3,700,000 shares of common stock of the
Company assuming an initial public offering price of $11.00 per share
and the application of proceeds as follows (in 000's)
Gross offering proceeds.............. $ 40,700
Underwriting discount................ (2,849)
Offering costs(*).................... (2,508)
Cash portion of the transactions..... (15,889)
Funds placed in escrow............... (1,500)
Due to stockholder................... (2,426)
Payment of accounts payable and other
current liabilities................ (1,511)
----------
Pro forma cash adjustment as of
September 30, 1997................. $ 14,017
==========
- ------------
(*) This amount represents the portion of the total estimated
offering costs of $4,300,000 which is expected to be incurred
subsequent to September 30, 1997, consisting principally of
professional fees associated with the Offering.
Subsequent to September 30, 1997, until the anticipated
closing of this Offering, the Company estimates that it will
have incurred approximately $1.8 million in period costs and
capital expenditures (principally salaries, general office
expenses and equipment purchases) paid by AFC on behalf of
the Company, as well as approximately $1.1 million in
interest expense associated with certain AFC bridge
financing transactions. These amounts as well as the
approximate $2.4 million reflected on the historical balance
sheet as due to stockholder will be repaid to AFC out of the
proceeds of the Offering. Additionally, the Company
anticipates using approximately $1.0 million of the proceeds
from the Offering to complete the purchase and installation
of the Company's management information systems. These
future expenditures are not reflected in the accompanying
unaudited pro forma combined balance sheet.
F-38
<PAGE>
================================================================================
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF ANY OFFER TO BUY ANY SECURITY
OTHER THAN THE SHARES OF COMMON STOCK OFFERED BY THIS PROSPECTUS, NOR DOES IT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE SHARES OF
COMMON STOCK BY ANYONE IN ANY JURISDICTION IN WHICH SUCH AN OFFER OR
SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
PAGE
----
Prospectus Summary...................... 3
Risk Factors............................ 10
Use of Proceeds......................... 19
Dividend Policy......................... 20
Dilution................................ 21
Capitalization.......................... 22
Selected Financial Data................. 23
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................ 24
Business................................ 27
Management.............................. 44
Certain Transactions.................... 50
Principal Stockholders.................. 56
Description of Capital Stock............ 57
Shares Eligible for Future Sale......... 61
Underwriting............................ 62
Legal Matters........................... 63
Experts................................. 63
Additional Information.................. 63
Index to Financial Statements........... F-1
UNTIL , 1998 ALL DEALERS EFFECTING TRANSACTIONS IN THE
REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE
REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO
THEIR UNSOLD ALLOTMENTS ON SUBSCRIPTIONS.
3,700,000 SHARES
[LOGO]
AMERICAN MEDICAL
PROVIDERS, INC.
CLASS A COMMON STOCK
------------------------
PROSPECTUS
------------------------
A.G. EDWARDS & SONS, INC.
J.C. BRADFORD & CO.
, 1998
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses to be paid by the Company
(other than underwriting compensation expected to be incurred) in connection
with the offering described in this Registration Statement. All amounts are
estimates, except the Securities and Exchange Commission registration fee, the
NASD filing fee and the Nasdaq National Market listing fee.
Securities and Exchange Commission
registration fee...................... $ 15,928
NASD filing fee......................... 5,181
Nasdaq National Market listing fee...... 62,725
Printing and engraving fees and
expenses.............................. 105,000
Legal fees and expenses................. 1,082,000
Accounting fees and expenses............ 2,800,000
------------
Miscellaneous expenses.................. 229,166
------------
Total.............................. $ 4,300,000
============
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
AMERICAN MEDICAL PROVIDERS, INC.
DELAWARE GENERAL CORPORATION LAW
The General Corporation Law of the State of Delaware (the "DGCL")
provides for indemnification by a corporation of costs incurred by directors,
employees and agents in connection with an action, suit or proceeding brought by
reason of their position as a director, employee or agent. The person being
indemnified must have acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the corporation. The DGCL
provides that a corporation may advance payment of expenses. The DGCL further
provides that the indemnification and advancement of expenses provisions of the
DGCL will not be deemed exclusive of any other rights to which these
indemnifications or advancements of expenses may be entitled under bylaw,
agreement, vote of stockholders or disinterested directors or otherwise, both as
to action under official capacity and as to action in another capacity when
holding such office.
In addition to the general indemnification section, Delaware law provides
further protection for directors under Section 102(b)(7) of the DGCL. This
section was enacted in June 1986 and allows a Delaware corporation to include in
its certificate of incorporation a provision that eliminates and limits certain
personal liability of a director for monetary damages for certain breaches of
the director' s fiduciary duty of care, provided that any such provision does
not (in the words of the statute) do any of the following:
"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 174 of this
Title [dealing with willful or negligent violation of the statutory
provision concerning dividends and stock purchases and redemptions], or
(iv) for any transaction from which the director derived an improper
personal benefit. No such provision shall eliminate or limit the liability
of a director for any act or omission occurring prior to the date when such
provision becomes effective . . . ."
CERTIFICATE OF INCORPORATION
The Amended Restated Certificate of Incorporation of the Company provides
that the liability of directors of the Company shall be eliminated to the
fullest extent permissible under the DGCL. If the DGCL is amended to authorize
the further elimination or limitation of the liability of directors, then the
liability of a director of the Company, in addition to the limitation on
personal liability described above, shall be limited to the fullest extent
permitted by the amended DGCL. Further, any repeal or modification of such
provision of the Amended and Restated Certificate of Incorporation by the
stockholders of the Company
II-1
<PAGE>
shall be prospective only, and shall not adversely affect any limitation on the
personal liability of a director of the Company existing at the time of such
repeal or modification.
BYLAWS
The Bylaws of the Company generally provide that the Company will indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action by reason of the fact that he or she is
or was a director, officer, employee or agent, of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), actually and
reasonably incurred by him or her in connection with such action if he or she
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interest of the Corporation; provided, however, that the
Company is only required to indemnify persons serving as directors, officers,
employees or agents of the Company for the expenses incurred in a proceeding if
such person is a party to and is successful, on the merits or otherwise, in such
proceeding. The Bylaws further provide that, in the event of any threatened, or
pending action, suit or proceeding in which any of the persons referred to above
is a party or is involved and that may give rise to a right of indemnification
under the Bylaws, following written request by such person, the Company will
promptly pay to such person amounts to cover expenses reasonably incurred by
such person in such proceeding in advance of its final disposition upon the
receipt by the Company of an undertaking executed by or on behalf of such person
providing that such person will repay the advance if it is ultimately determined
that such person is not entitled to be indemnified by the Company as provided in
the Bylaws.
ANKLE & FOOT CENTERS OF AMERICA, LLC
DELAWARE LIMITED LIABILITY COMPANY ACT
Subject to the restrictions, if any, as are set forth in its limited
liability company agreement, a Delaware limited liability company may, and has
the power to, indemnify and hold harmless any member or manager or other person
from and against any and all claims and demands whatsoever.
CERTIFICATE OF INCORPORATION
The Certificate of Incorporation of AFC generally provides that AFC will
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action by reason of the fact that he or
she is or was a director, officer employee or agent, of AFC, or is or was
serving at the request of AFC as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), actually and reasonably incurred
by him or her in connection with such action if he or she acted in good faith
and in a manner he or she reasonably believed to be in or not opposed to the
best interest of AFC; provided, however, that AFC is only required to indemnify
persons serving as directors, officers, employees or agents of AFC for the
expenses incurred in a proceeding if such person is a party to and is
successful, on the merits or otherwise, in such proceeding. The Certificate of
Incorporation further provides that, in the event of any threatened, or pending
action, suit or proceeding in which any of the persons referred to above is a
party or is involved and that may give rise to a right of indemnification under
the Certificate of Incorporation, following written request by such person, AFC
will promptly pay to such person amounts to cover expenses reasonably incurred
by such person in such proceeding in advance of its final disposition upon the
receipt by AFC of an undertaking executed by or on behalf of such person
providing that such person will repay the advance if it is ultimately determined
that such person is not entitled to be indemnified by AFC as provided in the
Certificate of Incorporation.
LIMITED LIABILITY COMPANY AGREEMENT
No member, affiliate or officer, director, shareholder, partner, employee
or agent or a member or any employee (an "AFC Person") shall be liable to the
Company or any other AFC Person for any loss, damage or claim incurred by reason
of any act or omission performed or omitted by such AFC Person in good faith on
behalf of AFC and in a manner reasonably believed to be within the scope of
authority conferred on such AFC Person, except that an AFC Person shall be
liable for any such loss, damage or claim incurred by reason of an AFC Person's
gross negligence or willful misconduct.
To the extent that, at law or in equity, an AFC Person has duties
(including fiduciary duties) and liabilities relating thereto to AFC or to any
other AFC Person, an AFC Person shall not be liable to AFC or to any other AFC
Person for its good faith reliance on the provisions of the LLC Agreement.
To the fullest extent permitted by applicable law, an AFC Person shall be
entitled to indemnification from AFC for any loss, damage or claim incurred by
an AFC Person by reason of any act or omission performed or omitted by such AFC
Person in good faith on behalf of the Company and in a manner reasonably
believed to be within the scope of authority conferred on such AFC Person,
except that no AFC Person shall be entitled to be indemnified in respect of any
loss, damage or claim incurred by such AFC Person by reason of gross negligence
or willful misconduct with respect to such acts or omissions.
To the fullest extent permitted by applicable law, expenses (including
legal fees) incurred by an AFC Person in defending any claim, demand, action,
suit or proceeding shall, from time to time, be advanced by AFC prior to the
final disposition of such claim, demand, action, suit or proceeding.
UNDERWRITING AGREEMENT
The Underwriting Agreement provides for the indemnification of the
directors and officers of the Company in certain circumstances.
INSURANCE
The Company intends to maintain liability insurance for the benefit of its
directors and officers.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The following information relates to securities of the Company issued or
sold within the past three years which were not registered under the Securities
Act:
The Company originally issued 20,000 shares of its common stock, without
class, par value $.01 per share on the dates listed below. On February 17, 1998
the Company converted each share of its existing common stock into 32.5 shares
of the Company's Class B Common Stock, par value $.001 per share. The share
numbers listed below reflect the effect of such conversion.
HOLDER NUMBER OF SHARES(1) DATE
- -------------------- ----------------------- --------
Jack N. McCrary..... 113,750 8/22/96
Jack N. McCrary..... 97,500 8/22/96
Ankle and Foot
Centers of
America, LLC(2)... 365,625 8/22/96
Kevin C. Graham..... 650 8/22/96
Wayne A. Bertsch.... 17,956 10/14/96
Wayne A. Bertsch.... 81 6/16/97
Randy Johnson....... 17,956 10/14/96
Randy Johnson....... 81 6/16/97
Cherie J. Partain... 325 10/14/96
Cherie J. Partain... 488 6/16/97
Robert C. Joyner.... 10,400 6/16/97
(TABLE CONTINUED ON FOLLOWING PAGE)
II-2
<PAGE>
HOLDER NUMBER OF SHARES(1) DATE
- -------------------- ----------------------- --------
Robert C. Joyner.... 7,638 9/09/97
Amanda Walker....... 163 6/16/97
Gary Hubschman...... 6,500 6/16/97
Karen Boyle......... 487 6/16/97
Kenneth Arrowood.... 3,250 9/09/97
Cecil Pickens....... 1,625 10/14/97
Joseph Grau......... 1,625 10/14/97
Robert C. Joyner, as
Escrow Agent...... 3,900 9/09/97
- ------------
(1) The Company received $200.00 in connection with the issuance of its original
650,000 shares to AFC and Jack McCrary. All other shares of the Company's
existing common stock were issued for par value.
(2) In August 1996, AMP was incorporated and shares of AMP were issued to AFC
as part of its formation efforts on behalf of AMP. In connection with
certain private placements of AFC during 1996, in an effort to fund the
organization and development of AMP, investors in these private placements
are entitled to be distributed the shares of AMP Class B currently held by
AFC. Certain of the investors pursuant to the private placement have the
right to sell one seventh of their shares for a portion of their initial
investment. Amounts to be distributed are as follows:
<TABLE>
<CAPTION>
DISTRIBUTABLE
MEMBERSHIP TOTAL CLASS B
MEMBER INTERESTS DATE CONSIDERATION SHARES
- ------------------------------------- ---------- --------- ------------- -------------
<S> <C> <C> <C> <C>
G. Brock Magruder.................... 5,469 5/5/96 $ 5,500 3,739
Stanley R. Kalish.................... 13,840 5/5/96 12,237 9,462
Thomas R. Whatley.................... 5,469 5/5/96 5,604 3,739
Alan H. Shaw......................... 13,840 5/5/96 12,300 9,462
Douglas H. Elleby.................... 13,839 5/5/96 12,237 9,461
S. F. Hartley........................ 13,839 5/5/96 12,237 9,461
Jack N. McCrary...................... 13,839 5/5/96 12,237 9,461
G. Brock Magruder, Jr................ 5,468 5/5/96 5,500 3,738
Mitchell G. Billing.................. 5,468 5/5/96 5,500 3,738
Ivan Wood(a)......................... 6,250 5/5/96 -- 4,273
Gregory Alvarez...................... 8,750 9/24/96 50,000 5,982
Johnnie W. Domingue.................. 8,750 9/24/96 50,000 5,982
Joseph D. Giovinco................... 8,750 9/24/96 50,000 5,982
S. F. Hartley........................ 8,750 9/24/96 50,000 5,982
J. M. Partners, Ltd.(b).............. 17,500 9/24/96 100,000 11,964
Stanley R. Kalish.................... 17,500 9/24/96 100,000 11,964
Daniel B. Katz....................... 17,500 9/24/96 100,000 11,964
Erwin I. Katz........................ 17,500 9/24/96 100,000 11,964
Wendy C. Katz........................ 17,500 9/24/96 100,000 11,964
David LaGuardia...................... 43,750 9/24/96 250,000 29,909
Sherman Nagler....................... 8,750 9/24/96 50,000 5,982
Robert G. Parker..................... 17,500 9/24/96 100,000 11,964
Steven P. Richman.................... 8,750 9/24/96 50,000 5,982
Jerry Silverman...................... 8,750 9/24/96 50,000 5,982
Texas Podiatry Group--Houston........ 17,500 9/24/96 100,000 11,964
George R. Vito....................... 8,750 9/24/96 50,000 5,982
John D. West......................... 17,500 9/24/96 100,000 11,964
Texas Podiatry Group, PPLC........... 8,750 9/24/96 50,000 5,982
</TABLE>
(TABLE CONTINUED ON FOLLOWING PAGE)
II-3
<PAGE>
<TABLE>
<CAPTION>
DISTRIBUTABLE
MEMBERSHIP TOTAL CLASS B
MEMBER INTERESTS DATE CONSIDERATION SHARES
- ------------------------------------- ---------- --------- ------------- -------------
<S> <C> <C> <C> <C>
Richard H. Weiner.................... 17,500 9/24/96 100,000 11,964
Southwest Podiatry Assoc, PA......... 8,750 9/24/96 50,000 5,982
Steven T. Arminio.................... 8,750 9/24/96 50,000 5,982
Robert I. Schwartz................... 8,750 9/24/96 50,000 5,982
Western Indemnity.................... 17,500 9/24/96 100,000 11,964
Bellaire Surgicare, IPA.............. 17,500 9/24/96 100,000 11,964
Sam H. Carr.......................... 1,750 9/24/96 10,000 1,196
Kevin C. Graham...................... 1,750 9/24/96 10,000 1,196
Randy E. Johnson..................... 875 9/24/96 5,000 598
Wayne A. Bertsch..................... 4,375 9/24/96 25,000 2,991
Robert C. Joyner..................... 4,375 6/16/97 25,000 2,991
Bay Area Podiatry Associates......... 8,750 8/1/97 50,000 5,982
Bay Area Podiatry Associates......... 4,375 8/1/97 25,000 2,991
Thomas S. Garrison................... 4,375 8/1/97 25,000 2,991
Alan H. Shaw......................... 8,750 9/24/96 50,000 5,982
Kenneth R. Draughan.................. 4,375 9/24/96 25,000 2,991
Jack N. McCrary...................... 52,500 9/24/96 (c) 35,892
</TABLE>
- ------------
(a) Such interests were issued to Mr. Wood for services rendered to AFC in
connection with its formation and organization.
(b) Membership interests were originally issued to J. M. Partners, Ltd., an
affiliate of John S. Bace. Subsequently, J. M. Partners, Ltd. transferred
its membership interests to Mr. Bace, family members and trusts controlled
by Mr. Bace.
(c) Mr. McCrary's membership interest in AFC was issued to him in exchange for
his agreement to defer compensation of $300,000 until successful completion
of the Offering.
The foregoing securities were issued pursuant to the exemption from
registration under Section 4(2) of the Act since no public offering was involved
and the securities were acquired for investment and not with a view to
distribution.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
The following exhibits are filed pursuant to Item 601 of Regulation S-K:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------------------------ ----------------------------------------------------------------------------------------
<C> <S>
1.1 -- Form of Underwriting Agreement
3.1 -- Form of Amended and Restated Certificate of Incorporation of American Medical Providers,
Inc. (the "Company")
3.2 -- Form of Amended and Restated Bylaws of the Company
3.3 -- Certificate of Incorporation of Ankle & Foot Centers of America, LLC ("AFC")
3.4 -- Limited Liability Company Agreement of AFC
4.1 -- Form of Certificate of Designation, Preferences and Rights of Series A Junior
Participating Preferred Stock
4.2 -- Form of Certificate for Class A Common Stock
4.3 -- Form of Certificate for Class B Common Stock
5.1 -- Opinion of Baker & Hostetler, LLP regarding legality of securities being registered
10.1 -- Form of 1997 Incentive and Non-Qualified Stock Option Plan of the Company
10.2 -- Employment Agreement between Ankle & Foot Centers of America LLC ("AFC") and Jack N.
McCrary
10.3 -- Employment Agreement between AFC and Wayne A. Bertsch
10.4 -- Employment Agreement between AFC and Randy E. Johnson
II-4
<PAGE>
<C> <S>
10.5+ -- Form of Management Services Agreement by and among the Company and each Regional Group
Practice
10.6+ -- Form of Physician Employment Agreement by and between each non-practice owner DPM and the
Regional Group Practice
10.7+ -- Form of Physician Engagement Agreement by and between each DPM practice owner and the
Regional Group Practice
10.8+ -- Form of Stock Purchase Agreement among the Company and certain DPM practice owners (with
attached schedule)
10.9+ -- Form of Business Purchase Agreement among the Company and certain DPM practice owners
(with attached schedule)
10.10+ -- Asset Purchase Agreement dated October 31, 1997 among the Company and Pyramid
Anesthesiology Group, Inc.
10.11+ -- Form of Registration Rights Agreement between the Company and each DPM practice owner
10.12 -- Form of Stockholder Protection Agreement dated as of February , 1998 between the Company
and , as Rights Agent.
10.13+ -- Reimbursement and Assumption Agreement dated as of January 20, 1998 between the Company
and Ankle & Foot Centers of America, L.L.C.
10.14+ -- Letter Agreement dated December 30, 1997 between the Company and Cooperative Centrale
Raiffeisen-Boerenleenbank B.A. "Rabobank Nederland," New York Branch
10.15+ -- Stock Purchase Agreement among the Company, Jerald N. Kramer, D.P.M., P.C., and the Owners
named thereon
10.16+ -- Employment Agreement between AFC and David LaGuardia
10.17+ -- Employment Agreement between AFC and Roger Bigham
10.18 -- Lease Agreement made and entered into effective January 19, 1997 by and between Doctors Hospital 1997, LP
and the Company.
10.19 -- Lease Agreement made and entered into effective January 19, 1997 by and between Mid America Equities, LP
and the Company.
23.1 -- Consent of Arthur Andersen LLP
23.2 -- Consent of Baker & Hostetler, LLP (contained in Exhibit 5.1)
24.1+ -- Power of Attorney (contained on the signature page II-4 of this Registration Statement)
27.1+ -- Financial Data Schedule
99.1+ -- Consent of Stanley R. Kalish, D.P.M. to serve on the Company's Board of Directors
99.2+ -- Consent of John S. Bace to serve on the Company's Board of Directors
99.3+ -- Consent of S.F. Hartley, D.P.M. to serve on the Company's Board of Directors
99.4+ -- Consent of Donald S. Huge, M.D. to serve on the Company's Board of Directors
99.5 -- Bridge Financing Rescission Form
99.6 -- Practice Owner Rescission Form
</TABLE>
- ------------
+ Previously filed.
(b) Financial Statement Schedules.
All schedules are omitted because they are not applicable or because the
required information is contained in the Financial Statements or Notes thereto.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes as follows:
(1) To provide to the Underwriters at the closing specified in the
Underwriting Agreement certificates in such denominations and registered in
such names as required by the Underwriters to permit prompt delivery to
each purchaser.
(2) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions described
in Item 14, or otherwise, the registrant has been advised that in the
opinion of the Commission such indemnification is against public policy as
expressed in the Act and is, therefore,
II-5
<PAGE>
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payments by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(3) That, for the purposes of determining any liability under the
Securities Act, the information omitted from the form of prospectus filed
as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this registration statement as of the time it was declared
effective.
(4) That, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
American Medical Providers, Inc. has duly caused this Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Houston, State of Texas, on February 17, 1998.
AMERICAN MEDICAL PROVIDERS, INC.
By: /s/ JACK N. McCRARY
JACK N. MCCRARY
CHAIRMAN, PRESIDENT AND CHIEF
EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------------------------------------ -----------------
/s/JACK N. McCRARY Chairman, President, Chief February 17, 1998
JACK N. MCCRARY Executive Officer and Director
(Principal Executive Officer)
/s/WAYNE A. BERTSCH Senior Vice President, Chief February 17, 1998
WAYNE A. BERTSCH Financial Officer and Director
(Principal Financial and
Accounting Officer)
/s/CECIL R. PICKENS Vice President and Chief February 17, 1998
CECIL R. PICKENS Accounting Officer (Principal
Accounting Officer)
II-7
EXHIBIT 1.1
3,700,000 SHARES
CLASS A COMMON STOCK
($.001 PAR VALUE)
FORM OF UNDERWRITING AGREEMENT
, 1998
A.G. EDWARDS & SONS, INC.
J.C. BRADFORD & CO.
AS REPRESENTATIVE OF THE SEVERAL UNDERWRITERS
C/O A.G. EDWARDS & SONS, INC.
ONE NORTH JEFFERSON AVENUE
ST. LOUIS, MISSOURI 63103
The undersigned, American Medical Providers, Inc., a Delaware corporation
(the "Company"), hereby addresses you as the representatives (the
"Representatives") of each of the persons, firms and corporations listed on
Schedule II hereto (collectively, the "Underwriters") and hereby confirms its
agreement with the several Underwriters as follows:
1. DESCRIPTION OF SHARES. The Company proposes to issue and sell to the
Underwriters shares of its Class A Common Stock, par value $.001 per share (the
"Common Stock") (such 3,700,000 shares of Common Stock are herein referred to
as the "Firm Shares"). Solely for the purpose of covering over-allotments in
the sale of the Firm Shares, the Company further proposes to grant to the
Underwriters the right to purchase up to an additional 15% of Firm Shares (the
"Option Shares"), as provided in Section 3 of this Agreement. The Firm Shares
and the Option Shares are herein sometimes referred to as the "Shares" and are
more fully described in the Prospectus hereinafter defined.
2. PURCHASE, SALE AND DELIVERY OF FIRM SHARES. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Company agrees to sell to the
Underwriters, and each such Underwriter agrees, severally and not jointly, (a)
to purchase from the Company at a purchase price of $ per share, the number of
Firm Shares set forth opposite the name of such Underwriter in Schedule II
hereto and (b) to purchase from the Company any additional number of Option
Shares which such Underwriter may become obligated to purchase pursuant to
Section 3 hereof.
The Company will deliver definitive certificates for the Firm Shares at the
office of A.G. Edwards & Sons, Inc., ("Edwards") 77 Water Street, New York,
New York ("Edwards' Office"), or such other place as you and the Company may
mutually agree upon, for the accounts of the Underwriters against payment to the
Company of the purchase price for the Firm Shares sold by it to the several
Underwriters by wire transfer in immediately available funds to the account of
the Company at a bank designated by the Company reasonably acceptable to Edwards
or by certified or bank cashier's check (in Federal Reserve funds) drawn to the
order of the Company and delivered to , or
at such other place as may be agreed upon between you and the Company (the
"Place of Closing"), at 10:00 a.m., St. Louis time, on ,
1998, or at such other time and date not later than four full business days
thereafter as you and the Company may agree, such time and date of payment and
delivery being herein called the "Closing Date."
The certificates for the Firm Shares so to be delivered will be made
available to you for inspection at Edwards' Office (or such other place as you
and the Company may mutually agree upon) at least one full business day prior to
the Closing Date and will be in such names and denominations as you may request
at least two full business days prior to the Closing Date.
It is understood that an Underwriter, individually, may (but shall not be
obligated to) make payment on behalf of the other Underwriters whose wire
transfer shall not have been received prior to the Closing Date
<PAGE>
for Shares to be purchased by such Underwriter. Any such payment by an
Underwriter shall not relieve the other Underwriters of any of their obligations
hereunder.
It is understood that the Underwriters propose to offer the Shares to the
public upon the terms and conditions set forth in the Registration Statement
hereinafter defined.
3. PURCHASE, SALE AND DELIVERY OF THE OPTION SHARES. The Company hereby
grants an option to the Underwriters to purchase from it on a pro rata basis up
to 555,000 Option Shares on the same terms and conditions as the Firm Shares;
provided, however, that such options may be exercised only for the purpose of
covering any over-allotments which may be made by them in the sale of the Firm
Shares. No Option Shares shall be sold or delivered unless the Firm Shares
previously have been, or simultaneously are, sold and delivered.
The options are exercisable on behalf of the several Underwriters by you,
as Representatives, at any time, and from time to time, before the expiration of
45 days from the date of this Agreement, for the purchase of all or part of the
Option Shares covered thereby, by notice given by you to the Company in the
manner provided in Section 13 hereof, setting forth the number of Option Shares
as to which the Underwriters are exercising the options, and the date of
delivery of said Option Shares, which date shall not be more than five business
days after such notice unless otherwise agreed to by the parties. You may
terminate the options at any time, as to any unexercised portion thereof, by
giving written notice to the Company to such effect.
You, as Representatives, shall make such allocation of the Option Shares
among the Underwriters as may be required to eliminate purchases of fractional
Shares.
Delivery of the Option Shares with respect to which the options shall have
been exercised shall be made available to or upon your order at Edwards' Office
(or at such other place as you and the Company may mutually agree upon), against
payment by you of the per share purchase price to the Company by wire transfer
in immediately available funds at a bank designated by the Company reasonably
acceptable to Edwards or by certified or cashier's bank check (in Federal
Reserve funds) drawn to the order of the Company and delivered to the place of
Closing. Such payment and delivery shall be made at 10:00 a.m., St. Louis time,
on the date designated in the notice given by you as above provided for, unless
some other date and time are agreed upon, which date and time of payment and
delivery are called the "Option Closing Date." The certificates for the Option
Shares so to be delivered will be made available to you for inspection at
Edwards' Office at least one full business day prior to the Option Closing Date
and will be in such names and denominations as you may request at least two full
business days prior to the Option Closing Date. On the Option Closing Date, the
Company shall provide the Underwriters such representations, warranties,
opinions and covenants with respect to the Option Shares as are required to be
delivered on the Closing Date with respect to the Firm Shares.
4. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY.
(a) The Company represents and warrants to and agrees with each
Underwriter that:
(i) A registration statement (Registration No. 333-39441) on Form S-1
with respect to the Shares, including a preliminary prospectus, and such
amendments to such registration statement as may have been required to the
date of this Agreement, has been carefully prepared by the Company pursuant
to and in conformity with the requirements of the Securities Act of 1933,
as amended (the "Act"), and the Rules and Regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the
"Commission") thereunder and has been filed with the Commission under the
Act. Copies of such registration statement, including any amendments
thereto, each related preliminary prospectus (meeting the requirements of
Rule 430 or 430A of the Rules and Regulations) contained therein, the
exhibits, financial statements and schedules have heretofore been delivered
by the Company to you. If such registration statement has not become
effective under the Act, a further amendment to such registration
statement, including a form of final prospectus, necessary to permit such
registration statement to become effective will be filed promptly by the
Company with the Commission. If such registration statement has become
effective under the Act, a final prospectus
2
<PAGE>
containing information permitted to be omitted at the time of effectiveness
by Rule 430A of the Rules and Regulations will be filed promptly by the
Company with the Commission in accordance with Rule 424(b) of the Rules and
Regulations. The term "Registration Statement" as used herein means the
registration statement as amended at the time it becomes or became
effective under the Act (the "Effective Date"), including financial
statements, schedules and all exhibits and, if applicable, the information
deemed to be included by Rule 430A of the Rules and Regulations. The term
"Prospectus" as used herein means (i) the prospectus as first filed with
the Commission pursuant to Rule 424(b) of the Rules and Regulations or,
(ii) if no such filing is required, the form of final prospectus included
in the Registration Statement at the Effective Date or (iii) if a Term
Sheet or Abbreviated Term Sheet (as such terms are defined in Rule 434(b)
and 434(c), respectively, of the Rules and Regulations) is filed with the
Commission pursuant to Rule 424(b)(7) of the Rules and Regulations, the
Term Sheet or Abbreviated Term Sheet and the last Preliminary Prospectus
filed with the Commission prior to the time the Registration Statement
became effective, taken together. The term "Preliminary Prospectus" as
used herein shall mean a preliminary prospectus as contemplated by Rule 430
or 430A of the Rules and Regulations included at any time in the
Registration Statement.
(ii) The Commission has not issued, and is not to the knowledge of
the Company threatening to issue, an order preventing or suspending the use
of any Preliminary Prospectus or the Prospectus nor instituted proceedings
for that purpose. Each Preliminary Prospectus at its date of issue, the
Registration Statement and the Prospectus and any amendments or supplements
thereto contains or will contain, as the case may be, all statements which
are required to be stated therein by, and in all material respects conform
or will conform, as the case may be, to the requirements of, the Act and
the Rules and Regulations. Neither the Registration Statement nor any
amendment thereto, as of the applicable effective date, and neither the
Prospectus nor any supplement thereto contains or will contain, as the case
may be, any untrue statement of a material fact or omits or will omit to
state any material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they
were made, not misleading; provided, however, that the Company makes no
representation or warranty as to information contained in or omitted from
the Registration Statement or the Prospectus, or any such amendment or
supplement, in reliance upon, and in conformity with, written information
furnished to the Company by or on behalf of the Underwriters specifically
for use in the preparation thereof; it being understood that the only
information so provided by or on behalf of the Underwriters is the
information included in the last paragraph on the cover page and in the
first and third paragraphs under the caption "Underwriting" in the
Prospectus.
(iii) The filing of the Registration Statement and the execution and
delivery of this Agreement and each of the Operative Documents (as defined
below) to which the Company is a party have been duly authorized by the
Board of Directors of the Company; the execution and delivery of each of
the Operative Documents have been duly authorized by necessary action by
each of the other parties thereto; this Agreement and each such Operative
Document constitutes a valid and legally binding obligation of the Company
and each other party thereto enforceable in accordance with their
respective terms; the issue and sale of the Shares by the Company and the
performance of this Agreement and each such Operative Document and the
consummation of the transactions herein and therein contemplated will not
result in a violation of the Company's or any Acquired Practice's (as
defined below) certificate or articles of incorporation, bylaws (or other
organizational documents) or any law, statute or rule applicable to the
Company or any such Acquired Practice or result in a breach or violation of
any of the terms and provisions of, or constitute a default under, or
result in the creation or imposition of any lien, charge or encumbrance
upon any properties or assets of the Company or its subsidiaries or any
Acquired Practice or its subsidiaries under, any law or statute, or under
any indenture, mortgage, deed of trust, note, loan agreement, sale and
leaseback arrangement or other agreement or instrument to which the Company
or any of its subsidiaries or any Acquired Practice or its subsidiaries is
a party or by which they are bound or to which any of the properties or
assets of the Company or its subsidiaries or any Acquired Practice or its
subsidiaries is subject, or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company or its
subsidiaries or
3
<PAGE>
any Acquired Practice or its subsidiaries or their respective properties;
no consent, approval, authorization, order, registration or qualification
of or with any court or governmental agency or body is required for the
consummation of the transactions herein or therein contemplated, except
such as may be required by the National Association of Securities Dealers,
Inc. (the "NASD") or under the Act or Rules and Regulations or any state
securities laws.
(iv) Except as described in the Prospectus, since September 30, 1997
neither the Company or any of its subsidiaries nor any Acquired Practice or
its subsidiaries has sustained any material loss or interference with its
business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or governmental
action, order or decree. Except as contemplated in the Prospectus,
subsequent to the respective dates as of which information is given in the
Registration Statement and the Prospectus, neither the Company or its
subsidiaries nor the Acquired Practices or their respective subsidiaries
have incurred any material liabilities or material obligations, direct or
contingent, other than in the ordinary course of business, or entered into
any material transactions not in the ordinary course of business, and there
has not been any material change in the capital stock or long-term debt of
the Company or its subsidiaries or the Acquired Practices or their
respective subsidiaries or any material adverse change in the condition
(financial or other), net worth, business, affairs, management, prospects
or results of operations of the Company or its subsidiaries or any Acquired
Practice or its subsidiaries. The Company and its subsidiaries and the
Acquired Practices and their respective subsidiaries have filed all
necessary federal, state and foreign income and franchise tax returns and
paid all taxes shown as due thereon; all tax liabilities are adequately
provided for on the books of the Company and its subsidiaries and each of
the Acquired Practices and its subsidiaries; the Company and its
subsidiaries and each of the Acquired Practices and its subsidiaries have
made all necessary payroll tax payments and are current and up-to-date as
of the date of this Agreement; and the Company and its subsidiaries and
each of the Acquired Practices and its subsidiaries have no knowledge of
any tax proceeding or action pending or threatened against the Company or
its subsidiaries which might materially adversely affect the business,
condition (financial or other), prospects or results of operation of the
Company or its subsidiaries or the Acquired Practices or their respective
subsidiaries.
(v) Except as described in the Prospectus, there is not now pending
nor, to the knowledge of the Company, threatened or contemplated, any
action, suit or proceeding to which the Company or its subsidiaries or any
of the Acquired Practices or its subsidiaries is a party before or by any
court or public, regulatory or governmental agency or body which might be
expected to result (individually or in the aggregate) in any material
adverse change in the condition (financial or other), business, prospects
or results of operations of the Company or its subsidiaries or any of the
Acquired Practices or its subsidiaries, or might be expected to materially
and adversely affect (individually or in the aggregate) the properties or
assets thereof; and there are no contracts or documents of the Company or
its subsidiaries or any of the Acquired Practices or its subsidiaries which
would be required to be filed as exhibits to the Registration Statement by
the Act or by the Rules and Regulations which have not been filed as
exhibits to the Registration Statement.
(vi) The Company has duly and validly authorized capital stock as
described in the Prospectus; all outstanding shares of Common Stock of the
Company and the Shares conform, or when issued will conform, to the
description thereof in the Registration Statement and the Prospectus and
have been, or, when issued and paid for will be, duly authorized, validly
issued, fully paid and nonassessable; and the issuance of the Shares to be
purchased from the Company hereunder is not subject to preemptive rights.
Except as described in the Prospectus, no options, warrants or other rights
to purchase, agreement or other obligations to issue or other rights to
convert any obligations into shares of capital stock of the Company.
(vii) The Company and its subsidiaries and each of the Acquired
Practices and its subsidiaries have been duly incorporated or formed and
are validly existing as corporations, partnerships or limited liability
companies in good standing under the laws of the states or other
jurisdictions in which they are
4
<PAGE>
incorporated or formed, with full power and authority (corporate and other)
to own, lease and operate their properties and conduct their businesses
and, with respect to the Company and its subsidiaries, as described in the
Registration Statement; the Company and its subsidiaries and each of the
Acquired Practices and its subsidiaries are duly qualified to do business
as foreign corporations, partnerships or limited liability companies in
good standing in each state or other jurisdiction in which their ownership
or leasing of property or conduct of business legally requires such
qualification, except where the failure to be so qualified would not have a
material adverse effect on the ability of the Company and its subsidiaries
or any Acquired Practice and its subsidiaries to conduct its or their
business and, with respect to the Company and its subsidiaries, as
described in the Registration Statement; and the outstanding shares of
capital stock of the Company's and each Acquired Practice's subsidiaries
have been duly authorized and validly issued, are fully paid and
nonassessable and are owned by the Company or such Acquired Practice free
and clear of any mortgage, pledge, lien, encumbrance, charge or adverse
claim and are not the subject of any agreement or understanding with any
person; no options, warrants or other rights to purchase, agreement or
other obligations to issue or other rights to convert any obligations into
shares of capital stock or ownership interests in the subsidiaries are
outstanding. Upon the completion of the acquisition of the Acquired
Practices in the manner described in the Registration Statement, all of the
capital stock or operating assets and receivables, as the case may be, will
be owned by the Company free and clear of all liens, encumbrances and
claims; and with respect to any capital stock of any of the Acquired
Practices acquired by the Company, the Company will own 100% of such
capital stock; and no options, warrants or other rights to purchase,
agreements or other obligations to issue or other rights to convert any
obligations into shares of capital stock or ownership interests in any of
the Acquired Practices are outstanding.
(viii) Arthur Andersen LLP, the accounting firm which has certified
the financial statements filed with the Commission as a part of the
Registration Statement, is an independent public accounting firm within the
meaning of the Act and the Rules and Regulations.
(ix) The consolidated financial statements and schedules of the
Company and the Acquired Practices, including the notes thereto, filed with
and as a part of the Registration Statement, are accurate in all material
respects and present fairly the consolidated financial position of the
Company and its subsidiaries and such Acquired Practices and their
respective subsidiaries as of the respective dates thereof and the
consolidated results of operations and statements of cash flow for the
respective periods covered thereby, all in conformity with generally
accepted accounting principles applied on a consistent basis throughout the
periods involved, except as otherwise disclosed in the Prospectus. The
summary financial data and selected financial data included in the
Registration Statement and Prospectus present fairly the information shown
therein and have been compiled on a basis consistent with that of the
audited financial statements in the Registration Statement and Prospectus.
(x) Neither the Company, any Acquired Practice nor any of their
respective subsidiaries is in default with respect to any contract or
agreement to which it is a party; provided that this representation shall
not apply to defaults which in the aggregate are not materially adverse to
the condition (financial or other) or the business, prospects or results of
operation of the Company, any Acquired Practice or their respective
subsidiaries.
(xi) Neither the Company or any of its subsidiaries nor any Acquired
Practice or any of its subsidiaries is in violation of any other laws,
ordinances or governmental rules or regulations to which it is subject, and
neither the Company or any subsidiary nor any Acquired Practice or any of
its subsidiaries has failed to obtain any other license, permit, franchise,
easement, consent, or other governmental authorization necessary to the
ownership, leasing and operation of its properties or to the conduct of its
business, which violation or failure might materially adversely affect the
business, operations, affairs, properties, prospects, profits or condition
(financial or other) of the Company or its subsidiaries or any Acquired
Practice and its subsidiaries. Neither the Company or any of its
subsidiaries nor any Acquired Practice or any of its subsidiaries has, at
any time during the past five years, (A) made any unlawful contributions to
any candidate for any political office, or failed fully to
5
<PAGE>
disclose any contribution in violation of law, or (B) made any payment to
any state, federal or foreign government official, or other person charged
with similar public or quasi-public duty (other than payment required or
permitted by applicable law).
(xii) Except as described in the Prospectus, the Company and its
subsidiaries and each Acquired Practice and its subsidiaries own or
possess, or can acquire on reasonable terms, adequate patents, patent
licenses, trademarks, service marks and trade names necessary to conduct
the business now operated by them, and neither the Company nor any
subsidiary nor any Acquired Practice and its subsidiaries has received any
notice of infringement of or conflict with asserted rights of others with
respect to any patents, patent licenses, trademarks, service marks or trade
names which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would have a material adverse effect on the
conduct of the business, condition (financial or other), prospects or
results of operation of the Company and its subsidiaries or any Acquired
Practice and its subsidiaries.
(xiii) The Company and its subsidiaries and each Acquired Practice
and its subsidiaries have good and marketable title to all property owned
by them, free and clear of all liens, encumbrances, restrictions and
defects except such as are described in the Registration Statement or do
not interfere with the use made and proposed to be made of such property;
and any property held under lease or sublease by the Company or its
subsidiaries and each Acquired Practice or its subsidiaries is held under
valid, subsisting and enforceable leases or subleases with such exceptions
as are not material and do not interfere with the use made and proposed to
be made of such property by the Company and its subsidiaries or such
Acquired Practice and its subsidiaries, and neither the Company or any of
its subsidiaries nor any Acquired Practice or its subsidiaries has any
notice or knowledge of any material claim of any sort which has been, or
may be, asserted by anyone adverse to the Company's or any Acquired
Practice's or any of their respective subsidiary's rights as lessee or
sublessee under any lease or sublease described above, or affecting or
questioning the Company's or any Acquired Practice's or any of their
respective subsidiary's rights to the continued possession of the leased or
subleased premises under any such lease or sublease in conflict with the
terms thereof.
(xiv) Except as described in the Prospectus, there is no factual
basis for any action, suit or other proceeding involving the Company or its
subsidiaries or any Acquired Practice or its subsidiaries or any of their
material assets for any failure of the Company or any of its subsidiaries
or any Acquired Practice or its subsidiaries, or any predecessor thereof,
to comply with any requirements of federal, state or local regulation
relating to air, water, solid waste management, hazardous or toxic
substances, or the protection of health or the environment. Except as
described in the Prospectus, none of the property owned or leased by the
Company or any of its subsidiaries or any Acquired Practice or its
subsidiaries is contaminated with any waste or hazardous substances, and
neither the Company nor any of its subsidiaries or any Acquired Practice or
its subsidiaries may be deemed an "owner or operator" of a "facility"
or "vessel" which owns, possesses, transports, generates or disposes of a
"hazardous substance" as those terms are defined in ^9601 of the
Comprehensive Environmental Response, Compensation and Liability Act of
1980, 42 U.S.C. ^9601 ET SEQ.
(xv) No labor disturbance exists with the employees of the Company or
its subsidiaries or any Acquired Practice or its subsidiaries or is
imminent which would have a material adverse effect on the business,
condition (financial or other), prospects or results of operation of the
Company and its subsidiaries or such Acquired Practice and its
subsidiaries.
(xvi) None of the Company nor the Acquired Practices has taken nor
will take, directly or indirectly, any action designed to or which might
reasonably be expected to cause or result in stabilization or manipulation
of the price of the Company's Common Stock, and the Company is not aware of
any such action taken or to be taken by affiliates of the Company or any
Acquired Practice.
(xvii) None of the Company nor the Acquired Practices is an
"investment company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act of 1940, as
amended.
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(xviii) The information set forth under the caption
"Capitalization" in the Prospectus is true and correct. All of the shares
conform to the description thereof contained in the Registration Statement.
The form of certificates for the Shares conforms to the requirements of the
Delaware General Corporation Laws ("DGCL").
(xix) Upon completion of the acquisition of the Acquired Practices in
the manner described in the Registration Statement, the shares of Common
Stock to be issued in connection therewith will be duly authorized, validly
issued and fully paid and non-assessable.
(xx) The Company, each of the Acquired Practices and each of their
respective subsidiaries maintain a system of internal accounting controls
sufficient to provide reasonable assurances that (1) transactions are
executed in accordance with management's general or specific authorization;
(2) transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted accounting
principles and to maintain accountability for assets; (3) access to assets
is permitted only in accordance with management's general or specific
authorization; and (4) the recorded accountability for assets is compared
with existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
(xxi) The Company, each of the Acquired Practices and each of their
respective subsidiaries carry, or are covered by, insurance in such amounts
and covering such risks as is adequate for the conduct of their respective
businesses and the value of their respective properties and as is customary
for companies engaged in similar industries.
(xxii) The Company, each of the Acquired Practices and each of their
respective subsidiaries are in compliance in all material respects with all
presently applicable provisions of the Employee Retirement Income Security
Act of 1974, as amended, including the regulations and published
interpretations thereunder ("ERISA"); no "reportable event" (as defined
in ERISA for which the Company or any of the Acquired Practices has
incurred and does not expect to incur liability under (I) Title IV of ERISA
with respect to termination of, or withdrawal from, any "pension plan" or
(ii) Sections 412 or 4971 of the Internal Revenue Code of 1986, as amended,
including the regulations and published interpretations thereunder (the
"Code"); and each "pension plan" for which the Company, any of the
Acquired Practices or any of their respective subsidiaries would have any
liability that is intended to be qualified under Section 401(a) of the Code
is so qualified in all material respects and nothing has occurred, whether
by action or by failure to act, which would cause the loss of such
qualification.
(xxiii) The Company has filed a registration statement pursuant to
12(g) of the Exchange Act, to register the Common Stock, has filed an
application to include the shares on the NASDAQ/NMS under the symbol
"AMPZ", and has received notification that the listing has been approved
subject to notice of issuance of the shares.
(xxiv) Except as disclosed in the Prospectus, there are no business
relationships or related party transactions required to be disclosed
therein by Item 404 of Regulation S-K of the Commission.
(xxv) The material documents relating to the acquisitions discussed
in the Prospectus, including Management Services Agreements, Physician
Employment Agreements, Physician Engagement Agreements, Stock Purchase
Agreements, Business Purchase Agreements, Asset Purchase Agreements,
Registration Rights Agreements, Employment Agreements and Stockholder
Protection Agreements (collectively, the "Operative Documents") each as
described in the Prospectus, will have been duly and validly authorized and
delivered by the Company (the extent a party thereto) and each of the other
parties thereto and will be valid and binding obligations of the Company
and each of the other parties thereto enforceable in accordance with their
respective terms.
(xxvi) All offers and sales by the Company of the Company's
securities prior to the date hereof, including the offer and sale of the
shares of Common Stock in connection with the acquisition of the Acquired
Practices were at all relevant times duly registered or the subject of an
available exemption from the registration requirements of the Act and the
Rules and Regulations, and were duly registered
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or the subject of an available exemption from the registration requirements
of the applicable state securities or Blue Sky laws, and any private
placement memoranda delivered in connection with offers and sales of the
Company's securities prior to the date hereof did not include any untrue
statement of a material fact or omit to state any material fact necessary
in order to make the statements therein not misleading.
For purposes of this Agreement, Acquired Practices means,
collectively, the Company's acquisition of (a) the capital stock or certain
assets and receivables of the 46 separate podiatric practices (the
"Affiliated Practices"), (b) the capital stock of the podiatric practice
owned by Dr. Jerald Kramer (the "Kramer Transfer"), (c) certain assets of
Pyramid Anesthesiology Group, Inc. (the "AnestheCare Acquisition') and (d)
Bellaire SurgiCare, Inc. and Clayton Outpatient Surgical Center, Inc. (the
"Ambulatory Surgery Center Acquisitions"), in each case, as described in
the Prospectus.
(b) Any certificate signed by any officer of the Company and delivered to
you or to counsel for the Underwriters shall be deemed a representation and
warranty by the Company to each Underwriter as to the matters covered thereby.
5. ADDITIONAL COVENANTS. The Company covenants and agrees with the
several Underwriters that:
(a) If the Registration Statement is not effective under the Act, the
Company will use its best efforts to cause the Registration Statement to become
effective as promptly as possible, and it will notify you, promptly after it
shall receive notice thereof, of the time when the Registration Statement has
become effective. The Company (i) will prepare and timely file with the
Commission under Rule 424(b) of the Rules and Regulations, if required, a
Prospectus containing information previously omitted at the time of
effectiveness of the Registration Statement in reliance on Rule 430A of the
Rules and Regulations or otherwise or a Term Sheet or Abbreviated Term Sheet, as
applicable; (ii) will not file any amendment to the Registration Statement or
supplement to the Prospectus of which the Underwriters shall not previously have
been advised and furnished with a copy or to which the Underwriters shall have
reasonably objected in writing or which is not in compliance with the Act or the
Rules and Regulations; and (iii) will promptly notify you after it shall have
received notice thereof of the time when any amendment to the Registration
Statement becomes effective or when any supplement to the Prospectus has been
filed.
(b) The Company will advise the Underwriters promptly, after it shall
receive notice or obtain knowledge thereof, of any request of the Commission for
amendment of the Registration Statement or for supplement to the Prospectus or
for any additional information, or of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or the use of
the Prospectus or of the institution or threatening of any proceedings for that
purpose, and the Company will use its best efforts to prevent the issuance of
any such stop order preventing or suspending the use of the Prospectus and to
obtain as soon as possible the lifting thereof, if issued.
(c) The Company will cooperate with the Underwriters and their counsel in
endeavoring to qualify the Shares for sale under the securities laws of such
jurisdictions as they may have designated and will make such applications, file
such documents, and furnish such information as may be necessary for that
purpose, provided the Company shall not be required to qualify as a foreign
corporation or to file a general consent to service of process in any
jurisdiction where it is not now so qualified or required to file such a consent
or to subject itself to taxation as doing business in any jurisdiction where it
is not now so taxed. The Company will, from time to time, file such statements,
reports, and other documents, as are or may be required to continue such
qualifications in effect for so long a period as the Underwriters may reasonably
request.
(d) The Company will deliver to, or upon the order of, the Underwriters,
without charge from time to time, as many copies of any Preliminary Prospectus
as they may reasonably request. The Company will deliver to, or upon the order
of, the Underwriters without charge as many copies of the Prospectus, as it
thereafter may be amended or supplemented, as they may from time to time
reasonably request. The Company consents to the use of such Prospectus by the
Underwriters and by all dealers to whom the Shares may be sold, both in
connection with the offering or sale of the Shares and for such other purposes
and for
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such period of time thereafter as the Prospectus is required by law to be
delivered in connection with the offering or sale of the Shares. The Company
will deliver to the Underwriters at or before the Closing Date two signed copies
of the Registration Statement and all amendments thereto including all exhibits,
financial statements and schedules filed therewith, and will deliver to the
Underwriters such number of copies of the Registration Statement, without
exhibits, and of all amendments thereto, as they may reasonably request.
(e) If, during the period in which a prospectus is required by law to be
delivered by an Underwriter or dealer, any event shall occur as a result of
which, in the judgment of the Company or in your judgment or in the opinion of
counsel for the Underwriters, it becomes necessary to amend or supplement the
Prospectus in order to make the statements therein, in light of the
circumstances existing at the time the Prospectus is delivered to a purchaser,
not misleading, or, if it is necessary at any time to amend or supplement the
Prospectus to comply with any law (including, without limitation, the Act and
the Rules and Regulations), the Company promptly will prepare and file with the
Commission an appropriate amendment to the Registration Statement or supplement
to the Prospectus so that the Prospectus as so amended or supplemented will not,
in the light of the circumstances when it is so delivered, be misleading, or so
that the Prospectus will comply with law.
(f) The Company will make generally available to its stockholders and will
file as an exhibit in a report pursuant to the Securities and Exchange Act of
1934, as amended (the "1934 Act"), as soon as it is practicable to do so, but
in any event not later than 15 months after the effective date of the
Registration Statement, an earnings statement in reasonable detail, covering a
period of at least 12 consecutive months beginning after the effective date of
the Registration Statement, which earnings statement shall satisfy the
requirements of Section 11(a) of the Act and Rule 158 of the Rules and
Regulations and will advise the Underwriters in writing when such statement has
been so made available.
(g) The Company will, for a period of five years from the Closing Date,
deliver to the Underwriters at their principal executive offices a reasonable
number of copies of annual reports, quarterly reports, current reports and
copies of all other documents, reports and information furnished by the Company
to its stockholders or filed with any securities exchange pursuant to the
requirements of such exchange or with the Commission pursuant to the Act or the
1934 Act. The Company will deliver to the Underwriters similar reports with
respect to any significant subsidiaries, as that term is defined in the Rules
and Regulations, which are not consolidated in the Company's financial
statements. Any report, document or other information required to be furnished
under this paragraph (g) shall be furnished as soon as practicable after such
report, document or information becomes available.
(h) The Company will apply the proceeds from the sale of the Shares as set
forth in the description under "Use of Proceeds" in the Prospectus, which
description complies in all respects with the requirements of Item 504 of
Regulation S-K.
(i) The Company will supply you with copies of all correspondence to and
from, and all documents issued to and by, the Commission in connection with the
registration of the Shares under the Act.
(j) Prior to the Closing Date (and, if applicable, the Option Closing
Date), the Company will furnish to you, as soon as they have been prepared,
copies of any unaudited interim consolidated financial statements of the Company
and its subsidiaries for any periods subsequent to the periods covered by the
financial statements appearing in the Registration Statement and the Prospectus.
(k) Prior to the Closing Date (and, if applicable, the Option Closing
Date), the Company will not issue or have issued on its behalf any press
releases or other communications directly or indirectly and will hold no press
conferences with respect to the Company or any of its subsidiaries, the
financial condition, results of operations, business, properties, assets or
liabilities of the Company or any of its subsidiaries, or the offering of the
Shares, without the prior written consent of Edwards.
(l) The Company will use its best efforts to obtain approval for, and
maintain the quotation of the Shares on, the National Association of Securities
Dealers, Inc. Automated Quotation/National Market System (the "NASDAQ/NMS").
The Shares have been approved for listing on the NASDAQ/NMS, subject to notice
of issuance under the symbol "AMPZ."
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(m) For a period of 180 days from the Effective Date, the Company will
not, and will use its best efforts to cause its directors, officers, 5%
stockholders and each owner of the Acquired Practices to not, directly or
indirectly sell, contract to sell or otherwise dispose of any shares of the
Company's Common Stock, any securities exchangeable for Common Stock or any
other rights to acquire such shares without the prior written consent of
Edwards, except for the Shares sold hereunder and except for sales of shares of
Common Stock to the Company's employees pursuant to the exercise of options
under the Company's 1997 Incentive and Non-Qualified Stock Option Plan as in
effect on the Effective Date.
(n) The Company and its subsidiaries will maintain and keep accurate books
and records reflecting their assets and maintain internal accounting controls
which provide reasonable assurance that (i) transactions are executed in
accordance with management's authorization, (ii) transactions are recorded as
necessary to permit the preparation of the Company's consolidated financial
statements and to maintain accountability for the assets of the Company and its
subsidiaries, (iii) access to the assets of the Company and its subsidiaries is
permitted only in accordance with management's authorization, and (iv) the
recorded accounts of the assets of the Company and its subsidiaries are compared
with existing assets at reasonable intervals.
6. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The several obligations of
the Underwriters to purchase and pay for the Shares, as provided herein, shall
be subject to the accuracy in all material respects, as of the date hereof and
as of the Closing Date (and, if applicable, the Option Closing Date), of the
representations and warranties of the Company contained herein, to the
performance in all material respects by the Company of its covenants and
obligations hereunder, and to the following additional conditions:
(a) All filings required by Rule 424 and Rule 430A of the Rules and
Regulations shall have been made. No stop order suspending the effectiveness of
the Registration Statement, as amended from time to time, shall have been issued
and no proceeding for that purpose shall have been initiated or, to the
knowledge of the Company or any Underwriter, threatened or contemplated by the
Commission, and any request of the Commission for additional information (to be
included in the Registration Statement or the Prospectus or otherwise) shall
have been complied with to the reasonable satisfaction of the Underwriters.
(b) No Underwriter shall have disclosed in writing to the Company on or
prior to the Closing Date (and, if applicable, the Option Closing Date), that
the Registration Statement or Prospectus or any amendment or supplement thereto
contains an untrue statement of fact which, in the opinion of counsel to the
Underwriters, is material, or omits to state a fact which, in the opinion of
such counsel, is material and is required to be stated therein or is necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
(c) On the Closing Date (and, if applicable, the Option Closing Date), you
shall have received the opinion of Baker & Hostetler LLP, counsel for the
Company, addressed to you and dated the Closing Date (and, if applicable, the
Option Closing Date), to the effect that:
(i) The Company and its subsidiaries have been duly incorporated and
are validly existing as corporations in good standing under the laws of the
states or other jurisdictions in which they are incorporated, with full
power and authority (corporate and other) to own, lease and operate their
properties and conduct their business as described in the Registration
Statement; the Company and its subsidiaries are duly qualified to do
business as foreign corporations in good standing in each state or other
jurisdiction in which their ownership or leasing of property or conduct of
business legally requires such qualification, except where the failure to
be so qualified would not have a material adverse effect on the ability of
the Company and its subsidiaries to conduct its or their business as
described in the Registration Statement; and the outstanding shares of
capital stock of the Company's subsidiaries have been duly authorized and
validly issued, are fully paid and nonassessable and, to the knowledge of
such counsel after due inquiry, are owned by the Company free and clear of
any mortgage, pledge, lien, encumbrance, charge or adverse claim and are
not the subject of any agreement or understanding with any person; no
options, warrants or other rights to purchase, agreement or other
obligations to issue or other rights to convert any obligations into shares
of capital stock or ownership interests in the subsidiaries are
outstanding.
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(ii) The Company has duly and validly authorized capital stock as set
forth under the heading "Capitalization" in the Prospectus; all
outstanding shares of Common Stock of the Company and the Shares conform to
the description thereof in the Prospectus under the heading "Description
of Capital Stock", and the outstanding shares of Common Stock have been
duly authorized and are validly issued, fully paid and non-assessable; the
Shares to be sold by the Company have been duly authorized and, when
delivered and paid for in accordance with this Agreement, will be validly
issued, fully paid and non-assessable, and the stockholders of the Company
have no preemptive rights with respect to the Shares.
(iii) Except as described in or contemplated by the Prospectus, to
the knowledge of such counsel, there are no outstanding securities of the
Company convertible or exchangeable into or evidencing the right to
purchase or subscribe for any shares of capital stock of the Company and
there are no outstanding or authorized options, warrants or rights of any
character obligating the Company to issue any shares of its capital stock
or any securities convertible or exchangeable into or evidencing the right
to purchase or subscribe for any shares of such stock; and except as
described in the Prospectus, to the knowledge of such counsel, no holder of
any securities of the Company or any other person has the right,
contractual or otherwise, which has not been satisfied or effectively
waived, to cause the Company to sell or otherwise issue to them, or to
permit them to underwrite the sale of, any of the Shares or the right to
have any shares of Common Stock or other securities of the Company included
in the Registration Statement or the right, as a result of the filing of
the Registration Statement, to require registration under the Act of any
shares of Common Stock or other securities of the Company.
(iv) All offers and sales by the Company of its securities prior to
the date of this Agreement, including the offer and sale of the shares of
Common Stock in connection with the acquisition of the Acquired Practices
were at all relevant times duly registered or the subject of an available
exemption from the registration requirements of the Act and the Rules and
Regulations, and were duly registered or the subject of an exemption from
the registration requirements of the applicable state securities or Blue
Sky Laws, and any private placement memorandum delivered in connection with
offers and sales of the Company's securities prior to the date of this
Agreement did not, to the knowledge of such counsel after due inquiry,
include any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein not
misleading.
(v) The Registration Statement has become effective under the Act
and, to the knowledge of such counsel, no stop order proceedings with
respect thereto have been instituted or are pending or threatened under the
Act.
(vi) This Agreement and each of the Operative Documents have been
duly authorized, executed and delivered by the Company to the extent a
party thereto and constitute the legal, valid and binding obligations of
the Company, except as such obligations may be subject to or limited by
bankruptcy, insolvency and general principles of equity and except as to
those provisions relating to indemnities and contribution for liabilities
arising under the Act.
(vii) To such counsel's knowledge, except as otherwise set forth in
the Prospectus all leases to which the Company is a party are valid and
binding.
(viii) Such counsel has been advised by the staff of the Commission
that the Registration Statement has become effective under the Act and, to
the knowledge of such counsel after due inquiry, no stop order suspending
the effectiveness of the Registration Statement has been issued and no
proceedings for that purpose have been instituted or are pending or
contemplated under the Act.
(ix) The Registration Statement and the Prospectus, and each
amendment or supplement thereto, as of their respective effective or issue
date, comply as to form and appear on their face to be appropriately
responsive in all material respects to the requirements of the Act and the
applicable Rules and Regulations (except that such counsel need express no
opinion as to the financial statements or other financial data).
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(x) The descriptions in the Registration Statement and Prospectus of
contracts and other documents filed as exhibits to the Registration
Statement are accurate in all material respects; all other material
agreements between the Company and third parties expressly referenced in
the Prospectus are legal, valid and binding obligations of the Company and
enforceable in accordance with their terms.
(xi) No authorization, approval, consent, order, registration or
qualification of or with any court or governmental body, authority or
agency is required with respect to the Company in connection with the
transactions contemplated by this Agreement, except such as may be required
under the Act or the Rules and Regulations or as may be required by the
NASD or under state securities laws in connection with the purchase and
distribution of the Shares by the Underwriters.
(xii) The filing of the Registration Statement has been duly
authorized by the Board of Directors of the Company. This Agreement and
each of the Operative Documents (to which the Company is a party) has been
duly authorized, executed and delivered by the Company. The performance of
this Agreement and the Operative Documents and the consummation of the
transactions herein and therein contemplated will not result in a violation
of the Company's certificate of incorporation, bylaws or other
organizational document or result in a breach or violation of any of the
terms and provisions of, or constitute a default under, or result in the
creation or imposition of any lien, charge or encumbrance upon any
properties or assets of the Company and its subsidiaries under, any
statute, or under any indenture, mortgage, deed of trust, note, loan
agreement, sale and leaseback arrangement, or any other agreement or
instrument known to such counsel after due inquiry to which the Company or
any of its subsidiaries is a party or by which they are bound or to which
any of the properties or assets of the Company or its subsidiaries are
subject, or any order, rule or regulation known to such counsel after due
inquiry of any court or governmental agency or body having jurisdiction
over the Company or its subsidiaries or their properties, except, in the
case of any such violation, breach, default, creation or imposition, to
such extent as does not materially adversely affect the business, condition
(financial or other), prospects or results of operation of the Company and
its subsidiaries.
(xiii) To the knowledge of such counsel after due inquiry, (A) there
are no material (individually, or in the aggregate) legal, governmental or
regulatory proceedings pending or threatened to which the Company or any
subsidiary is a party or of which the business or properties of the Company
or any subsidiary is the subject which are not disclosed in the
Registration Statement and Prospectus; (B) there are no contracts or
documents of a character required to be described in the Registration
Statement or the Prospectus or to be filed as an exhibit to the
Registration Statement which are not described or filed as required; and
(C) there are no statutes or regulations required to be described in the
Registration Statement or Prospectus which are not described as required.
(xiv) To the knowledge of such counsel after due inquiry, the Company
and each of its subsidiaries hold all licenses, certificates, permits and
approvals from all state, federal and other regulatory authorities, and
have satisfied in all material respects the requirements imposed by
regulatory bodies, administrative agencies or other governmental bodies,
agencies or officials, that are required for the Company and its
subsidiaries lawfully to own, lease and operate its properties and conduct
its business as described in the Prospectus, and, to the knowledge of such
counsel after due inquiry, each of the Company and its subsidiaries is
conducting its business in compliance in all material respects with all of
the laws, rules and regulations of each jurisdiction in which it conducts
its business.
(xv) The statements made in the Registration Statement under the
captions "Dividend Policy", "Capitalization", "Description of Capital
Stock", "Certain Transactions", "Shares Eligible for Future Sale",
"Management-Employment Agreements", "-- 1997 Incentive and Non-Qualified
Stock Option Plan" and "Certain Anti-Takeover and Other Provisions of
Delaware Law" and the Company's certificate of incorporation and bylaws,
to the extent that they constitute summaries of documents referred to
therein or matters of law or legal conclusions, have been reviewed by such
counsel and are accurate summaries and fairly present the information
disclosed therein.
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(xvi) The Company is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
Such counsel shall confirm that in the course of its duties in connection
with the preparation of the Registration Statement and Prospectus, nothing came
to such counsel's attention that would lead them to believe that either the
Registration Statement or Prospectus or any amendment or supplement thereto
(other than the financial statements or other financial data as to which such
counsel need express no opinion) contains any untrue statement of a material
fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
In rendering the foregoing opinion, such counsel may rely, provided that
the opinion shall state that you and they are entitled to so rely, as to all
matters of fact, upon certificates and written statements of the executive
officers of, and accountants for, the Company.
(d) You shall have received on the Closing Date (and, if applicable, the
Option Closing Date), from McDermott, Will & Emery, counsel to the Underwriters,
such opinion or opinions, dated the Closing Date (and, if applicable, the Option
Closing Date) with respect to the incorporation of the Company, the validity of
the Shares, the Registration Statement, the Prospectus and other related matters
as you may reasonably require; the Company shall have furnished to such counsel
such documents as they reasonably request for the purpose of enabling them to
pass on such matters.
(e) On the business day immediately preceding the date of this Agreement
and on the Closing Date (and, if applicable, the Option Closing Date), you shall
have received from Arthur Andersen LLP, a letter or letters, dated the date of
this Agreement and the Closing Date (and, if applicable, the Option Closing
Date), respectively, in form and substance satisfactory to you, confirming that
they are independent public accountants with respect to the Company within the
meaning of the Act and the published Rules and Regulations, and the answer to
Item 509 of Regulation S-K set forth in the Registration Statement is correct
insofar as it relates to them, and stating to the effect set forth in Schedule
II hereto.
(f) Except as contemplated in the Prospectus, (i) neither the Company nor
any of its subsidiaries nor any Acquired Practice nor any of its subsidiaries
shall have sustained since September 30, 1997 any loss or interference with its
business from fire, explosion, flood or other calamity, whether or not covered
by insurance, or from any labor dispute or court or governmental action, order
or decree; and (ii) subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, neither the Company
nor any of its subsidiaries shall have incurred any liability or obligation,
direct or contingent, or entered into transactions, and there shall not have
been any change in the capital stock or long-term debt of the Company and its
subsidiaries or any change in the condition (financial or other), net worth,
business, affairs, management, prospects or results of operations of the Company
or its subsidiaries or any Acquired Practice or any of its subsidiaries, the
effect of which, in any such case described in clause (i) or (ii), is in your
judgment so material or adverse as to make it impracticable or inadvisable to
proceed with the public offering or the delivery of the Shares being delivered
on such Closing Date (and, if applicable, the Option Closing Date) on the terms
and in the manner contemplated in the Prospectus.
(g) There shall not have occurred any of the following: (i) a suspension
or material limitation in trading in securities generally on the New York Stock
Exchange or the American Stock Exchange or the establishing on such exchanges by
the Commission or by such exchanges of minimum or maximum prices which are not
in force and effect on the date hereof; (ii) a general moratorium on commercial
banking activities declared by either federal or state authorities; (iii) the
outbreak or escalation of hostilities involving the United States or the
declaration by the United States of a national emergency or war, if the effect
of any such event specified in this clause (iii) in your judgment makes it
impracticable or inadvisable to proceed with the public offering or the delivery
of the Shares in the manner contemplated in the Prospectus; (iv) any calamity or
crisis, change in national, international or world affairs, act of God, change
in the international or domestic markets, or change in the existing financial,
political or economic conditions in the United States or elsewhere, if the
effect of any such event specified in this clause (iv) makes it impracticable or
inadvisable to proceed with the public offering or the delivery of the Shares in
the manner
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contemplated in the Prospectus; or (v) the enactment, publication, decree, or
other promulgation of any federal or state statute, regulation, rule, or order
of any court or other governmental authority, or the taking of any action by any
federal, state or local government or agency in respect of fiscal or monetary
affairs, if the effect of any such event specified in this clause (v) in your
judgment makes it impracticable or inadvisable to proceed with the public
offering or the delivery of the Shares in the manner contemplated in the
Prospectus.
(h) You shall have received certificates, dated the Closing Date (and, if
applicable, the Option Closing Date) and signed by the President and the Chief
Financial Officer of the Company stating that (i) they have carefully examined
the Registration Statement and the Prospectus as amended or supplemented and
nothing has come to their attention that would lead them to believe that either
the Registration Statement or the Prospectus, or any amendment or supplement
thereto as of their respective effective or issue dates, contained, and the
Prospectus as amended or supplemented at such Closing Date, contains any untrue
statement of a material fact, or omits to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, and, that (ii) all
representations and warranties made herein by the Company are true and correct
in all material respects at such Closing Date, with the same effect as if made
on and as of such Closing Date, and all agreements herein to be performed by the
Company on or prior to such Closing Date have been duly performed in all
material respects.
(i) The Company shall not have failed, refused, or been unable, at or
prior to the Closing Date (and, if applicable, the Option Closing Date) to have
performed in all material respects any agreement on their part to be performed
or any of the conditions herein contained and required to be performed or
satisfied by them at or prior to such Closing Date.
(j) The Company shall have furnished to you at the Closing Date (and, if
applicable, the Option Closing Date) such other certificates as you may have
reasonably requested as to the accuracy, on and as of such Closing Date, of the
representations and warranties of the Company and as to the performance by the
Company of their obligations hereunder.
(k) The Shares shall have been approved for trading upon official notice
of issuance on the NASDAQ/NMS under the symbol "AMPZ".
All such opinions, certificates, letters and documents will be in compliance
with the provisions hereof only if they are reasonably satisfactory to you and
to McDermott, Will & Emery, counsel for the several Underwriters. The Company
will furnish you with such conformed copies of such opinions, certificates,
letters and documents as you may request.
If any of the conditions specified above in this Section 6 shall not have
been satisfied at or prior to the Closing Date (and, if applicable, the Option
Closing Date) or waived by you in writing, this Agreement may be terminated by
you on notice to the Company.
7. INDEMNIFICATION.
The Company agrees to indemnify and hold harmless each Underwriter and each
person, if any, who controls any Underwriter within the meaning of the Act,
against any losses, claims, damages or liabilities, joint or several, to which
such Underwriter or such controlling person may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement, any
Preliminary Prospectus, the Prospectus, or any amendment or supplement thereto,
or in any blue sky application or other document executed by the Company or
based on any information furnished by the Company, filed in any jurisdiction in
order to qualify any or all of the Shares under the securities laws thereof
("Blue Sky Application"), or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; and will reimburse each Underwriter and
each such controlling person for any legal or other expenses reasonably incurred
by such Underwriter or such controlling person in connection with investigating
or defending any
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such loss, claim, damage, liability or action; provided, however, that the
Company shall not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in the
Registration Statement, such Preliminary Prospectus or the Prospectus, or such
amendment or supplement, or any Blue Sky Application in reliance upon and in
conformity with written information furnished to the Company by you or by any
Underwriter through you, specifically for use in the preparation thereof; it
being understood that the only information so provided by or on behalf of the
Underwriters is the information included in the last paragraph or the cover page
and in the first and third paragraphs under the caption "Underwritten in the
Prospectus". This indemnity agreement shall be in addition to any liabilities
which the Company may otherwise have.
(b) Each Underwriter will indemnify and hold harmless the Company, each of
its directors, each of its officers who have signed the Registration Statement
and, each person, if any, who controls the Company within the meaning of the
Act, against any losses, claims, damages or liabilities, joint or several, to
which the Company or any such director, officer or controlling person may become
subject, under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the Registration Statement, any Preliminary Prospectus, the Prospectus, any
amendment or supplement thereto, or any Blue Sky Application or arise out of or
are based upon the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, in
each case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in the
Registration Statement, such Preliminary Prospectus or the Prospectus, such
amendment or supplement, or any Blue Sky Application in reliance upon and in
conformity with written information furnished to the Company by any such
Underwriter specifically for use in the preparation thereof; it being understood
that the only information so provided by or on behalf of the Underwriters is the
information included in the last paragraph on the cover page and in the first
and third paragraphs under the caption "Underwriting" in the Prospectus and
will reimburse any legal or other expenses reasonably incurred by the Company or
any such director, officer or controlling person in connection with
investigating or defending any such loss, claim, damage, liability or action.
This indemnity agreement shall be in addition to any liabilities which the
Underwriters may otherwise have.
(c) Any party which proposes to assert the right to be indemnified under
this Section 7 shall, within ten days after receipt of notice of commencement of
any action, suit or proceeding against such party in respect of which a claim is
to be made against an indemnifying party under this Section 7, notify each such
indemnifying party of the commencement of such action, suit or proceeding,
enclosing a copy of all papers served, but the omission so to notify such
indemnifying party of any such action, suit or proceeding shall not relieve such
indemnifying party from any liability which it may have to any indemnified party
otherwise than under this Section 7. In case any such action, suit or proceeding
shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate in, and, to the extent that it shall wish, jointly with
any other indemnifying party, similarly notified, to assume the defense thereof,
with counsel reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party shall not be liable to such
indemnified party for any legal or other expenses, other than reasonable costs
of investigation, subsequently incurred by such indemnified party in connection
with the defense thereof. The indemnified party shall have the right to employ
its own counsel in any such action, but the fees and expenses of such counsel
shall be at the expense of such indemnified party unless (i) the employment of
counsel by such indemnified party at the expense of the indemnifying party has
been authorized by the indemnifying party, (ii) the indemnified party shall have
been advised by such counsel in a written opinion that there may be a conflict
of interest between the indemnifying party and the indemnified party in the
conduct of the defense, or certain aspects of the defense, of such action (in
which case the indemnifying party shall not have the right to direct the defense
of such action with respect to those matters or aspects of the defense on which
a conflict exists or may exist
15
<PAGE>
on behalf of the indemnified party) or (iii) the indemnifying party shall not in
fact have employed counsel to assume the defense of such action, in any of which
events such fees and expenses to the extent applicable shall be borne by the
indemnifying party. An indemnifying party shall not be liable for any settlement
of any action or claim effected without its consent. Each indemnified party, as
a condition of such indemnity, shall cooperate in good faith with the
indemnifying party in the defense of any such action or claim.
(d) If the indemnification provided for in this Section 7 is for any
reason, other than pursuant to the terms thereof, judicially determined (by the
entry of a final judgment or decree by a court of competent jurisdiction and the
expiration of time to appeal or the denial of the last right to appeal) to be
unavailable to an indemnified party under subsections (a) or (b) above in
respect of any losses, claims, damages or liabilities (or actions in respect
thereof) referred to therein, then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is appropriate
to reflect the relative benefits received by the Company and the Underwriters
from the offering of the Shares. If, however, the allocation provided by the
immediately preceding sentence is not permitted by applicable law, then each
indemnifying party shall contribute to such amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault, as applicable, of the Company and
the Underwriters in connection with the statements or omissions which resulted
in such losses, claims, damages or liabilities (or actions in respect thereof),
as well as other relevant equitable considerations. The relative benefits
received by, as applicable, the Company and the Underwriters shall be deemed to
be in the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company bear to the total underwriting
discounts and commissions received by the Underwriters, in each case as set
forth in the table on the cover page of the Prospectus. The relative fault shall
be determined by reference to, among other things, whether the untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or the Underwriters and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company and the Underwriters
agree that it would not be just and equitable if contributions pursuant to this
subsection (d) were determined by pro rata allocation (even if the Underwriters
were treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations referred
to above in this subsection (d). The amount paid or payable by an indemnified
party as a result of the losses, claims, damages or liabilities (or actions in
respect thereof) referred to above in this subsection (d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (d), no Underwriter shall be
required to contribute any amount in excess of the underwriting discounts and
commissions applicable to the Shares purchased by such Underwriter. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The Underwriters' obligations in this
subsection (d) to contribute are several in proportion to their respective
underwriting obligations and not joint.
8. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. All
representations, warranties, and agreements of the Company contained in Sections
7 and 11 herein or in certificates delivered pursuant hereto, and the agreements
of the Underwriters contained in Section 7 hereof, shall remain operative and in
full force and effect regardless of any termination or cancellation of this
Agreement or any investigation made by or on behalf of any Underwriter or any
controlling person, the Company or any of its officers, directors or any
controlling persons and shall survive delivery of the Shares to the Underwriters
hereunder.
9. SUBSTITUTION OF UNDERWRITERS.
(a) If any Underwriter shall default in its obligation to purchase the
Shares which it has agreed to purchase hereunder, you may in your discretion
arrange for you or another party or other parties to purchase such Shares on the
terms contained herein. If within thirty-six hours after such default by any
Underwriter you do not arrange for the purchase of such Shares, then the Company
shall be entitled to a further period of
16
<PAGE>
thirty-six hours within which to procure another party or parties reasonably
satisfactory to you to purchase such Shares on such terms. In the event that,
within the respective prescribed periods, you notify the Company that you have
so arranged for the purchase of such Shares, or the Company notifies you that it
has so arranged for the purchase of such Shares, you or the Company shall have
the right to postpone the Closing Date for a period of not more than seven days,
in order to effect whatever changes may thereby be made necessary in the
Registration Statement or the Prospectus, or in any other documents or
arrangements, and the Company agrees to file promptly any amendments to the
Registration Statement or the Prospectus which in your opinion may thereby be
made necessary. The term "Underwriter" as used in this Agreement shall include
any persons substituted under this Section 9 with like effect as if such person
had originally been a party to this Agreement with respect to such Shares.
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters made by you or the Company as
provided in subsection (a) above, the aggregate number of Shares which remains
unpurchased does not exceed one tenth of the total Shares to be sold on the
Closing Date, then the Company shall have the right to require each
non-defaulting Underwriter to purchase the Shares which such Underwriter agreed
to purchase hereunder and, in addition, to require each non-defaulting
Underwriter to purchase its pro rata share (based on the number of Shares which
such Underwriter agreed to purchase hereunder) of the Shares of such defaulting
Underwriter or Underwriters for which such arrangements have not been made; but
nothing herein shall relieve a defaulting Underwriter from liability for its
default.
(c) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters made by you or the Company as
provided in subsection (a) above, the number of Shares which remains unpurchased
exceeds one tenth of the total Shares to be sold on the Closing Date, or if the
Company shall not exercise the right described in subsection (b) above to
require the non-defaulting Underwriters to purchase Shares of the defaulting
Underwriter or Underwriters, then this Agreement shall thereupon terminate,
without liability on the part of any non-defaulting Underwriter or the Company
except for the expenses to be borne by the Company and the Underwriters as
provided in Section 11 hereof and the indemnity and contribution agreements in
Section 7 hereof; but nothing herein shall relieve a defaulting Underwriter from
liability for its default.
10. EFFECTIVE DATE AND TERMINATION.
(a) This Agreement shall become effective at 1:00 p.m., St. Louis time, on
the first business day following the effective date of the Registration
Statement, or at such earlier time after the effective date of the Registration
Statement as you in your discretion shall first release the Shares for offering
to the public; provided, however, that the provisions of Section 7 and 11 shall
at all times be effective. For the purposes of this Section 10(a), the Shares
shall be deemed to have been released to the public upon release by you of the
publication of a newspaper advertisement relating to the Shares or upon release
of telegrams, facsimile transmissions or letters offering the Shares for sale to
securities dealers, whichever shall first occur.
(b) This Agreement may be terminated by you at any time before it becomes
effective in accordance with Section 10(a) by notice to the Company; provided,
however, that the provisions of this Section 10 and of Section 7 and Section 11
hereof shall at all times be effective. In the event of any termination of this
Agreement pursuant to Section 9 or this Section 10(b) hereof, the Company shall
not then be under any liability to any Underwriter except as provided in Section
7 or Section 11 hereof.
(c) This Agreement may be terminated by you at any time at or prior to the
Closing Date by notice to the Company if any condition specified in Section 6
hereof shall not have been satisfied on or prior to the Closing Date. Any such
termination shall be without liability of any party to any other party except as
provided in Sections 7 and 11 hereof.
(d) This Agreement also may be terminated by you, by notice to the
Company, as to any obligation of the Underwriters to purchase the Option Shares,
if any condition specified in Section 6 hereof shall not have been satisfied at
or prior to the Option Closing Date or as provided in Section 9 of this
Agreement.
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If you terminate this Agreement as provided in Sections 10(b), 10(c) or
10(d), you shall notify the Company by telephone or telegram, confirmed by
letter.
11. COSTS AND EXPENSES. The Company will bear and pay the costs and
expenses incident to the registration of the Shares and public offering thereof,
including, without limitation, (a) the fees and expenses of the Company's
accountants and the fees and expenses of counsel for the Company, (b) the
preparation, printing, filing, delivery and shipping of the Registration
Statement, each Preliminary Prospectus, the Prospectus and any amendments or
supplements thereto (except as otherwise expressly provided in Section 5(d)
hereof) and the printing, delivery and shipping of this Agreement, the Agreement
Among Underwriters, the Selected Dealer Agreement, and Underwriters'
Questionnaires, (c) the furnishing of copies of such documents (except as
otherwise expressly provided in Section 5(d) hereof) to the Underwriters, (d)
the registration or qualification of the Shares for offering and sale under the
securities laws of the various states, including the reasonable fees and
disbursements of Underwriters' counsel relating to such registration or
qualification, (e) the fees payable to the NASD and the Commission in connection
with their review of the proposed offering of the Shares, (f) all printing and
engraving costs related to preparation of the certificates for the Shares,
including transfer agent and registrar fees, (g) all initial transfer taxes, if
any, (h) all fees and expenses relating to the authorization of the Shares for
trading on NASDAQ/NMS, (i) all travel expenses, including air fare and
accommodation expenses, of representatives of the Company in connection with the
offering of the Shares and (j) all of the other costs and expenses incident to
the performance by the Company of the registration and offering of the Shares;
provided, however, that the Underwriters will bear and pay the fees and expenses
of the Underwriters' counsel (other than fees and disbursements relating to the
registration or qualification of the Shares for offering and sale under the
securities laws of the various states), the Underwriters' out-of-pocket
expenses, and any advertising costs and expenses incurred by the Underwriters
incident to the public offering of the Shares.
If this Agreement is terminated by you in accordance with the provisions of
Section 10(c), the Company shall reimburse the Underwriters for all of their
out-of-pocket expenses, including the reasonable fees and disbursements of
counsel to the Underwriters.
12. NOTICES. All notices or communications hereunder, except as herein
otherwise specifically provided, shall be in writing and if sent to the
Underwriters shall be mailed, delivered, sent by facsimile transmission, or
telegraphed and confirmed c/o A.G. Edwards & Sons, Inc. at One North Jefferson
Avenue, St. Louis, Missouri 63103, Attention: Syndicate, facsimile number (314)
289-7387, or if sent to the Company shall be mailed, delivered, sent by
facsimile transmission, or telegraphed and confirmed to the Company at 3555
Timmons Lane, Suite 1550, Houston, TX 77027, facsimile number (713) 621-5500.
Notice to any Underwriter pursuant to Section 7 shall be mailed, delivered, sent
by facsimile transmission, or telegraphed and confirmed to such Underwriter's
address as it appears in the Underwriters' Questionnaire furnished in connection
with the offering of the Shares or as otherwise furnished to the Company.
13. PARTIES. This Agreement shall inure to the benefit of and be binding
upon the Underwriters, and the Company and their respective successors and
assigns. Nothing expressed or mentioned in this Agreement is intended or shall
be construed to give any person, corporation or other entity, other than the
parties hereto and their respective successors and assigns and the controlling
persons, officers and directors referred to in Section 7, any legal or equitable
right, remedy or claim under or in respect of this Agreement or any provision
herein contained; this Agreement and all conditions and provisions hereof being
intended to be and being for the sole and exclusive benefit of the parties
hereto and their respective successors and assigns and said controlling persons
and said officers and directors, and for the benefit of no other person,
corporation or other entity. No purchaser of any of the Shares from any
Underwriter shall be construed a successor or assign by reason merely of such
purchase.
In all dealings with the Company under this Agreement you shall act on
behalf of each of the several Underwriters and the Company shall be entitled to
act and rely upon any statement, request, notice or agreement on behalf of the
Underwriters, made or given by you on behalf of the Underwriters, as if the same
shall have been made or given in writing by the Underwriters.
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<PAGE>
14. COUNTERPARTS. This Agreement may be executed by any one or more of
the parties hereto in any number of counterparts, each of which shall be deemed
to be an original, but all such counterparts shall together constitute one and
the same instrument.
15. PRONOUNS. Whenever a pronoun of any gender or number is used herein,
it shall, where appropriate, be deemed to include any other gender and number.
16. APPLICABLE LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Missouri.
If the foregoing is in accordance with your understanding, please so
indicate in the space provided below for that purpose, whereupon this letter
shall constitute a binding agreement among the Company and the Underwriters.
AMERICAN MEDICAL PROVIDERS, INC.
By: __________________________________
Title: _______________________________
Accepted in St. Louis, Missouri as of the date first above written, on behalf of
ourselves and each of the several Underwriters named in Schedule I hereto.
A.G. EDWARDS & SONS, INC.
By: ____________________________________________________________________________
Title: _________________________________________________________________________
19
EXHIBIT 3.1
FORM OF
AMERICAN MEDICAL PROVIDERS, INC.
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
Jack N. McCrary and Wayne A. Bertsch, being the duly elected President and
Secretary, respectively, of American Medical Providers, Inc. (the
"Corporation"), a corporation organized and existing under and by virtue of
the Delaware General Corporation Law, do hereby certify as follows:
1. That the Corporation was originally incorporated in the State of
Delaware on August 9, 1996, under the name of Podiatry Newco, Inc.
2. That the Board of Directors of the Corporation, in accordance with
Sections 242 and 245 of the Delaware General Corporation Law, adopted
resolutions as of February 17, 1998 providing for the adoption of an Amended and
Restated Certificate of Incorporation of the Corporation in the form attached
hereto as EXHIBIT A which amends and restates the Certificate of Incorporation
in its entirety. The resolution further directed that the Amended and Restated
Certificate of Incorporation be submitted to the stockholders of the Corporation
for their consideration and approval.
3. That, in accordance with Section 242 of the Delaware General
Corporation Law, the holders of a majority of the outstanding stock of the
Corporation adopted a resolution dated as of February 17, 1998 providing for the
adoption of the Amended and Restated Certificate of Incorporation of the
Corporation. Such resolution was adopted by written consent in lieu of a special
meeting of stockholders of the Corporation, as permitted by Section 228(a) of
the Delaware General Corporation Law, and written notice of the taking of a
corporate action without a meeting by less than unanimous written consent has
been given as required by Section 228(d) of the Delaware General Corporation
Law.
4. The existing Certificate of Incorporation is amended and restated in
its entirety as set forth on EXHIBIT A attached hereto.
5. This Amended and Restated Certificate shall become effective on the
17th day of February, 1998 (the "Effective Time") pursuant to Section 103(d)
of the DGCL.
6. At the Effective Time, each share of the Corporation's common stock,
$.01 par value per share, issued and outstanding immediately prior to the
Effective Time (the "Old Common Stock") shall be reclassified as and changed
into thirty-two and one-half (32.5) validly issued, fully paid, and
non-assessable shares of Class B Common Stock $.001 par value per share ("Class
B Common Stock") authorized by the Third Article of the Amended and Restated
Certificate, without any action by the holder thereof. Each certificate that
theretofore represented a share or shares of Old Common Stock shall thereafter
represent that number of shares of Class B Common Stock into which the share or
shares of Old Common Stock represented by such certificate shall have been
reclassified.
IN WITNESS WHEREOF, American Medical Providers, Inc. has caused this
Amended and Restated Certificate of Incorporation to be executed by Jack N.
McCrary, its President, and Wayne A. Bertsch, its Secretary, as of this 17th day
of February, 1998.
AMERICAN MEDICAL PROVIDERS, INC.
By: __________________________________
Jack N. McCrary, President
ATTEST:
By:
Wayne A. Bertsch, Secretary
<PAGE>
EXHIBIT A
FORM OF
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
AMERICAN MEDICAL PROVIDERS, INC.
A DELAWARE CORPORATION
FIRST. NAME. The name of the corporation is AMERICAN MEDICAL PROVIDERS,
INC.
SECOND. A._PURPOSE. The purpose of this corporation is to engage in any
lawful act or activity for which a corporation may be organized under the
General Corporation Law of the State of Delaware ("Delaware Law").
B._ADDRESS. The address of its registered office in the State of Delaware
is 1209 Orange Street, Wilmington, Delaware 19801, in the County of New Castle.
The name of its registered agent at such address is The Corporation Trust
Company.
THIRD. A. AUTHORIZED SHARES. The total number of shares of all classes of
stock which the corporation shall have authority to issue is 41,000,000,
consisting of (i) 21,000,000 shares of Common Stock (a) 20,000,000 shares of
which shall be designated as Class A Common Stock (the "Class A Common Stock")
with a par value of $.001 per share and (b) 1,000,000 shares of which shall be
designated as Class B Common Stock (the "Class B Common Stock") with a par
value of $.001 per share and (ii) 20,000,000 shares with a par value of $.001
per share shall be designated as Preferred Stock. Except as set forth below, the
designations, preferences, qualifications, limitations, restrictions, and
special or relative rights of the Class A Common Stock and the Class B Common
Stock shall be identical and equal in all respects, share for share, except that
the voting power in the Corporation for the election of directors and for any
and all other purposes shall be vested exclusively in the holders of the Class A
Common Stock and the Class B Common Stock as set forth below, and at all
meetings of the shareholders and at all elections of the directors, each holder
of the Class A Common Stock on the relevant record date shall be entitled to one
vote for each share of Class A Common Stock held by him or her and registered on
the books of the Corporation and each holder of the Class B Common Stock shall
be entitled to two-thirds ( 2/3) of a vote for each share of Class B Common
Stock held by him or her and registered on the books of the Corporation. Each
fractional share of Class A Common Stock or Class B Common Stock shall be
entitled to a corresponding fractional vote on each matter submitted to a vote
of shareholders equal to the fraction of a share held multiplied by the vote for
a share of such class.
B. VOTING. Holders of Class A Common Stock of the Company are entitled to
one vote per share and the holders of Class B Common Stock of the corporation
are entitled to two-thirds ( 2/3) of a vote per share. The corporation's Board
of Directors consists of the number of directors set forth in the by-laws of the
corporation. Except as set forth in the next sentence, holders of Class B Common
Stock are entitled to elect as a class one member of the Board of Directors and
the holders of the Class A Common Stock are entitled to elect as a class all
remaining members of the Board of Directors. Upon the conversion of 65% or more
of the Class B Common Stock outstanding on the Effective Date (as defined below)
into Class A Common Stock, as provided below, the holders of Class B Common
Stock shall no longer have the right to vote on the election of one director as
a separate class and such director shall thereafter be elected by holders of the
Class A Common Stock and Class B Common Stock voting together as a single class.
The "Effective Date" shall mean the date of the Prospectus for the
corporation's initial public offering of the Class A Common Stock pursuant to a
Registration Statement filed with the Securities and Exchange Commission on Form
S-1, as amended. The Class A Common Stock and Class B Common Stock possess
ordinary voting rights and vote together as a single class in respect of all
other corporate matters.
C. CLASS B CONVERSION. The Class B Common Stock is convertible into Common
Stock, at the option of the holder thereof, upon the occurrence of a Conversion
Event (as defined below) on a share-for-share basis, provided however, that if
during the six years following the date of the Prospectus (the "Effective
Date") for the corporation's initial public offering of the Class A Common
Stock pursuant to a Registration Statement filed with the Securities and
Exchange Commission on Form S-1, as amended the
A-1
<PAGE>
Common Stock reaches certain average closing prices over a 15-day period on the
Nasdaq National Market, other over-the-counter market or an exchange, as then
applicable (the "Trading Market") then, as set forth below, the conversion
ratio with respect to a certain number of shares of Class B Common Stock will
immediately be adjusted such that a pro rata share of all Class B Common Stock
held by each holder of Class B Common Stock (each such share, an "Adjusted
Conversion Share") shall be convertible in accordance with this Third Article
into three (3) validly issued, fully paid and non-assessable shares of Class A
Common Stock without further action on the part of the holder thereof or the
Corporation (except the cancellation of stock certificate(s) representing the
applicable shares of Class B Common Stock and the issuance of certificate(s)
representing the number of shares of Class A Common Stock into which such shares
of Class B Common Stock are converted).
On the date that the average closing price on the Trading Market for the
preceding 15 consecutive trading days (the "Average Price") exceeds 150% of
the price to the public on the Effective Date, 130,000 of the shares of Class B
Common Stock outstanding on the Effective Date will immediately become Adjusted
Conversion Shares. Thereafter, the remaining 520,000 shares of Class B Common
Stock outstanding on the Effective Date will become Adjusted Conversion Shares
in four remaining increments of 130,000 shares of Class B Common Stock each (20%
of the total number of shares of Class B Common Stock outstanding on the
Effective Date) upon the attainment of new Average Prices. The Average Prices
which must be attained prior to each new 20% increment becoming Adjusted
Conversion Shares will equal 120% of each preceding Average Price applicable to
the preceding 20% increment. Upon a Conversion Event, each holder of Class B
Common Stock will have the right to have each share of Class B Common Stock
converted into that number of shares of Class A Common Stock as each such share
is entitled to based upon the Average Prices achieved, if any. Any additional
Average Price attained after the occurrence of a Conversion Event but before
conversion of a share of Class B Common Stock will continue to act to make such
share an Adjusted Conversion Share, as applicable. Shares of Class B Common
Stock held by a holder shall automatically convert into Class A Common Stock
immediately prior to the disposition of such shares of Class B Common Stock by
such holder.
A Conversion Event shall be deemed to have occurred (i) in the event of a
disposition of such share of Class B Common Stock by the holder thereof
(excluding dispositions to such holder's affiliates), (ii) in the event any
person not affiliated with the corporation acquires beneficial ownership of 15%
or more of the outstanding shares of capital stock of the corporation, (iii) in
the event any person not affiliated with the corporation offers to acquire 15%
or more of the outstanding shares of capital stock of the corporation, (iv) in
the event the holder of such shares elects to so convert at any time after the
second anniversary of the Effective Date, (v) on the sixth anniversary of the
Effective Date, or (vi) in the event the holders of a majority of the
outstanding shares of Class A Common Stock approve such conversion. In addition,
the corporation may elect to convert any outstanding shares of Class B Common
Stock into shares of Common Stock in the event 95% or more of the outstanding
shares of Class B Common Stock as of the Effective Date have previously been
converted into shares of Class A Common Stock. Appropriate adjustments shall be
made to all Average Prices to reflect changes in the capital structure of the
corporation including, but not limited to, stock splits or stock dividends.
Upon the sixth anniversary of the Effective Date, all shares of Class B
Common Stock not previously converted to Class A Common Stock shall
automatically convert as follows: (i) each share of Class B Common Stock which
is not an Adjusted Conversion Share shall automatically convert into one validly
issued, fully paid and non-assessable share of Class A Common Stock and (ii)
each share of Class B Common Stock which is an Adjusted Conversion Share shall
automatically convert in three validly issued, fully paid and non-assessable
shares of Class A Common Stock and both conversions shall be without further
action on the part of the holder thereof or the corporation (except the
cancellation of stock certificate(s) representing the applicable shares of Class
B Common Stock and the issuance of certificate(s) representing the number of
shares of Class A Common Stock into which such shares of Class B Common Stock
are converted).
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At the time of any voluntary conversion, the record holder of shares of
Class B Common Stock shall deliver to the principal office of the corporation or
any transfer agent for shares of the Class A Common Stock (i) the certificate or
certificates representing the shares of Class B Common Stock to be converted,
duly endorsed in blank or accompanied by proper instruments of transfer, and
(ii) written notice to the corporation specifying the number of shares of Class
B Common Stock to be converted into shares of Class B Common Stock and stating
the name or names (with addresses) and denomination in which the certificate or
certificates representing the shares of Class A Common Stock issuable upon such
conversion are to be issued and including instructions for the delivery thereof.
Conversion shall be deemed to have been effected at the time when delivery is
made to the corporation or to the transfer agent of both such written notice and
the certificate or certificates representing the shares of Class B Common Stock
to be converted or such later time as may be specified in such written notice,
and as of such time each person named in such written notice as the person to
whom a certificate representing shares of Class A Common Stock is to be issued
shall be deemed to be the holder of record of the number of Class A Common Stock
to be evidenced by that certificate. Delivery of such certificates and such
written notice shall obligate the corporation to issue such shares of Class A
Common Stock, and thereupon the corporation or its transfer agent shall promptly
issue and deliver at such stated address to such record holder of shares of
Class A Common Stock a certificate or certificates representing the number of
shares of Class A Common Stock to which such record holder is entitled by reason
of such conversion, and shall cause such shares of Class A Common Stock to be
registered in the name of such record holder.
In the event of the conversion of less than all of the shares of Class B
Common Stock evidenced by a certificate surrendered to the corporation in
accordance with the procedures herein, the corporation shall execute and and
deliver to or upon the written order of the holder of such unconverted shares,
without charge to such holder, a new certificate evidencing the number of shares
of Class B Common Stock not converted.
The corporation hereby reserves and shall at all times reserve and keep
available, out of its authorized and unissued shares of Class A Common Stock,
for the purposes of effecting conversions, such number of duly authorized shares
of Class A Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of Class B Common Stock. The corporation
covenants that all of the shares of Class A Common Stock so issuable shall, when
so issued, be duly and validly issued, fully paid and non-assessable, and free
from liens and charges. The corporation shall take all action as may be
necessary to ensure that all such shares of Class A Common Stock may be issued
without violation of any applicable law or regulation, or of any requirements of
any Trading Market upon which the shares of Class A Common Stock are or may be
listed.
D. PREEMPTIVE RIGHTS. No Holder of shares of Class A Common Stock or
Class B Common Stock shall be entitled to preemptive or subscriptive rights.
E. PREFERRED STOCK. Shares of Preferred Stock may be issued in series
from time to time by the board of directors, and the board of directors is
expressly authorized to fix by resolution or resolutions the designations and
the powers, preferences and rights, and the qualifications, limitations and
restrictions thereof, of the shares of each series of Preferred Stock, including
without limitation the following:
(a) the distinctive serial designation of such series which shall
distinguish it from other series;
(b) the number of shares included in such series, which number may be
increased or decreased from time to time unless otherwise provided by the
board of directors in the resolution or resolutions providing for the issue
of such series;
(c) the dividend rate (or method of determining such rate, which may
be faced or variable) payable to the holders of the shares of such series,
any conditions upon which such dividends shall be paid and the date or
dates upon which such dividends shall be payable;
(d) whether dividends on the shares of such series shall be cumulative
and, in the case of shares of any series having cumulative dividend rights,
the date or dates or method of determining the date or dates from which
dividends on the shares of such series shall be cumulative;
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(e) the amount or amounts which shall be payable out of the assets of
the corporation to the holders of the shares of such series upon voluntary
or involuntary liquidation, dissolution or winding up the corporation;
(f) the price or prices at which, the period or periods within which
and the terms and conditions upon which the shares of such series may be
purchased or redeemed, in whole or in part, at the option of the
corporation or at the option of the holder or holders thereof or upon the
happening of a specified event or events;
(g) the obligation, if any, of the corporation to purchase or redeem
shares of such series pursuant to a sinking fund or otherwise and the price
or prices at which, the period or periods within which and the terms and
conditions upon which the shares of such series shall be redeemed or
purchased, in whole or in part, pursuant to such obligation;
(h) whether or not the shares of such series shall be convertible or
exchangeable, at any time or times at the option of the holder or holders
thereof or at the option of the corporation or upon the happening of a
specified event or events, into shares of any other class or classes or any
other series of the same or any other class or classes of stock or debt
securities of the corporation or of any other entity, and the price or
prices or rate or rates of exchange or conversion and any adjustments
applicable thereto; and
(i) the voting rights, if any, of the holders of the shares of such
series.
FOURTH. Bylaws. The board of directors of the corporation is expressly
authorized to adopt, amend or repeal the by-laws of the corporation. This
Article Fourth and the by-laws of the corporation may not be amended, modified
or repealed by the holders of the capital stock of the corporation except by the
affirmative vote of the holders of not less than a majority of the Total Voting
Power (as hereinafter defined) of the corporation.
The term "Total Voting Power" shall mean the nondiluted aggregate number
of votes that may be cast by the holders of outstanding Voting Securities. The
term "Voting Securities" shall mean securities entitled to vote in the
ordinary course in the election of directors or of persons serving in a similar
governing capacity, including the voting rights attached to such securities and
rights or options to acquire such securities.
FIFTH. A. NUMBER OF DIRECTORS. The number of directors of the corporation
shall be up to nine (9) with the exact number set from time to time pursuant to
the by-laws of the corporation.
B. CLASSES OF DIRECTORS. The directors of the corporation shall be divided
into three classes, as nearly equal in number as possible, as determined by the
board of directors, with the initial term of office of Class I to expire at the
first annual meeting of shareholders thereafter, the initial term of office of
Class II to expire at the second annual meeting of shareholders thereafter and
the initial term of office of Class III to expire at the third annual meeting of
shareholders thereafter, with each class of directors to hold office until their
successors have been duly elected and qualified. Except as set forth in the
Third Article, the holders of Class B Common Stock are entitled to elect as a
class one member of Class I of the Board of Directors and the holders of Class A
Common Stock are entitled to elect as a class the remaining member or members of
Class I of the Board of Directors and all members of Class II and Class III of
the Board of Directors. At each annual meeting of shareholders following such
initial classification and election, directors elected to succeed the directors
whose terms expire at such annual meeting shall be elected to hold office for a
term expiring at the annual meeting of shareholders in the third year following
the year of their election and until their successors have been duly elected and
qualified. If the number of directors is changed, any increase or decrease shall
be apportioned among the classes so as to maintain or attain a number of
directors in each class as nearly equal as possible, but no decrease in the
number of directors may shorten the term of any incumbent director.
C. TERM; VACANCIES. Directors shall hold office until the annual meeting
for the year in which their terms expire and until their successors shall be
elected and shall qualify, subject, however, to prior death, resignation,
retirement, disqualification or removal from office. Any vacancy on the
Corporation's Board of
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Directors, however resulting, may be filled by the affirmative vote of a
majority of the remaining directors then in office, even if less than a quorum.
Any director elected to fill a vacancy shall hold office only until the next
annual meeting of stockholders and until their successors shall be elected and
shall qualify. No director may be removed by the stockholders of the Corporation
except for cause.
D. CUMULATIVE VOTING. Shareholders shall not be entitled to cumulate votes
in the election of directors.
This Article Fifth may not be amended, modified or repealed except by the
affirmative vote of the holders of not less than sixty percent (60%), of the
Total Voting Power.
SIXTH. CONSENT. No action required or permitted to be taken by the
holders of any class or series of stock of the corporation, including but not
limited to the election of directors, may be taken by written consent or
consents and must be taken at a duly called annual meeting or at a special
meeting of shareholders. This Article Sixth may not be amended, modified or
repealed except by the affirmative vote of the holders of not less than sixty
percent (60%) of the Total Voting Power of the corporation.
SEVENTH. MATERIAL INTEREST OF AFFILIATES. In addition, any contract or
transaction between the Corporation or any of its subsidiaries and one or more
of its directors or Controlling Persons (or any of their "affiliates" as such
term is defined in Rule 12b-2 of the Securities and Exchange Act of 1934, as
amended), or between the corporation or any of its subsidiaries and any other
corporation, partnership, association or other organization in which one or more
of its directors or Controlling Persons have a material financial interest,
shall require that (i) the material facts as to his or her relationship or
interest and as to the contract or transaction be fully and fairly disclosed in
good faith to the Board of Directors and (ii) the Board of Directors in good
faith authorize the contract or transaction by the affirmative vote of a
majority of the disinterested directors, even though the disinterested directors
be less than a quorum. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the Board of Directors
which authorizes the contract or transaction. A mere common directorship does
not constitute a material financial interest within the meaning of this
subdivision. A director is not interested within the meaning of this subdivision
in a resolution fixing the compensation of another director as a director,
officer or employee of the corporation, notwithstanding the fact that the first
director is also receiving compensation from the corporation.
If the other provisions hereinabove are met, no such contract or other
transaction contemplated above, or vote of a director, whether one or more, or
the Board of Directors, shall be void or voidable solely because a director is
not a disinterested director with respect to a matter and is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction to which such director is not a
disinterested director or solely because his or her or their votes are counted
for such approval.
(c) Dividends on the outstanding shares of the corporation, if any,
shall not be declared except upon the affirmative vote of not less than
sixty percent (60%) of the whole Board of Directors at any regular or
special meeting. Dividends may be paid by the corporation in cash, in
property, or in the corporation's own shares, but only as permitted under
Delaware Law. Subject to limitations upon the authority of the Board of
Directors imposed by any law, the declaration of and provision for payment
of dividends shall be at the discretion of the Board of Directors.
(d) The Board of Directors may, by resolution passed by the
affirmative vote of at least sixty percent (60%) of the whole Board of
Directors, appoint from its membership, annually, an Executive Committee of
two or more directors, which shall include the Chief Executive Officer and
the Chief Financial Officer of the corporation. The appointment or removal
of any member (or alternate members) of the Executive Committee shall
require the affirmative vote of not less than sixty percent (60%) of the
whole Board of Directors.
This Article Seventh may not be amended, modified or repealed by the
holders of the capital stock of the corporation except by the affirmative vote
of the holders of not less than a majority of the Total Voting Power of the
corporation.
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EIGHTH. LIABILITY OF DIRECTORS. The liability of directors of the
corporation for monetary damages shall be eliminated so the fullest extent
permissible under Delaware Law. No amendment, modification or repeal of this
Article Eighth shall adversely affect any right or protection of a director that
exists at the time of such amendment, modification or repeal.
This Article Eighth may not be amended, modified or repealed except by the
affirmative vote of the holders of not less than eighty percent (80%), of the
Total Voting Power of the corporation.
NINTH. INDEMNIFICATION. The corporation is authorized to indemnify the
directors, officers, employees or other agents of the corporation to the fullest
extent permissible under Delaware Law.
TENTH. SHAREHOLDER PROTECTION RIGHTS PLAN. The Board of Directors is
expressly authorized to adopt, amend or repeal a shareholder protection rights
plan, which plan may distinguish between shares of Common Stock or other
securities of the same class or series and may distinguish between shareholders
of Common Stock or other securities of the same class or series.
This Article Tenth may not be amended, modified or repealed except by the
affirmative vote of the holders of not less than eighty percent (80%), of the
Total Voting Power of the corporation.
ELEVENTH. EXISTENCE. This Corporation shall have perpetual existence.
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EXHIBIT 3.2
FORM OF
AMENDED AND RESTATED BYLAWS
OF
AMERICAN MEDICAL PROVIDERS, INC.
ARTICLE I
CORPORATE OFFICES
1.1 PRINCIPAL OFFICE
The Board of Directors shall fix the location of the principal executive
office of the corporation at any place within or outside the State of Delaware.
Unless and until redesignated by the Board of Directors, the principal executive
office of the corporation is 3555 Timmons Lane, Suite 1550, Houston, Texas
77027. The Board of Directors may at any time establish branch or subordinate
offices at any place or location.
1.2 REGISTERED OFFICE AND AGENT
The Corporation shall have and maintain at all times (a) a registered
office in the State of Delaware, which office shall be located at 1209 Orange
Street, Wilmington, Delaware 19801, and (b) a registered agent located at such
address whose name is The Corporation Trust Company, until changed from time to
time as provided by the General Corporation Law of the State of Delaware
("Delaware Corporation Law").
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS
All meetings of the stockholders of the Corporation shall be held within
or without the State of Delaware as may be designated by the Board of Directors
or the president, or, if not designated, at the registered office of the
Corporation.
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2.2 ANNUAL MEETINGS
The annual meeting of stockholders for the election of directors and for
the transaction of such other business as may properly be brought before the
meeting shall be held on such date and at such time as determined by resolution
of the Board of Directors. If, at the place of the meeting, this date shall fall
upon a legal holiday, then such meeting shall be held on the next succeeding
business day at the same hour. If no annual meeting is held in accordance with
the foregoing provisions, the board of directors shall cause the meeting to be
held as soon thereafter as convenient. If no annual meeting is held in
accordance with the foregoing provisions, a special meeting may be held in lieu
of the annual meeting, and any action taken at that special meeting shall have
the same effect as if it had been taken at the annual meeting, and in such case
all references in these Bylaws to the annual meeting of stockholders shall be
deemed to refer to such special meeting.
2.3 SPECIAL MEETINGS
Unless otherwise prescribed law or by the Certificate of Incorporation,
special meetings of stockholders, for any purpose or purposes, may be called
only by either the Chairman, if there be one, or the President, and shall be
called by the Secretary or any Assistant Secretary, if there be one, at the
request in writing of a majority of the Board of Directors or of any holder or
holders of an aggregate of ten percent (10%) or more of the issued and
outstanding stock of the Corporation entitled to vote at any such meeting
called. Such request shall state the purpose or purposes of the proposed
meeting. Upon receipt of such written request, the president shall fix a date
and time for such meeting which such date shall be within ten business days of
the proposed date specified in the written request.
2.4 NOTICE OF MEETING
Except as otherwise provided in these Bylaws or Delaware Corporation Law,
written notice of any meeting of stockholders stating the place, date and hour
of the meeting and, in the case of a special meeting, the purpose for which the
meeting is called, shall be delivered either personally or by mail to each
stockholder of record entitled to vote at such meeting not less than ten nor
more than sixty days before the date of the meeting. If mailed, such notice
shall be deemed to be delivered as to any stockholder of record when deposited
in the United States mail addressed to the stockholder at his address as it
appears on the stock transfer books of the Corporation, with postage prepaid.
When a meeting is adjourned to another time or place, notice need not be given
of the adjourned meeting if the time and place thereof are announced at the
meeting at which the adjournment is taken. At the adjourned meeting the
Corporation may transact any business which might have been transacted at the
original meeting. If the adjournment is for more than thirty days, or if after
the adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given to each stockholder of record entitled
to vote at the meeting.
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2.5 WAIVER OF NOTICE
Any stockholder, either before or after any stockholders, meeting, may
waive in writing notice of the meeting, and his waiver shall be deemed the
equivalent of giving notice. Attendance at a meeting by a stockholder shall
constitute a waiver of notice, except when the stockholder attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
2.6 FIXING OF RECORD DATE
For the purpose of determining the stockholders entitled to notice of or
to vote at any meeting of stockholders or any adjournment thereof, or express
consent to corporate action in writing without a meeting or entitled to receive
payment of any dividend or other distribution or allotment of any rights, or
entitled to exercise any rights in respect of any change, conversion or exchange
of stock or for the purpose of any other lawful action, the board of directors
of the Corporation may fix, in advance, a record date which shall be not more
than sixty (60) days nor less than ten (10) days prior to the date of such
meeting, nor more than sixty (60) days prior to any other action. If no record
date is fixed, the record date for determining the stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held. The record date for determining stockholders for any
other purpose shall be at the close of business on the day on which the board of
directors adopts the resolution relating thereto. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting, provided, however,
that the board of directors may fix a new record date for the adjourned meeting.
2.7 NOTICE OF BUSINESS
At any meeting of the stockholders of the Corporation, only such proper
business shall be conducted as shall have been brought before the meeting (i) by
or at the direction of the Board of Directors or (ii) by any stockholder of the
Corporation who is a stockholder of record at the time of giving of the notice
provided for in this Section 2.7, who shall be entitled to vote at such meeting
and who complies with the notice procedures set forth in this Section 2.7. For
business to be brought before a meeting of stockholders by a stockholder, the
stockholder shall have given timely notice thereof in writing to the Secretary
of the Corporation. To be timely, a stockholder's notice shall be delivered to
or mailed and received at the principal executive office of the Corporation not
less than 50 days nor more than 75 days prior to the meeting; PROVIDED, HOWEVER,
that in the event that less than 60 days' notice or prior public disclosure of
the date of the meeting is given or made to stockholders, notice by the
stockholder to be timely must be so received not later than the close of
business on the tenth day following the day on
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which such notice of the date of the meeting was mailed or such public
disclosure was made, whichever first occurs. Such stockholder's notice to the
Secretary of the Corporation shall set forth as to each matter the stockholder
proposes to bring before the meeting (i) a brief description of the business
desired to be brought before the meeting, the reasons for conducting such
business at the meeting and, in the event that such business includes a proposal
to amend any document, including these Bylaws, the language of the proposed
amendment, (ii) the name and address, as they appear on the Corporation's books,
of the stockholder proposing such business, (iii) the class and number of shares
of capital stock of the Corporation which are beneficially owned by such
stockholder and (iv) any material interest of such stockholder in such business.
Notwithstanding anything in these Bylaws to the contrary, no business shall be
conducted at a meeting of the stockholders except in accordance with the
procedures set forth in this Section 2.7. The chairman of the meeting of
stockholders shall, if the facts warrant, determine and declare to the meeting
that business was not properly brought before the meeting and in accordance with
the provisions of these Bylaws, and if he should so determine, he shall so
declare to the meeting and any such business not properly brought before the
meeting shall not be transacted. Notwithstanding the foregoing provisions of
this Section 2.7, a stockholder shall also comply with all applicable
requirements of the Securities and Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder with respect to matters set forth
in this Section 2.7.
2.8 QUORUM
Except as otherwise provided by law or by the Certificate of
Incorporation, the holders of a majority of the capital stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. 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. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder entitled to vote at the
meeting.
2.9 VOTING
Unless otherwise required by law, the Certificate of Incorporation or
these Bylaws, any question brought before any meeting of stockholders shall be
decided by the vote of the holders of a majority of the stock represented and
entitled to vote thereat. Each stockholder shall have one vote for each share of
Class A Common Stock and 2/3 of a vote for each share of Class B Common Stock
entitled to vote held of record by such stockholder and a proportionate vote for
each fractional share so held, unless otherwise provided in the Certificate of
Incorporation. The Board of Directors, in its discretion, or the officer of the
Corporation presiding at a meeting of stockholders, in his discretion, may
require that any votes cast at such meeting shall be cast by written ballot.
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Persons holding stock in a fiduciary capacity shall be entitled to vote
the shares so held. Persons whose stock pledged shall be entitled to vote,
unless in the transfer by the pledgor on the books of the Corporation he has
expressly empowered the pledgee to vote thereon, in which case only the pledgee,
or his proxy, may represent such stock and vote thereon.
If shares having voting power stand of record in the names of two or more
persons, whether fiduciaries, members of a partnership, joint tenants, tenants
in common, tenants by the entirety, or otherwise, or if two or more persons have
the same fiduciary relationship respecting the same shares, unless the secretary
of the Corporation is given written notice to the contrary and is furnished with
a copy of the instrument or order appointing them or creating the relationship
wherein it is so provided, their acts with respect to voting shall have the
following effect: (i) if only one votes, his act binds all; (ii) if more than
one vote, the act of the majority so voting binds all; and (iii) if more than
one vote, but the vote is evenly split on any particular matter, each fraction
may vote the securities in question proportionately, or any person voting the
shares or a beneficiary, if any, may apply to the Court of Chancery or any court
of competent jurisdiction in the State of Delaware to appoint an additional
person to act with the persons so voting the shares. The shares shall then be
voted as determined by a majority of such persons and the person appointed by
the Court. If a tenancy is held in unequal interests, a majority or even-split
for the purpose of this subsection shall be a majority or even-split in
interest.
2.10 PROXIES
A stockholder entitled to vote at a meeting of stockholders or to express
consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for him by proxy. No proxy shall be
voted or acted upon after three (3) years from its date, unless the proxy
provides for a longer period.
2.11 LIST OF STOCKHOLDERS ENTITLED TO VOTE
The officer of the Corporation who has charge of the stock ledger of the
Corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder of the
Corporation who is present.
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2.12 STOCK LEDGER
The stock ledger of the Corporation shall be the only evidence as to who
are the stockholders entitled to examine the stock ledger, the list required by
Section 2.11 of this Article II or the books of the Corporation, or to vote in
person or by proxy at any meeting of stockholders.
2.13 ORGANIZATION OF MEETINGS
The Chairman of the Board of Directors, if any, shall preside at each
meeting of stockholders, or in the absence of the Chairman of the Board of
Directors, the Vice-Chairman of the Board of Directors, if any, or in the
absence of the Vice-Chairman, the President, or in the absence of the President,
the Chief Financial Officer of the Company, or in the absence of the Chief
Financial Officer, by a chairman designated by the Board of Directors, in the
absence of such designation, by a chairman chosen at the meeting. The Secretary
shall act as secretary of all meetings of stockholders and keep the records of
such meetings, and in the absence of the Secretary, his or her duties shall be
performed by any other officer authorized by the Board of Directors or in the
absence of such authorization any officer authorized by these Bylaws or if no
such officer is available or willing to so act, by any person appointed by
resolution duly adopted at the meeting.
The order of business at each such meeting shall be as determined by the
chairman of the meeting. The chairman of the meeting shall have the right and
authority, subject to applicable law and the provisions of the Amended and
Restated Articles of Incorporation and these Bylaws, to prescribe such rules,
regulations and procedures and to do all such acts and things as are necessary
or desirable for the proper conduct of the meeting, including without
limitation, the establishment of procedures for the maintenance of order and
safety, limitation on the time allotted to questions or comments on the affairs
of the corporation, restrictions on entry to such meetings after the time
prescribed for the commencement thereof and the opening and closing of the
voting polls.
2.14 ADVANCE NOTICE
(a) NOMINATION OF DIRECTORS. Only persons who are nominated in
accordance with the following procedures shall be eligible for election as
directors of the corporation, except as may be otherwise provided in the Amended
and Restated Articles of Incorporation of the corporation with respect to the
right of holders of certain classes of stock of the corporation to nominate and
elect a specified number of directors in certain circumstances. Nominations of
persons for election to the Board of Directors may be made at any annual meeting
of stockholders, or at any special meeting of stockholders called for the
purpose of electing directors, (i) by or at the direction of the Board of
Directors (or any duly authorized committee thereof) or (ii) by the stockholder
of the corporation (x) who is a stockholder of record on the date of the giving
of the notice provided for in this Section 2.14 and on the record date for the
determination of stockholders entitled to vote at such meeting and (y) who
complies with the notice procedures set forth in this Section 2.14.
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In addition to any other applicable requirements, for a nomination to be
made by a stockholder, such stockholder must have given timely notice thereof in
proper written form to the Secretary of the Corporation.
To be timely, a stockholder's notice to the Secretary must be delivered to
or mailed and received at the principal executive offices of the corporation not
less than sixty (60) days nor more than ninety (90) days prior to the
anniversary date of the immediately preceding annual meeting of the
stockholders; provided, however, that (i) in the event that the annual meeting
is called for a date that is not within thirty (30) days before or after such
anniversary date, notice by the stockholder in order to be timely must be so
received not later than the close of business on the tenth (10th) day following
the day on which such notice of the date of the annual meeting was mailed for
such public disclosure of the date of the annual meeting was made, whichever
first occurs; and (ii) in the case of a special meeting of stockholders called
for the purpose of electing directors, not later than the close of business on
the tenth (10th) day following the day on which notice of the date of the
special meeting was mailed or public disclosure of the date of the special
meeting was made, whichever first occurs.
To be in proper written form, a stockholder's notice to the Secretary must
set forth (x) as to each person whom the stockholder proposes to nominate for
election as a director (i) the name, age, business address and residence address
of the person, (ii) the principal occupation or employment of the person, (iii)
the class or series and number of shares of capital stock of the corporation
which are owned beneficially or of record by the person and (iv) any other
information relating to the person that would be required to be disclosed in a
proxy statement or other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to Section 14 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations promulgated thereunder; and (y) as to the stockholder giving the
notice (i) the name and record address of such stockholder, (ii) the class or
series and number of shares of capital stock of the corporation which are owned
beneficially (as determined pursuant to Rule 13d-3 of the Exchange Act) or of
record by such stockholder, (iii) a description of all arrangements or
understandings between such stockholder and each proposed nominee and any other
person or persons (including their names) pursuant to which the nomination(s)
are to be made by such stockholder, (iv) a representation that such stockholder
intends to appear in person or by proxy at the meeting to nominate the persons
named in its notice and (v) any other information relating to such stockholder
that would be required to be disclosed in a proxy statement or other filings
required to be made in connection with solicitations of proxies for election of
directors pursuant to Section 14 of the Exchange Act and the rules and
regulations promulgated thereunder. Such notice must be accompanied by a written
consent of each proposed nominee to being named as a nominee and to serve as a
director if elected.
No person shall be eligible for election as a director of the corporation
unless nominated in accordance with the procedures set forth in this Section
2.14. If the Chairman of the meeting determines that a nomination was not made
in accordance with the foregoing procedures, the Chair-
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man shall declare to the meeting that the nomination was defective and such
defective nomination shall be disregarded.
(b) BUSINESS AT ANNUAL MEETING. No business may be transacted at an annual
meeting of stockholders, other than business that is either (1) specified in the
notice of meeting (or any supplement thereto) given by or at the direction of
the Board of Directors (or any duly authorized committee thereon, (ii) otherwise
properly brought before the annual meeting by or at the direction of the Board
of Directors (or any duly authorized committee thereof) or (iii) otherwise
properly brought before the annual meeting by any stockholder of the corporation
(x) who is a stockholder of record on the date of the giving of the notice
provided for in this Section 2.14 and on the record date for the determination
of stockholders entitled to vote at such annual meeting and (y) who complied
with the notice procedures set forth in this Section 2.14.
In addition to any other applicable requirements, for business to be
properly brought before an annual meeting by a stockholder, such stockholder
must have given timely notice thereof in proper written form to the Secretary of
the corporation.
To be timely, a stockholder's notice to the Secretary must be delivered to
or mailed and received at the principal executive offices of the corporation not
less than sixty (60) days nor more than ninety (90) days prior to the
anniversary date of the immediately preceding annual meeting of stockholders;
provided, however, that in the event that the annual meeting is called for a
date that is not within thirty (30) days before or after such anniversary date,
notice by the stockholder in order to be timely must be so received not later
than the close of business on the tenth (10th) day following the day on which
such notice of the date of the annual meeting was mailed for such public
disclosure of the date of the annual meeting was made, whichever first occurs.
To be in proper written form, a stockholder's notice to the Secretary must
set forth as to each matter such stockholder proposes to bring before the annual
meeting (i) a brief description of the business desired to be brought before the
annual meeting and the reasons for conducting such business at the annual
meeting, (ii) the name and record address of such stockholder, (iii) the class
or series and number of shares of capital stock of the corporation which are
owned beneficially (as determined pursuant to Rule 13d-3 of the Exchange Act) or
of record by such stockholders, (iv) a description of all arrangements or
understandings between such stockholder and any other person or persons
(including their names) in connection with the proposal of such business by such
stockholder and any material interest of such stockholder in such business and
(v) a representation that such stockholder intends to appear in person or by
proxy at the annual meeting to bring such business before the meeting.
No business shall be conducted at the annual meeting of stockholders
except business brought before the annual meeting in accordance with the
procedures set forth in this Section 2.14, provided, however, that, once
business has been properly brought before the annual meeting in accordance with
such procedures, nothing in this Section 2.14 shall be deemed to preclude
discussion by any stockholder of any such business. If the Chairman of an annual
meeting
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determines that business was not properly brought before the annual meeting in
accordance with the foregoing procedures, the Chairman shall declare to the
meeting that the business was not properly brought before the meeting and such
business shall not be transacted.
2.15 INSPECTORS OF ELECTION
In advance of any meeting of stockholders, the Board of Directors may
appoint inspectors of election to act at the meeting and any adjournment
thereof. If inspectors of election are not so appointed or designated or if any
persons so appointed fail to appear or refuse to act, then the Chairman of the
meeting may, and on the request of any stockholder or a stockholder's proxy
shall, appoint inspectors of election (or persons to replace those who so fail
to appear) at the meeting The number of inspectors shall be either one (1) or
three (3). If appointed at a meeting on the request of one ( 1 ) or more
stockholders or proxies, the majority of shares represented in person or by
proxy shall determine whether one (1) or three (3) inspectors are to be
appointed.
The inspectors of election shall determine the number of shares
outstanding and the voting power of each, the shares represented at the meeting,
the existence of a quorum and the authenticity, validity, and effect of proxies,
receive votes, ballots or consents, hear and determine all challenges and
questions in any way arising in connection with the right to vote, count and
tabulate all votes or consents, (if permitted by the Amended and Restated
Articles of Incorporation), determine when the polls shall close, determine the
result and do any other acts that may be proper to conduct the election or vote
with fairness to all stockholders. If there are three (3) inspectors of
election, the decision, act or certificate of a majority is effective in all
respects as to the decision, act or certificate or all. Any report or
certificate made by the inspectors of election is prima facie evidence of the
facts stated therein.
ARTICLE III
DIRECTORS
3.1 POWERS
Subject to the provisions of Delaware Corporation Law and any limitations
in the Amended and Restated Articles of Incorporation and these Bylaws relating
to action required to be approved by the stockholders or by the outstanding
shares, the business and affairs of the corporation shall be managed and all
corporate powers shall be exercised by or under the direction of the Board of
Directors. The Board may delegate the management of the day-to-day operation of
the business of the corporation to a management company or other person provided
that the business and affairs of the corporation shall be managed and all
corporate powers shall be exercised under the ultimate direction of the Board.
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3.2 NUMBER OF DIRECTORS
The authorized number of directors of the corporation shall be not less
than seven (7) nor more than twelve (12), and the exact number of directors
shall be eight (8) until changed, within the limits specified above, by a
resolution amending such exact number, duly adopted by at least sixty percent
(60%) of the entire Board of Directors or by the stockholders, in accordance
with-the provisions set forth in the Amended and Restated Articles of
Incorporation, these Bylaws and applicable laws. In accordance with the
provisions set forth in the Restated Articles of Incorporation and subject to
the limitations contained therein, the minimum and maximum number of directors
may be changed, or a definite number may be fixed without provision for an
indefinite number, by a duly adopted amendment to the Amended and Restated
Articles of Incorporation or by an amendment to this Bylaw duly adopted by the
vote or written consent, if permitted by the Amended and Restated Articles of
Incorporation, of stockholders entitled to vote in such manner as set forth in
the Amended and Restated Articles of Incorporation; provided, however, that an
amendment reducing the fixed number or the minimum number of directors to a
number less than five (5) cannot be adopted if the votes cast against its
adoption at a meeting are equal to more than the outstanding shares entitled to
vote thereon.
No reduction of the authorized number of directors shall have the effect
of removing any director before that director's term of office expires.
3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS AND REMOVAL
At each annual meeting of stockholders, directors shall be elected to hold
office until the next election of the class for which such directors were
designated and until their successors have been elected and qualified, in
accordance with the provisions set forth in the Amended and Restated Articles of
Incorporation and in these Bylaws. Each director, including a director elected
to fill a vacancy, shall hold office, in accordance with the provisions set
forth in the Amended and Restated Articles of Incorporation and in these Bylaws,
until the expiration of the term for which elected and until a successor has
been elected and qualified, except in the case of the death, resignation, or
removal of such a director.
No director may be removed from office, except as provided by the Amended
and Restated Articles of Incorporation or by law.
3.4 CLASS OR SERIES DIRECTORS
Whenever the holders of any class or series of stock are entitled to elect
one or more directors by the articles of incorporation, the provisions of the
last sentence of Section 3.3 shall apply, with respect to the removal without
cause of a director or directors so elected, to the vote of the holders of the
outstanding shares of that class or series and not to the vote of the
outstanding shares as a whole. Unless otherwise provided in the Restated
Articles of Incorporation or these Bylaws, vacancies and newly created
directorships resulting from any increase in the authorized number of directors
elected by all of the stockholders having the right to vote as a single class or
from any other cause may be filled by a majority of the directors then in
office, although less than
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a quorum, or by the sole remaining director. Whenever the holders of any class
or classes of stock or series thereof are entitled to elect one or more
directors by the articles of incorporation, vacancies and newly created
directorships of such class or classes or series may be filled by a majority of
the directors elected by such class or classes or series thereof then in office,
or by the sole remaining director so elected. Any director elected or appointed
to fill a vacancy shall hold office until the next election of the class of
directors of the director which such director replaced, and until and his or her
successor is elected and qualified or until his or her earlier resignation or
removal.
3.5 RESIGNATION AND VACANCIES
(a) Any director may resign effective upon giving oral or written notice
to the Chairman of the Board, the President, the Secretary or the Board of
Directors, unless the notice specifies a later time for the effectiveness of
such resignation. If the resignation of a director is effective at a future
time, the Board of Directors may elect a successor to take office when the
resignation becomes effective.
(b) Unless otherwise provided in the Restated Articles of Incorporation of
these Bylaws, vacancies on the Board of Directors may be filled by a majority of
the remaining directors, although less than a quorum, or a sole remaining
director.
(c) The stockholders may elect a director to fill any vacancy not filled
by the directors in accordance with law and with the provisions of the Restated
Articles of Incorporation and these Bylaws.
(d) A vacancy or vacancies in the Board of Directors shall be deemed to
exist (i) in the event of the death, resignation or removal of any director,
(ii) if the Board of Directors by resolution declares vacant the office of a
director who has been declared of unsound mind by an order of court or convicted
of a felony, (iii) if the authorized number of directors is increased as
provided in the Restated Articles of Incorporation, or (iv) if the stockholders
fail, at any meeting of stockholders at which any director or directors are
elected, to elect the full authorized number of directors to be elected at that
meeting, as provided in the Restated Articles of Incorporation.
3.6 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
Regular meetings of the Board of Directors may be held at any place within
or outside the State of Delaware that has been designated from time to time by
resolution of the Board. In the absence of such a designation, regular meetings
shall be held at the principal executive office of the Corporation. Special
meetings of the Board may be held at any place within or outside the State of
Delaware that has been designated in the notice of the meeting or, if not stated
in the notice or if there is no notice, at the principal executive office of the
corporation.
Members of the Board may participate in a meeting through the use of
conference telephone or similar communications equipment, so long as all
directors participating in such meeting can hear
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one another. Participation in a meeting pursuant to this paragraph constitutes
presence in person at such meeting
3.7 REGULAR MEETINGS
Regular meetings of the Board of Directors may be held without notice if
the time and place of such meetings are fixed by the Board of Directors or by
these Bylaws.
3.8 SPECIAL MEETINGS; NOTICE
Subject to the provisions of the following paragraph, special meetings of
the Board of Directors for any purpose or purposes may be called at any time by
the Chairman of the Board, the President, any Vice President, the Secretary or
any two (2) directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail,
telegram, charges prepaid, or by telecopier, addressed to each director at that
director's address as it is shown on the records of the corporation. If the
notice is mailed, it shall be deposited in the United States mail at least four
(4) days before the time of the holding of the meeting. If the notice is
delivered personally or by telephone or by telecopier or telegram, it shall be
delivered personally or by telephone or by telecopier or to the telegraph
company at least forty-eight (48) hours before the time of the holding of the
meeting. Any oral notice given personally or by telephone may be communicated
either to the director or to a person at the office of the director who the
person giving the notice has reason to believe will promptly communicate it to
the director. The notice need not specify the purpose of the meeting.
3.9 QUORUM AND ACTION AT MEETING
At meetings of the board of directors or any committee designated by the
board, a majority of the total number of directors, or a majority of the members
of any such committee, as the case may be, shall constitute a quorum for the
transaction of business. In the event one or more of the directors shall be
disqualified to vote at any meeting, then the required quorum shall be reduced
by one for each such director so disqualified; provided, however, that in no
case shall less than one-third (1/3) of the number so fixed constitute a quorum.
If a quorum is present, the act of the majority of directors in attendance shall
be the act of the board of directors or any committee thereof, as the case may
be, unless the act of a greater number is required by these Bylaws, the
Certificate of Incorporation or Delaware Corporation Law. If a quorum shall not
be present at any meeting of the board of directors, the directors present
thereat may adjourn that meeting from time to time, without notice other than
announcement at the meting, until a quorum shall be present.
3.10 WAIVER OF NOTICE
Notice of a meeting need not be given to any director who signs a waiver
of notice or a consent to holding the meeting or an approval of the minutes
thereof, whether before or after the meeting, or who attends the
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meeting without protesting, prior thereto or at its commencement, the lack of
notice to such director. All such waivers, consents, and approvals shall be
filed with the corporate records or made a part of the minutes of the meeting. A
waiver of notice need not specify the purpose of any regular or special meeting
of the Board of Directors.
3.11 ADJOURNMENT
A majority of the directors present, whether or not a quorum is present,
may adjourn any meeting to another time and place.
3.12 NOTICE OF ADJOURNMENT
If the meeting is adjourned for more than twenty-four (24) hours, notice
of any adjournment to another time and place shall be given prior to the time of
the adjourned meeting to the directors who were not present at the time of the
adjournment.
3.13 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Any action required or permitted to be taken by the Board of Directors
under the provisions of the Restated Articles of Incorporation and these Bylaws
or otherwise may be taken without a meeting, if all members of the Board
individually or collectively consent in writing to such action. Such written
consent or consents shall be filed with the minutes of the proceedings of the
Board. Such action by written consent shall have the same force and effect as a
unanimous vote of the Board of Directors.
3.14 FEES AND COMPENSATION OF DIRECTORS
Directors and members of committees may receive such compensation, if any,
for their services and such reimbursement of expenses as may be fixed or
determined by resolution of the Board of Directors. This Section 3.14 shall not
be construed to preclude any director from serving the corporation in any other
capacity as an officer, agent, employee or otherwise and receiving compensation
for those services.
ARTICLE IV
COMMITTEES
4.1 EXECUTIVE COMMITTEE
EXECUTIVE COMMITTEE. In accordance with the provisions set forth in these
Bylaws and the Restated Articles of Incorporation, the Board of Directors may,
by resolution passed by the affirmative vote of at least sixty percent (60%) of
the whole Board of Directors, appoint from its
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membership, annually, an Executive Committee of two or more directors, which
shall include the Chief Executive Officer and the Chief Financial Officer of the
Corporation. The Board of Directors may designate in such resolution one or more
directors as alternate members of the Executive Committee, who may replace any
absent or disqualified member at any meeting of the Committee. The Executive
Committee, during the intervals between meetings of the Board of Directors,
shall have and there is hereby granted to it all of the authority and power of
the Board of Directors in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation be affixed to papers
which may require it, except that the Executive Committee shall have authority
to act in the manner and to the extent provided in the resolution of the Board
and may have all the authority of the Board, except with respect to:
(a) approving or adopting, or recommending to the stockholders, any action
or matter expressly required by Delaware Corporation Law to be submitted to
stockholders for approval; or
(b) adopting, amending or repealing any bylaw of the Corporation.
The Executive Committee shall keep regular minutes of all business
transacted at its meetings, and all action of the Executive Committee shall be
reported to the Board of Directors at its next meeting. The minutes of the
Executive Committee shall be placed in the minute book of the Corporation.
Members of the Executive Committee shall receive such compensation as may be set
forth in the resolution appointing such member and shall be reimbursed for
reasonable expenses actually incurred by reason of membership on the Executive
Committee.
4.2 OTHER COMMITTEES OF DIRECTORS
(a) The Board of Directors may, by resolution adopted by a majority of the
authorized number of directors, designate one or more other committees, each
consisting of two (2) or more directors, to serve at the pleasure of the Board
of Directors. The Board may designate one or more directors as alternate members
of any committee, who may replace any absent member at any meeting of the
committee. The appointment of members or alternate members of a committee
requires the vote of a majority of the authorized number of directors. Any such
committee shall have authority to act, in the manner and to the extent provided
in the resolution of the Board of Directors and may have all the authority of
the Board, except with respect to the limitations as set forth in Section 4.1.
(b) The Board of Directors may, by resolution adopted by a majority of the
authorized number of directors, appoint from its membership an Audit Committee,
a Compensation and Stock Option Committee and a Finance and Strategic Planning
Committee.
4.3 MEETINGS AND ACTIONS OF COMMITTEES
Meetings and actions of committees permitted by the provisions of the
Restated Articles of Incorporation shall be governed by, and held and taken in
accordance with each of the provisions of
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Article III of these Bylaws, with such changes in the context of those Bylaws as
are necessary to substitute the committee and its members for the Board of
Directors and its members; provided, however, that the time of regular meetings
of committees may be determined either by resolution of the Board of Directors
or by resolution of the committee, that special meetings of committees may also
be called by resolution of the Board of Directors, and that notice of special
meetings of committees shall also be given to all alternate members, who shall
have the right to attend all meetings of the committee. The Board of Directors
may adopt rules for the government of any committee not inconsistent with the
provisions of these Bylaws and the Restated Articles of Incorporation.
ARTICLE V
OFFICERS
5.1 OFFICERS
The officers of the corporation shall be a Chief Executive Officer, a
President, a Secretary, and a Chief Financial Officer. The corporation may also
have, at the discretion of the Board of Directors, a Chairman of the Board, a
Vice Chairman of the Board, one or more Vice Presidents, one or more Assistant
Secretaries, a Treasurer, one or more Assistant Treasurers, and such other
officers as may be appointed in accordance with the provisions of Section 5.3 of
these Bylaws. Any number of offices may be held by the same person.
5.2 APPOINTMENT OF OFFICERS
The officers of the corporation, except such officers as may be appointed
in accordance with the provisions of Section 5.3 or Section 5.5 of these Bylaws,
shall be chosen by the Board and serve at the pleasure of the Board of
Directors, subject to the rights, if any, of an officer under any contract of
employment.
5.3 SUBORDINATE OFFICERS
The Board of Directors may appoint, or may empower the Chairman of the
Board or the President to appoint, such other officers as the business of the
corporation may require, each of whom shall hold office for such period, have
such authority, and perform such duties as are provided in these Bylaws or as
the Board of Directors may from time to time determine.
5.4 REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, if any, of an officer under any contract of
employment, all officers serve at the pleasure of the Board of Directors and any
officer may be removed, either with or without cause, by the Board of Directors
at any regular or special meeting of the Board or, except in case of
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an officer chosen by the Board of Directors, by any officer upon whom such power
of removal may be conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
5.5 VACANCIES IN OFFICES
A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled in the manner prescribed in
these Bylaws for regular appointments to that office.
5.6 CHAIRMAN OF THE BOARD
The Chairman of the Board, if such an officer be elected, shall, if
present, preside at meetings of the Board of Directors and exercise and perform
such other powers and duties as may from time to time be assigned by the Board
of Directors or as may be prescribed by these Bylaws or by law.
5.7 CHIEF EXECUTIVE OFFICER
Subject to such supervisory powers, if any, as may be given by the Board
of Directors to the Chairman of the Board, if there be such an officer, the
Chief Executive Officer shall have general supervision, direction, and control
of the business and the officers of the corporation. The Chief Executive Officer
shall preside at all meetings of the stockholders and, in the absence or
nonexistence of a Chairman of the Board, at all meetings of the Board of
Directors. The Chief Executive Officer shall have the general powers and duties
of management usually vested in the office of Chief Executive Officer of a
corporation, and shall have such other powers and duties as may be prescribed by
the Board of Directors or these Bylaws.
5.8 PRESIDENT
Subject to such supervisory powers, if any, as may be given by the Board
of Directors to the Chief Executive Officer, if there be such an officer, the
President shall have general supervision, direction, and control of the business
and the officers of the corporation. The President shall preside at all meetings
of the stockholders and, in the absence or nonexistence of a Chief Executive
Officer, at all meetings of the Board of Directors. The President shall have the
general powers and duties of management usually vested in the office of
President of a corporation, and shall have such other powers and duties as may
be prescribed by the Board of Directors or these Bylaws.
5.9 VICE PRESIDENTS
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In the absence or disability of the President, the Vice Presidents, if
any, in order of their rank as fixed by the Board of Directors or, if not
ranked, a Vice President designated by the Board of Directors, shall perform all
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. The Vice Presidents
shall have such other powers and perform such other duties as from time to time
may be prescribed for them respectively by the Board of Directors, these Bylaws,
the President or the Chairman of the Board.
5.10 SECRETARY
The Secretary shall keep or cause to be kept, at the principal executive
office of the corporation or such other place as the Board of Directors may
direct, a book of minutes of all meetings and actions of Directors, committees
of directors and stockholders. The minutes shall show the time and place of each
meeting, whether regular or special (and, if special, how authorized and the
notice given), the names of those present at directors' meetings or committee
meetings, the number of shares present or represented at stockholders' meetings,
and the proceedings thereof.
The Secretary shall keep, or cause to be kept, at the principal executive
office of the corporation or at the office of the corporation's transfer agent
or registrar, as determined by resolution of the Board of Directors, a share
register, or a duplicate share register, showing the names of all stockholders
and their addresses, the number and classes of shares held by each. the number
and date of certificates evidencing such shares, and the number and date of
cancellation of every certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all meetings of
the stockholders and of the Board of Directors required to be given by law or by
these Bylaws. The Secretary shall keep the seal of the corporation, if one be
adopted, in safe custody and shall have such other powers and perform such other
duties as may be prescribed by the Board of Directors or by these Bylaws.
5.11 CHIEF FINANCIAL OFFICER
The Chief Financial Officer shall keep and maintain, or cause to be kept
and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings, and shares. The books of account shall at all reasonable
times be open to inspection by any director.
The Chief Financial Officer shall deposit all money and other valuables in
the name and to the credit of the corporation with such depositaries as may be
designated by the Board of Directors. The Chief Financial Officer shall disburse
the funds of the corporation as may be ordered by the Board of Directors, shall
render to the President and directors, whenever they request it, an account of
all of his or her transactions as Chief Financial Officer and of the financial
condition of the corporation, and shall have such other powers and perform such
other duties as may be prescribed by the Board of Directors or these Bylaws.
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ARTICLE VI
INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS
6.1 INDEMNIFICATION: THIRD PARTY ACTIONS
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that he or she is or was a director, officer, employee or agent, of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him or her in connection with such action, suit or proceeding if he
or she acted in good faith and in a manner he or she reasonably believed to be
in or not opposed to the best interest of the Corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of NOLO CONTENDERE or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he or she reasonably believed to be
in or not opposed to the best interest of the Corporation, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that his or
her conduct was unlawful.
6.2 INDEMNIFICATION: DERIVATIVE ACTIONS
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he or she is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees) actually and reasonably incurred by him or her in connection with the
defense or settlement of such action or suit if he or she acted in good faith
and in a manner he or she reasonably believed to be in or not opposed to the
best interests of the Corporation and, except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the Corporation unless and only to the extent that
the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper.
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6.3 MANDATORY INDEMNIFICATION
To the extent that a director or officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Sections 6.1 and 6.2 above or in
defense of any claim, issue or matter therein, he or she shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
him or her in connection therewith.
6.4 AUTHORIZATION FOR INDEMNIFICATION
Any indemnification under Sections 6.1 and 6.2 above (unless ordered by a
court) shall be made by the Corporation only as authorized in the specific case
upon a determination that indemnification of the director, officer, employee or
agent is proper in the circumstances because he or she has met the applicable
standard of conduct set forth in Sections 6.1 and 6.2 above. Such determination
shall be made (1) by the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to such action, suit or proceeding,
or (2) if such a quorum is not obtainable, or, even if obtainable a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, or (3) by the stockholders.
6.5 ADVANCE PAYMENT OF EXPENSES
Expenses incurred in defending a civil or criminal action, suit or
proceeding may be paid by the Corporation in advance of the final disposition of
such action, suit or proceeding upon receipt of an undertaking by or on behalf
of the director or officer to repay such amount if it shall ultimately be
determined that he or she is not entitled to be indemnified by the Corporation
as authorized in this Article VI. Such expenses incurred by other employees and
agents may be so paid upon such terms and conditions, if any, as the Board of
Directors deems appropriate.
6.6 NON-EXCLUSIVITY
The indemnification and advancement of expenses provided by, or granted
pursuant to, the other subsections of this Article VI shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
or her official capacity and as to action in another capacity while holding such
office, and shall continue, unless otherwise provided, when authorized or
ratified, as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors and administrators
of such a person.
6.7 INSURANCE
The Corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
Corporation or is or was serving
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at the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him or her and incurred by him or her in
any such capacity, or arising out of his or her status as such, whether or not
the Corporation would have the power to indemnify him or against such liability
under the provisions of this Article VI.
6.8 DEFINITIONS
For purposes of this Article VI, the following terms shall have the
following meanings:
(a) references to "the Corporation" shall include, in addition to
the resulting corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or merger which, if
its separate existence had continued, would have had power and authority to
indemnify its directors, officers, employees or agents so that any person who is
or was a director, officer, employee or agent of such constituent corporation,
or is or was serving at the request of such constituent corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise shall stand in the same position under the
provisions of this Article VI with respect to the resulting or surviving
corporation as he or she would have with respect to such constituent corporation
if its separate existence had continued;
(b) references to "other enterprises" shall include employee benefit
plans;
(c) references to "fines" shall include any excise taxes assessed on
a person with respect to an employee benefit plan;
(d) references to "serving at the request of the Corporation" shall
include any service as a director, officer, employee or agent of the Corporation
which imposes duties on, or involves services by, such director, officer,
employee, or agent with respect to an employee benefit plan, its participants,
or beneficiaries; and
(e) a person who acted in good faith and in a manner he reasonably
believed to be in the interest of the participants and beneficiaries of an
employee benefit plan shall be deemed to have acted in a manner "not opposed to
the interests of the Corporation" as referred to in this Article VI.
6.9 CONFLICTS
No indemnification or advance shall be made under this Article VI, except
where such indemnification or advance is mandated by law or the order, judgment
or decree of any court of competent jurisdiction, in any circumstance where it
appears:
(1) That it would be inconsistent with a provision of the Restated
Articles of Incorporation, these Bylaws, a resolution of the stockholders or an
agreement in effect at the time
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of the accrual of the alleged cause of the action asserted in the proceeding in
which the expenses were incurred or other amounts were paid, which prohibits or
otherwise limits indemnification; or
(2) That it would be inconsistent with any condition expressly imposed by
a court in approving a settlement.
6.10 RIGHT TO BRING SUIT
If a claim under this Article VI is not paid in full by the Corporation
within 90 days after a written claim has been received by the Corporation
(either because the claim is denied or because no determination is made), the
claimant may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim and, if successful in whole or in part,
the claimant shall also be entitled to be paid the expenses of prosecuting such
claim. The Corporation shall be entitled to raise as a defense to any such
action that the claimant has not met the standards of conduct that make it
permissible under Delaware Corporation Law for the Corporation to indemnify the
claimant for the claim. Neither the failure of the Corporation (including its
Board of Directors, independent legal counsel, or its stockholders) to have made
a determination prior to the commencement of such action that indemnification of
the claimant is permissible in the circumstances because he or she has met the
applicable standard of conduct, if any, nor an actual determination by the
Corporation (including its Board of Directors, independent legal counsel, or its
stockholders) that the claimant has not met the applicable standard of conduct,
shall be a defense to such action or create a presumption for the purposes of
such action that the claimant has not met the applicable standard of conduct.
6.11 AMENDMENT, REPEAL OR MODIFICATION
Any amendment, repeal or modification of any provision of this Article VI
shall not adversely affect any right or protection of a director or agent of the
Corporation existing at the time of such amendment, repeal or modification.
ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF SHARE REGISTER
The corporation shall keep either at its principal executive office or at
the office of its transfer agent or registrar (if either be appointed), as
determined by resolution of the Board of Directors, a record of its stockholders
listing the names and addresses of all stockholders and the number and class of
shares held by each stockholder.
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A stockholder or stockholders of the corporation holding at least five
percent (5%) in the aggregate of the outstanding voting shares of the
corporation or who hold at least one percent (1%) of such voting shares and have
filed a Schedule 14B with the United States Securities and Exchange Commission
relating to the election of directors, shall have an absolute right to do either
or both of the following (i) inspect and copy the record of stockholders' names,
addresses, and shareholdings during usual business hours upon five (5) days'
prior written demand upon the corporation, or (ii) obtain from the transfer
agent for the corporation, upon written demand and upon the tender of such
transfer agent's usual charges for such list (the amount of which charges shall
be stated to the stockholder by the transfer agent upon request), a list of the
stockholders' names and addresses who are entitled to vote for the election of
directors, and their shareholdings, as of the most recent record date for which
it has been compiled or as of a date specified by the stockholder subsequent to
the date of demand. The list shall be made available on or before the later of
five (5) business days after the demand is received or the date specified
therein as the date as of which the list is to be compiled.
The record of stockholders shall also be open-to inspection and copying by
any stockholder or holder of a voting trust certificate at any time during usual
business hours upon written demand on the corporation, for a purpose reasonably
related to the holder's interests as a stockholder or holder of a voting trust
certificate.
Any inspection and copying under this Section 7.1 may be made in person or
by an agent or attorney of the stockholder or holder of a voting trust
certificate making the demand.
7.2 MAINTENANCE AND INSPECTION OF BYLAWS
The corporation shall keep at its principal executive office or at its
principal business office the original or a copy of these Bylaws as amended to
date, which shall be open to inspection by the stockholders at all reasonable
times during office hours.
7.3 MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS
The accounting books and records and the minutes of proceedings of the
stockholders and the Board of Directors, and committees of the Board of
Directors shall be kept at such place or places as are designated by the Board
of Directors or, in absence of such designation, at the principal executive
office of the corporation. The minutes shall be kept in written form, and the
accounting books and records shall be kept either in written form or in any
other form capable of being converted into written form.
The minutes and accounting books and records shall be open to inspection
upon the written demand on the corporation of any stockholder or holder of a
voting trust certificate at any reasonable time during usual business hours, for
a purpose reasonably related to such holder's interests as a stockholder or as
the holder of a voting trust certificate. Such inspection by a stockholder or
holder of a voting trust certificate may be made in person or by an agent or
attorney and the right of
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inspection includes the right to copy and make extracts. Such rights of
inspection shall extend to the records of each subsidiary corporation of the
corporation.
7.4 INSPECTION BY DIRECTORS
Every director shall have the absolute right at any reasonable time to
inspect and copy all books, records, and documents of every kind and to inspect
the physical properties of the corporation and each of its subsidiary
corporations, domestic or foreign. Such inspection by a director may be made in
person or by an agent or attorney and the right of inspection includes the right
to copy and make extracts.
7.5 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The Chairman of the Board, the Vice Chairman of the Board, the President,
any Vice President, the Chief Financial Officer, the Secretary or Assistant
Secretary of this corporation, or any other person authorized by the Board of
Directors or the President or a Vice President, is authorized to vote,
represent, and exercise on behalf of this corporation all rights incident to any
and all shares of any other corporation or corporations standing in the name of
this corporation. The authority herein granted may be exercised either by such
person directly or by any other person authorized to do so by proxy or power of
attorney duly executed by such person having the authority.
ARTICLE VIII
GENERAL MATTERS
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING
For purposes of determining the stockholders entitled to receive payment
of any dividend or other distribution or allotment of any rights or entitled to
exercise any rights in respect of any other lawful action, other than with
respect to notice or voting at a stockholders meeting, the Board of Directors
may fix, in advance, a record date, which shall not be more than sixty (60) days
prior to any such action. Only stockholders of record at the close of business
on the record date are entitled to receive the dividend, distribution or
allotment of rights, or to exercise the rights, as the case may be,
notwithstanding any transfer of any shares on the books of the corporation after
the record date, except as otherwise provided in the Restated Articles of
Incorporation or Delaware Corporation Law.
If the Board of Directors does not so fix a record date, then the record
date for determining stockholders for any such purpose shall be at the close of
business on the day on which the Board adopts the resolution relating thereto or
the sixtieth (60th) day prior to the date of that action, whichever is later.
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8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS
From time to time, the Board of Directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the corporation, and only the persons so authorized
shall sign or endorse those instruments.
8.3 CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED
The Board of Directors, except as otherwise provided in these Bylaws, may
authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the Board of Directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
8.4 CERTIFICATES FOR SHARES
A certificate or certificates for shares of the corporation shall be
issued to each stockholder when any of such shares are fully paid. The Board of
Directors may authorize the issuance of certificates for shares partly paid
provided that these certificates shall state the total amount of the
consideration to be paid for them and the amount actually paid. All certificates
shall be signed in the name of the corporation by the Chairman of the Board or
the Vice Chairman of the Board or the President or a Vice President and by the
Chief Financial Officer or the Treasurer or the Secretary or an Assistant
Secretary, certifying the number of shares and the class or series of shares
owned by the stockholder. Any or all of the signatures on the certificate may be
by facsimile.
In case any officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed on a certificate has ceased to be such
officer, transfer agent or registrar before such certificate is issued, it may
be issued by the corporation with the same effect as if that person were an
officer, transfer agent or registrar at the date of issue.
8.5 LOST CERTIFICATES
Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation or its transfer agent or registrar and cancelled
at the same time. The Board of Directors may, in case any share certificate or
certificate for any other security is lost, stolen or destroyed (as evidenced by
a written affidavit or affirmation of such fact), authorize the issuance of
replacement certificates on such terms and conditions as the Board may require;
the Board may require indemnification of the corporation secured by a bond or
other adequate security sufficient to protect the corporation against any claim
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that may be made against it, including any expense or liability, on account of
the alleged loss, theft or destruction of the certificate or the issuance of the
replacement certificate.
8.6 CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the Code shall govern the construction of these
Bylaws. Without limiting the generality of this provision, the singular number
includes the plural, the plural number includes the singular, and the term
"person" includes both a corporation and a natural person.
ARTICLE IX
AMENDMENTS
9.1 AMENDMENT BY STOCKHOLDERS
Except as otherwise provided in the Restated Articles of Incorporation or
in these Bylaws new Bylaws may be adopted or these Bylaws may be amended or
repealed by the vote or written consent of holders of a majority of the
outstanding shares entitled to vote; provided, however, that if the Restated
Articles of Incorporation of the corporation set forth the number of authorized
Directors of the corporation, then the authorized number of Directors may be
changed only by an amendment of the Restated Articles of Incorporation.
9.2 AMENDMENT BY DIRECTORS
Except as otherwise provided in the Restated Articles of Incorporation or
in these Bylaws, these Bylaws including amendments adopted by the stockholders
may be altered, amended or repealed by a majority vote of the whole Board of
Directors at any regular or special meeting of the Board of Directors provided
that the stockholders may from time to time specify particular provisions of the
Bylaws which shall not be amended by the Board of Directors. Notwithstanding the
foregoing, any alteration, amendment or repeal of Sections 2.3, 2.4, 2.7, 2.11,
2.12, 2.14, 3.2, 3.3, 3.4, 3.5, 3.8, 3.9, 4.1, Article VI or Article IX shall
require the affirmative vote of not less than sixty percent (60%) of the whole
Board of Directors.
9.3 RECORD OF AMENDMENTS
Whenever an amendment or new Bylaw is adopted, it shall be copied in the
book of minutes with the original Bylaws. If any Bylaw is repealed, the fact of
repeal, with the date of the meeting at which the repeal was enacted or written
consent was filed, shall be stated in said book.
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ARTICLE X
INTERPRETATION
Reference in these Bylaws to any provision of Delaware Corporation Law
shall be deemed to include all amendments thereof.
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EXHIBIT 3.3
CERTIFICATE OF INCORPORATION
OF
ANKLE & FOOT CENTERS OF AMERICA, LLC
ARTICLE I.
SECTION 1. NAME. The name of the corporation (hereinafter called the
"Corporation") is Ankle & Foot Centers of America, LLC.
ARTICLE II.
SECTION 1. DURATION. The period of its duration is perpetual.
ARTICLE III.
SECTION 1. REGISTERED OFFICE AND AGENT. The address of its registered
office is 1013 Centre Road, Wilmington, New Castle County, Delaware 19805, and
the name of its registered agent at such address is Corporation Service Company.
ARTICLE IV.
SECTION 1. BUSINESS PURPOSE. The Corporation is organized for the
purpose of transacting any and all lawful business for which corporations may be
organized under the General Corporation Law of Delaware.
ARTICLE V.
SECTION 1. STOCK. The Corporation is authorized to issue one class of
stock to be designated as "Common Stock". The total number of shares of Common
Stock which the Corporation shall have authority to issue is One Hundred
Thousand (100,000) shares of Common Stock, $.01 par value.
ARTICLE VI.
SECTION 1. BOARD OF DIRECTORS. The business and affairs of the
Corporation shall be managed by or under the direction of the Board of
Directors. The number of directors constituting the Board of Directors of the
Corporation and their qualifications shall be fixed or determined by, or in the
manner provided in, the Bylaws of the Corporation.
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ARTICLE VII.
SECTION 1. NO PREEMPTIVE RIGHTS. Unless specifically granted pursuant to
an agreement entered into by and between the Corporation and a stockholder, no
holder of securities of the Corporation shall be entitled as a matter of right,
preemptive or otherwise, to subscribe for or purchase any securities of the
Corporation now or hereafter authorized to be issued, or securities held in the
treasury of the Corporation, whether issued or sold for cash or other
consideration or as a dividend or otherwise. Any such securities may be issued
or disposed of by the board of directors to such persons and on such terms as in
its discretion it shall deem advisable.
ARTICLE VIII.
SECTION 1. DIRECTOR LIABILITY. No director (including any advisory
director) of the Corporation shall be liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (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 174 of the Delaware General Corporation Law, or (iv) for any transaction
from which the director derived an improper personal benefit.
ARTICLE IX.
SECTION 1. INDEMNIFICATION. The Corporation shall indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending, or completed action, suit or proceeding, whether civil, criminal,
administrative, or investigative (other than an action by or in the right of the
Corporation) by reason of the fact that he is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit, or proceeding by
judgment, order, settlement, conviction or upon a plea of NOLO CONTENDERE or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
SECTION 2. ACTION BY OR IN THE RIGHT OF THE CORPORATION. The Corporation
shall indemnify any person who was or is a party or is threatened to be made a
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party to any threatened, pending or completed action or suit by or in the right
of the Corporation to procure a judgment in its favor by reason of the fact that
he is or was a director, officer, employee or agent of the Corporation, or is or
was serving at the request of the Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Corporation and except that no
indemnification shall be made in respect of any claim, issue, or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Delaware Court of Chancery or the court
in which such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.
SECTION 3. EXPENSES. To the extent that a director, officer, employee or
agent of the Corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in Sections 1 and 2, or in
defense of any claim, issue or matter therein, he shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
SECTION 4. AUTHORIZATION. Any indemnification under Sections 1 and 2
(unless ordered by a court) shall be made by the Corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in Sections 1 and 2. Such determination
shall be made (i) by the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to such action, suit or proceeding,
or (ii) if such a quorum is not obtainable, or, even if obtainable, if a quorum
of disinterested directors so directs, by independent legal counsel in a written
opinion, or (iii) by the stockholders. Notwithstanding the foregoing, a
director, officer, employee or agent of the Corporation shall be able to contest
any determination that the director, officer, employee or agent has not met the
applicable standard of conduct set forth in Sections 1 and 2 by petitioning a
court of appropriate jurisdiction.
SECTION 5. EXPENSES IN ADVANCE. Expenses incurred in defending or
settling a civil or criminal action, suit or proceeding by a director, officer,
employee or agent who may be entitled to indemnification pursuant to Sections 1
and 2 of this Article IX shall be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding, upon receipt of an
undertaking by or on behalf of the director, officer, employee or agent to repay
such amount if it shall ultimately be determined that he is not entitled to be
indemnified by the Corporation as authorized in this Article IX.
SECTION 6. ADVANCEMENT NOT EXCLUSIVE. The indemnification and
advancement of expenses provided by, or granted pursuant to, the other sections
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of this Article IX shall not be deemed exclusive of any other rights to which
those seeking indemnification or advancement of expenses may be entitled under
any Bylaw, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office.
SECTION 7. INSURANCE. The Corporation shall have the power to purchase
and maintain insurance on behalf of any person who is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the Corporation would have the
power to indemnify him against such liability under the provisions of Article
IX.
SECTION 8. DEFINITION OF CORPORATION. For purposes of this Article IX
references to "the Corporation" shall include, in addition to the Corporation,
any constituent corporation (including any constituent of a constituent)
absorbed in a consolidation or merger which, if its separate existence had
continued, would have had power and authority to indemnify its directors,
officers, and employees or agents, so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is or was serving
at the request of such constituent corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under the provisions of this
Article IX with respect to the Corporation as he would have with respect to such
constituent corporation if its separate existence had continued.
SECTION 9. OTHER DEFINITIONS. For purposes of this Article IX,
references to "other enterprises" shall include employee benefit plans;
references to "fines" shall include any excise taxes assessed on a person with
respect to an employee benefit plan; and references to "serving at the request
of the Corporation" shall include any service as a director, officer, employee
or agent of the Corporation, which imposes duties on, or involves services by,
such director, officer, employee or agent with respect to an employee benefit
plan, its participants or beneficiaries; and a person who acted in good faith
and in a manner he reasonably believed to be in the interest of the participants
and beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the Corporation" as referred to in
this Article IX.
SECTION 10. CONTINUATION OF INDEMNIFICATION. The indemnification and
advancement of expenses provided by, or granted pursuant to, this Article IX
shall, unless otherwise provided when authorized or ratified, continue as to a
person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators of such a
person.
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ARTICLE X.
SECTION 1. NO CUMULATIVE VOTING. At each election for directors, every
stockholder entitled to vote at such election shall have the right to vote, in
person or by proxy, the number of shares owned by him for as many persons as
there are directors to be elected and for whose election he has a right to vote.
A stockholder may not cumulate his votes in any election of directors.
IN WITNESS WHEREOF, I have hereunto set my hand this ____ day of July,
1996.
--------------------------
Richard C. Yount, Jr.,
Incorporator
5
EXHIBIT 3.4
LIMITED LIABILITY COMPANY AGREEMENT OF
ANKLE & FOOT CENTERS OF AMERICA, LLC
This Limited Liability Company Agreement of Ankle & Foot Centers of
America, L.L.C. (the "Company") is adopted as of May 4, 1996 (this "Agreement"),
by and between the Member or Members signing this Agreement and listed on
Schedule A attached ("Members").
WHEREAS, the Members wish to form a limited liability company pursuant
to the Delaware Limited Liability Company Act, 6 DEL. C. ' 18-101, ET SEQ., as
amended from time to time (the "Delaware Act"), by filing a Certificate of
Formation of the Company with the office of the Secretary of State of the State
of Delaware and entering into this Agreement.
NOW, THEREFORE, in consideration of the agreements and obligations set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Members hereby agree as
follows:
ARTICLE I
DEFINED TERMS
Section 1.1 DEFINITIONS. Unless the context otherwise requires, the
terms defined in this Article I shall, for the purposes of this Agreement, have
the meanings herein specified.
"Affiliate" means with respect to a specified Person, any Person that
directly or indirectly controls, is controlled by, or is under common control
with, the specified Person. As used in this definition, the term "control" means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through ownership
of voting securities, by contract or otherwise.
"Agreement" means this Limited Liability Company Agreement of the
Company, as amended, modified, supplemented or restated from time to time.
"Capital Account" means, with respect to any Member, the account
maintained for such Member in accordance with the provisions of Section 4.4
hereof.
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"Capital Contribution" means, with respect to any Member, the aggregate
amount of money and the initial Gross Asset Value of any property (other than
money) contributed to the Company pursuant to Section 4.1 hereof with respect to
such Member's Interest.
"Certificate" means the Certificate of Formation of the Company and any
and all amendments thereto and restatements thereof filed on behalf of the
Company with the office of the Secretary of State of the State of Delaware
pursuant to the Delaware Act.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any corresponding federal tax statute enacted after the date of this
Agreement. A reference to a specific section ss. of the Code refers not only to
such specific section but also to any corresponding provision of any federal tax
statute enacted after the date of this Agreement, as such specific section or
corresponding provision is in effect on the date of application of the
provisions of this Agreement containing such reference.
"Company" means Ankle & Foot Centers of America, L.L C., the limited
liability company formed under and pursuant to the Delaware Act and this
Agreement.
"Covered Person" means any Member, any Affiliate of a Member or any
officers, directors, shareholders, partners, employees, representatives or
agents of a Member or their respective Affiliates, or any employee or agent of
the Company or its Affiliates.
"Delaware Act" means the Delaware Limited Liability Company Act, 6 DEL.
C. ' 18-101, ET SEQ., as amended from time to time.
"Depreciation" means, for each Fiscal Year or other period, an amount
equal to the depreciation, amortization or other cost recovery deduction
allowable with respect to an asset for such Fiscal Year or other period;
provided, however, that if the Gross Asset Value of an asset differs from its
adjusted basis for federal income tax purposes at the beginning of such Fiscal
Year or other period, Depreciation shall be an amount that bears the same ratio
to such beginning Gross Asset Value as the federal income tax depreciation,
amortization or other cost recovery deduction with respect to such asset for
such Fiscal Year or other period bears to such beginning adjusted tax basis; and
provided further, that if the federal income tax depreciation, amortization or
other cost recovery deduction for such Fiscal Year or other period is zero,
Depreciation shall be determined with reference to such beginning Gross Asset
Value using any reasonable method selected by the Managing Member.
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"Fiscal Year" means (i) the period commencing upon the formation of the
Company and ending on December 31, 1996, (ii) any subsequent twelve (12) month
period commencing on January 1 and ending on December 31, or (iii) any portion
of the period described in Clause (ii) of this sentence for which the Company is
required to allocate Profits, Losses and other items of Company income, gain,
loss or deduction pursuant to Article VIII hereof.
"Gross Asset Value" means, with respect to any asset, such asset's
adjusted basis for federal income tax purposes, except as follows:
(i) the initial Gross Asset Value of any asset contributed by a
Member to the Company shall be the gross fair market value of such asset,
as agreed to by the contributing Member and the Managing Member, or in
the case of any asset contributed by the Managing Member, as determined
by the Managing Member;
(ii) the Gross Asset Value of all Company assets shall be adjusted
to equal their respective gross fair market values, as determined by the
Managing Member, as of the following times: (a) the distribution by the
Company to a Member of more than a DE MINIMIS amount of Company assets as
consideration for such Member's Interest; and (b) the liquidation of the
Company within the meaning of Treasury Regulation '1.704-1(b)(2)(ii)(g);
provided, however, that adjustments pursuant to Clause (a) of this
sentence shall be made only if the Managing Member reasonably determines
that such adjustments are necessary or appropriate to reflect the
relative economic interests of the Members in the Company; and
(iii) the Gross Asset Value of any Company asset distributed to
any Member shall be the gross fair market value of such asset on the date
of distribution, as determined by the Managing Member.
If the Gross Asset Value of an asset has been determined or adjusted
pursuant to Paragraph (i) or Paragraph (ii) above, such Gross Asset Value shall
thereafter be adjusted by the Depreciation taken into account with respect to
such asset for purposes of computing Profits and Losses.
"Interest" means a Member's share of the profits and losses of the
Company and a Member's rights to receive distributions of the Company's assets
in accordance with the provisions of this Agreement and the Delaware Act.
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"Managing Member" has the meaning set forth in Section 6.1 hereof.
"Member" means any member, individually, when acting in the capacity as
a member of the Company, and "Members" means all of the members, collectively,
when acting in their capacities as members of the Company. For all purposes of
the Delaware Act, all Members shall constitute a single class or group of
members.
"Membership Interests" or "Membership Units" shall mean the certificates
issued to reflect the Members' Percentage Interest in the Company. The Company
is currently authorized to issue 1,000,000 Membership Interests or Membership
Units.
"Net Cash Flow" means, for each Fiscal Year or other period of the
Company, the gross cash receipts of the Company from all sources, but excluding
any amounts, such as gross receipts taxes, that are held by the Company as a
collection agent or in trust for others or that are otherwise not
unconditionally available to the Company, less all amounts paid by or for the
account of the Company during the same Fiscal Year or other period (including,
without limitation, payments of principal and interest on any Company
indebtedness and expenses reimbursed to the Members under Section 5.2 hereof),
and less any amounts determined by the Managing Member to be necessary to
provide a reasonable reserve for working-capital needs or any other
contingencies of the Company. Net Cash Flow shall be determined in accordance
with [the cash receipts and disbursements method of accounting and otherwise in
accordance with] generally accepted accounting principles, consistently applied.
Net Cash Flow shall not be reduced by depreciation, amortization, cost recovery
deductions, depletion, similar allowances or other non-cash items, but shall be
increased by any reduction of reserves previously established.
"Percentage Interest" means the percentage of a Member set forth
opposite the name of such Member in the column "Percentage Interest" on Schedule
A attached hereto, as such percentage may be adjusted from time to time pursuant
to the terms of this Agreement.
"Person" means any individual, corporation, association, partnership
(general or limited), joint venture, trust, estate, limited liability company,
or other legal entity or organization.
"Profits" and "Losses" means, for each Fiscal Year, an amount equal to
the Company's taxable income or loss for such Fiscal Year, determined in
accordance with '703(a) of the Code (but including in taxable income or loss,
for this purpose, all items of income, gain, loss or deduction required to be
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stated separately pursuant to '703(a)(1) of the Code), with the following
adjustments:
(i) any income of the Company exempt from federal income tax and
not otherwise taken into account in computing Profits or Losses pursuant
to this definition shall be added to such taxable income or loss;
(ii) any expenditures of the Company described in '705(a)(2)(B) of
the Code (or treated as expenditures described in '705(a)(2)(B) of the
Code pursuant to Treasury Regulation '1.704-1(b)(2)(iv)(i)) and not
otherwise taken into account in computing Profits or Losses pursuant to
this definition shall be subtracted from such taxable income or loss;
(iii) in the event the Gross Asset Value of any Company asset is
adjusted in accordance with Paragraph (ii) or Paragraph (iii) of the
definition of "Gross Asset Value" above, the amount of such adjustment
shall be taken into account as gain or loss from the disposition of such
asset for purposes of computing Profits or Losses;
(iv) gain or loss resulting from any disposition of any asset of
the Company with respect to which gain or loss is recognized for federal
income tax purposes shall be computed by reference to the Gross Asset
Value of the asset disposed of, notwithstanding that the adjusted tax
basis of such asset differs from its Gross Asset Value; and
(v) in lieu of the depreciation, amortization and other cost
recovery deductions taken into account in computing such taxable income
or loss, there shall be taken into account Depreciation for such Fiscal
Year or other period, computed in accordance with the definition of
"Depreciation" above.
"Tax Matters Member" shall be the Managing Member.
"Treasury Regulations" means the income tax regulations, including
temporary regulations, promulgated under the Code, as such regulations may be
amended from time to time (including corresponding provisions of succeeding
regulations).
Section 1.2 HEADINGS. The headings and subheadings in this Agreement are
included for convenience and identification only and are in no way intended to
describe, interpret, define or limit the scope, extent or intent of this
Agreement or any provision hereof.
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ARTICLE II
FORMATION AND TERM
Section 2.1 FORMATION.
(i) The Members hereby agree to form the Company as a limited
liability company under and pursuant to the provisions of the Delaware
Act and agree that the rights, duties and liabilities of the Members
shall be as provided in the Delaware Act, except as otherwise provided
herein.
(ii) Upon the execution of this Agreement, the Members listed on
Schedule A shall be members of the Company.
(iii) The name and mailing address of each Member, the amount
contributed to the capital of the Company, and the initial Percentage
Interest of such Member shall be listed on Schedule A attached hereto.
The Managing Member shall be required to update Schedule A from time to
time as necessary to accurately reflect the information therein. Any
amendment or revision to Schedule A made in accordance with this
Agreement shall not be deemed an amendment to this Agreement. Any
reference in this Agreement to Schedule A shall be deemed to be a
reference to Schedule A as amended and in effect from time to time.
(iv) Kathryn Sweers, as an authorized person within the meaning of
the Delaware Act, executed, delivered and filed the Certificate and any
and all amendments thereto and restatements thereof.
Section 2.2 NAME. The name of the limited liability company formed
hereby and by the filing of the Certificate is Ankle & Foot Centers of America,
L.L.C. The business of the Company may be conducted upon compliance with all
applicable laws under any other name designated by the Managing Member.
Section 2.3 TERM. The term of the Company shall commence on the date of
the filing of the Certificate in the office of the Secretary of State of the
State of Delaware and shall continue until December 31, 1999, unless dissolved
before such date in accordance with the provisions of this Agreement.
Section 2.4 REGISTERED AGENT AND OFFICE. The Company's registered agent
and office in Delaware shall be The Prentice-Hall Corporation System, Inc., 1013
Centre Road, Wilmington, Delaware 19805. At any time, the Managing Member may
designate another registered agent and/or registered office.
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Section 2.5 PRINCIPAL PLACE OF BUSINESS. The principal place of business
of the Company shall be at 3355 Timmons Lane, Suite 1550, Houston, Texas 77027.
At any time, the Managing Member may change the location of the Company's
principal place of business.
Section 2.6 QUALIFICATION IN OTHER JURISDICTIONS. The Managing Member
shall cause the Company to be qualified, formed or registered under assumed or
fictitious name statutes or similar laws in any jurisdiction in which the
Company transacts business in which such qualification, formation or
registration is required or desirable. The Managing Member, as an authorized
person within the meaning of the Delaware Act, shall execute, deliver and file
any certificates (and any amendments and/or restatements thereof) necessary for
the Company to qualify to do business in a jurisdiction in which the Company may
wish to conduct business.
ARTICLE III
PURPOSE AND POWERS OF THE COMPANY
Section 3.1 PURPOSE. The Company is formed for the object and purpose
of, and the nature of the business to be conducted and promoted by the Company
is, engaging in any lawful act or activity for which limited liability companies
may be formed under the Delaware Act and engaging in any and all activities
necessary, convenient, desirable or incidental to the foregoing.
Section 3.2 POWERS OF THE COMPANY.
(i) The Company shall have the power and authority to take any and
all actions necessary, appropriate, proper, advisable, convenient or
incidental to or for the furtherance of the purpose set forth in Section
3.1, including, but not limited to the power:
(a) to conduct its business, carry on its operations and
have and exercise the powers granted to a limited liability
company by the Delaware Act in any state, territory, district or
possession of the United States, or in any foreign country that
may be necessary, convenient or incidental to the accomplishment
of the purpose of the Company;
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(b) to acquire by purchase, lease, contribution of property
or otherwise, own, hold, operate, maintain, finance, improve,
lease, sell, convey, mortgage, transfer, demolish or dispose of
any real or personal property that may be necessary, convenient or
incidental to the accomplishment of the purpose of the Company;
(c) to enter into, perform and carry out contracts of any
kind, including, without limitation, contracts with any Member or
any Affiliate thereof, or any agent of the Company necessary to,
in connection with, convenient to, or incidental to the
accomplishment of the purpose of the Company;
(d) to purchase, take, receive, subscribe for or otherwise
acquire, own, hold, vote, use, employ, sell, mortgage, lend,
pledge, or otherwise dispose of, and otherwise use and deal in and
with, shares or other interests in or obligations of domestic or
foreign corporations, associations, general or limited
partnerships (including, without limitation, the power to be
admitted as a partner thereof and to exercise the rights and
perform the duties created thereby), trusts, limited liability
companies (including, without limitation, the power to be admitted
as a member or appointed as a manager thereof and to exercise the
rights and perform the duties created thereby), or individuals or
direct or indirect obligations of the United States or of any
government, state, territory, governmental district or
municipality or of any instrumentality of any of them;
(e) to lend money for any proper purpose, to invest and
reinvest its funds, and to take and hold real and personal
property for the payment of funds so loaned or invested;
(f) to sue and be sued, complain and defend, and
participate in administrative or other proceedings, in its name;
(g) to appoint employees and agents of the Company, and
define their duties and fix their compensation;
(h) to indemnify any Person in accordance with the Delaware
Act and to obtain any and all types of insurance;
(i) to cease its activities and cancel its Certificate;
(j) to negotiate, enter into, renegotiate, extend, renew,
terminate, modify, amend, waive, execute, acknowledge or take any
other action with respect to any lease, contract or security
agreement in respect of any assets of the Company;
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(k) to borrow money and issue evidences of indebtedness,
and to secure the same by a mortgage, pledge or other lien on the
assets of the Company;
(l) to pay, collect, compromise, litigate, arbitrate or
otherwise adjust or settle any and all other claims or demands of
or against the Company or to hold such proceeds against the
payment of contingent liabilities; and
(m) to make, execute, acknowledge and file any and all
documents or instruments necessary, convenient or incidental to
the accomplishment of the purpose of the Company.
(ii) The Company, and the Managing Member on behalf of the
Company, may enter into and perform any and all documents, agreements and
instruments contemplated under Section 3.2(i), all without any further
act, vote or approval of any Member notwithstanding any other provision
of this Agreement, the Delaware Act or other applicable law. The Managing
Member is hereby authorized to enter into and perform on behalf of the
Company any and all documents, agreements and instruments contemplated
under Section 3.2(i), but such authorization shall not be deemed a
restriction on the power of the Managing Member to enter into other
documents on behalf of the Company. The Managing Member may authorize any
Person (including, without limitation, any other Member) to enter into
and perform any document on behalf of the Company.
(iii) The Company may merge with, or consolidate into, another
Delaware limited liability company or other business entity (as defined
in Section 18-209(a) of the Delaware Act) upon the approval of the
Managing Member in its sole discretion .
Section 3.3 LIMITATIONS ON COMPANY POWERS. The Company shall] not do
business in any jurisdiction that would jeopardize the limitation on liability
afforded to the Members under the Delaware Act or this Agreement.
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ARTICLE IV
CAPITAL CONTRIBUTIONS, SECURITIES
AND CAPITAL ACCOUNTS
Section 4.1 CAPITAL CONTRIBUTIONS.
(i) Each initial Member has contributed or is deemed to have
contributed the amount set forth on Schedule A attached hereto to the
capital of the Company. The agreed value of the Capital Contributions
made or deemed to have been made by each Member shall be set forth on
Schedule A.
(ii) No Member shall be required to make any additional capital
contribution to the Company. However, a Member may make additional
capital contributions to the Company with the written consent of the
Managing Member.
Section 4.2 MEMBER'S INTEREST. A Member's Interest shall for all
purposes be personal property. A Member has no interest in specific Company
property.
Section 4.3 STATUS OF CAPITAL CONTRIBUTIONS.
(i) Except as otherwise provided in this Agreement, the amount of
a Member's Capital Contributions may be returned to it, in whole or in
part, at any time, but only with the consent of the Managing Member. Any
such returns of Capital Contributions shall be made to all Members in the
same proportions as distributions and allocations are made.
Notwithstanding the foregoing, no return of a Member's Capital
Contributions shall be made hereunder if such distribution would violate
applicable state law. Under circumstances requiring a return of any
Capital Contribution, no Member shall have the right to demand or receive
property other than cash, except as may be specifically provided in this
Agreement.
(ii) No Member shall receive any interest, salary or drawing with
respect to its Capital Contributions or its Capital Account or for
services rendered on behalf of the Company or otherwise in its capacity
as a Member (including as a Managing Member), except as otherwise
specifically provided in this Agreement.
(iii) Except as otherwise provided herein and by applicable state
law, the Members shall be liable only to make their Capital Contributions
pursuant to Section 4.1 hereof, and no Member shall be required to lend
any funds to the Company or, after a Member's Capital Contributions have
been fully paid pursuant to Section 4.1 hereof, to make any additional
capital contributions to the Company. No Member shall have any personal
liability for the repayment of any Capital Contribution of any other
Member.
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Section 4.4 CAPITAL ACCOUNTS.
(i) An individual Capital Account shall be established and
maintained for each Member.
(ii) The Capital Account of each Member shall be maintained in
accordance with the following provisions:
(a) to such Member's Capital Account there shall be
credited such Member's Capital Contributions, such Member's
distributive share of Profits and the amount of any Company
liabilities that are assumed by such Member or that are secured by
any Company assets distributed to such Member;
(b) to such Member's Capital Account there shall be debited
the amount of cash and the Gross Asset Value of any Company assets
distributed to such Member pursuant to any provision of this
Agreement, such Member's distributive share of Losses and the
amount of any liabilities of such Member that are assumed by the
Company or that are secured by any property contributed by such
Member to the Company; and
(c) in determining the amount of any liability for purposes
of this Subsection (ii), there shall be taken into account '752(c)
of the Code and any other applicable provisions of the Code and
the Treasury Regulations.
Section 4.5 ADVANCES. If any Member shall advance any funds to the
Company in excess of its Capital Contributions, the amount of such advance shall
neither increase its Capital Account nor entitle it to any increase in its share
of the distributions of the Company. The amount of any such advance shall be a
debt obligation of the Company to such Member and shall be repaid to it by the
Company with interest at a rate agreed to by the Managing Member, and upon such
other terms and conditions as shall be determined by the Managing Member. Any
such advance shall be payable and collectible only out of Company assets, and
the other Members shall not be personally obligated to repay any part thereof.
No Person who makes any nonrecourse loan to the Company shall have or acquire,
as a result of making such loan, any direct or indirect interest in the profits,
capital or property of the Company, other than as a creditor.
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ARTICLE V
MEMBERS
Section 5.1 POWERS OF MEMBERS. The Members shall have the power to
exercise any and all rights or powers granted to the Members pursuant to the
express terms of this Agreement. Except as otherwise specifically provided by
this Agreement or required by the Delaware Act, no Member other than the
Managing Member shall have the power to act for or on behalf of, or to bind, the
Company. Notwithstanding the foregoing sentence, all Members shall constitute
one class or group of members of the Company for all purposes of the Delaware
Act.
Section 5.2 REIMBURSEMENTS. The Company shall reimburse the Members,
including the Managing Member, for all ordinary and necessary out-of-pocket
expenses incurred by the Members on behalf of the Company. The Managing Member's
determination of which expenses may be reimbursed to a Member, including the
Managing Member, and the amount of such expenses shall be conclusive. Such
reimbursement shall be treated as an expense of the Company that shall be
deducted in computing the Net Cash Flow and shall not be deemed to constitute a
distributive share of Profits or a distribution or return of capital to any
Member.
Section 5.3 PARTITION. Each Member waives any and all rights that
it may have to maintain an action for partition of the Company's property.
Section 5.4 TRANSFER AND RESIGNATION. A Member may not assign or
transfer all or any part of its Interest to any Person without the consent of
the Managing Member. A Member may not resign from the Company prior to the
dissolution and winding up of the Company. A resigning Member shall not be
entitled to receive any distribution and shall not otherwise be entitled to
receive the fair value of its Interest except as otherwise expressly provided
for in this Agreement.
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ARTICLE VI
MANAGEMENT
Section 6.1 MANAGEMENT OF THE COMPANY.
(i) Jack N. McCrary shall be the managing member of the Company
(the "Managing Member") and, in such capacity, shall manage the Company
in accordance with this Agreement. The Managing Member is an agent of the
Company's business, and the actions of the Managing Member taken in such
capacity and in accordance with this Agreement shall bind the Company.
(ii) The Managing Member shall have full, exclusive and complete
discretion to manage and control the business and affairs of the Company,
to make all decisions affecting the business and affairs of the Company
and to take all such actions as it deems necessary or appropriate to
accomplish the purpose of the Company as set forth herein. The Managing
Member shall be the sole Person with the power to bind the Company,
except and to the extent that such power is expressly delegated to any
other Person by the Managing Member, and such delegation shall not cause
the Managing Member to cease to be a Member or the managing member of the
Company. There shall not be a "manager" (within the meaning of the Act)
of the Company.
(iii) The Managing Member may appoint individuals with such titles
as it may elect, including the titles of President, Vice President,
Treasurer and Secretary, to act on behalf of the Company with such power
and authority as the Managing Member may delegate in writing to any such
Person.
Section 6.2 POWERS OF THE MANAGING MEMBER. The Managing Member shall
have the right, power and authority, in the management of the business and
affairs of the Company, to do or cause to be done any and all acts, at the
expense of the Company, deemed by the Managing Member to be necessary or
appropriate to effectuate the business, purposes and objectives of the Company.
Without limiting the generality of the foregoing, the Managing Member shall have
the power and authority to:
(a) establish a record date with respect to all actions to
be taken hereunder that require a record date be established,
including with respect to allocations and distributions;
(b) bring and defend on behalf of the Company actions and
proceedings at law or in equity before any court or governmental,
administrative or other regulatory agency, body or commission or
otherwise; and
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(c) execute all documents or instruments, perform all
duties and powers and do all things for and on behalf of the
Company in all matters necessary, desirable, convenient or
incidental to the purpose of the Company, including, without
limitation, all documents, agreements and instruments related
thereto and the consummation of all transactions contemplated
thereby.
The expression of any power or authority of the Managing Member in this
Agreement shall not in any way limit or exclude any other power or authority
which is not specifically or expressly set forth in this Agreement.
Section 6.3 COMMITTEES.
(a) For organizational purposes, the Members or the Managing Member may
from one or more committees of the Members, including, without limitation, (i) a
Board of Managers responsible for the planning and oversignt of the policies nad
strategies of the Company and any other actions not expressly delegated to
another committee, body, officer or other representative of the Company, (ii) a
Medical Policy Advisory Board which shall advise the Members and officers of the
Company responsible for planning nad oversight of the formation and operation of
regional group practices to be managed by the Company, and (iii) such other
committees as the Members or the Managing Member may desire from time to time.
(b) The Board of Managers shall meet at least annually and at such other
regular or special meetings at times and locations reasonably acceptable to its
participating representatives. At each annual meeting, the representatives of
the Board of Managers shall review the general terms and conditions pursuant to
which the Company will operate during the immediate succeeding year, which
general terms and conditions shall continue to be effective until replaced by
new terms approved by the Board of Managers. Any representative of the Board of
Managers may request such committee to review the maximum and minimum terms
applicable to the current calendar year if such representative has information
or data evidencing that market conditions have changed materially since such
rates were set or that such rates are materially inappropriate.
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6.4 AUTHORITY OF MEMBERS AND COMMITTEES.
(a) With respect to any conflicts or disagreements between and among the
boards and committees and/or the Managing Member of the Company, the Managing
Members shall have ultimate decision making authority.
6.5 OFFICERS.
(a) The Members or, if the Members fail to designate, then the Managing
Member may designate one or more Persons to one or more officer positions of the
Company. Such officers may include, without limitation, Chief Executive Officer,
Chief Financial Officer, President, Vice President, Treasurer, Assistant
Treasurer, Secretary and Assistant Secretary. No officer need be a resident of
the State of Delaware. The Members or the Managing Member may assign titles to
particular officers. Each officer shall hold office until his successor shall be
duly designated and shall qualify to hold such office, or until his death or
until he shall resign or shall have been removed in the manner hereinafter
provided. Any number of offices may be held by the same Person. The salaries or
other compensation, if any, of the officers and agents of the Company may be
fixed from time to time by the Members. The authority of any officers or agents
of the Company shall be subject to the supervisory control of the Members. Only
Members or their duly authorized agents shall have the authority to make policy
decisions for the Company. Unless the Members or the Managing Member decide
otherwise, the assignment of such title shall constitute the delegation to such
officer of the authority and duties set forth below and those that are normally
associated with that office:
(i)PRESIDENT. Unless otherwise specified by the Members, the
Managing Member shall be designated as the President of the Company. The
President shall be the chief operating officer and chief executive
officer of the Company and shall have general executive powers to manage
the operations of the Company, and such other powers and duties as this
Agreement, the Members or the Managing Member may from time to time
prescribe.
(ii)CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall
be the principal financial officer of the Company and shall have such
powers and perform such duties as this Agreement, the Members or the
Managing Member may from time to time prescribe.
(iii)VICE PRESIDENTS. In the absence of the President, or in the
event of his inability or refusal to act, the Vice President (or in the
event there be more than one Vice President, the Vice Presidents in the
order designated by the Members or the Managing Member, or in the
absence of any such designation, then in the order of their election or
appointment) 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.
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(iv)SECRETARY. The Secretary shall keep the minutes of the
meetings of the Company and of the Board of Managers, and shall exercise
general supervision over the files of the Company. The Secretary shall
give notice of meetings and shall perform other duties commonly incident
to such office.
(v)ASSISTANT SECRETARY. At the request of the Secretary or in
the Secretary's absence or inability to act, the Assistant Secretary
shall perform part or all of the Secretary's duties.
(vi)TREASURER. The Treasurer shall have general supervision of
the funds, securities, notes, drafts, acceptances, and other commercial
paper and evidences of indebtedness of the Company and he shall
determine that funds belonging to the Company are kept on deposit in
such banking institutions as the Members or the Board of Managers may
from time to time direct. The Treasurer shall determine that accurate
accounting records are kept, and the Treasurer shall render reports of
the same and of the financial condition of the Company to the Members or
the Board of Managers at any time upon request. The Treasurer shall
perform other duties commonly incident to such office, including, but
not limited to, the execution of tax returns.
(vii)ASSISTANT TREASURER. At the request of the Treasurer or in
the Treasurer's absence or inability to act, the Assistant Treasurer
shall perform part or all of the Treasurer's duties.
(b) Any officer may resign as such at any time. Such resignation shall
be made in writing and shall take effect at the time specified therein, or if no
time be specified, at the time of its receipt by the Company. The acceptance of
a resignation shall not be necessary to make it effective, unless expressly so
provided in the resignation. Any officer may be removed as such, either with or
without cause, by the Members; provided, however, that such removal shall be
without prejudice to the contract rights, if any, of the officer so removed.
Designation of an officer shall not of itself create contract rights. Any
vacancy occurring in any office of the Company may be filled by the applicable
Committee or the Members.
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6.6 DUTIES OF OFFICERS Each officer shall devote such time, effort, and
skill to the Company's business affairs as he deems necessary and proper for the
Company's welfare and success. The Members expressly recognize that the officers
have substantial other business relationships and activities with Persons other
than the Company.
6.7 NO DUTY TO CONSULT Except as otherwise provided herein or by
applicable law, neither the Company nor its duly appointed agents, designees or
representatives including the Managing Member and the officers of the Company
shall have a duty or obligation to consult with or seek the advice of the
Members on any matter relating to the day-to-day business affairs of the Company
duly delegated to such Persons; provided, however, that such Persons shall not
be restricted from consulting with or the seeking the advice of the Members.
6.8 REIMBURSEMENT All expenses incurred with respect to the organization
operation and management of the Company shall be borne by the Company.
6.9 MEMBERS AND AFFILIATES DEALING WITH THE COMPANY Subject to obtaining
any consent expressly required hereunder, the Company may appoint, employ,
contract, or otherwise deal with any Person, including Affiliates of the
Members, individuals with whom the Members are otherwise related, and with
business entities which have a financial interest in a Member or in which a
Member has a financial interest, for transacting Company business, including any
acts or services for the Company as the members of any committee, officer or
other representative with the proper authority may approve.
Section 6.10 NO MANAGEMENT BY OTHER MEMBERS. Except as otherwise
expressly provided herein, no Member other than the Managing Member shall take
part in the day-to-day management, or the operation or control of the business
and affairs of the Company. Except and only to the extent expressly delegated by
the Managing Member, no Member or other Person other than the Managing Member
shall be an agent of the Company or have any right, power or authority to
transact any business in the name of the Company or to act for or on behalf of
or to bind the Company.
Section 6.11 RELIANCE BY THIRD PARTIES. Any Person dealing with the
Company or the Managing Member may rely upon a certificate signed by the
Managing Member as to:
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(i) the identity of the Managing Member or any other Member
hereof;
(ii) the existence or non-existence of any fact or facts which
constitute a condition precedent to acts by the Managing Member or in
any other manner germane to the affairs of the Company;
(iii) the Persons who are authorized to execute and deliver any
instrument or document of or on behalf of the Company; or
(iv) any act or failure to act by the Company or as to any other
matter whatsoever involving the Company or any Member.
ARTICLE VII
AMENDMENTS AND MEETINGS
Section 7.1 AMENDMENTS. Any amendment to this Agreement shall be adopted
and be effective as an amendment hereto if approved by the Managing Member,
provided, however, that no amendment shall be made, and any such purported
amendment shall be void and ineffective, to the extent the result thereof would
be to cause the Company to be treated as anything other than a partnership for
purposes of United States income taxation.
Section 7.2 MEETINGS OF THE MEMBERS.
(i) Meetings of the Members may be called at any time by the
Managing Member. Notice of any meeting shall be given to all Members not
less than two (2) days nor more than thirty (30) days prior to the date
of such meeting. Each Member may authorize any Person to act for it by
proxy on all matters in which a Member is entitled to participate,
including waiving notice of any meeting, or voting or participating at a
meeting. Every proxy must be signed by the Member or its
attorney-in-fact.
(ii) Each meeting of Members shall be conducted by the Managing
Member or by such other Person that the Managing Member may designate.
The Managing Member, in its sole discretion, shall establish all other
provisions relating to meetings of Members, including notice of the
time, place or purpose of any meeting at which any matter is to be voted
on by any Members, waiver of any such notice, action by consent without
a meeting, the establishment of a record date, quorum requirements,
voting in person or by proxy or any other matter with respect to the
exercise of any such right to vote.
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ARTICLE VIII
ALLOCATIONS
Section 8.1 PROFITS AND LOSSES. Subject to the allocation rules of
Section 8.2 hereof, Profits and Losses for any Fiscal Year shall be allocated to
the Members in accordance with their Percentage Interests.
Section 8.2 ALLOCATION RULES.
(i) For purposes of determining the Profits, Losses or any other
items allocable to any period, Profits, Losses and any such other items
shall be determined on a daily, monthly or other basis, as determined by
the Managing Member using any method that is permissible under '706 of
the Code and the Treasury Regulations thereunder.
(ii) Except as otherwise provided in this Agreement, all items
of Company income, gain, loss, deduction and any other allocations not
otherwise provided for shall be divided among the Members in the same
proportions as they share Profits and Losses for the Fiscal Year in
question.
(iii) The Members are aware of the income tax consequences of
the allocations made by this Article VIII and hereby agree to be bound
by the provisions of this Article VIII in reporting their shares of
Company income and loss for income tax purposes.
Section 8.3 TAX ALLOCATIONS: SECTION 704(C) OF THE CODE.
(i) In accordance with '704(c) of the Code and the Treasury
Regulations thereunder, income, gain, loss and deduction with respect to
any property contributed to the capital of the Company shall, solely for
income tax purposes, be allocated among the Members so as to take
account of any variation between the adjusted basis of such property to
the Company for federal income tax purposes and its initial Gross Asset
Value (computed in accordance with Section 1.1 hereof).
(ii) In the event the Gross Asset Value of any Company asset is
adjusted pursuant to Paragraph (ii) of the definition of "Gross Asset
Value" contained in Section 1.1 hereof, subsequent allocations of
income, gain, loss and deduction with respect to such asset shall take
account of any variation between the adjusted basis of such asset for
federal income tax purposes and its Gross Asset Value in the same manner
as under '704(c) of the Code and the Treasury Regulations thereunder.
(iii) Any elections or other decisions relating to allocations
under this Section 8.3, including the selection of any allocation method
permitted under Treasury Regulation '1.704-3, shall be made by the
Managing Member in any manner that reasonably reflects the purpose and
intention of this Agreement. Allocations pursuant to this Section 8.3
are solely for purposes of federal, state and local taxes and shall not
affect, or in any way be taken into account in computing, any Member's
Capital Account or share of Profits, Losses, other items or
distributions pursuant to any provision of this Agreement.
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ARTICLE IX
DISTRIBUTIONS
Section 9.1 NET CASH FLOW. Except as otherwise provided in Article XIII
hereof (relating to the dissolution of the Company), any distribution of the Net
Cash Flow and/or any non-cash distributions during any Fiscal Year shall be
distributed to the Members in accordance with their Percentage Interests.
Section 9.2 DISTRIBUTION RULES.
(i) All distributions pursuant to Section 9.1 hereof shall be at
such times and in such amounts as shall be determined by the Managing
Member; provided, however, that the Managing Member shall use its best
efforts to cause the Company to distribute to the Members an amount of
Net Cash Flow as shall be sufficient to enable the Members to fund their
federal and state income tax liabilities attributable to their
respective distributive shares of the taxable income of the Company.
(ii) All amounts withheld pursuant to the Code or any provision
of any state or local tax law with respect to any payment, distribution
or allocation to the Company or the Members shall be treated as amounts
distributed to the Members pursuant to this Article IX for all purposes
of this Agreement. The Managing Member is authorized to withhold from
distributions and to pay over to any federal, state or local government
any amounts required to be so withheld pursuant to the Code or any
provision of any other federal, state or local law and shall allocate
such amounts to those Members with respect to which such amounts were
withheld.
Section 9.3 LIMITATIONS ON DISTRIBUTION. Notwithstanding any provision
to the contrary contained in this Agreement, the Company shall not make a
distribution to any Member with respect to such Member's Interest if such
distribution would violate Section 18-607 of the Delaware Act or other
applicable law.
ARTICLE X
BOOKS AND RECORDS
Section 10.1 BOOKS, RECORDS AND FINANCIAL STATEMENTS.
(i) At all times during the continuance of the Company, the
Company shall maintain, at its principal place of business, separate
books of account for the Company that shall show a true and accurate
record of all costs and expenses incurred, all charges made, all credits
made and received and all income derived in connection with the
operation of the Company business in accordance with generally accepted
accounting principles consistently applied, and, to the extent
inconsistent therewith, in accordance with this Agreement. Such books of
account, together with a copy of this Agreement and of the Certificate,
shall at all times be maintained at the principal place of business of
the Company and shall be open to inspection and examination at
reasonable times by each Member and its duly authorized representative
for any purpose reasonably related to such Member's interest as a member
of the Company.
(ii) The Managing Member shall prepare and maintain, or cause to
be prepared and maintained, the books of account of the Company. The
following financial information, which need not be examined and
certified to by an independent certified public accountant, shall be
transmitted by the Managing Member to each Member within three (3)
months after the close of each Fiscal Year:
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(a) balance sheet of the Company as of the beginning and close
of such Fiscal Year;
(b) statement of Company profits and losses for such Fiscal
Year;
(c) statement of such Member's Capital Account as of the close
of such Fiscal Year, and changes therein during such Fiscal Year; and
(d) a statement indicating such Member's share of each item of
Company income, gain, loss, deduction or credit for such Fiscal Year for
income tax purposes.
Section 10.2 ACCOUNTING METHOD. For both financial and tax reporting
purposes and for purposes of determining profits and losses, the books and
records of the Company shall be kept on the accrual method of accounting applied
in a consistent manner and shall reflect all Company transactions and be
appropriate for the Company's business.
Section 10.3 AUDIT. At any time at the Managing Member's sole
discretion, the financial statements of the Company may be audited by an
independent certified public accountant, selected by the Managing Member, with
such audit to be accompanied by a report of such accountant containing its
opinion. The cost of such audits will be an expense of the Company. A copy of
any such audited financial statements and accountant's report will be made
available for inspection by the Members.
ARTICLE XI
TAX MATTERS
Section 11.1 TAX MATTERS MEMBER.
(i) The Managing Member is hereby designated as "Tax Matters
Member" of the Company for purposes of ' 6231(a)(7) of the Code and
shall have the power to manage and control, on behalf of the Company,
any administrative proceeding at the Company level with the Internal
Revenue Service relating to the determination of any item of Company
income, gain, loss, deduction or credit for federal income tax purposes.
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(ii) The Tax Matters Member shall, within ten (10) days of the
receipt of any notice from the Internal Revenue Service in any
administrative proceeding at the Company level relating to the
determination of any Company item of income, gain, loss, deduction or
credit, mail a copy of such notice to each Member.
Section 11.2 RIGHT TO MAKE SECTION 754 ELECTION. The Tax Matters Member
may, in its sole discretion, make or revoke, on behalf of the Company, an
election in accordance with ' 754 of the Code, so as to adjust the basis of
Company property in the case of a distribution of property within the meaning of
' 734 of the Code, and in the case of a transfer of a Company interest within
the meaning of ' 743 of the Code. Each Member shall, upon request of the Tax
Matters Member, supply the information necessary to give effect to such an
election.
Section 11.3 TAXATION AS PARTNERSHIP. The Company shall be treated as
a partnership for U.S. federal income tax purposes.
ARTICLE XII
LIABILITY, EXCULPATION
AND INDEMNIFICATION
Section 12.1 LIABILITY
(i) Except as otherwise provided by the Delaware Act, the debts,
obligations and liabilities of the Company, whether arising in contract,
tort or otherwise, shall be solely the debts, obligations and
liabilities of the Company, and no Covered Person shall be obligated
personally for any such debt, obligation or liability of the Company
solely by reason of being a Covered Person.
(ii) Except as otherwise expressly required by law, a Member,
including the Managing Member, in its capacity as Member or Managing
Member, shall have no liability in excess of (a) the amount of its
Capital Contributions, (b) its share of any assets and undistributed
profits of the Company, (c) its obligation to make other payments
expressly provided for in this Agreement, and (d) the amount of any
distributions wrongfully distributed to it.
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Section 12.2 EXCULPATION.
(i) No Covered Person shall be liable to the Company or any
other Covered Person for any loss, damage or claim incurred by reason of
any act or omission performed or omitted by such Covered Person in good
faith on behalf of the Company and in a manner reasonably believed to be
within the scope of authority conferred on such Covered Person by this
Agreement, except that a Covered Person shall be liable for any such
loss, damage or claim incurred by reason of such Covered Person's gross
negligence or willful misconduct.
(ii) A Covered Person shall be fully protected in relying in
good faith upon the records of the Company and upon such information,
opinions, reports or statements presented to the Company by any Person
as to matters the Covered Person reasonably believes are within such
other Person's professional or expert competence and who has been
selected with reasonable care by or on behalf of the Company, including
information, opinions, reports or statements as to the value and amount
of the assets, liabilities, profits, losses or any other facts pertinent
to the existence and amount of assets from which distributions to
Members might properly be paid.
Section 12.3 DUTIES AND LIABILITIES OF COVERED PERSONS.
(i) To the extent that, at law or in equity, a Covered Person
has duties (including fiduciary duties) and liabilities relating thereto
to the Company or to any other Covered Person, a Covered Person acting
under this Agreement shall not be liable to the Company or to any other
Covered Person for its good faith reliance on the provisions of this
Agreement. The provisions of this Agreement, to the extent that they
restrict the duties and liabilities of a Covered Person otherwise
existing at law or in equity, are agreed by the parties hereto to
replace such other duties and liabilities of such Covered Person .
(ii) Unless otherwise expressly provided herein, (a) whenever a
conflict of interest exists or arises between Covered Persons, or (b)
whenever this Agreement or any other agreement contemplated herein or
therein provides that a Covered Person shall act in a manner that is, or
provides terms that are, fair and reasonable to the Company or any
Member, the Covered Person shall resolve such conflict of interest,
taking such action or providing such terms, considering in each case the
relative interest of each party (including its own interest) to such
conflict, agreement, transaction or situation and the benefits and
burdens relating to such interests, any customary or accepted industry
practices, and any applicable generally accepted accounting practices or
principles. In the absence of bad faith by the Covered Person, the
resolution, action or term so made, taken or provided by the Covered
Person shall not constitute a breach of this Agreement or any other
agreement contemplated herein or of any duty or obligation of the
Covered Person at law or in equity or otherwise.
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(iii) Whenever in this Agreement a Covered Person is permitted
or required to make a decision (a) in its "discretion" or under a grant
of similar authority or latitude, the Covered Person shall be entitled
to consider only such interests and factors as it desires, including its
own interests, and shall have no duty or obligation to give any
consideration to any interest of or factors affecting the Company or any
other Person, or (b) in its "good faith" or under another express
standard, the Covered Person shall act under such express standard and
shall not be subject to any other or different standard imposed by this
Agreement or other applicable law.
Section 12.4 INDEMNIFICATION. To the fullest extent permitted by
applicable law, a Covered Person shall be entitled to indemnification from the
Company for any loss, damage or claim incurred by such Covered Person by reason
of any act or omission performed or omitted by such Covered Person in good faith
on behalf of the Company and in a manner reasonably believed to be within the
scope of authority conferred on such Covered Person by this Agreement, except
that no Covered Person shall be entitled to be indemnified in respect of any
loss, damage or claim incurred by such Covered Person by reason of gross
negligence or willful misconduct with respect to such acts or omissions;
PROVIDED, HOWEVER, that any indemnity under this Section 12.4 shall be provided
out of and to the extent of Company assets only, and no Covered Person shall
have any personal liability on account thereof.
Section 12.5 EXPENSES. To the fullest extent permitted by applicable
law, expenses (including legal fees) incurred by a Covered Person in defending
any claim, demand, action, suit or proceeding shall, from time to time, be
advanced by the Company prior to the final disposition of such claim, demand,
action, suit or proceeding upon receipt by the Company of an undertaking by or
on behalf of the Covered Person to repay such amount if it shall be determined
that the Covered Person is not entitled to be indemnified as authorized in
Section 12.4 hereof.
Section 12.6 INSURANCE. The Company may purchase and maintain insurance,
to the extent and in such amounts as the Managing Member shall, in its sole
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discretion, deem reasonable, on behalf of Covered Persons and such other Persons
as the Managing Member shall determine, against any liability that may be
asserted against or expenses that may be incurred by any such Person in
connection with the activities of the Company or such indemnitees, regardless of
whether the Company would have the power to indemnify such Person against such
liability under the provisions of this Agreement. The Managing Member and the
Company may enter into indemnity contracts with Covered Persons and adopt
written procedures pursuant to which arrangements are made for the advancement
of expenses and the funding of obligations under Section 12.5 hereof and
containing such other procedures regarding indemnification as are appropriate.
Section 12.7 OUTSIDE BUSINESSES. Any Member or Affiliate thereof may
engage in or possess an interest in other business ventures of any nature or
description, independently or with others, similar or dissimilar to the business
of the Company, and the Company and the Members shall have no rights by virtue
of this Agreement in and to such independent ventures or in the income or
profits derived therefrom, and the pursuit of any such venture, even if
competitive with the business of the Company, shall not be deemed wrongful or
improper. No Member or Affiliate thereof shall be obligated to present any
particular investment opportunity to the Company even if such opportunity is of
a character that, if presented to the Company, could be taken by the Company,
and any Member of Affiliate thereof shall have the right to take for its own
account (individually or as a partner, shareholder, fiduciary or otherwise) or
to recommend to others any such particular investment opportunity.
ARTICLE XIII
DISSOLUTION, LIQUIDATION AND TERMINATION
Section 13.1 DISSOLUTION. The Company shall be dissolved and its affairs
shall be wound up upon the occurrence of any of the following events:
(i) The expiration of the term of the Company, as provided in
Section 2.3 hereof;
(ii) The bankruptcy or dissolution of a Member, or the
occurrence of any other event under the Delaware Act that terminates the
continued membership of a Member in the Company;
(iii) the entry of a decree of judicial dissolution under
Section 18-802 of the Delaware Act; or
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(iv) the written determination of the Managing Member.
Section 13.2 NOTICE OF DISSOLUTION. Upon the dissolution of the Company,
the Managing Member shall promptly notify the Members of such dissolution.
Section 13.3 LIQUIDATION. Upon dissolution of the Company, the Managing
Member, as liquidating trustee, shall immediately commence to wind up the
Company's affairs; PROVIDED, HOWEVER, that a reasonable time shall be allowed
for the orderly liquidation of the assets of the Company and the satisfaction of
liabilities to creditors so as to enable the Members to minimize the normal
losses attendant upon a liquidation. The Members shall continue to share profits
and losses during liquidation in the same proportions, as specified in Article
VIII hereof, as before liquidation. The proceeds of liquidation shall be
distributed, as realized, in the manner provided in Section 18-804 of the
Delaware Act, subject to the applicable provisions of Article IX. In the event
that the Managing Member is unable to perform in its capacity as liquidating
trustee due to its bankruptcy, dissolution, death, adjudicated incompetency or
any other termination of the Managing Member as an entity, the liquidating
trustee shall be a Person approved by a majority of the Interests of the
remaining Members.
Section 13.4 TERMINATION. The Company shall terminate when all of the
assets of the Company have been distributed in the manner provided for in this
Article XIII, and the Certificate shall have been canceled in the manner
required by the Delaware Act.
Section 13.5 CLAIMS OF THE MEMBERS. Members and former Members shall
look solely to the Company's assets for the return of their Capital
Contributions, and if the assets of the Company remaining after payment of or
due provision for all debts, liabilities and obligations of the Company are
insufficient to return such Capital Contributions, the Members and former
Members shall have no recourse against the Company or any other Member.
ARTICLE XIV
CERTIFICATED MEMBERSHIP INTERESTS OR UNITS
Section 14.1 ENTITLEMENT TO CERTIFICATES. Every owner of Membership
Interests or Membership Units in the Company, unless and to the extent the
Company elects otherwise, shall be entitled to have a certificate, in such form
as is approved by the Company and conforms with applicable law, certifying the
Membership Interest owned by such owner.
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Section 14.2 MULTIPLE CLASSES OF INTEREST. If the Company shall be
authorized to issue more than one class of Membership or more than one series of
any Membership, a statement of the powers, designations, preferences and
relative, participating, optional or other special rights of each class of
membership interest or series thereof and the qualification, limitations or
restrictions of such preferences and/or rights shall, unless the Members shall
by resolution provide that such class or series of Membership shall be
uncertificated, be set forth in full or summarized on the face or back of the
certificate which the Company shall issue to represent such class or series of
Membership; Interest; provided that, to the extent allowed by law, in lieu of
such statement, the face or back of such certificate may state that the Company
will furnish a copy of such statement without charge to each requesting Member.
Section 14.3 SIGNATURES. Each certificate representing Membership in the
Company shall be signed by or in the name of the Company by (1) any of the
President or Vice President of the Company; and (2) any of the Treasurer, an
Assistant Treasurer, the Secretary or an Assistant Secretary of the Company. The
signature of the officers of the Company may be facsimiles. In case any officer
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to hold such office before such certificate is issued, it may
be issued by the Company with the same effect as if he held such office on the
date of issue.
Section 14.4 ISSUANCE AND PAYMENT. Subject to the provisions of the Act
and this Agreement, Membership may be issued for such consideration and to such
persons as the Company may determine from time to time. Membership may not be
issued until the full amount of the consideration has been paid, unless upon the
face or back of each certificate issued to represent any partly paid Membership
there shall have been set forth the total amount of the consideration to be paid
therefor and the amount paid thereon up to and including the time said
certificate is issued.
Section 14.5 RESTRICTIVE LEGEND. In the absence of a more restrictive
legend, all certificates which evidence Membership shall be stamped or typed in
a conspicuous place with the following legend:
THE INTEREST REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE LIMITED
LIABILITY AGREEMENT OF THE COMPANY DATED AS OF May 4, 1996, AS IT
EXISTS FROM TIME TO TIME, WHICH RESTRICTS ANY SALE, ASSIGNMENT, TRANSFER,
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CONVEYANCE, ENCUMBRANCE, PLEDGE OR OTHER TRANSFER OR ALIENATION (WITH OR
WITHOUT CONSIDERATION) OF SUCH INTERESTS OR UNITS. THE COMPANY WILL FURNISH
TO THE RECORD HOLDER OF THIS CERTIFICATE, WITHOUT CHARGE, UPON WRITTEN
REQUEST TO THE COMPANY AT ITS PRINCIPAL PLACE OF BUSINESS, A COPY OF SUCH
LIMITED LIABILITY AGREEMENT. THE SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE.
WITHOUT SUCH REGISTRATION, SUCH SECURITIES MAY NOT BE SOLD, ASSIGNED,
TRANSFERRED, CONVEYED, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED,
EXCEPT UPON DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL SATISFACTORY TO
THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED FOR SUCH TRANSFER.
Such legend shall also be placed on all Certificates which are hereafter issued
to any Member.
Section 14.6 LOST, STOLEN OR DESTROYED CERTIFICATES. The Company may
direct a new certificate or certificates to be issued in place of any
certificate or certificates theretofore issued by the Company alleged to have
been lost, stolen or destroyed upon the making of an affidavit of that fact by
the Person claiming the certificate of stock to be lost, stolen or destroyed.
When authorizing such issue of a new certificate or certificates, the Company
may, in its discretion and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen or destroyed certificate or certificates,
or his legal representative, to advertise the same in such manner as it shall
require and/or to give the Company a bond in such sum as it may direct as
indemnity against any claim that may be made against the Company with respect to
the certificate alleged to have been lost, stolen or destroyed.
Section 14.7 TRANSFER OF MEMBERSHIP INTEREST. Upon surrender to the
Company or its transfer agent, if any, of a certificate representing Membership
duly endorsed or accompanied by proper evidence of succession, assignation or
authority to transfer in accordance with this Agreement and of the payment of
all taxes applicable to the transfer of said Membership, the Company shall be
obligated to issue a new certificate to the Person entitled thereto, cancel the
old certificate and record the transaction upon its books, provided, however,
that the Company shall not be so obligated unless such transfer was made in
compliance with the provisions of this Agreement and any applicable state and
federal securities Laws.
Section 14.8 REGISTERED HOLDERS. The Company shall be entitled to
recognize the exclusive right of a Person registered on its books as the owner
of the indicated Membership and shall not be bound to recognize any equitable or
other claim to or interest in such Membership on the part of any Person other
than such registered owner, whether or not it shall have express or other notice
thereof, except as otherwise provided by Law.
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ARTICLE XV
MISCELLANEOUS
Section 15.1 NOTICES. All notices provided for in this Agreement shall
be in writing, duly signed by the party giving such notice, and shall be
delivered, telecopied or mailed by registered or certified mail, as follows.
(i) If given to the Company, in care of the Managing Member at
the Company's mailing address set forth below:
3555 Timmons, Suite 1550
Houston, Texas 77027
(ii) If given to any Member, at the address set forth on the
books and records of the Company.
All such notices shall be deemed to have been given when received.
Section 15.2 FAILURE TO PURSUE REMEDIES. The failure of any party to
seek redress for violation of, or to insist upon the strict performance of, any
provision of this Agreement shall not prevent a subsequent act, which would have
originally constituted a violation from having the effect of an original
violation.
Section 15.3 CUMULATIVE REMEDIES. The rights and remedies provided by
this Agreement are cumulative and the use of any one right or remedy by any
party shall not preclude or waive its right to use any or all other remedies.
Said rights and remedies are given in addition to any other rights the parties
may have by law, statute, ordinance or otherwise.
Section 15.4 BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of all of the parties and, to the extent permitted by this
Agreement, their successors, legal representatives and assigns.
Section 15.5 INTERPRETATION. Throughout this Agreement, nouns, pronouns
and verbs shall be construed as masculine, feminine, neuter, singular or plural,
whichever shall be applicable. All references herein to "Articles," "Sections"
and paragraphs shall refer to corresponding provisions of this Agreement.
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Section 15.6 SEVERABILITY. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof, and this Agreement shall be construed in all respects as if such invalid
or unenforceable provision were omitted.
Section 15.7 COUNTERPARTS. This Agreement may be executed in any number
of counterparts with the same effect as if all parties hereto had signed the
same document. All counterparts shall be construed together and shall constitute
one instrument.
Section 15.8 INTEGRATION. This Agreement constitutes the entire
agreement among the parties hereto pertaining to the subject matter hereof and
supersedes all prior agreements and understandings pertaining thereto.
Section 15.9 GOVERNING LAW. This Agreement and the rights of the parties
hereunder shall be interpreted in accordance with the laws of the State of
Delaware, and all rights and remedies shall be governed by such laws without
regard to principles of conflict of laws.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above stated.
MEMBERS:
/s/ Jack N. McCrary
Jack N. McCrary
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EXHIBIT 4.1
FORM OF
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
OF SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
OF
AMERICAN MEDICAL PROVIDERS, INC.
PURSUANT TO SECTION 151 OF THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE
We, Jack N. McCrary, Chairman, President and Chief Executive Officer, and
Wayne A. Bertsch, Senior Vice President and Chief Financial Officer, of American
Medical Providers, Inc. a corporation organized and existing under the General
Corporation Law of the State of Delaware, in accordance with provisions of
Section 103 thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by the
Certificate of Incorporation of the said Corporation, the said Board of
Directors on February 17, 1998, adopted the following resolution creating a
series of 15,000,000 shares of Preferred Stock designated as Series A Junior
Participating Preferred Stock:
NOW THEREFORE BE IT RESOLVED, that a series of the Company's Preferred
Stock consisting of 15,000,000 shares of Preferred Stock be, and hereby is,
designated as Series A Junior Participating Preferred Stock, par value
$0.001 per share (the "Series A Preferred"), and that the Series A
Preferred shall have the designations, powers, preferences, rights and
qualifications, limitations and restrictions substantially as set forth in
the Certificate of Designation, Preferences and Rights of Series A Junior
Participating Preferred Stock (the "Series A Certificate") attached
hereto as EXHIBIT A.
That said Certificate states that the Board of Directors does hereby fix
and herein state and express such designations, powers, preferences and relative
and other special rights and qualifications, limitations and restrictions
thereof as follows (all terms used herein which are defined in the Certificate
of Incorporation shall be deemed to have the meanings provided therein).
Section 1. DESIGNATION AND AMOUNT. The shares of such series shall be
designated as "Series A Junior Participating Preferred Stock" (the "Series A
Preferred Stock") and the number of shares constituting such series shall be
15,000,000. Such number of shares of Series A Preferred Stock may be increased
or decreased by resolution of the Board of Directors; provided, that no decrease
shall reduce the number of shares of Series A Preferred Stock to a number less
than the number of shares of Series A Preferred Stock then outstanding plus the
number of shares of Series A Preferred Stock reserved for issuance upon the
exercise of outstanding options, rights or warrants or upon the conversion of
any outstanding securities issued by the Corporation convertible or exercisable
into Series A Preferred Stock.
Section 2. DIVIDENDS AND DISTRIBUTIONS.
(A) Subject to the prior and superior rights of the holders of any shares
of any series of preferred stock ranking prior and superior to the shares of
Series A Preferred Stock with respect to dividends, the holders of shares of
Series A Preferred Stock shall be entitled to receive, when, as and if declared
by the Board of Directors out of funds legally available for the purpose,
dividends payable in cash in an amount per share (rounded to the nearest cent),
subject to the provision for adjustment hereinafter set forth, equal to 100
times the aggregate per share amount of all cash dividends, and 100 times the
aggregate per share amount (payable in kind) of all non-cash dividends or other
distributions (other than a dividend payable in shares of the Class A Common
Stock, par value $0.001 per share, of the Corporation (the "Class A Common
Stock") or the Class B Common Stock, par value $0.001 per share of the
Corporation (the "Class B Common Stock") or a subdivision of the outstanding
shares of Class A Common Stock or Class B Common Stock (collectively, the
"Common Stock") (by reclassification or otherwise)), declared on the Common
Stock since the first issuance of any share or fraction of a share of Series A
Preferred Stock. In the event the Corporation shall at any time after February
17, 1998 (the "Rights Declaration Date") (i) declare any dividend on Common
Stock payable in shares of Common Stock, (ii) subdivide the outstanding
<PAGE>
Common Stock or (iii) combine the outstanding Common Stock into a smaller number
of shares, then in each such case the amount to which holders of shares of
Series A Preferred Stock were entitled immediately prior to such event under the
preceding sentence shall be adjusted by multiplying such amount by a fraction
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the Series
A Preferred Stock as provided in paragraph (A) above immediately after it
declares a dividend or distribution on the Common Stock (other than a dividend
payable in shares of Common Stock).
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Preferred Stock from the date of issue of such shares of
Series A Preferred Stock. Accrued but unpaid dividends shall not bear interest.
Dividends paid on the shares of Series A Preferred Stock in an amount less than
the total amount of such dividends shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders of shares of
Series A Preferred Stock entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be no more than 30 days
prior to the date fixed for the payment thereof.
Section 3. VOTING RIGHTS. The holders of shares of Series A Preferred
Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth, each
share of Series A Preferred Stock shall entitle the holder thereof to 100 votes
on all matters submitted to a vote of the stockholders of the Corporation. In
the event the Corporation shall at any time after the Rights Declaration Date
(i) declare any dividend on Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding Common Stock, or (iii) combine the outstanding Common
Stock into a smaller number of shares, then in each case the number of votes per
share to which holders of shares of Series A Preferred Stock were entitled
immediately prior to such event shall be adjusted by multiplying such number by
a fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
(B) Except as otherwise provided herein or by law, the holders of shares
of Series A Preferred Stock and the holders of shares of Common Stock shall vote
together as one class on all matters submitted to a vote of stockholders of the
Corporation.
(C) Except as otherwise provided herein or provided by law, the holders of
shares of Series A Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for taking any corporate
action.
Section 4. CERTAIN RESTRICTIONS.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Series A Preferred Stock outstanding shall have
been paid in full, the Corporation shall not
(i) declare or pay dividends on, make any other distribution on, or
redeem or purchase or otherwise acquire for consideration any shares of
stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends on or make any other distributions on any
shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred
Stock, except dividends paid or distributions made ratably on the Series
A Preferred Stock and all such stock ranking on a parity with respect to
the particular dividend or distribution in proportion to the total
amounts to which the holders of all such shares are then entitled;
2
<PAGE>
(iii) redeem or purchase or otherwise acquire for consideration shares
of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred
Stock, provided that the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such parity stock in exchange for shares
of any stock of the Corporation ranking junior (both as to dividends and
upon dissolution, liquidation or winding up) to the Series A Preferred
Stock;
(iv) purchase or otherwise acquire for consideration any shares of
Series A Preferred Stock, or any shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up)
with the Series A Preferred Stock, except in accordance with a purchase
or offer made in writing or by publication (as determined by the Board
of Directors) to all holders of such shares upon such terms as the Board
of Directors, after consideration of the respective annual dividend
rates and other relative rights and preferences of the respective series
and classes, shall determine in good faith will result in fair and
equitable treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
Section 5. REACQUIRED SHARES. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
to be created by resolution or resolutions of the Board of Directors, subject to
the conditions and restrictions on issuance set forth herein.
Section 6. LIQUIDATION, DISSOLUTION OR WINDING UP.
(A) Upon any liquidation (voluntary or otherwise), dissolution or winding
up of the Corporation, no distribution shall be made to the holders of shares of
stock ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Preferred Stock unless, prior thereto, the holders
of shares of Series A Preferred Stock shall have received $100 per share, plus
an amount equal to accrued and unpaid dividends and distributions thereon,
whether or not declared, to the date of such payment (the "Series A Liquidation
Preference"). Following the payment of the full amount of the Series A
Liquidation Preference, no additional distributions shall be made to the holders
of shares of Series A Preferred Stock unless, prior thereto, the holders of
shares of Common Stock shall have received an amount per share (the "Common
Stock Liquidation Amount") equal to the quotient obtained by dividing (i) the
Series A Liquidation Preference by (ii) 100 (as appropriately adjusted an set
forth in subparagraph C below to reflect such events as stock splits, stock
dividends and recapitalization with respect to the Common Stock) (such number in
clause (ii), the "Adjustment Number"). Following the payment of the full
amount of the Series A Liquidation Preference and the Common Stock Liquidation
Amount in respect of all outstanding shares of Series A Preferred Stock and
Common Stock, respectively, holders of Series A Preferred Stock and holders of
shares of Common Stock shall receive their ratable and proportionate share of
remaining assets to be distributed in the ratio of the Adjustment Number to 1
with respect to such Preferred Stock and Common Stock, on a per share basis,
respectively.
(B) In the event, however, that there are not sufficient assets available
to permit payment in full of the Series A Liquidation Preference and the
liquidation preferences of all other series of preferred stock, if any, which
rank on a parity with the Series A Preferred Stock, then such remaining assets
shall be distributed ratably to the holders of the Series A Preferred Stock and
the holders of such parity shares in proportion to their respective liquidation
preferences.
(C) In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, (iii) combine the
outstanding Common Stock into a smaller number of shares, (iv) reclassify the
Common Stock or (v) effect a recapitalization of the Common Stock, then in each
such case the Adjustment
3
<PAGE>
Number in effect immediately prior to such event shall be adjusted by
multiplying such Adjustment Number by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 7. CONSOLIDATION, MERGER, ETC. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
Series A Preferred Stock shall at the same time be similarly exchanged or
changed in an amount per share (subject to the provision for adjustment
hereinafter set forth) equal to 100 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time after the Rights Declaration Date
(i) declare any dividend on Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding Common Stock, or (iii) combine the outstanding Common
Stock into a smaller number of shares, then in each such case the amount set
forth in the preceding sentence with respect to the exchange or change of shares
of Series A Preferred Stock shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
Section 8. NO REDEMPTION. The shares of Series A Preferred Stock shall
not be redeemable.
Section 9. RANKING. The Series A Preferred Stock shall rank junior to all
other series of the Corporation's preferred stock, if any, as to the payment of
dividends and the distribution of assets, unless the terms of any such series
shall provide otherwise. Nothing in this Certificate shall limit the power of
the Board of Directors to create a new series of preferred stock ranking senior
to the Series A Preferred Stock in any respect.
Section 10. AMENDMENT. The Amended and Restated Certificate of
Incorporation of the Corporation shall not be further amended in any manner
which would materially alter or change the powers, preferences or special rights
of the Series A Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of two-thirds or more of the outstanding shares
of Series A Preferred Stock, voting separately as a class.
Section 11. FRACTIONAL SHARES. Series A Preferred Stock may be issued in
fractions of a share, which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series A Preferred Stock.
IN WITNESS WHEREOF, we have executed and subscribed this Certificate and do
affirm the foregoing as true under the penalties of perjury this 17th day of
February, 1998.
_____________________________________
Jack N. McCrary
Chairman, President and Chief
Executive Officer
Attest:
- ------------------------------------------------------
Wayne A. Bertsch, Senior Vice President
and Chief Financial Officer
4
EXHIBIT 4.2
AMERICAN MEDICAL
PROVIDERS INC.(TM)
NUMBER SHARES
A
CLASS A COMMON STOCK $.001 PAR VALUE
PER SHARE
THIS CERTIFICATE IS TRANSFERABLE
IN HOUSTON, TEXAS AND NEW YORK, NEW YORK CUSIP 02744Q 10 9
SEE REVERSE FOR
CERTAIN DEFINITIONS
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
This Certifies that
is the owner of
FULLY PAID AND NONASSESSABLE SHARES OF CLASS A
COMMON STOCK, $.001 PAR VALUE PER SHARE, OF
AMERICAN MEDICAL
PROVIDERS INC.(TM)
(a corporation organized under the laws of the State of Delaware and herein
referred to as the "Corporation"), transferable on the books of the Corporation
upon surrender of this certificate properly endorsed. This Certificate and the
shares represented hereby are issued and shall be subject to all of the terms,
conditions and limitations of the Articles of Incorporation and Bylaws of the
Corporation, including all amendments heretofore or hereafter made to such
Certificate of Incorporation and Bylaws, to all of which reference is made
hereby and to all of which the holder assents by acceptance hereof. The
Corporation is authorized to issue more than one class of stock and more than
one series of preferred stock. Upon the written request of the record holder of
this Certificate, a full statement of the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights will be furnished without charge.
This Certificate is not valid unless countersigned by the Transfer Agent
and registered by the Registrar of the Corporation.
IN WITNESS WHEREOF, the Corporation has caused the facsimile signatures
of its duly authorized President and its duly authorized Secretary and its
facsimile seal to be hereunto affixed.
Dated: COUNTERSIGNED AND REGISTERED:
[SEAL]
TRANSFER AGENT AND REGISTRAR
BY
PRESIDENT SECRETARY AUTHORIZED SIGNATURE
<PAGE>
AMERICAN MEDICAL PROVIDERS, INC.
EACH CLASS OF AUTHORIZED SHARES OF COMMON STOCK OF THE CORPORATION IS
IDENTICAL IN ALL RESPECTS EXCEPT THAT (I) THE CLASS A COMMON STOCK VOTES ONE
VOTE PER SHARE AND CLASS B COMMON STOCK VOTES TWO-THIRDS (2/3) OF A VOTE PER
SHARE, (II) THE CLASS B COMMON STOCK MAY BE CONVERTED INTO CLASS A COMMON STOCK
AT CERTAIN CONVERSION RATIOS AND UPON THE OCCURRENCE OF CERTAIN EVENTS AND (III)
EXCEPT IN CERTAIN CIRCUMSTANCES THE CLASS B COMMON STOCK HAS THE ABILITY TO
ELECT ONE MEMBER OF THE CORPORATION'S BOARD OF DIRECTORS AS A CLASS AND THE
CLASS A COMMON STOCK HAS THE ABILITY TO ELECT THE REMAINING MEMBERS OF THE BOARD
OF DIRECTORS, ALL AS SET FORTH IN THE CORPORATION'S AMENDED AND RESTATED
ARTICLES OF INCORPORATION, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF
THE CORPORATION AND IS AVAILABLE UPON WRITTEN REQUEST.
[THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND ARE "RESTRICTED
SECURITIES" AS THAT TERM IS DEFINED IN RULE 144 UNDER THE ACT. THE SHARES MAY
NOT BE OFFERED FOR SALE, SOLD, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, OR PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE ACT, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO
THE SATISFACTION OF THE CORPORATION.]
The following abbreviations, when used in the inscription on the face of
this Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM -- as tenants in common UNIF GIFT MIN ACT -- ___________ Custodian ____________
TEN ENT -- as tenants by the entireties (Cust) (Minor)
JT TEN -- as joint tenants with right Under Uniform Gifts to Minors
of survivorship and not as Act _________________________
tenants in common (State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
ASSIGNMENT
For Value Received, ___________________hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF TRANSFEREE
[ ]_____________________________________________________
________________________________________________________________________________
(Please print or typewrite name and address including zip code of transferee)
________________________________________________________________________________
________________________________________________________________________________
__________________________________________________________________________Shares
of the Class A Common Stock represented by the within Certificate and do hereby
irrevocably constitute and appoint ____________________________________ Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated ________________________________
X ____________________________________
NOTICE: THE SIGNATURE(S) TO (SIGNATURE)
THIS ASSIGNMENT MUST CORRESPOND
WITH THE NAME(S) AS WRITTEN UPON
THE FACE OF THE CERTIFICATE IN X ____________________________________
EVERY PARTICULAR, WITHOUT (SIGNATURE)
ALTERATION OR ENLARGEMENT OR
ANY CHANGE WHATEVER. ------------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN
ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND
CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED
SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT
TO S.E.C. RULE 17Ad-15.
------------------------------------------------
SIGNATURE(S) GUARANTEED BY:
------------------------------------------------
EXHIBIT 4.3
AMERICAN MEDICAL
PROVIDERS INC.(TM)
NUMBER SHARES
B
CLASS B COMMON STOCK $.001 PAR VALUE
PER SHARE
THIS CERTIFICATE IS TRANSFERABLE
IN HOUSTON, TEXAS AND NEW YORK, NEW YORK CUSIP 02744Q 10 9
SEE REVERSE FOR
CERTAIN DEFINITIONS
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
This Certifies that
is the owner of
FULLY PAID AND NONASSESSABLE SHARES OF CLASS B
COMMON STOCK, $.001 PAR VALUE PER SHARE, OF
AMERICAN MEDICAL
PROVIDERS INC.(TM)
(a corporation organized under the laws of the State of Delaware and herein
referred to as the "Corporation"), transferable on the books of the Corporation
upon surrender of this certificate properly endorsed. This Certificate and the
shares represented hereby are issued and shall be subject to all of the terms,
conditions and limitations of the Articles of Incorporation and Bylaws of the
Corporation, including all amendments heretofore or hereafter made to such
Certificate of Incorporation and Bylaws, to all of which reference is made
hereby and to all of which the holder assents by acceptance hereof. The
Corporation is authorized to issue more than one class of stock and more than
one series of preferred stock. Upon the written request of the record holder of
this Certificate, a full statement of the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights will be furnished without charge.
This Certificate is not valid unless countersigned by the Transfer Agent
and registered by the Registrar of the Corporation.
IN WITNESS WHEREOF, the Corporation has caused the facsimile signatures
of its duly authorized President and its duly authorized Secretary and its
facsimile seal to be hereunto affixed.
Dated: COUNTERSIGNED AND REGISTERED:
[SEAL]
TRANSFER AGENT AND REGISTRAR
BY
PRESIDENT SECRETARY AUTHORIZED SIGNATURE
<PAGE>
AMERICAN MEDICAL PROVIDERS, INC.
EACH CLASS OF AUTHORIZED SHARES OF COMMON STOCK OF THE CORPORATION IS
IDENTICAL IN ALL RESPECTS EXCEPT THAT (I) THE CLASS A COMMON STOCK VOTES ONE
VOTE PER SHARE AND CLASS B COMMON STOCK VOTES TWO-THIRDS (2/3) OF A VOTE PER
SHARE, (II) THE CLASS B COMMON STOCK MAY BE CONVERTED INTO CLASS A COMMON STOCK
AT CERTAIN CONVERSION RATIOS AND UPON THE OCCURRENCE OF CERTAIN EVENTS AND (III)
EXCEPT IN CERTAIN CIRCUMSTANCES, THE CLASS B COMMON STOCK HAS THE ABILITY TO
ELECT ONE MEMBER OF THE CORPORATION'S BOARD OF DIRECTORS AS A CLASS AND THE
CLASS A COMMON STOCK HAS THE ABILITY TO ELECT THE REMAINING MEMBERS OF THE BOARD
OF DIRECTORS, ALL AS SET FORTH IN THE CORPORATION'S AMENDED AND RESTATED
ARTICLES OF INCORPORATION, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF
THE CORPORATION AND IS AVAILABLE UPON WRITTEN REQUEST.
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND ARE "RESTRICTED
SECURITIES" AS THAT TERM IS DEFINED IN RULE 144 UNDER THE ACT. THE SHARES MAY
NOT BE OFFERED FOR SALE, SOLD, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, OR PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE ACT, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO
THE SATISFACTION OF THE CORPORATION.
The following abbreviations, when used in the inscription on the face of
this Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM -- as tenants in common UNIF GIFT MIN ACT -- ___________ Custodian ____________
TEN ENT -- as tenants by the entireties (Cust) (Minor)
JT TEN -- as joint tenants with right Under Uniform Gifts to Minors
of survivorship and not as Act _________________________
tenants in common (State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
ASSIGNMENT
For Value Received, ___________________hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF TRANSFEREE
[ ]_____________________________________________________
________________________________________________________________________________
(Please print or typewrite name and address including zip code of transferee)
________________________________________________________________________________
________________________________________________________________________________
__________________________________________________________________________Shares
of the Class B Common Stock represented by the within Certificate and do hereby
irrevocably constitute and appoint ____________________________________ Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated ________________________________
X ____________________________________
NOTICE: THE SIGNATURE(S) TO (SIGNATURE)
THIS ASSIGNMENT MUST CORRESPOND
WITH THE NAME(S) AS WRITTEN UPON
THE FACE OF THE CERTIFICATE IN X ____________________________________
EVERY PARTICULAR, WITHOUT (SIGNATURE)
ALTERATION OR ENLARGEMENT OR
ANY CHANGE WHATEVER. ------------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN
ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND
CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED
SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT
TO S.E.C. RULE 17Ad-15.
------------------------------------------------
SIGNATURE(S) GUARANTEED BY:
------------------------------------------------
EXHIBIT 5.1
[LETTERHEAD OF BAKER & HOSTETLER LLP]
February 17, 1998
American Medical Providers, Inc.
Suite 1550
3555 Timmons Lane
Houston, Texas 77027
Ladies and Gentlemen:
As counsel for American Medical Providers, Inc. (the "Company"), we are
familiar with the Registration Statement on Form S-1 (File No. 333-39441) and
Amendments No. 1, 2 and 3 thereto (the Registration Statement, as amended herein
the "Registration Statement") filed by the Company with the Securities and
Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended, with respect to 4,255,000 shares of the Company's Class A Common Stock,
par value $.001 per share (the "Shares").
In connection with the foregoing, we have examined the Amended and Restated
Certificate of Incorporation of the Company, the form of Underwriting Agreement
to be entered into by the Company and the Underwriters identified therein with
respect to the Shares and such records of the corporate proceedings of the
Company and other documents and matters as we deem as necessary to render this
opinion.
Based upon such examination, we are of the opinion that:
1. The Company is a corporation duly organized and validly existing
under the laws of the State of Delaware.
2. The Shares have been duly authorized and, when issued and sold
pursuant to the Underwriting Agreement in the manner contemplated
by the Registration Statement, will be validly issued, fully paid
and non-assessable.
We consent to the filing of this opinion as Exhibit 5 to the Registration
Statement and to the reference to us under the caption "Legal Matters" in the
Prospectus that is a part of the Registration Statement.
Sincerely,
/s/ BAKER & HOSTETLER LLP
Baker & Hostetler LLP
EXHIBIT 10.1
AMERICAN MEDICAL PROVIDERS, INC.
FORM OF
1997 STOCK INCENTIVE PLAN
SECTION 1. GENERAL PURPOSE OF PLAN; DEFINITIONS.
The name of this plan is the American Medical Providers, Inc. 1997 Stock
Incentive Plan (the "Plan"). The Plan was adopted by the Company's Board of
Directors on _________, 1997, subject to the approval of the Stockholders of the
Company, which approval was obtained on , 1997. The purpose of the Plan is to
enable the Company to attract and retain highly qualified personnel who will
contribute to the Company's success by their ability, ingenuity and industry and
to provide incentives to the participating officers, directors, employees,
consultants and advisors that are linked directly to increases in stockholder
value and will therefore inure to the benefit of all stockholders of the
Company.
For purposes of the Plan, the following terms shall be defined as set
forth below:
(1) "ADMINISTRATOR" means the Board, or if and to the extent the Board
does not administer the Plan, the Committee in accordance with Section 2.
(2) "BOARD" means the Board of Directors of the Company.
(3) "CODE" means the Internal Revenue Code of 1986, as amended from time
to time, or any successor thereto.
(4) "COMMITTEE" means a committee appointed by the Board and composed of
two or more members of the Board who qualify as (i) "Non-Employee Directors"
within the meaning of Rule 16b-3 promulgated by the Securities and Exchange
Commission (the "Commission") under the Securities Exchange Act of 1934 (the
"Exchange Act"), and as such Rule may be amended from time to time, or any
successor definition adopted by the Commission, and (ii) "outside directors"
within the meaning of Section 162(m) of the Code. If at any time or to any
extent the Board shall not administer the Plan, then the functions of the Board
specified in the Plan shall be exercised by the Committee.
(5) "COMPANY" means American Medical Providers, Inc., a Delaware
corporation (or any successor corporation).
(6) "DEFERRED STOCK" means an award made pursuant to Section 7 below of
the right to receive Stock at the end of a specified deferral period.
1
<PAGE>
(7) "DISABILITY" means the inability of a Participant to perform
substantially his duties and responsibilities to the Company by reason of a
physical or mental disability or infirmity (i) for a continuous period of six
months or (ii) at such earlier time as the Participant submits medical evidence
satisfactory to the Administrator that he has a physical or mental disability or
infirmity which will likely prevent him from returning to the performance of his
work duties for six months or longer. The date of such Disability shall be on
the last day of such six-month period or the day on which the Participant
submits such satisfactory medical evidence, as the case may be.
(9) "EFFECTIVE DATE" shall mean the date provided pursuant to Section 11.
(10) "ELIGIBLE EMPLOYEE" means an officer and/or employee of the Company
or any Subsidiary.
(11) "FAIR MARKET VALUE" means, as of any given date, with respect to any
awards granted hereunder, (A) if the Stock is publicly traded, the closing sale
price of the Stock on such date as reported in the Western Edition of the Wall
Street Journal, or the average of the closing price of the Stock on each day on
which the Stock was traded over a period of up to twenty trading days
immediately prior to such date, (B) the fair market value of the Stock as
determined in accordance with a method prescribed in the agreement evidencing
any award hereunder, or (C) the fair market value of the Stock as otherwise
determined by the Administrator in the good faith exercise of its discretion.
(12) "INCENTIVE STOCK OPTION" means any Stock Option intended to be
designated as an "incentive stock option" within the meaning of Section 422 of
the Code.
(13) "LIMITED STOCK APPRECIATION RIGHT" means a Stock Appreciation Right
that can be exercised only in the event of a "Change of Control" (as defined in
the award evidencing such Limited Stock Appreciation Right).
(14) "NON-QUALIFIED STOCK OPTION" means any Stock Option that is not an
Incentive Stock Option, including any Stock Option that provides (as of the time
such option is granted) that it will not be treated as an Incentive Stock
Option.
(15) "PARENT CORPORATION" means any corporation (other than the Company)
in an unbroken chain of corporations ending with the Company, if each of the
corporations in the chain (other than the Company) owns stock possessing 50% or
more of the combined voting power of all classes of stock in one of the other
corporations in the chain.
(16) "PARTICIPANT" means any Eligible Employee, director, consultant or
advisor to the Company selected by the Administrator, pursuant to the
Administrator's authority in Section 2 below, to receive grants of Stock
Options, Stock Appreciation Rights, Limited Stock
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Appreciation Rights, Restricted Stock awards, Deferred Stock awards,
Performance Shares or any combination of the foregoing.
(17) "PERFORMANCE SHARE" means an award of shares of Stock pursuant to
Section 7 that is subject to restrictions based upon the attainment of specified
performance objectives.
(18) "RESTRICTED STOCK" means an award granted pursuant to Section 7 of
shares of Stock subject to certain restrictions.
(19) "STOCK" means the common stock, $.001 par value per share, of the
Company.
(20) "STOCK APPRECIATION RIGHT" means the right pursuant to an award
granted under Section 6 to receive an amount equal to the difference between (A)
the Fair Market Value, as of the date such Stock Appreciation Right or portion
thereof is surrendered, of the shares of Stock covered by such right or such
portion thereof, and (B) the aggregate exercise price of such right or such
portion thereof.
(21) "STOCK OPTION" means any option to purchase shares of Stock granted
pursuant to Section 5.
(22) "SUBSIDIARY" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company, if each of the
corporations (other than the last corporation) in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in the chain.
SECTION 2. ADMINISTRATION.
The Plan shall be administered in accordance with the requirements of Rule
16b-3 of the Exchange Act and Section 162(m) of the Code (but only to the extent
necessary to maintain qualification of the Plan under Rule 16b-3 of the Exchange
Act and Section 162(m) of the Code) by the Board or by the Committee which shall
be appointed by the Board and which shall serve at the pleasure of the Board.
Pursuant to the terms of the Plan, the Administrator shall have the power
and authority to grant to Eligible Employees, directors, consultants and
advisors to the Company, pursuant to the terms of the Plan: (a) Stock Options,
(b) Stock Appreciation Rights or Limited Stock Appreciation Rights, (c)
Restricted Stock, (d) Performance Shares, (c) Deferred Stock or (f) any
combination of the foregoing.
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In particular, the Administrator shall have the authority:
(a) to select those Eligible Employees, directors, consultants and
advisors of the Company who shall be Participants;
(b) to determine whether and to what extent Stock Options, Stock
Appreciation Rights, Limited Stock Appreciation Rights, Restricted Stock,
Deferred Stock, Performance Shares or a combination of the foregoing, are to be
granted hereunder to Participants;
(c) to determine the number of shares of Stock to be covered by each
such award granted hereunder;
(d) to determine the terms and conditions, not inconsistent with the
terms of the Plan, of any award granted hereunder (including, but not limited
to, (x) the restrictions applicable to Restricted or Deferred Stock awards and
the conditions under which restrictions applicable to such Restricted or
Deferred Stock shall lapse, and (y) the performance goals and periods applicable
to the award of Performance Shares); and
(e) to determine the terms and conditions, not inconsistent with the
terms of the Plan, which shall govern all written instruments evidencing the
Stock Options, Stock Appreciation Rights, Limited Stock Appreciation Rights,
Restricted Stock, Deferred Stock, Performance Shares
or any combination of the foregoing.
The Administrator shall have the authority, in its discretion, to adopt,
alter and repeal such administrative rules, guidelines and practices governing
the Plan as it shall from time to time deem advisable; to interpret the terms
and provisions of the Plan and any award issued under the Plan (and any
agreements relating thereto); and to otherwise supervise the administration of
the Plan.
All decisions made by the Administrator pursuant to the provisions of the
Plan shall be final and binding on all persons, including the Company and the
Participants.
SECTION 3. STOCK SUBJECT TO PLAN.
The total number of shares of Stock reserved and available for issuance
under the Plan shall be 1,157,098. Such shares may consist, in whole or in part,
of authorized and unissued shares or treasury shares. The aggregate number of
shares of Stock as to which Stock Options, Stock Appreciation Rights, Restricted
Stock and Performance Shares may be granted to any individual during any
calendar year may not, subject to adjustment as provided in this Section 3,
exceed 80% of the shares of Stock reserved for the purposes of the Plan in
accordance with the provisions of this Section 3.
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Consistent with the provisions of Section 162(m) of the Code, as from time
to time applicable, to the extent that (i) a Stock Option expires or is
otherwise terminated without being exercised, or (ii) any shares of Stock
subject to any Restricted Stock, Deferred Stock or Performance Share award
granted hereunder are forfeited, such shares shall again be available for
issuance in connection with future awards under the Plan. If any shares of Stock
have been pledged as collateral for indebtedness incurred by a Participant in
connection with the exercise of a Stock Option and such shares are returned to
the Company in satisfaction of such indebtedness, such shares shall again be
available for issuance in connection with future awards under the Plan.
In the event of any merger, reorganization, consolidation,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, contribution of shares, exchange
of shares, change in corporate structure or other transaction affecting the
Stock, a substitution or adjustment shall be made in (i) the aggregate number of
shares reserved for issuance under the Plan, (ii) the kind, number and option
price of shares subject to outstanding Stock Options granted under the Plan, and
(iii) the kind, number and purchase price of shares issuable pursuant to awards
of Restricted Stock, Deferred Stock and Performance Shares, as may be determined
by the Administrator, in its sole discretion. Such other substitutions or
adjustments shall be made as may be determined by the Administrator, in its sole
discretion. An adjusted option price shall also be used to determine the amount
payable by the Company upon the exercise of any Stock Appreciation Right or
Limited Stock Appreciation Right associated with any Stock Option. In connection
with any event described in this paragraph, the Administrator may provide, in
its discretion, for the cancellation of any outstanding awards and payment in
cash or other property therefor.
SECTION 4. ELIGIBILITY.
Officers (including officers who are directors of the Company), directors,
employees of the Company, and consultants and advisors to the Company who are
responsible for or are in a position to contribute to the management, growth
and/or profitability of the business of the Company shall be eligible to be
granted Stock Options, Stock Appreciation Rights, Limited Stock Appreciation
Rights, Restricted Stock awards, Deferred Stock awards or Performance Shares
hereunder. However, only Eligible Employees of the Company and Subsidiaries
shall be eligible to receive grants of Incentive Stock Options. The Participants
under the Plan shall be selected from time to time by the Administrator, in its
sole discretion, from among the Eligible Employees, directors, consultants and
advisors to the Company recommended by the senior management of the Company, and
the Administrator shall determine, in its sole discretion, the number of shares
of Stock covered by each award.
SECTION 5. STOCK OPTIONS.
Stock Options may be granted alone or in addition to other awards granted
under the Plan. Any Stock Option granted under the Plan shall be in such form as
the Administrator may from
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time to time approve, and the provisions of Stock Option awards need not be the
same with respect to each optionee. Recipients of Stock Options shall enter into
a subscription and/or award agreement with the Company, in such form as the
Administrator shall determine, which agreement shall set forth, among other
things, the exercise price of the option, the term of the option and provisions
regarding exercisability of the option granted thereunder.
The Stock Options granted under the Plan may be of two types: (i)Incentive
Stock Options and (ii)Non-Qualified Stock Options.
The Administrator shall have the authority to grant to any Eligible
Employee Incentive Stock Options, Non-Qualified Stock Options, or both types of
Stock Options (in each case with or without Stock Appreciation Rights or Limited
Stock Appreciation Rights). Directors, consultants and advisors may only be
granted Non-Qualified Stock Options (with or without Stock Appreciation Rights
or Limited Stock Appreciation Rights). To the extent that any Stock Option does
not qualify as an Incentive Stock Option, it shall constitute a separate
Non-Qualified Stock Option. The Company shall have no liability to a
Participant, or any other party, if a Stock Option (or any part thereof) which
is intended to be an Incentive Stock Option is not an Incentive Stock Option.
More than one option may be granted to the same optionee and be outstanding
concurrently hereunder.
Stock Options granted under the Plan shall be subject to the following
terms and conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Administrator shall deem
desirable:
(1) OPTION PRICE. The option price per share of Stock purchasable under a
Stock Option shall be determined by the Administrator in its sole discretion at
the time of grant but shall not, in the case of Incentive Stock Options, be less
than 100% of the Fair Market Value of the Stock on such date and shall not, in
any event, be less than the par value (if any) of the Stock. If an employee owns
or is deemed to own (by reason of the attribution rules applicable under Section
424(d) of the Code) more than 10% of the combined voting power of all classes of
stock of the Company or any Parent Corporation and an Incentive Stock Option is
granted to such employee, the option price of such Incentive Stock Option (to
the extent required by the Code at the time of grant) shall be no less than 110%
of the Fair Market Value of the Stock on the date such Incentive Stock Option is
granted.
(2) OPTION TERM. The term of each Stock Option shall be fixed by the
Administrator, but no Stock Option shall be exercisable more than ten years
after the date such Stock Option is granted; PROVIDED, HOWEVER, that if an
employee owns or is deemed to own (by reason of the attribution rules of Section
424(d) of the Code) more than 10% of the combined voting power of all classes of
stock of the Company or any Parent Corporation and an Incentive Stock Option is
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granted to such employee, the term of such Incentive Stock Option (to the extent
required by the Code at the time of grant) shall be no more than five years from
the date of grant.
(3) EXERCISABILITY. Stock Options shall be exercisable at such time or
times and subject to such terms and conditions as shall be determined by the
Administrator at or after grant. The Administrator may provide, in its
discretion, that any Stock Option shall be exercisable only in installments, and
the Administrator may waive such installment exercise provisions at any time in
whole or in part based on such factors as the Administrator may determine, in
its sole discretion, including but not limited to in connection with any "change
in control" of the Company, as defined in any stock option agreement.
(4) METHOD OF EXERCISE. Subject to Section 5(3) above, Stock Options may
be exercised in whole or in part at any time during the option period, by giving
written notice of exercise to the Company specifying the number of shares to be
purchased, accompanied by payment in full of the purchase price in cash or its
equivalent as determined by the Administrator. As determined by the
Administrator, in its sole discretion, payment in whole or in part may also be
made (i) by means of any cashless exercise procedure approved by the
Administrator, (ii) in the form of unrestricted Stock already owned by the
optionee, or (iii) in the case of the exercise of a NonQualified Stock Option,
in the form of Restricted Stock or Performance Shares subject to an award
hereunder (based, in each case, on the Fair Market Value of the Stock on the
date the option is exercised); PROVIDED, HOWEVER, that in the case of an
Incentive Stock Option, the right to make payment in the form of already owned
shares may be authorized only at the time of grant. If payment of the option
exercise price of a Non-Qualified Stock Option is made in whole or in part in
the form of Restricted Stock or Performance Shares, the shares received upon the
exercise of such Stock Option (to the extent of the number of shares of
Restricted Stock or Performance Shares surrendered upon exercise of such Stock
Option) shall be restricted in accordance with the original terms of the
Restricted Stock or Performance Share award in question, except that the
Administrator may direct that such restrictions shall apply only to that number
of shares equal to the number of shares surrendered upon the exercise of such
option. An optionee shall generally have the right to dividends and any other
rights of a stockholder with respect to the Stock subject to the option only
after the optionee has given written notice of exercise, has paid in full for
such shares, and, if requested, has given the representation described in
paragraph (1) of Section 10.
The Administrator may require the voluntary surrender of all or a portion
of any Stock Option granted under the Plan as a condition precedent to the grant
of a new Stock Option. Subject to the provisions of the Plan, such new Stock
Option shall be exercisable at the price, during such period and on such other
terms and conditions as are specified by the Administrator at the time the new
Stock Option is granted; PROVIDED, HOWEVER, should the Administrator so require,
the number of shares subject to such new Stock Option shall not be greater than
the number of shares subject to the surrendered Stock Option. Consistent with
the provisions of Section 162(m), to the extent applicable, upon their
surrender, Stock Options shall be canceled and the shares previously subject to
such canceled Stock Options shall again be available for grants of Stock Options
and other awards hereunder.
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(5) LOANS. The Company may make loans available to Stock Option holders in
connection with the exercise of outstanding options granted under the Plan, as
the Administrshall (i) be evidenced by promissory notes entered into by the
Stock Option holders in favor of the Company, (ii) be subject to the terms and
conditions set forth in this Section 5(5) and such other terms and conditions,
not inconsistent with the Plan, as the Administrator shall determine, (iii) bear
interest, if any, at such rate as the Administrator shall determine, and (iv) be
subject to Board approval (or to approval by the Administrator to the extent the
Board may delegate such authority). In no event may the principal amount of any
such loan exceed the sum of (x) the exercise price less the par value (if any)
of the shares of Stock covered by the option, or portion thereof, exercised by
the holder, and (y) any federal, state, and local income tax attributable to
such exercise. The initial term of the loan, the schedule of payments of
principal and interest under the loan, the extent to which the loan is to be
with or without recourse against the holder with respect to principal or
interest and the conditions upon which the loan will become payable in the event
of the holder's termination of employment shall be determined by the
Administrator. Unless the Administrator determines otherwise, when a loan is
made, shares of Stock having a Fair Market Value at least equal to the principal
amount of the loan shall be pledged by the holder to the Company as security for
payment of the unpaid balance of the loan, and such pledge shall be evidenced by
a pledge agreement, the terms of which shall be determined by the Administrator,
in its discretion; PROVIDED; HOWEVER, that each loan shall comply with all
applicable laws, regulations and rules of the Board of Governors of the Federal
Reserve System and any other governmental agency having jurisdiction.
(6) NON-TRANSFERABILITY OF OPTIONS. Unless otherwise determined by the
Administrator subject to the limitations on transferability set forth in Rule
16b-3, no Stock Option shall be transferable by the optionee, and all Stock
Options shall be exercisable, during the optionee's lifetime, only by the
optionee. Notwithstanding the foregoing, an Incentive Stock Option shall not be
transferable except by will or the laws of descent and distribution, and shall
be exercisable, during the optionee's lifetime, only by the optionee.
(7) TERMINATION OF EMPLOYMENT OR SERVICE. If an optionee's employment with
or service as a director, consultant or advisor to the Company terminates by
reason of death, Disability or for any other reason, the Stock Option may
thereafter be exercised to the extent provided in the applicable subscription or
award agreement, or as otherwise determined by the Administrator, PROVIDED,
HOWEVER, that an optionee who has been granted an Incentive Stock Option and
whose employment has been terminated must exercise the Incentive Stock Option
within three months following such termination or within twelve months in the
event such termination is the result of optionee's disability.
(8) ANNUAL LIMIT ON INCENTIVE STOCK OPTIONS. To the extent that the
aggregate Fair Market Value (determined as of the date the Incentive Stock
Option is granted) of shares of Stock
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with respect to which Incentive Stock Options granted to an Optionee under this
Plan and all other option plans of the Company or its Parent Corporation become
exercisable for the first time by the Optionee during any calendar year exceeds
$100,000, such Stock Options shall be treated as Non-Qualified Stock Options.
SECTION 6. STOCK APPRECIATION RIGHTS AND LIMITED STOCK APPRECIATION RIGHTS.
(1) GRANT AND EXERCISE. Stock Appreciation Rights and Limited Stock
Appreciation Rights may be granted either alone ("Free Standing Rights") or in
conjunction with all or part of any Stock Option granted under the Plan
("Related Rights"). In the case of a Non-Qualified Stock Option, Related Rights
may be granted either at or after the time of the grant of such Stock Option. In
the case of an Incentive Stock Option, Related Rights may be granted only at the
time of the grant of the Incentive Stock Option.
A Related Right or applicable portion thereof granted in conjunction with
a given Stock Option shall terminate and no longer be exercisable upon the
termination or exercise of the related Stock Option, except that, unless
otherwise provided by the Administrator at the time of grant, a Related Right
granted with respect to less than the full number of shares covered by a related
Stock Option shall only be reduced if and to the extent that the number of
shares covered by the exercise or termination of the related Stock Option
exceeds the number of shares not covered by the Related Right.
A Related Right may be exercised by an optionee, in accordance with
paragraph (2) of this Section 6, by surrendering the applicable portion of the
related Stock Option. Upon such exercise and surrender, the optionee shall be
entitled to receive an amount determined in the manner prescribed in paragraph
(2) of this Section 6. Stock Options which have been so surrendered, in whole or
in part, shall no longer be exercisable to the extent the Related Rights have
been so exercised.
(2) TERMS AND CONDITIONS. Stock Appreciation Rights shall be subject to
such terms and conditions, not inconsistent with the provisions of the Plan, as
shall be determined from time to time by the Administrator, including the
following:
(a) Stock Appreciation Rights that are Related Rights ("Related
Stock Appreciation Rights") shall be exercisable only at such time or times and
to the extent that the Stock Options to which they relate shall be exercisable
in accordance with the provisions of Section 5 and this Section 6 of the Plan;
PROVIDED, HOWEVER, that no Related Stock Appreciation Right shall be exercisable
during the first six months of its term, except that this additional limitation
shall not apply in the event of death or Disability of the optionee prior to the
expiration of such six-month period.
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(b) Upon the exercise of a Related Stock Appreciation Right, an
optionee shall be entitled to receive up to, but not more than, an amount in
cash or that number of shares of Stock (or in some combination of cash and
shares of Stock) equal in value to the excess of the Fair Market Value of one
share of Stock as of the date of exercise over the option price per share
specified in the related Stock Option multiplied by the number of shares of
Stock in respect of which the Related Stock Appreciation Right is being
exercised, with the Administrator having the right to determine the form of
payment.
(c) Related Stock Appreciation Rights shall be transferable only
when and to the extent that the underlying Stock Option would be transferable
under paragraph (6) of Section 5 of the Plan.
(d) Upon the exercise of a Related Stock Appreciation Right, the
Stock Option or part thereof to which such Related Stock Appreciation Right is
related shall be deemed to have been exercised for the purpose of the limitation
set forth in Section 3 of the Plan on the number of shares of Stock to be issued
under the Plan, but only to the extent of the number of shares issued under the
Related Stock Appreciation Right.
(e) A Related Stock Appreciation Right granted in connection with an
Incentive Stock Option may be exercised only if and when the Fair Market Value
of the Stock subject to the Incentive Stock Option exceeds the exercise price of
such Stock Option.
(f) Stock Appreciation Rights that are Free Standing Rights ("Free
Standing Stock Appreciation Rights") shall be exercisable at such time or times
and subject to such terms and conditions as shall be determined by the
Administrator at or after grant; PROVIDED, HOWEVER, that no Free Standing Stock
Appreciation Right shall be exercisable during the first six months of its term,
except that this limitation shall not apply in the event of death or Disability
of the recipient of the Free Standing Stock Appreciation Right prior to the
expiration of such six-month period.
(g) The term of each Free Standing Stock Appreciation Right shall be
fixed by the Administrator, but no Free Standing Stock Appreciation Right shall
be exercisable more than ten years after the date such right is granted.
(h) Upon the exercise of a Free Standing Stock Appreciation Right, a
recipient shall be entitled to receive up to, but not more than, an amount in
cash or that number of shares of Stock (or any combination of cash or shares of
Stock) equal in value to the excess of the Fair Market Value of one share of
Stock as of the date of exercise over the price per share specified in the Free
Standing Stock Appreciation Right (which price shall be no less than 100% of the
Fair Market Value of the Stock on the date of grant) multiplied by the number of
shares of Stock in respect to which the right is being exercised, with the
Administrator having the right to determine the form of payment.
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(i) Free Standing Stock Appreciation Rights shall be transferable
only when and to the extent that a Stock Option would be transferable under
paragraph (6) of Section 5 of the Plan.
(j) In the event of the termination of employment or service of a
Participant who has been granted one or more Free Standing Stock Appreciation
Rights, such rights shall be exercisable at such time or times and subject to
such terms and conditions as shall be determined by the Administrator at or
after grant.
(k) Limited Stock Appreciation Rights may only be exercised within
the 30-day period following a "Change of Control" (as defined by the
Administrator in the agreement evidencing such Limited Stock Appreciation Right)
and, with respect to Limited Stock Appreciation Rights that are Related Rights
("Related Limited Stock Appreciation Rights"), only to the extent that the Stock
Options to which they relate shall be exercisable in accordance with the
provisions of Section 5 and this Section 6 of the Plan; PROVIDED, HOWEVER, that
no Related Limited Stock Appreciation Right shall be exercisable during the
first six months of its term, except that this additional limitation shall not
apply in the event of death or Disability of the optionee prior to the
expiration of such six-month period.
(l) Upon the exercise of a Limited Stock Appreciation Right, the
recipient shall be entitled to receive an amount in cash equal in value to the
excess of the "Change of Control Price" (as defined in the agreement evidencing
such Limited Stock Appreciation Right) of one share of Stock as of the date of
exercise over (A) the option price per share specified in the related
Stock Option, or (B) in the case of a Limited Stock Appreciation Right which is
a Free Standing Stock Appreciation Right, the price per share specified in the
Free Standing Stock Appreciation Right, such excess to be multiplied by the
number of shares in respect of which the Limited Stock Appreciation Right shall
have been exercised.
SECTION 7. RESTRICTED STOCK, DEFERRED STOCK AND PERFORMANCE SHARES.
(1) GENERAL. Restricted Stock, Deferred Stock or Performance Share awards
may be issued either alone or in addition to other awards granted under the
Plan. The Administrator shall determine the persons to whom, and the time or
times at which, grants of Restricted Stock, Deferred Stock or Performance Share
awards shall be made; the number of shares to be awarded; the price, if any, to
be paid by the recipient of Restricted Stock, Deferred Stock or Performance
Share awards; the Restricted Period (as defined in paragraph (3) hereof)
applicable to Restricted Stock or Deferred Stock awards; the performance
objectives applicable to Performance Share or Deferred Stock awards; the date or
dates on which restrictions applicable to such Restricted Stock or Deferred
Stock awards shall lapse during such Restricted Period; and all other conditions
of the Restricted Stock, Deferred Stock and Performance Share awards. The
Administrator may also condition the grant of Restricted Stock, Deferred Stock
awards or Performance Shares upon the exercise of Stock Options, or upon such
other criteria as the
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Administrator may determine, in its sole discretion. The provisions of the same
with respect to each recipient. In the discretion of the Administrator, loans
may be made to Participants in connection with the purchase of Restricted Stock
under substantially the same terms and conditions as provided in Section 5(5)
with respect to the exercise of Stock Options.
(2) AWARDS AND CERTIFICATES. The prospective recipient of a Restricted
Stock, Deferred Stock or Performance Share award shall not have any rights with
respect to such award, unless and until such recipient has executed an agreement
evidencing the award (a "Restricted Stock Award Agreement," "Deferred Stock
Award Agreement" or "Performance Share Award Agreement," as appropriate) and
delivered a fully executed copy thereof to the Company, within a period of sixty
days (or such other period as the Administrator may specify) after the award
date. Except as otherwise provided below in this Section 7(2), (i) each
Participant who is awarded Restricted Stock or Performance Shares shall be
issued a stock certificate in respect of such shares of Restricted Stock or
Performance Shares; and (ii) such certificate shall be registered in the name of
the Participant, and shall bear an appropriate legend referring to the terms,
conditions and restrictions applicable to such award.
The Company may require that the stock certificates evidencing Restricted
Stock or Performance Share awards hereunder be held in the custody of the
Company until the restrictions thereon shall have lapsed, and that, as a
condition of any Restricted Stock award or Performance Share award, the
Participant shall have delivered a stock power, endorsed in blank, relating to
the Stock covered by such award.
With respect to Deferred Stock awards, at the expiration of the Restricted
Period, stock certificates in respect of such shares of Deferred Stock shall be
delivered to the participant, or his legal representative, in a number equal to
the number of shares of Stock covered by the Deferred Stock award.
(3) RESTRICTIONS AND CONDITIONS. The Restricted Stock, Deferred Stock and
Performance Share awards granted pursuant to this Section 7 shall be subject to
the following restrictions and conditions:
(a) Subject to the provisions of the Plan and the Restricted Stock
Award Agreement, Deferred Stock Award Agreement or Performance Share Award
Agreement, as appropriate, governing such award, during such period as may be
set by the Administrator commencing on the grant date (the "Restricted Period"),
the Participant shall not be permitted to sell, transfer, pledge or assign
shares of Restricted Stock, Performance Shares or Deferred Stock awarded under
the Plan; PROVIDED, HOWEVER, that the Administrator may, in its sole discretion,
provide for the lapse of such restrictions in installments and may accelerate or
waive such restrictions in whole or in part, based on such factors and such
circumstances as the Administrator may determine, in its sole discretion,
including, but not limited to, the attainment of certain performance related
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goals, the Participant's termination of employment or service, death or
Disability or the occurrence of a "Change of Control" as defined in the
agreement evidencing such award.
(b) Except as provided in paragraph (3)(a) of this Section 7, the
Participant shall generally have, with respect to the shares of Restricted Stock
or Performance Shares, all of the rights of a stockholder with respect to such
stock during the Restricted Period. The Participant shall generally not have the
rights of a stockholder with respect to stock subject to Deferred Stock awards
during the Restricted period; PROVIDED, HOWEVER, that dividends declared during
the Restricted period with respect to the number of shares covered by a Deferred
Stock award shall be paid to the Participant. Certificates for shares of
unrestricted Stock shall be delivered to the Participant promptly after, and
only after, the Restricted Period shall expire without forfeiture in respect of
such shareistrator, in its sole discretion, shall otherwise determine.
(c) The rights of holders of Restricted Stock, Deferred Stock and
Performance Share awards upon termination of employment or service for any
reason during the Restricted Period shall be set forth in the Restricted Stock
Award Agreement, Deferred Stock Award Agreement or Performance Share Award
Agreement, as appropriate, governing such awards.
SECTION 8. AMENDMENT AND TERMINATION.
The Board may amend, alter, suspend or discontinue the Plan in any respect
at any time. Board approval must be accompanied by (i) shareholder approval in
those cases in which amendment, alteration or discontinuation requires
shareholder approval under applicable law or regulations or the requirements of
the principal exchange or interdealer quotation system on which the Common Stock
is listed or quoted and (ii) affected Participant's approval if the amendment,
alteration or discontinuation would adversely affect the Participant's rights
under any outstanding award.
The Administrator may amend the terms of any award theretofore granted,
prospectively and retroactively, but, subject to Section 3 above, no such
amendment shall impair the rights of any holder without his or her consent.
SECTION 9. UNFUNDED STATUS OF PLAN.
The Plan is intended to constitute an "unfunded" plan for incentive
compensation. With respect to any payments not yet made to a Participant by the
Company, nothing contained herein shall give any such Participant any rights
that are greater than those of a general creditor of the Company.
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SECTION 10. GENERAL PROVISIONS.
(1) The Company may require any person to whom an award is granted, or any
person to whom an award is transferred in accordance with the Plan, as a
condition of exercising or acquiring stock under any award, (1) to give written
assurances satisfactory to the Company as to such person's knowledge and
experience in financial and business matters and/or to employ a purchaser
representative reasonably satisfactory to the Company who is knowledgeable and
experienced in financial and business matters, and that he or she is capable of
evaluating, alone or together with the purchaser representative, the merits and
risks of exercising the award; and (2) to give written assurances satisfactory
to the Company stating that such person is acquiringtion of selling or otherwise
distributing the stock. The foregoing requirements, and any assurances given
pursuant to such requirements, shall be inoperative if (i) the issuance of the
shares upon the exercise or acquisition of stock under the award has been
registered under a then currently effective registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), or (ii) as to any
particular requirement, a determination is made by counsel for the Company that
such requirement need not be met in the circumstances under the then applicable
securities laws.
All certificates for shares of Stock delivered under the Plan shall be
subject to such stock transfer orders and other restrictions as the
Administrator may deem advisable under the rules, regulations and other
requirements of the Commission, any stock exchange upon which the Stock is then
listed, and any applicable federal or state securities law, and the
Administrator may cause a legend or legends to be placed on any such
certificates to make appropriate reference to such restrictions.
(2) Nothing contained in the Plan shall prevent the Board from adopting
other or additional compensation arrangements, subject to stockholder approval
if such approval is required; and such arrangements may be either generally
applicable or applicable only in specific cases. The adoption of the Plan shall
not confer upon any employee, consultant or advisor of the Company any right to
continued employment or service with the Company, as the case may be, nor shall
it interfere in any way with the right of the Company to terminate the
employment or service of any of its employees, consultants or advisors at any
time.
(3) Each Participant shall, no later than the date as of which the value
of an award first becomes includible in the gross income of the Participant for
federal income tax purposes, pay to
the Company, or make arrangements satisfactory to the Administrator regarding
payment of, by law to be withheld with respect to the award.
The obligations of the Company under the Plan shall be conditional on the making
of such payments or arrangements, and the Company shall, to the extent permitted
by law, have the right to deduct any such taxes from any payment of any kind
otherwise due to the Participant.
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(4) No member of the Board or the Administrator, nor any officer or
employee of the Company acting on behalf of the Board or the Administrator,
shall be personally liable for any action, determination, or interpretation
taken or made in good faith with respect to the Plan, and all members of the
Board or the Administrator and each and any officer or employee of the Company
acting on their behalf shall, to the extent permitted by law, be fully
indemnified and protected by the Company in respect of any such action,
determination or interpretation.
(5) During the terms of any award made hereunder, the Company shall keep
available at all times the number of shares of stock required to satisfy such
award.
(6) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares hereunder; provided, however, that this undertaking shall
not require the Company to register under the Securities Act either the Plan,
any award made hereunder or any stock issued or issuable pursuant to any such
award. If, after reasonable efforts, the Company is unable to obtain from any
such regulatory commission or agency the authority which counsel for the Company
deems necessary for the lawful issuance and sale of stock under the Plan, the
Company shall be relieved from any liability for failure to issue and sell stock
upon exercise of such award unless and until such authority is obtained.
SECTION 11. EFFECTIVE DATE OF PLAN.
The Plan became effective (the "Effective Date") on ___________, 1997, the
date the Company's stockholders formally approved the Plan.
SECTION 12. TERM OF PLAN.
No Stock Option, Stock Appreciation Right, Limited Stock Appreciation
Right, Restricted Stock, Deferred Stock or Performance Share award shall be
granted pursuant to the Plan on or after the tenth anniversary of the Effective
Date, but awards theretofore granted may extend beyond that date.
15
EXHIBIT 10.2
ANKLE & FOOT CENTERS OF AMERICA, L.L.C.
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of November 17, 1997 between Ankle & Foot Centers of
America, L.L.C. a Delaware limited liability corporation (the "Company"), and
Jack N. McCrary, (the "Executive"), and joined into for the purposes
hereinafter stated by American Medical Providers, Inc., a Delaware Corporation
("AMP").
In consideration of the premises and the respective covenants and
agreements of the parties herein contained, and intending to be legally bound
hereby, the parties agree as follows:
1. EMPLOYMENT. The Company hereby agrees to employ the Executive and the
Executive hereby agrees to serve the Company on the terms and conditions set
forth herein. In addition, the Executive and the Company hereby agree that
subject to and effective as of either of the following to occur: (a) the closing
of the proposed Initial Public Offering ("IPO") of American Medical Providers,
Inc., (formerly Podiatric Newco, Inc., ("AMP"), or (b) the sale or merger by
AMP of substantially all of the assets of AMP or by the Company's shareholders
of a controlling interest in AMP's stock, other than in connection with the IPO,
this Employment Agreement (the "Agreement") shall be assumed by "AMP")
and/or such company into which AMP is merged or by whom AMP is otherwise
acquired. Upon either of the events in (a) or (b) above, this Employment
Agreement shall supersede that certain letter agreement regarding employment
between the Company and Executive, dated as of N/A (the "Prior Agreement"),
and the Prior Agreement shall thereupon automatically terminate without further
obligation by either Executive or the Company. Upon AMP's assumption of this
Agreement, all references to the Company herein shall thereafter refer to AMP.
2. TERM OF EMPLOYMENT: DUTIES. From the period commencing on the date
hereof and ending immediately prior to the Effective Time (as defined in the S-1
registration filed by "AMP" in connection with its IPO (or in the event of a
sale or merger ("Sale or Merger") of the Company, as defined in the definitive
agreement associated therewith) the employment of the Executive shall be
governed by the terms and conditions set forth in the Prior Agreement. The term
of this Agreement (the "Term"), and Executive's employment with the Company
hereunder, shall commence at the Effective Time and, unless earlier terminated
in accordance with the terms hereof, shall continue until the fifth anniversary
of the Effective Time (such initial term of the Agreement referred to as the
"Initial Term"); PROVIDED, HOWEVER, that the Term shall automatically be
renewed for successive, additional five year periods at the end of the Initial
Term and each renewal term thereafter, unless either the Company or the
Executive provides at least one year's notice to the other of its intention not
to renew the Term; and PROVIDED, FURTHER, that if the "IPO", Sale, or Merger,
is terminated in accordance with its terms prior to the Effective Time or the
"IPO," the Sale or Merger is abandoned or otherwise does not close, (x) this
Agreement shall automatically terminate without further obligation by either
party hereto, (y) the terms and conditions set forth in this Agreement shall not
apply and (z) the employment of the Executive shall continue to be governed by
the terms and conditions set forth in the Prior Agreement.
During the Term, the Executive shall be employed as the President, and
Chief Executive Officer of the Company, and serve as Chairman of the Company's
Executive Committee, reporting to the Board of Directors of the Company, serving
the Board of Directors of the Company (the "Board") with the traditional
duties, responsibilities and authority of such office companies similar in size
to the Company including the duties authorized as is set forth on Exhibit B
attached hereto. Executive shall during the term hereof serve as a member of the
Board of Directors and will serve as its Chairman. The Executive agrees that he
shall perform his duties hereunder faithfully and to the best of his abilities
and in furtherance of the business of the Company and its subsidiaries and shall
devote substantially all of his business time, energy and attention to the
business of the Company and its subsidiaries. Notwithstanding the above, the
Company acknowledges and agrees that Executive will be permitted to devote a
reasonable amount of business time, energy, and attention to pursuit of
activities on behalf of the entities described on Exhibit 2, attached hereto and
pursue other business and personal endeavors that do not reasonably interfere
with his duties under this Agreement.
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3. COMPENSATION AND RELATED MATTERS.
(a) BASE SALARY. During the Term, the Company shall pay to the executive
an initial annual base salary, (the "Base Salary") as set forth on Exhibit A,
payable in accordance with the Company's normal payroll practices or as the
Company and the Executive may otherwise agree. The Base Salary shall be reviewed
by the Company annually and shall be subject to discretionary increase by the
Company from time to time, but shall not be decreased from the rate in effect at
any time and from time to time during the Term.
(b) ANNUAL PERFORMANCE BONUS. Executive shall be entitled to participate
in the Company's Executive Officer Performance Bonus Plan or any similar or
successor annual bonus plan of the Company, (the "Performance Bonus Plan") and
to receive an annual performance bonus upon the achievement of one or more
annual performance goals, (the "Performance Goals") in accordance with the
terms of the Performance Bonus Plan; PROVIDED, that Executive's annual target
bonus under the Performance Bonus Plan (the "Annual Target Bonus") shall not
be less than 75% of the Base Salary in effect at the time the Performance Goals
for such plan year are established.
(c) LONG-TERM INCENTIVE. The Executive shall be eligible to participate
in any long-term incentive compensation and/or stock option plans maintained
from time to time by the Company. In addition, pursuant to prior action of the
Stock Option Committee of the Board, Executive has previously been granted an
option, (the "Market Option") to purchase One Hundred Twenty-Five Thousand
(125,000) shares of the Company common stock, 001 par value, (the "Common
Stock") at an exercise price equal to the price to the public in connection
with AMP's IPO, with a term of 10 years from the date of grant. The Market
Option will vest twenty-five (25%) per annum on each of the first through fourth
anniversaries of the Effective Time; PROVIDED, that the Market Option will not
become exercisable in whole or in part in the event the Market Option is
terminated in accordance with its terms prior to the Effective Time or if the
IPO, Sale or Merger is abandoned or otherwise does not close; and PROVIDED,
FURTHER, that the Market Option shall be subject to the terms of the American
Medical Providers, Inc., 1997 Stock Incentive Plan and the stock option
agreement to be entered into in connection with the grant of the Market Option.
(d) BENEFITS. PERQUISITES AND EXPENSES. During the Term, the Executive
shall be eligible to participate in employee benefit and fringe benefit plans
and programs generally available to the executive officers of the Company and
such additional benefits as the Board may from time to time provide. In
addition, Executive shall be entitled to receive the personal benefits described
on Exhibit A hereto. Executive shall be entitled to reimbursement for business
expenses, including travel and entertainment; PROVIDED, that such reimbursement
shall be limited to reasonable and necessary expenses incurred by Executive in
connection with the performance of duties on behalf of the Company subject to:
(i) timely submission of a properly executed Company expense report form
accompanied by appropriate supporting documentation, and (ii) compliance with
Company policies and procedures governing business expense reimbursement and
reporting based upon principles and guidelines established by the Audit
Committee of the Board, including periodic audits by the Internal Audit
Department of the Company and/or the Audit Committee of the Board.
(e) RETIREMENT BENEFITS. The Executive shall be entitled to participate
in any Supplemental Executive Retirement Plan or any similar or successor plan,
(the "SERP") and in any tax qualified and any other supplemental pension plans
should such plans be generally available to the executive officers of the
Company.
4. TERMINATION OF EXECUTIVE. Prior to the expiration of the Term and
subject to the payment of the amounts required under Section 5, the Executive's
employment with the Company may be terminated, (a) by the Company for Cause, (as
defined herein) or without Cause, (b) by the Executive for or without Good
Reason (as defined herein), (c) by reason of the Executive's death or
Disability, (as defined herein) or (d) by the mutual written consent of the
parties hereto. For purposes of this Agreement:
(i) "Cause" means; (A) conviction of, plea of guilty, or voluntary
settlement of embezzlement, theft, or fraud involving the Company; (B)
actions which have had or will likely have a material
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adverse financial effect on the Company as a whole for an extended period
of time, where appropriate evidence exists that such actions are directly
attributable to them; (i) gross management negligence or repeated
ineptitude of the Executive and/or; (ii) deliberate refusal of the
Executive to follow the instructions or directions of the Board; (C)
conviction of or a plea of guilty or NOLO CONTENDERE to a felony, other
than a felony involving a moving violation; (D) violation of the
non-compete or confidentiality provisions of this Agreement, PROVIDED that
no such violation will be deemed to have occurred if, within 30 days
following receipt by Executive of a notice from the Board identifying the
violation, the Executive, (i) cures the violation, and (ii) establishes
that the violation was unintentional and not reasonably likely to result in
harm to the Company, in each case to the reasonable satisfaction of the
Board; (E) material incapacitation or repeated absence from work due to
reckless and self-abusive behavior or conduct, such as alcoholism and/or
drug abuse, which renders Executive incapable of performing his duties;
PROVIDED, that physical or mental disability due to injury or disease shall
not be grounds for termination for Cause; (F) gross insubordination or
persistent refusal to follow reasonable instructions; or (G) inability to
perform the duties of the Executive's office or consistent failure to
perform in accordance with reasonable expectations due to incompetence, or
due to repeated and unexcused absence from work having a material adverse
effect on the Company provided that mere failure to achieve performance
targets or expectations (including without limitation, those set forth in
the Performance Bonus Plan) shall not in and of itself constitute Cause
hereunder.
For purposes of this Agreement, the Board shall have 60 days to
terminate the Executive for Cause following the date on which the Board
discovers the existence of a specific set of facts that, in the aggregate,
then constitute Cause, after which period no Cause with respect to such
specific set of facts shall be deemed to exist; PROVIDED. that the
repetition or reoccurrence of the same or a similar set of facts shall
constitute separate ground for termination for Cause.
(ii) "Disability" means the Executive's absence from the full-time
performance of his duties with the Company for one hundred eighty (180)
continuous days or more within any period of 12 consecutive months as a
result of the Executive's incapacity due to mental or physical illness;
PROVIDED, that during any period prior to the termination of Executive's
employment by reason of Disability in which Executive is absent from the
full-time performance of his duties with the Company due to Disability, the
Company shall continue to pay Executive his Base Salary at the rate in
effect at the commencement of such period of Disability;
(iii) "Good Reason" means, without the Executive's express written
consent, the occurrence of any of the following events:
(A) a reduction by the Company in the Executive's Base Salary or
Annual Target Bonus in effect from time to time; (B) a material
reduction in the aggregate level of participation in and/or compensation
and benefit opportunities under all other compensation and employee
benefit plans in which Executive is entitled to participate from time to
time; PROVIDED, HOWEVER,that changes affecting the participation in or
benefits under such plans (other than the Performance Bonus Plan, any
SERP and the benefits described in Exhibit (A)) with respect to
similarly situated executives of the Company shall not constitute Good
Reason hereunder; (C) a reduction in the Executive's titles, duties or
authority with the Company; (D) notification by the Company of its
intention to renew this Agreement pursuant to the provisions of Section
2; (E) the termination of the Executive's employment by the executive
for any reason within 12 months following a Change in Control (as
defined herein); (F) relocation of the Company's Corporate offices by
more than 25 miles from its present location at 3555 Timmons Lane,
Houston, Texas 77027; (G) failure of Executive to be elected to the
Board of Directors of the Company or to be elected its Chairman; (H)
encroachment by the Board on the Executives right to manage the Company
as set forth on Exhibit B; or (1) a change in who Executives reports to
occurs.
(iv) "Change in Control," means the occurrence of any one of the
following events:
(A) any "person", (as such term is defined in Section 3(a)(9) of
the Securities Exchange Act of 1934, (the "Exchange Act") and as used
in Sections 13(d)(3) and 14(d)(2) of the
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Exchange Act) becomes an Acquiring Person, (as such term is defined in
the Company's Shareholder Protection Rights Agreement to be adopted at
the Effective Time) or any person that is not bound by the Shareholder
Agreement of the Company to be entered into in connection with the
Merger, (the "Shareholder Agreement") becomes the beneficial owner (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of securities of the Company representing 25% or more of the undiluted
total voting power of the Company's then outstanding securities eligible
to vote for the election of members of the Board, (the "Company Voting
Securities"); PROVIDED, HOWEVER, that no event described in the
immediately preceding clause shall be deemed to constitute a Change in
Control by virtue of any of the following: (i) an acquisition of Company
Voting Securities by the Company and/or one or more direct or indirect
majority-owned subsidiaries of the Company, (ii) an acquisition of
Company Voting Securities by any employee benefit plan sponsored or
maintained by the Company or any corporation controlled by the Company,
(iii) an acquisition by any underwriter temporarily holding securities
pursuant to an offering of such securities, or (iv) any acquisition by
the Executive or any "group", (as such term is defined in Rule 3d-5
under the Exchange Act) of persons including the Executive; or
(B) Individuals who, at the beginning of any period of twenty-four
(24) consecutive months, constitute the Board, (the "Incumbent Board")
cease for any reason to constitute at least a majority thereof;
PROVIDED, HOWEVER, that any person becoming a director subsequent to the
beginning of such twenty-four (24) month period, whose election, or
nomination for election, by the Company's shareholders was approved by
either, (i) the Board consistent with the terms of the Shareholder
Agreement, during the period the Shareholder Agreement is in effect, or
(ii) a vote of at least 60% of the directors comprising the Incumbent
Board (either by a specific vote or by approval of the proxy statement
of the Company in which such person is named as a nominee for director,
without objection to such nomination) shall be, for purposes of this
paragraph (B), considered as though such person were a member of the
Incumbent Board; PROVIDED, FURTHER, that no individual initially elected
or nominated as a director of the Company as a result of an actual or
threatened election contest with respect to directors of any other
actual or threatened solicitation of proxies or consents by or on behalf
of any person other than the Board shall be deemed to be a member of the
Incumbent Board; or
(C) there is consummated a merger or consolidation of the Company
or a subsidiary thereof with or into any other corporation other than a
merger or consolidation which would result in the holders of the voting
securities of the Company outstanding immediately prior thereto holding
securities which, in combination with the ownership of any trustee or
other fiduciary holding securities under an employee benefit plan of the
Company, represent immediately after such merger or consolidation at
least 60% of the combined voting power of the then outstanding voting
securities of either the Company or the other entity which survives such
merger or consolidation or any parent of such other entity; or
(D) the stockholders of the Company approve, (i) a plan of
complete liquidation or dissolution of the Company, or (ii) an agreement
for the sale or disposition by the Company of all or substantially all
the Company's assets.
5. PAYMENTS UPON TERMINATION OF EXECUTIVE.
(a) If the employment of the Executive shall be terminated other than by
reason of death or Disability, (i) by the Company (other than for Cause), or
(ii) by the Executive for Good Reason, then the Company shall pay or provide to
the Executive, (or the Executive's beneficiary or estate):
(1) within thirty (30) days following the date of such termination of
employment ("Termination Date"), a lump-sum cash amount equal to the sum of,
(i) the Executive's unpaid Base Salary through the Termination Date, (ii) any
accrued but unpaid annual bonus under the Performance Bonus Plan in respect of
the annual bonus period preceding the bonus period in which the Termination Date
occurs, (iii) any unpaid reimbursable business expenses properly incurred
through the Termination Date, and (iv) a bonus payment equal to the Executive's
Annual Target Bonus in the year of termination, multiplied by a fraction the
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numerator of which is the number of months in the bonus year of termination in
which the Executive has worked at least one day and the denominator of which is
12;
(2) within thirty (30) days following the Termination Date, a lump-sum
cash amount equal to the greater of; (A) the Executive's then Base Salary
payable over the remainder of the Term plus a bonus equal to the Executive's
Annual Target Bonus in the year of termination multiplied by a fraction the
numerator of which is the number of complete months remaining in the Term and
the denominator of which is 12, or (B) 3.0 times the sum of: (i) the Executive's
annual rate of Base Salary as of the Termination Date plus, (ii) the Annual
Target Bonus for the year in which the Termination Date occurs, (in each such
case, Executive's Base Salary and Annual Target Bonus being determined without
taking into account any reductions thereto constituting Good Reason).
(3) for a period terminating on the earlier of; (A) the commencement of
the provision of substantially equivalent benefits by a new employer; or (B) the
later of, (i) the last day of the Term, or (ii) twenty-four (24) months
following the Termination Date, the Company shall continue to keep in full force
and effect, (or otherwise provide) all policies of medical, accident, disability
and life insurance with respect to the Executive and his dependents with
substantially the same level of coverage, upon substantially the same terms and
otherwise substantially to the same extent as such policies shall have been in
effect immediately prior to the Termination Date, and, as applicable, the
Company and the Executive shall share the costs of the continuation of such
insurance coverage in the same proportion as such costs were shared immediately
prior to the date of termination;
(4) for purposes of determining final average compensation, (or making any
similar calculation) and years of service, (for purposes of eligibility, vesting
and benefit accrual) under any tax-qualified of supplemental defined benefit
retirement plan, (including without limitation any SERP) Executive shall be
deemed to have remained employed by the Company hereunder until the end of the
Term and to have received his then current Base Salary and Annual Target Bonus
through the end of the Term; PROVIDED, that to the extent such benefits cannot
be accrued under and paid from any tax-qualified pension plan, such benefits
shall be accrued under and paid from any SERP or other supplemental plan.
(5) all options to purchase Common Stock held by the Executive shall
immediately become fully vested and exercisable and shall remain exercisable
until the later of; (A) the date that is 24 months following the Termination
Date; and (B) the expiration of the stated term of such options; and
(b) If the employment of the Executive shall be terminated, (i) by reason
of the Executive's death or Disability, (ii) by the Company for Cause, (iii) by
the Executive without Good Reason, or (iv) by the mutual written consent of the
parties hereto, (each a "Non-qualifying Termination"), then the Company shall
pay to the Executive (or the Executive's beneficiary or estate) within thirty
(30) days following the Termination Date a lump-sum cash amount equal to the sum
of the Executive's unpaid Base Salary through the Termination Date plus any
bonus payments which have been earned or become payable, to the extent not
theretofore paid, plus any unpaid reimbursable business expenses properly
incurred through the Termination Date. In addition, Executive (or the
Executive's beneficiary or estate) shall have no less than ninety days following
the termination of his employment pursuant to a Non-qualifying Termination to
exercise any outstanding options to the extent vested and exercisable as of the
Termination Date. If the employment of the Executive shall be terminated, by
reason of the Executive's death or Disability, for a period terminating on the
earlier of; (A) the commencement of the provision of substantially equivalent
benefits by a new employer; or (B) the later of, (i) the last day of the Term,
or (ii) twenty-four (24) months following the Termination Date, the Company
shall continue to keep in full force and effect, (or otherwise provide) all
policies of medical, accident, disability and life insurance with respect to the
Executive and his dependents with substantially the same level of coverage, upon
substantially the same terms and otherwise substantially to the same extent as
such policies shall have been in effect immediately prior to the Termination
Date, and, as applicable, the Company and the Executive shall share the costs of
the continuation of such insurance coverage in the same proportion as such costs
were shared immediately prior to the Termination Date;
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6. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Notwithstanding anything in this Agreement to the contrary, in the
event that any payment or distribution by the Company, by any affiliate of the
Company or by any person whose actions result in a change in control of the
Company, (to the extent the Company approves of the arrangements pursuant to
which the payment by such person is made to the Executive) to or for the benefit
of the Executive, (whether paid or payable or distributed or distributable
pursuant to the terms of the Agreement or otherwise, but determined without
regard to any additional payments required under this Section 6), (a
"Payment") would be subject to the excise tax imposed by Section 4999 of the
Code, or any interest or penalties are incurred by the Executive with respect to
such excise tax, such excise tax, together with any such interest and penalties,
are hereinafter collectively referred to as the "Excise Tax") then the
Executive shall be entitled to receive an additional payment, (a "Gross-Up
Payment") in an amount such that, after payment by the Executive of all taxes,
(including any interest or penalties imposed with respect to such taxes)
including, without limitation, any income and employment taxes and Excise Tax,
imposed upon the Gross-Up Payment but before deduction for any federal, state or
local income or other tax upon the Payments, the Executive will retain a net
amount equal to the sum of, (i) the Payments, and (ii) an amount equal to the
product of any deductions, (or portions thereof) disallowed because of the
inclusion of the Gross-Up Payment in the Executive's adjusted gross income for
federal income tax purposes and the highest applicable marginal rate of federal
income taxation for the calendar year in which the Gross-Up Payment is to be
made. For purposes of determining the amount of the Gross-Up Payment, the
Executive shall be deemed to, (1) pay applicable federal income taxes at the
highest applicable marginal rate of federal income taxation (including
surcharges) for the calendar year in which the Gross-Up Payment is to be made,
(2) pay applicable state and local income taxes at the highest applicable
marginal rate of taxation, (including surcharges) for the calendar year in which
the Gross-Up Payment is to be made, net of the maximum reduction in federal
income taxes which could be obtained from deduction of such state and local
taxes, and (3) have otherwise allowable deductions for federal income tax
purposes at least equal to those disallowed because of the inclusion of the
Gross-Up Payment in the Executive's adjusted gross income.
(b) Subject to the provisions of Section 6(a), all determinations required
to be made under this Section 6, including whether and when a Gross-Up Payment
is required and the amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination shall be made by the public
accounting firm that is retained by the Company as of the date immediately prior
to the change in control, (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the Executive within fifteen
(15) business days of the receipt of notice from the Company or the Executive
that there has been a Payment, or such earlier time as is requested by the
Company, (collectively, the "Determination"). In the event that the Accounting
Firm is serving as accountant or auditor for the individual, entity or group
effecting the change in control, the Executive may appoint another nationally
recognized public accounting firm reasonably acceptable to the Company to make
the determinations required hereunder, (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All reasonable fees and expenses
of the Accounting Firm shall be borne solely by the Company and, subject to
applicable law and obligation to the Company's stockholders, the Company shall
enter into any agreement reasonably requested by the Accounting Firm that is
generally recognized as standard in connection with the performance of the
services hereunder. The Gross-Up Payment under this Section 6 with respect to
any Payment shall be made no later than thirty (30) days following the date of
such Payment. If the Accounting Firm determines that no Excise Tax is payable by
the Executive, it shall furnish the Executive with a written opinion to such
effect, and to the effect that failure to report the Excise Tax, if any, on the
Executive's applicable federal income tax return should not result in the
imposition of a negligence or similar penalty. The Determination by the
Accounting Firm shall be binding upon the Company and the Executive. As a result
of uncertainty in the application of Section 4999 of the Code at the time of the
Determination, it is possible that Gross-Up Payments which will not have been
made by the Company should have been made ("Underpayment") or Gross-Up
Payments are made by the Company which should not have been made,
("Overpayment") consistent with the calculations required to be made
hereunder. In the event that the Executive thereafter is required to make
payment of any additional Excise Tax, the Accounting Firm shall
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determine the amount of the Underpayment that has occurred and any such
Underpayment, (together with interest at the rate provided in Section
1274(b)(2)(B) of the Code) shall be promptly paid by the Company to or for the
benefit of the Executive. In the event the amount of the Gross-Up Payment
exceeds the amount necessary to reimburse the Executive for his Excise Tax, the
Accounting Firm shall determine the amount of the Overpayment that has been made
and any such Overpayment, (together with interest at the rate provided in
Section 1274(b)(2) of the Code) shall be promptly paid by the Executive to or
for the benefit of the Company. The Executive shall cooperate, to the extent his
reasonable expenses in connection therewith are reimbursed by the Company, with
any reasonable requests by the Company in connection with any contests or
disputes with the Internal Revenue Service in connection with the Excise Tax.
7. WITHHOLDING TAXES. The Company shall have the right to withhold from
any and all payments due to the Executive, (or his beneficiary or estate)
hereunder all taxes which, by applicable federal, state, local or other law, the
Company is required to withhold therefrom.
8. SUCCESSORS: BINDING AGREEMENT.
(a) This Agreement is personal in nature and none of the parties hereto
shall, without the consent of the other, assign, or transfer this Agreement or
any rights or obligations hereunder; PROVIDED, that in the event of the merger,
consolidation, transfer or sale of substantially all of the assets of the
Company with or to any other individual or entity, this Agreement shall, subject
to the provisions hereof, be binding upon and inure to the benefit of such
successor and such successor shall discharge and perform all the promises,
covenants, duties and obligations of the Company hereunder, all references
herein to the "Company" shall refer to such successor.
(b) This Agreement shall inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive shall
die while any amounts remain payable to the Executive hereunder, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to such person or persons appointed in writing by the
Executive to receive such amounts or, if no person is so appointed, to the
Executive's estate.
9. RESOLUTION OF DISPUTES; LEGAL FEES: NO MITIGATION.
(a) Except as provided in Sections 10 and 11, all disputes hereunder shall
be settled by final, binding arbitration, conducted before a panel of three (3)
arbitrators in Texas in accordance with the rules of the American Arbitration
Association then in effect. Judgment on the arbitration award may be entered in
any court having jurisdiction. The Company shall bear the expenses of such
arbitration.
(b) If any contest or dispute shall arise under this Agreement involving
termination of the Executive's employment with the Company or involving the
failure or refusal of the Company to perform fully in accordance with the terms
hereof, the Company shall advance and reimburse the Executive, on a current
basis, all legal fees and expenses, if any, incurred by the Executive in
connection with such contest or dispute; PROVIDED,that the Executive agrees to
return any advanced or reimbursed expenses to the extent the arbitrators, (or
the court, in the case of a dispute described in Section 10 or 11) determine
that the Company has prevailed as to the material issues raised in determination
of the dispute.
(c) The Company's obligation to make any payments provided for in this
Agreement to the Executive and otherwise to perform its obligations hereunder
shall not be affected by any setoff, counterclaim, recoupment, defense or other
claim, right or action which the Company may have against the Executive or
others. In no event shall the Executive be obligated to seek other employment or
take other action by way of mitigation of the amounts payable to the Executive
under any of the provisions of this Agreement, and such amounts shall not be
reduced whether or not the Executive obtains other employment.
10. NON-COMPETITION.
(a) DISCLOSURE. The Executive has disclosed to the Board, in writing, all
heathcare-related interests, investments, or business activities, whether as
proprietor, stockholder, partner, co-venturer, director, officer, employee,
independent contractor, agent, consultant, or in any other capacity or manner
whatsoever. The
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Executive shall notify the Board, in writing, of any changes in or additions to
such interests, activities or investments permitted in accordance with terms of
this Agreement, within 15 days of such change or addition.
(b) PROHIBITED ACTIVITY. Without the written consent of a majority of the
Independent Directors, the Executive may not engage in any of the following
actions during the period that is; (A) prior to the Executive's termination of
employment with the Company; (B) within two years following the termination of
his employment with the Company during the Initial Term is such termination is
by the Company for Cause or by the Executive other than for Good Reason; and (C)
within one year following his termination of employment during the Term but
after the Initial Term of such termination is by the Company for Cause or by the
Executive other than Good Reason.
(i) own, either directly or indirectly, any interest in any business that
competes with the "Primary Business" in which the Company or any subsidiary or
affiliate is engaged, within a radius of 20 miles from any site, facility, or
location which is owned, managed or operated by or affiliated with the Company
or any of its subsidiaries and affiliates, including Podiatric Physician
practices of any kind. For purposes of this Agreement, "Primary Business"
shall mean the delivery of Podiatric healthcare services in markets where the
Company or its subsidiaries own, operate or manage Physician Practices or
Ambulatory Surgery Centers. These Podiatric healthcare services can include but
are not limited to; (A) individual Podiatric Physician Practices and/or
Podiatric physician-based organizations such as primary care and specialty
clinics, Podiatric Physician-hospital organizations ("PMOs") or medical
service organizations ("MSOs"), or Podiatric Physician medical groups; and (B)
ambulatory programs such as home health care, ambulatory surgery, occupational
and sports medicine centers, and other diagnostic, rehabilitative and treatment
services for Podiatric patients. Some of these services, sites and facilities
may be located in satellite areas for the purpose of extending the Physician
Practice's geographic service area and to serve as access points and/or referral
sources for either the local delivery system or the Physician Practice's
geographic service area and to serve as access points and/or referral sources
for either the local delivery system or the Physician Practice's. The Board may
modify, from time to time, the definition of Primary Business to include any
additional Podiatric business or service in which the Company may engage during
the Term or to exclude any business or service in which the Company ceases to
engage. The definition of "Primary Business" may also be modified to include
any Podiatric business or service into which, as of the Termination Date, the
Company definitively intends to expand, regardless of whether such expansion
actually occurs after the Executive's termination. For purposes of the preceding
sentence, the date on which a modification of the definition of "Primary
Business" shall be effective shall be the date on which the Executive is
provided written notice of such modification, (the "Notice Date") PROVIDED,
HOWEVER,that no such modification as to which notice is provided on or after the
Termination Date shall be effective against the Executive; and PROVIDED,
FURTHER, that no such modification shall be effective with respect to any
interests, investments or business activities engaged in by Executive prior to
the Notice Date of such modification and properly disclosed prior to such Notice
Date pursuant to Section 10(a);
(ii) participate or serve, either directly or indirectly, whether as a
proprietor, stockholder, partner, co-venturer, director, officer, employee,
independent contractor, agent, consultant, or in any other capacity or manner
whatsoever in any business or service activity that competes with the Primary
Business;
(iii) directly or indirectly, solicit or recruit any individual employed
by the Company, its subsidiaries or affiliates for the purpose of being employed
by him or by any competitor of the Company on whose behalf he is acting as an
agent, representative or employee, or convey any confidential information or
trade secrets regarding other employees of the Company, its subsidiaries or
affiliates to any other person; or
(iv) directly or indirectly, influence or attempt to influence customers
of the Company or any of its subsidiaries or affiliates to direct their business
to any competitor of the Company; PROVIDED, HOWEVER, that neither, (i) the
"beneficial ownership" by Executive, either individually or as a member of a
"group," as such terms are used in Rule 13d under the Exchange Act, as a
passive investment, of not more than five percent (5%) of the voting stock of
any publicly held corporation, nor (ii) the beneficial ownership by
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Executive of any interest described in the first sentence of Section 10(a) and
properly and timely disclosed in accordance with the terms therewith, shall
alone constitute a violation of this Agreement.
In the event that the Executive engages in the conduct proscribed by this
Section 10, the Executive agrees to repay any lump-sum severance amount received
pursuant to Section 5 of this Agreement, and all outstanding stock options held
by the Executive shall expire as of the date of the Executive's commencement of
such proscribed conduct. It is further expressly agreed that the Company will or
would suffer irreparable injury if Executive were to compete with the Company or
any subsidiary or affiliate in violation of this Agreement and that the Company
would by reason of such competition be entitled to preliminary or injunctive
relief in a court of appropriate jurisdiction, and Executive further consents
and stipulates to the entry of such preliminary or injunctive relief in such a
court prohibiting Executive from competing with the Company or any subsidiary or
affiliate in violation of this Agreement upon an appropriate finding by such
court that Executive has violated this Section 10.
(c) UNENFORCEABLE PROVISIONS. It is the desire and the intent of the
parties that the provisions of this Section 10 shall be enforceable to the
fullest extent permissible under applicable law and public policy. Accordingly,
if this Section 10 or any portion thereof shall be adjudicated to be invalid or
unenforceable whether because of the duration and scope of the covenants set
forth herein or otherwise, the length and scope of the restrictions set forth in
this Section 10 shall be reduced to the extent necessary so that this covenant
may be enforced to the fullest extent possible under applicable law.
11. CONFIDENTIAL INFORMATION. The Executive acknowledges that in his
employment hereunder, and during prior periods of employment with the Company
and/or its subsidiaries, he has occupied and will continue to occupy a position
of trust and confidence. The Executive shall not, except as may be required to
perform his duties hereunder or as required by applicable law, until the
expiration of the applicable periods described in Section 10(b) or until such
information shall have become public other than by the Executive's unauthorized
disclosure, disclose to others or use, whether directly or indirectly, any
Confidential Information regarding the Company, its subsidiaries and affiliates.
"Confidential Information" shall mean information about the Company, its
subsidiaries and affiliates, and their respective clients and customers that is
not publicly disclosed by the Company or otherwise generally available to
members of the public seeking such information and that was learned by the
Executive in the course of his employment by the Company, its subsidiaries and
affiliates, including, (without limitation) any proprietary knowledge, trade
secrets, data, formulae, information and client and customer lists and all
papers, resumes, and records, (including computer records) of the documents
containing such Confidential Information. The Executive acknowledges that such
Confidential Information is specialized, unique in nature and of great value to
the Company, its subsidiaries and affiliates, and that such information gives
the Company, its subsidiaries and affiliates a competitive advantage. The
Executive agrees to deliver or return to the Company, at the Company's request
at any time or upon termination or expiration of his employment or as soon
thereafter as possible, all documents, computer tapes and disks, records, lists,
data, drawings, prints, notes and written information, (and all copies thereof)
furnished by the Company, its subsidiaries or affiliates or prepared by the
Executive during the term of his employment by the Company, its subsidiaries and
affiliates.
In the event that the Executive engages in any conduct proscribed by this
Section 11, the Executive agrees to repay any lump-sum severance amount received
pursuant to Section 5 of this Agreement, and all outstanding stock options held
by the Executive shall expire as of the date of the Executive's commencement of
such proscribed conduct. It is further expressly agreed that the Company will or
would suffer irreparable injury if Executive were to disclose or threaten to
disclose Confidential Information regarding the Company or any subsidiary or
affiliate in violation of this Agreement or otherwise fail to comply with the
provisions of this Section 11, and that the Company would, by reason of such
disclosure or threatened disclosure or other failure to comply, be entitled to
preliminary or permanent injunctive relief in a court of appropriate
jurisdiction, and Executive further consents and stipulates to the entry of such
preliminary or permanent injunctive relief in such a court prohibiting Executive
from disclosing Confidential Information in violation of this Agreement or
otherwise requiring Executive to comply with the provisions of this Section 11
upon an appropriate finding by such court that Executive has violated this
Section 11.
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12. NOTICE. For the purposes of this Agreement, any notices, demands and
all other communications required or permitted hereunder shall be in writing and
shall be deemed to have been duly given upon; (A) transmitter's confirmation of
a receipt of a facsimile transmission; (B) confirmed delivery by a standard
overnight carrier; or (C) the expiration of five business days after the day
when mailed by certified or registered mail, postage prepaid, addressed as
follows, (or at such other address as the parties hereto shall specify by like
notice);
If to Executive: Jack N. McCrary
3555 Timmons Lane, Suite 1550
Houston, TX 77027
If to Company: American Medical Providers, Inc.
3555 Timmons Lane, Suite 1550
Houston, Texas 77027
Attention: Chief Executive Officer
13. AMENDMENT WAIVER. No provisions of this Agreement may be waived,
modified or discharged unless such waiver, modification or discharge is agreed
to in a written document signed by the Executive and such officer of the
Company, as may be specifically designated by the Board. No waiver by either
party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement.
14. ENTIRE AGREEMENT. This Agreement and Exhibit A hereto set forth the
entire agreement of the parties hereto in respect of the subject matter
contained herein and supersede all prior agreements, promises, covenants,
arrangements, communications, representations or warranties, whether oral or
written, by any officer, employee or representative of any party hereto.
15. GOVERNING LAW: VENUE: VALIDITY. The interpretation, construction and
performance of this Agreement shall be governed by and construed and enforced in
accordance with the internal laws of the State of Texas without regard to the
principle of conflicts of laws and, at the election of the Executive, the venue
of any dispute arising under this Agreement shall be Texas. The invalidity or
unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement, which other
provisions shall remain in full force and effect.
16. HEADINGS. Section headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose.
17. SEVERABILITY. In the event that a court of competent jurisdiction
determines that any portion of this Agreement is in violation of any statute or
public policy, only the portions of this Agreement that violate such statute or
public policy shall be stricken. All portions of this Agreement that do not
violate any statute or public policy shall continue in full force and effect.
Further, any court order striking any portion of this Agreement shall modify the
stricken terms as narrowly as possible to give as much effect as possible to the
intentions of the parties under this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day of December, 1997.
Ankle and Foot Centers of America,
LLC.
By: /s/WAYNE A. BERTSCH
Name: Wayne A. Bertsch
Title:
Executive: /s/JACK N. McCRARY
Joined into for the purpose hereabove stated by American Medical Providers,
Inc., this day of December, 1997.
By: /s/WAYNE A. BERTSCH
Name: Wayne A. Bertsch
Title:
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EXHIBIT A
COMPENSATION AND LEAVE POLICIES
BASE COMPENSATION
Commencing with the Initial Public Offering (the "IPO") Date (the "IPO
Date") of AMP, (or the Sale Merger of AMP's Shares other than the IPO ("Sale
or Merger Date"), Executive shall be paid by the Company a base salary of not
less than Three Hundred Thousand Dollars, ($300,000.00) per annum. In the event
that AMP successfully completes its IPO or there is a Sale or Merger, (other
than the IPO) AFCA will pay to Executive the sum of $300,000 for services
rendered prior to the IPO Date, (or the Sale or Merger Date, if appropriate) and
AMP will reimburse AFCE therefor as part of the IPO or Sale or Merger.
INVENTIVE COMPENSATION
Executive shall participate in the Company's Executive Officers Performance
Plan with his annual "Target Bonus" not being less than 75% of his Base
Salary.
LEAVE-VACATION AND HOLIDAYS
Executive shall be entitled to leave of six (6) weeks per annum, to be
taken in accordance with Employer's regular vacation policies. Executive shall
be entitled to at least nine (9) paid holidays per annum in accordance with
Employer regular paid holidays policies.
BENEFITS
Health Insurance including major medical for personal, family and
dependents at no cost to Executive.
Life Insurance equivalent to four times Executive salary.
Disability insurance equivalent to 60% of Base Salary upon permanent
disability.
OTHER PAYMENTS:
Executive shall be reimbursed up to $5,000 for the cost of an annual health
examination.
Executive shall receive a minimum of $1,000 per month as an automobile
allowance.
Executive shall be reimbursed up to $300.00 per month for membership dues.
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EXHIBIT B
AMERICAN MEDICAL PROVIDERS, INC
("PARENT")
SUMMARY OF TERMS OF
EMPLOYMENT AGREEMENTS
(SUBJECT TO NEGOTIATIONS WITH
NAMED EXECUTIVES)
MANAGEMENT DUTIES AND AUTHORITY: Mr. McCrary shall serve as a member of
and Chairman of the Parent Board of Directors, as President and chief Executive
Officer of Parent, ("CEO") and Chairman of the Executive Committee of the
Parent Board, ("Chairman").
EXCLUSIVE AUTHORITIES: In his capacity as CEO, Mr. McCrary shall, subject
to the oversight of the Parent Board, have exclusive authority and
responsibility for managing the day to day operations of Parent and its
subsidiaries, including the exclusive right to authorize Parent to engage in the
following actions:
1. relocation of the corporate offices of Parent;
2. any transaction involving capital expenditures up to $5 million
provided there is cash on hand at the Parent for such expenditure;
3. the determination of the compensation of and employment and
corporate policies applicable to employees of Parent and its subsidiaries
to the extent that such determination is consistent with a budget that has
been approved by the Parent Board and implementation of the corporate
budget and controlling corporate expenses;
4. approval of the selection of the senior lender participants and
agent bank in any corporate financing; and
5. presentation of proposals of the executive officers of Parent to
the Parent Board or any Committee thereof.
RESTRICTIONS ON MANAGEMENT AUTHORITY: Mr. McCrary shall not be permitted
to use any of his authority as CEO and Chairman to cause Parent to engage any of
the following activities without first obtaining the consent of the Parent
Board:
-- issuing debt obligations of Parent, except with respect to
acquisitions of physician's practices, and provided that the total
consideration in debt, cash, and stock is less that $10.0 million dollars.
-- issuing any equity securities of Parent, except with respect to
acquisitions of physicians practices, and provided that the total
consideration in debt, cash, and stock is less than $10.0 million dollars;
-- materially changing Parent's business strategy;
-- amending Parent's corporate charter or bylaws;
-- entering into a transaction, (other than an acquisition of a
business) involving the expenditure by Parent of more than $5 million, ($10
million in the case of construction and renovation projects or real estate
acquisitions);
-- approving Parent's annual operating and capital budget; or
-- making an acquisition of any business involving an expenditure by
Parent of more than $10 million.
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In addition, Mr. McCrary shall not be permitted, (other than in his
capacity as Chairman Executive Committee) to cause Parent to engage in the
following activities without the approval of the Parent Board or the Executive
Committee;
-- entering into transactions over the course of a fiscal year
involving expenditures by Parent of more than $20 million, except with
respect to acquisitions of physician practices or related ancillary
businesses;
-- making any acquisition involving an expenditure by Parent of more
than $10.0 million;
-- materially changing Parent's business strategy; or
-- determining the compensation, (including long-term incentive
compensation) of or employment policies specifically applicable to the
executive officers of Parent.
RESIDUAL MANAGEMENT AUTHORITY: Any other duties, authority and
responsibilities that are not explicitly reserved for the Parent Board or the
Executive Committee shall be reserved for Mr. McCrary.
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EXHIBIT 10.3
ANKLE & FOOT CENTERS OF AMERICA, L.L.C.
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of November 17, 1997 between Ankle & Foot Centers of
America, L.L.C. a Delaware limited liability corporation (the "Company"), and
Wayne A. Bertsch, (the "Executive"), and joined into for the purposes
hereinafter stated by American Medical Providers, Inc., a Delaware Corporation
("AMP").
In consideration of the premises and the respective covenants and
agreements of the parties herein contained, and intending to be legally bound
hereby, the parties agree as follows:
1. EMPLOYMENT. The Company hereby agrees to employ the Executive and the
Executive hereby agrees to serve the Company on the terms and conditions set
forth herein. In addition, the Executive and the Company hereby agree that
subject to and effective as of either of the following to occur: (a) the closing
of the proposed Initial Public Offering ("IPO") of American Medical Providers,
Inc., (formerly Podiatric Newco, Inc., ("AMP"), or (b) the sale or merger by
AMP of substantially all of the assets of AMP or by the Company's shareholders
of a controlling interest in AMP's stock, other than in connection with the IPO,
this Employment Agreement (the "Agreement") shall be assumed by "AMP")
and/or such company into which AMP is merged or by whom AMP is otherwise
acquired. Upon either of the events in (a) or (b) above, this Employment
Agreement shall supersede that certain letter agreement regarding employment
between the Company and Executive, dated as of August 12, 1996 (the "Prior
Agreement"), and the Prior Agreement shall thereupon automatically terminate
without further obligation by either Executive or the Company. Upon AMP's
assumption of this Agreement, all references to the Company herein shall
thereafter refer to AMP.
2. TERM OF EMPLOYMENT: DUTIES. From the period commencing on the date
hereof and ending immediately prior to the Effective Time (as defined in the S-1
registration filed by "AMP" in connection with its IPO (or in the event of a
sale or merger ("Sale or Merger") of the Company, as defined in the definitive
agreement associated therewith) the employment of the Executive shall be
governed by the terms and conditions set forth in the Prior Agreement. The term
of this Agreement (the "Term"), and Executive's employment with the Company
hereunder, shall commence at the Effective Time and, unless earlier terminated
in accordance with the terms hereof, shall continue until the third anniversary
of the Effective Time (such initial term of the Agreement referred to as the
"Initial Term"); PROVIDED, HOWEVER, that the Term shall automatically be
renewed for successive, additional three year periods at the end of the Initial
Term and each renewal term thereafter, unless either the Company or the
Executive provides at least one year's notice to the other of its intention not
to renew the Term; and PROVIDED, FURTHER, that if the "IPO", Sale, or Merger,
is terminated in accordance with its terms prior to the Effective Time or the
"IPO," the Sale or Merger is abandoned or otherwise does not close, (x) this
Agreement shall automatically terminate without further obligation by either
party hereto, (y) the terms and conditions set forth in this Agreement shall not
apply and (z) the employment of the Executive shall continue to be governed by
the terms and conditions set forth in the Prior Agreement.
During the Term, the Executive shall be employed as the Senior Vice
President, and Chief Financial Officer of the Company, and serve as member of
the Company's Executive Committee, reporting to the President and Chief
Executive Officer of the Company with the traditional duties, responsibilities
and authority of such office in companies similar in size to the Company.
Executive shall during the term hereof serve as a member of the Board of
Directors. The Executive agrees that he shall perform his duties hereunder
faithfully and to the best of his abilities and in furtherance of the business
of the Company and its subsidiaries and shall devote substantially all of his
business time, energy and attention to the business of the Company and its
subsidiaries.
3. COMPENSATION AND RELATED MATTERS.
(a) BASE SALARY. During the Term, the Company shall pay to the executive
an initial annual base salary, (the "Base Salary") as set forth on Exhibit A,
payable in accordance with the Company's normal payroll practices or as the
Company and the Executive may otherwise agree. The Base Salary shall be
<PAGE>
reviewed by the Company annually and shall be subject to discretionary increase
by the Company from time to time, but shall not be decreased from the rate in
effect at any time and from time to time during the Term.
(b) ANNUAL PERFORMANCE BONUS. Executive shall be entitled to participate
in the Company's Executive Officer Performance Bonus Plan or any similar or
successor annual bonus plan of the Company, (the "Performance Bonus Plan") and
to receive an annual performance bonus upon the achievement of one or more
annual performance goals, (the "Performance Goals") in accordance with the
terms of the Performance Bonus Plan; PROVIDED, that Executive's annual target
bonus under the Performance Bonus Plan (the "Annual Target Bonus") shall not
be less than 60% of the Base Salary in effect at the time the Performance Goals
for such plan year are established.
(c) LONG-TERM INCENTIVE. The Executive shall be eligible to participate
in any long-term incentive compensation and/or stock option plans maintained
from time to time by the Company. In addition, pursuant to prior action of the
Stock Option Committee of the Board, Executive has previously been granted an
option, (the "Market Option") to purchase Sixty-Five Thousand (65,000) shares
of the Company common stock, 001 par value, (the "Common Stock") at an
exercise price equal to the price to the public in connection with AMP's IPO,
with a term of 10 years from the date of grant. The Market Option will vest
twenty-five (25%) per annum on each of the first through fourth anniversaries of
the Effective Time; PROVIDED, that the Market Option will not become exercisable
in whole or in part in the event the Market Option is terminated in accordance
with its terms prior to the Effective Time or if the IPO, Sale or Merger is
abandoned or otherwise does not close; and PROVIDED, FURTHER, that the Market
Option shall be subject to the terms of the American Medical Providers, Inc.,
1997 Stock Incentive Plan and the stock option agreement to be entered into in
connection with the grant of the Market Option.
(d) BENEFITS. PERQUISITES AND EXPENSES. During the Term, the Executive
shall be eligible to participate in employee benefit and fringe benefit plans
and programs generally available to the executive officers of the Company and
such additional benefits as the Board may from time to time provide. In
addition, Executive shall be entitled to receive the personal benefits described
on Exhibit A hereto. Executive shall be entitled to reimbursement for business
expenses, including travel and entertainment; PROVIDED, that such reimbursement
shall be limited to reasonable and necessary expenses incurred by Executive in
connection with the performance of duties on behalf of the Company subject to:
(i) timely submission of a properly executed Company expense report form
accompanied by appropriate supporting documentation, and (ii) compliance with
Company policies and procedures governing business expense reimbursement and
reporting based upon principles and guidelines established by the Audit
Committee of the Board, including periodic audits by the Internal Audit
Department of the Company and/or the Audit Committee of the Board.
(e) RETIREMENT BENEFITS. The Executive shall be entitled to participate
in any Supplemental Executive Retirement Plan or any similar or successor plan,
(the "SERP") and in any tax qualified and any other supplemental pension plans
should such plans be generally available to the executive officers of the
Company.
4. TERMINATION OF EXECUTIVE. Prior to the expiration of the Term and
subject to the payment of the amounts required under Section 5, the Executive's
employment with the Company may be terminated, (a) by the Company for Cause, (as
defined herein) or without Cause, (b) by the Executive for or without Good
Reason (as defined herein), (c) by reason of the Executive's death or
Disability, (as defined herein) or (d) by the mutual written consent of the
parties hereto. For purposes of this Agreement:
(i) "Cause" means; (A) conviction of, plea of guilty, or voluntary
settlement of embezzlement, theft, or fraud involving the Company; (B)
actions which have had or will likely have a material adverse financial
effect on the Company as a whole for an extended period of time, where
appropriate evidence exists that such actions are directly attributable to
the; (i) gross management negligence or repeated ineptitude of the
Executive and/or; (ii) deliberate refusal of the Executive to follow the
instructions or directions of the Board; (C) conviction of or a plea of
guilty or NOLO CONTENDERE to a felony, other than a felony involving a
moving violation; (D) violation of the non-compete or
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confidentiality provisions of this Agreement, PROVIDED that no such
violation will be deemed to have occurred if, within 30 days following
receipt by Executive of a notice from the Board identifying the violation,
the Executive, (i) cures the violation, and (ii) establishes that the
violation was unintentional and not reasonably likely to result in harm to
the Company, in each case to the reasonable satisfaction of the Board; (E)
material incapacitation or repeated absence from work due to reckless and
self-abusive behavior or conduct, such as alcoholism and/or drug abuse,
which renders Executive incapable of performing his duties; PROVIDED, that
physical or mental disability due to injury or disease shall not be grounds
for termination for Cause; (F) gross insubordination or persistent refusal
to follow reasonable instructions; or (G) inability to perform the duties
of the Executive's office or consistent failure to perform in accordance
with reasonable expectations due to incompetence, or due to repeated and
unexcused absence from work having a material adverse effect on the Company
provided that mere failure to achieve performance targets or expectations
(including without limitation, those set forth in the Performance Bonus
Plan) shall not in and of itself constitute Cause hereunder.
For purposes of this Agreement, the Board shall have 60 days to
terminate the Executive for Cause following the date on which the Board
discovers the existence of a specific set of facts that, in the aggregate,
then constitute Cause, after which period no Cause with respect to such
specific set of facts shall be deemed to exist; PROVIDED. that the
repetition or reoccurrence of the same or a similar set of facts shall
constitute separate ground for termination for Cause.
(ii) "Disability" means the Executive's absence from the full-time
performance of his duties with the Company for one hundred eighty (180)
days or more within any period of 12 consecutive months as a result of the
Executive's incapacity due to mental or physical illness; PROVIDED, that
during any period prior to the termination of Executive's employment by
reason of Disability in which Executive is absent from the full-time
performance of his duties with the Company due to Disability, the Company
shall continue to pay Executive his Base Salary at the rate in effect at
the commencement of such period of Disability;
(iii) "Good Reason" means, without the Executive's express written
consent, the occurrence of any of the following events:
(A) a reduction by the Company in the Executive's Base Salary or
Annual Target Bonus in effect from time to time; (B) a material
reduction in the aggregate level of participation in and/or compensation
and benefit opportunities under all other compensation and employee
benefit plans in which Executive is entitled to participate from time to
time; PROVIDED, HOWEVER,that changes affecting the participation in or
benefits under such plans (other than the Performance Bonus Plan, any
SERP and the benefits described in Exhibit (A)) with respect to
similarly situated executives of the Company shall not constitute Good
Reason hereunder; (C) a reduction in the Executive's titles, duties or
authority with the Company; (D) notification by the Company of its
intention to renew this Agreement pursuant to the provisions of Section
2; (E) the termination of the Executive's employment by the executive
for any reason within 12 months following a Change in Control (as
defined herein); (F) relocation of the Company's Corporate offices by
more than 25 miles from its present location at 3555 Timmons Lane,
Houston, Texas 77027; (G) failure of Executive to be elected to the
Board of Directors of the Company; (H) a change in who Executive reports
to occurs or (I) the termination, for any reason, other than death or
disability of the Employment of Jack N. McCrary as President and Chief
Executive Officer.
(iv) "Change in Control," means the occurrence of any one of the
following events:
(A) any "person", (as such term is defined in Section 3(a)(9) of
the Securities Exchange Act of 1934, (the "Exchange Act") and as used
in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) becomes an
Acquiring Person, (as such term is defined in the Company's Shareholder
Protection Rights Agreement to be adopted at the Effective Time) or any
person that is not bound by the Shareholder Agreement of the Company to
be entered into in connection with the Merger, (the "Shareholder
Agreement") becomes the beneficial owner (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Company representing
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25% or more of the undiluted total voting power of the Company's then
outstanding securities eligible to vote for the election of members of
the Board, (the "Company Voting Securities"); PROVIDED, HOWEVER, that
no event described in the immediately preceding clause shall be deemed
to constitute a Change in Control by virtue of any of the following: (i)
an acquisition of Company Voting Securities by the Company and/or one or
more direct or indirect majority-owned subsidiaries of the Company, (ii)
an acquisition of Company Voting Securities by any employee benefit plan
sponsored or maintained by the Company or any corporation controlled by
the Company, (iii) an acquisition by any underwriter temporarily holding
securities pursuant to an offering of such securities, or (iv) any
acquisition by the Executive or any "group", (as such term is defined
in Rule 3d-5 under the Exchange Act) of persons including the Executive;
or
(B) Individuals who, at the beginning of any period of twenty-four
(24) consecutive months, constitute the Board, (the "Incumbent Board")
cease for any reason to constitute at least a majority thereof;
PROVIDED, HOWEVER, that any person becoming a director subsequent to the
beginning of such twenty-four (24) month period, whose election, or
nomination for election, by the Company's shareholders was approved by
either, (i) the Board consistent with the terms of the Shareholder
Agreement, during the period the Shareholder Agreement is in effect, or
(ii) a vote of at least 60% of the directors comprising the Incumbent
Board (either by a specific vote or by approval of the proxy statement
of the Company in which such person is named as a nominee for director,
without objection to such nomination) shall be, for purposes of this
paragraph (B), considered as though such person were a member of the
Incumbent Board; PROVIDED, FURTHER, that no individual initially elected
or nominated as a director of the Company as a result of an actual or
threatened election contest with respect to directors of any other
actual or threatened solicitation of proxies or consents by or on behalf
of any person other than the Board shall be deemed to be a member of the
Incumbent Board; or
(C) there is consummated a merger or consolidation of the Company
or a subsidiary thereof with or into any other corporation other than a
merger or consolidation which would result in the holders of the voting
securities of the Company outstanding immediately prior thereto holding
securities which, in combination with the ownership of any trustee or
other fiduciary holding securities under an employee benefit plan of the
Company, represent immediately after such merger or consolidation at
least 60% of the combined voting power of the then outstanding voting
securities of either the Company or the other entity which survives such
merger or consolidation or any parent of such other entity; or
(D) the stockholders of the Company approve, (i) a plan of
complete liquidation or dissolution of the Company, or (ii) an agreement
for the sale or disposition by the Company of all or substantially all
the Company's assets.
5. PAYMENTS UPON TERMINATION OF EXECUTIVE.
(a) If the employment of the Executive shall be terminated other than by
reason of death or Disability, (i) by the Company (other than for Cause), or
(ii) by the Executive for Good Reason, then the Company shall pay or provide to
the Executive, (or the Executive's beneficiary or estate):
(1) within thirty (30) days following the date of such termination of
employment ("Termination Date"), a lump-sum cash amount equal to the sum of,
(i) the Executive's unpaid Base Salary through the Termination Date, (ii) any
accrued but unpaid annual bonus under the Performance Bonus Plan in respect of
the annual bonus period preceding the bonus period in which the Termination Date
occurs, (iii) any unpaid reimbursable business expenses properly incurred
through the Termination Date, and (iv) a bonus payment equal to the Executive's
Annual Target Bonus in the year of termination, multiplied by a fraction the
numerator of which is the number of months in the bonus year of termination in
which the Executive has worked at least one day and the denominator of which is
12;
(2) within thirty (30) days following the Termination Date, a lump-sum
cash amount equal to the greater of; (A) the Executive's then Base Salary
payable over the remainder of the Term plus a bonus equal
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to the Executive's Annual Target Bonus in the year of termination multiplied by
a fraction the numerator of which is the number of complete months remaining in
the Term and the denominator of which is 12, or (B) 2.0 times the sum of: (i)
the Executive's annual rate of Base Salary as of the Termination Date plus, (ii)
the Annual Target Bonus for the year in which the Termination Date occurs, (in
each such case, Executive's Base Salary and Annual Target Bonus being determined
without taking into account any reductions thereto constituting Good Reason).
(3) for a period terminating on the earlier of; (A) the commencement of
the provision of substantially equivalent benefits by a new employer; or (B) the
later of, (i) the last day of the Term, or (ii) twenty-four (24) months
following the Termination Date, the Company shall continue to keep in full force
and effect, (or otherwise provide) all policies of medical, accident, disability
and life insurance with respect to the Executive and his dependents with
substantially the same level of coverage, upon substantially the same terms and
otherwise substantially to the same extent as such policies shall have been in
effect immediately prior to the Termination Date, and, as applicable, the
Company and the Executive shall share the costs of the continuation of such
insurance coverage in the same proportion as such costs were shared immediately
prior to the date of termination;
(4) for purposes of determining final average compensation, (or making any
similar calculation) and years of service, (for purposes of eligibility, vesting
and benefit accrual) under any tax-qualified of supplemental defined benefit
retirement plan, (including without limitation any SERP) Executive shall be
deemed to have remained employed by the Company hereunder until the end of the
Term and to have received his then current Base Salary and Annual Target Bonus
through the end of the Term; PROVIDED, that to the extent such benefits cannot
be accrued under and paid from any tax-qualified pension plan, such benefits
shall be accrued under and paid from any SERP or other supplemental plan.
(5) all options to purchase Common Stock held by the Executive shall
immediately become fully vested and exercisable and shall remain exercisable
until the later of; (A) the date that is 24 months following the Termination
Date; and (B) the expiration of the stated term of such options; and
(b) If the employment of the Executive shall be terminated, (i) by reason
of the Executive's death or Disability, (ii) by the Company for Cause, (iii) by
the Executive without Good Reason, or (iv) by the mutual written consent of the
parties hereto, (each a "Non-qualifying Termination"), then the Company shall
pay to the Executive (or the Executive's beneficiary or estate) within thirty
(30) days following the Termination Date a lump-sum cash amount equal to the sum
of the Executive's unpaid Base Salary through the Termination Date plus any
bonus payments which have been earned or become payable, to the extent not
theretofore paid, plus any unpaid reimbursable business expenses properly
incurred through the Termination Date. In addition, Executive (or the
Executive's beneficiary or estate) shall have no less than ninety days following
the termination of his employment pursuant to a Non-qualifying Termination to
exercise any outstanding options to the extent vested and exercisable as of the
Termination Date. If the employment of the Executive shall be terminated, by
reason of the Executive's death or Disability, for a period terminating on the
earlier of; (A) the commencement of the provision of substantially equivalent
benefits by a new employer; or (B) the later of, (i) the last day of the Term,
or (ii) twenty-four (24) months following the Termination Date, the Company
shall continue to keep in full force and effect, (or otherwise provide) all
policies of medical, accident, disability and life insurance with respect to the
Executive and his dependents with substantially the same level of coverage, upon
substantially the same terms and otherwise substantially to the same extent as
such policies shall have been in effect immediately prior to the Termination
Date, and, as applicable, the Company and the Executive shall share the costs of
the continuation of such insurance coverage in the same proportion as such costs
were shared immediately prior to the Termination Date;
6. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY. (a) Notwithstanding
anything in this Agreement to the contrary, in the event that any payment or
distribution by the Company, by any affiliate of the Company or by any person
whose actions result in a change in control of the Company, (to the extent the
Company approves of the arrangements pursuant to which the payment by such
person is made to the Executive) to or for the benefit of the Executive,
(whether paid or payable or distributed or distributable pursuant to the terms
of the Agreement or otherwise, but determined without regard to any additional
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payments required under this Section 6), (a "Payment") would be subject to the
excise tax imposed by Section 4999 of the Code, or any interest or penalties are
incurred by the Executive with respect to such excise tax, such excise tax,
together with any such interest and penalties, are hereinafter collectively
referred to as the "Excise Tax") then the Executive shall be entitled to
receive an additional payment, (a "Gross-Up Payment") in an amount such that,
after payment by the Executive of all taxes, (including any interest or
penalties imposed with respect to such taxes) including, without limitation, any
income and employment taxes and Excise Tax, imposed upon the Gross-Up Payment
but before deduction for any federal, state or local income or other tax upon
the Payments, the Executive will retain a net amount equal to the sum of, (i)
the Payments, and (ii) an amount equal to the product of any deductions, (or
portions thereof) disallowed because of the inclusion of the Gross-Up Payment in
the Executive's adjusted gross income for federal income tax purposes and the
highest applicable marginal rate of federal income taxation for the calendar
year in which the Gross-Up Payment is to be made. For purposes of determining
the amount of the Gross-Up Payment, the Executive shall be deemed to, (1) pay
applicable federal income taxes at the highest applicable marginal rate of
federal income taxation (including surcharges) for the calendar year in which
the Gross-Up Payment is to be made, (2) pay applicable state and local income
taxes at the highest applicable marginal rate of taxation, (including
surcharges) for the calendar year in which the Gross-Up Payment is to be made,
net of the maximum reduction in federal income taxes which could be obtained
from deduction of such state and local taxes, and (3) have otherwise allowable
deductions for federal income tax purposes at least equal to those disallowed
because of the inclusion of the Gross-Up Payment in the Executive's adjusted
gross income.
(b) Subject to the provisions of Section 6(a), all determinations required
to be made under this Section 6, including whether and when a Gross-Up Payment
is required and the amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination shall be made by the public
accounting firm that is retained by the Company as of the date immediately prior
to the change in control, (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the Executive within fifteen
(15) business days of the receipt of notice from the Company or the Executive
that there has been a Payment, or such earlier time as is requested by the
Company, (collectively, the "Determination"). In the event that the Accounting
Firm is serving as accountant or auditor for the individual, entity or group
effecting the change in control, the Executive may appoint another nationally
recognized public accounting firm reasonably acceptable to the Company to make
the determinations required hereunder, (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All reasonable fees and expenses
of the Accounting Firm shall be borne solely by the Company and, subject to
applicable law and obligation to the Company's stockholders, the Company shall
enter into any agreement reasonably requested by the Accounting Firm that is
generally recognized as standard in connection with the performance of the
services hereunder. The Gross-Up Payment under this Section 6 with respect to
any Payment shall be made no later than thirty (30) days following the date of
such Payment. If the Accounting Firm determines that no Excise Tax is payable by
the Executive, it shall furnish the Executive with a written opinion to such
effect, and to the effect that failure to report the Excise Tax, if any, on the
Executive's applicable federal income tax return should not result in the
imposition of a negligence or similar penalty. The Determination by the
Accounting Firm shall be binding upon the Company and the Executive. As a result
of uncertainty in the application of Section 4999 of the Code at the time of the
Determination, it is possible that Gross-Up Payments which will not have been
made by the Company should have been made ("Underpayment") or Gross-Up
Payments are made by the Company which should not have been made,
("Overpayment") consistent with the calculations required to be made
hereunder. In the event that the Executive thereafter is required to make
payment of any additional Excise Tax, the Accounting Firm shall determine the
amount of the Underpayment that has occurred and any such Underpayment,
(together with interest at the rate provided in Section 1274(b)(2)(B) of the
Code) shall be promptly paid by the Company to or for the benefit of the
Executive. In the event the amount of the Gross-Up Payment exceeds the amount
necessary to reimburse the Executive for his Excise Tax, the Accounting Firm
shall determine the amount of the Overpayment that has been made and any such
Overpayment, (together with interest at the rate provided in Section 1274(b)(2)
of the Code) shall be promptly paid by the Executive to or for the benefit of
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the Company. The Executive shall cooperate, to the extent his reasonable
expenses in connection therewith are reimbursed by the Company, with any
reasonable requests by the Company in connection with any contests or disputes
with the Internal Revenue Service in connection with the Excise Tax.
7. WITHHOLDING TAXES. The Company shall have the right to withhold from
any and all payments due to the Executive, (or his beneficiary or estate)
hereunder all taxes which, by applicable federal, state, local or other law, the
Company is required to withhold therefrom.
8. SUCCESSORS: BINDING AGREEMENT.
(a) This Agreement is personal in nature and none of the parties hereto
shall, without the consent of the other, assign, or transfer this Agreement or
any rights or obligations hereunder; PROVIDED, that in the event of the merger,
consolidation, transfer or sale of substantially all of the assets of the
Company with or to any other individual or entity, this Agreement shall, subject
to the provisions hereof, be binding upon and inure to the benefit of such
successor and such successor shall discharge and perform all the promises,
covenants, duties and obligations of the Company hereunder, all references
herein to the "Company" shall refer to such successor.
(b) This Agreement shall inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive shall
die while any amounts remain payable to the Executive hereunder, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to such person or persons appointed in writing by the
Executive to receive such amounts or, if no person is so appointed, to the
Executive's estate.
9. RESOLUTION OF DISPUTES; LEGAL FEES: NO MITIGATION.
(a) Except as provided in Sections 10 and 11, all disputes hereunder shall
be settled by final, binding arbitration, conducted before a panel of three (3)
arbitrators in Texas in accordance with the rules of the American Arbitration
Association then in effect. Judgment on the arbitration award may be entered in
any court having jurisdiction. The Company shall bear the expenses of such
arbitration.
(b) If any contest or dispute shall arise under this Agreement involving
termination of the Executive's employment with the Company or involving the
failure or refusal of the Company to perform fully in accordance with the terms
hereof, the Company shall advance and reimburse the Executive, on a current
basis, all legal fees and expenses, if any, incurred by the Executive in
connection with such contest or dispute; PROVIDED, that the Executive agrees to
return any advanced or reimbursed expenses to the extent the arbitrators, (or
the court, in the case of a dispute described in Section 10 or 11) determine
that the Company has prevailed as to the material issues raised in determination
of the dispute.
(c) The Company's obligation to make any payments provided for in this
Agreement to the Executive and otherwise to perform its obligations hereunder
shall not be affected by any setoff, counterclaim, recoupment, defense or other
claim, right or action which the Company may have against the Executive or
others. In no event shall the Executive be obligated to seek other employment or
take other action by way of mitigation of the amounts payable to the Executive
under any of the provisions of this Agreement, and such amounts shall not be
reduced whether or not the Executive obtains other employment.
10. NON-COMPETITION.
(a) DISCLOSURE. The Executive has disclosed to the Board, in writing, all
heathcare-related interests, investments, or business activities, whether as
proprietor, stockholder, partner, co-venturer, director, officer, employee,
independent contractor, agent, consultant, or in any other capacity or manner
whatsoever. The Executive shall notify the Board, in writing, of any changes in
or additions to such interests, activities or investments permitted in
accordance with the terms of this Agreement, within 15 days of such change or
addition.
(b) PROHIBITED ACTIVITY. Without the written consent of a majority of the
Independent Directors, the Executive may not engage in any of the following
actions during the period that is; (A) prior to the Executive's termination of
employment with the Company; (B) within two years following the termination
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of his employment with the Company during the Initial Term if such termination
is by the Company for Cause or by the Executive other than for Good Reason; and
(C) within one year following his termination of employment during the Term but
after the Initial Term if such termination is by the Company for Cause or by the
Executive other than Good Reason.
(i) own, either directly or indirectly, any interest in any business that
competes with the "Primary Business" in which the Company or any subsidiary or
affiliate is engaged, within a radius of 20 miles from any site, facility, or
location which is owned, managed or operated by or affiliated with the Company
or any of its subsidiaries and affiliates, including Podiatric Physician
practices of any kind. For purposes of this Agreement, "Primary Business"
shall mean the delivery of Podiatric healthcare services in markets where the
Company or its subsidiaries own, operate or manage Physician Practices or
Ambulatory Surgery Centers. These Podiatric healthcare services can include but
are not limited to; (A) individual Podiatric Physician Practices and/or
Podiatric physician-based organizations such as primary care and specialty
clinics, Podiatric Physician-hospital organizations ("PMOs") or medical
service organizations ("MSOs"), or Podiatric Physician medical groups; and (B)
ambulatory programs such as home health care, ambulatory surgery, occupational
and sports medicine centers, and other diagnostic, rehabilitative and treatment
services for Podiatric patients. Some of these services, sites and facilities
may be located in satellite areas for the purpose of extending the Physician
Practice's geographic service area and to serve as access points and/or referral
sources for either the local delivery system or the Physician Practice's
geographic service area and to serve as access points and/or referral sources
for either the local delivery system or the Physician Practice's. The Board may
modify, from time to time, the definition of Primary Business to include any
additional Podiatric business or service in which the Company may engage during
the Term or to exclude any business or service in which the Company ceases to
engage. The definition of "Primary Business" may also be modified to include
any Podiatric business or service into which, as of the Termination Date, the
Company definitively intends to expand, regardless of whether such expansion
actually occurs after the Executive's termination. For purposes of the preceding
sentence, the date on which a modification of the definition of "Primary
Business" shall be effective shall be the date on which the Executive is
provided written notice of such modification, (the "Notice Date") PROVIDED,
HOWEVER, that no such modification as to which notice is provided on or after
the Termination Date shall be effective against the Executive; and PROVIDED,
FURTHER, that no such modification shall be effective with respect to any
interests, investments or business activities engaged in by Executive prior to
the Notice Date of such modification and properly disclosed prior to such Notice
Date pursuant to Section 10(a);
(ii) participate or serve, either directly or indirectly, whether as a
proprietor, stockholder, partner, co-venturer, director, officer, employee,
independent contractor, agent, consultant, or in any other capacity or manner
whatsoever in any business or service activity that competes with the Primary
Business;
(iii) directly or indirectly, solicit or recruit any individual employed
by the Company, its subsidiaries or affiliates for the purpose of being employed
by him or by any competitor of the Company on whose behalf he is acting as an
agent, representative or employee, or convey any confidential information or
trade secrets regarding other employees of the Company, its subsidiaries or
affiliates to any other person; or
(iv) directly or indirectly, influence or attempt to influence customers
of the Company or any of its subsidiaries or affiliates to direct their business
to any competitor of the Company; PROVIDED, HOWEVER, that neither, (i) the
"beneficial ownership" by Executive, either individually or as a member of a
"group," as such terms are used in Rule 13d under the Exchange Act, as a
passive investment, of not more than five percent (5%) of the voting stock of
any publicly held corporation, nor (ii) the beneficial ownership by Executive of
any interest described in the first sentence of Section 10(a) and properly and
timely disclosed in accordance with the terms therewith, shall alone constitute
a violation of this Agreement.
In the event that the Executive engages in the conduct proscribed by this
Section 10, the Executive agrees to repay any lump-sum severance amount received
pursuant to Section 5 of this Agreement, and all outstanding stock options held
by the Executive shall expire as of the date of the Executive's commencement of
such proscribed conduct. It is further expressly agreed that the Company will or
would suffer irreparable injury if Executive were to compete with the Company or
any subsidiary or affiliate in violation
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of this Agreement and that the Company would by reason of such competition be
entitled to preliminary or injunctive relief in a court of appropriate
jurisdiction, and Executive further consents and stipulates to the entry of such
preliminary or injunctive relief in such a court prohibiting Executive from
competing with the Company or any subsidiary or affiliate in violation of this
Agreement upon an appropriate finding by such court that Executive has violated
this Section 10.
(c) UNENFORCEABLE PROVISIONS. It is the desire and the intent of the
parties that the provisions of this Section 10 shall be enforceable to the
fullest extent permissible under applicable law and public policy. Accordingly,
if this Section 10 or any portion thereof shall be adjudicated to be invalid or
unenforceable whether because of the duration and scope of the covenants set
forth herein or otherwise, the length and scope of the restrictions set forth in
this Section 10 shall be reduced to the extent necessary so that this covenant
may be enforced to the fullest extent possible under applicable law.
11. CONFIDENTIAL INFORMATION. The Executive acknowledges that in his
employment hereunder, and during prior periods of employment with the Company
and/or its subsidiaries, he has occupied and will continue to occupy a position
of trust and confidence. The Executive shall not, except as may be required to
perform his duties hereunder or as required by applicable law, until the
expiration of the applicable periods described in Section 10(b) or until such
information shall have become public other than by the Executive's unauthorized
disclosure, disclose to others or use, whether directly or indirectly, any
Confidential Information regarding the Company, its subsidiaries and affiliates.
"Confidential Information" shall mean information about the Company, its
subsidiaries and affiliates, and their respective clients and customers that is
not publicly disclosed by the Company or otherwise generally available to
members of the public seeking such information and that was learned by the
Executive in the course of his employment by the Company, its subsidiaries and
affiliates, including, (without limitation) any proprietary knowledge, trade
secrets, data, formulae, information and client and customer lists and all
papers, resumes, and records, (including computer records) of the documents
containing such Confidential Information. The Executive acknowledges that such
Confidential Information is specialized, unique in nature and of great value to
the Company, its subsidiaries and affiliates, and that such information gives
the Company, its subsidiaries and affiliates a competitive advantage. The
Executive agrees to deliver or return to the Company, at the Company's request
at any time or upon termination or expiration of his employment or as soon
thereafter as possible, all documents, computer tapes and disks, records, lists,
data, drawings, prints, notes and written information, (and all copies thereof)
furnished by the Company, its subsidiaries or affiliates or prepared by the
Executive during the term of his employment by the Company, its subsidiaries and
affiliates.
In the event that the Executive engages in any conduct proscribed by this
Section 11, the Executive agrees to repay any lump-sum severance amount received
pursuant to Section 5 of this Agreement, and all outstanding stock options held
by the Executive shall expire as of the date of the Executive's commencement of
such proscribed conduct. It is further expressly agreed that the Company will or
would suffer irreparable injury if Executive were to disclose or threaten to
disclose Confidential Information regarding the Company or any subsidiary or
affiliate in violation of this Agreement or otherwise fail to comply with the
provisions of this Section 11, and that the Company would, by reason of such
disclosure or threatened disclosure or other failure to comply, be entitled to
preliminary or permanent injunctive relief in a court of appropriate
jurisdiction, and Executive further consents and stipulates to the entry of such
preliminary or permanent injunctive relief in such a court prohibiting Executive
from disclosing Confidential Information in violation of this Agreement or
otherwise requiring Executive to comply with the provisions of this Section 11
upon an appropriate finding by such court that Executive has violated this
Section 11.
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12. NOTICE. For the purposes of this Agreement, any notices, demands and
all other communications required or permitted hereunder shall be in writing and
shall be deemed to have been duly given upon; (A) transmitter's confirmation of
a receipt of a facsimile transmission; (B) confirmed delivery by a standard
overnight carrier; or (C) the expiration of five business days after the day
when mailed by certified or registered mail, postage prepaid, addressed as
follows, (or at such other address as the parties hereto shall specify by like
notice):
If to Executive: Wayne A. Bertsch
3555 Timmons Lane, Suite 1550
Houston, TX 77027
If to Company: Ankle and Foot Centers of America,
LLC.
or American Medical Providers, Inc.
3555 Timmons Lane, Suite 1550
Houston, Texas 77027
Attention: Chief Executive Officer
13. AMENDMENT WAIVER. No provisions of this Agreement may be waived,
modified or discharged unless such waiver, modification or discharge is agreed
to in a written document signed by the Executive and such officer of the
Company, as may be specifically designated by the Board. No waiver by either
party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement.
14. ENTIRE AGREEMENT. This Agreement and Exhibit A hereto set forth the
entire agreement of the parties hereto in respect of the subject matter
contained herein and supersede all prior agreements, promises, covenants,
arrangements, communications, representations or warranties, whether oral or
written, by any officer, employee or representative of any party hereto.
15. GOVERNING LAW: VENUE: VALIDITY. The interpretation, construction and
performance of this Agreement shall be governed by and construed and enforced in
accordance with the internal laws of the State of Texas without regard to the
principle of conflicts of laws and, at the election of the Executive, the venue
of any dispute arising under this Agreement shall be Texas. The invalidity or
unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement, which other
provisions shall remain in full force and effect.
16. HEADINGS. Section headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose.
17. SEVERABILITY. In the event that a court of competent jurisdiction
determines that any portion of this Agreement is in violation of any statute or
public policy, only the portions of this Agreement that violate such statute or
public policy shall be stricken. All portions of this Agreement that do not
violate any statute or public policy shall continue in full force and effect.
Further, any court order striking any portion of this Agreement shall modify the
stricken terms as narrowly as possible to give as much effect as possible to the
intentions of the parties under this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day of December, 1997.
Ankle and Foot Centers of America,
LLC.
By: /s/JACK N. McCRARY
Name: JACK N. McCRARY
Title:
Executive: /s/ WAYNE A. BERTSCH
Wayne A. Bertsch
Joined into for the purpose hereabove stated by American Medical Providers,
Inc., this day of December, 1997.
By: /s/JACK N. McCRARY
Name: JACK N. McCRARY
Title: __Chairman, President and Chief Executive Officer
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EXHIBIT A
COMPENSATION AND LEAVE POLICIES
BASE COMPENSATION
Commencing with the Initial Public Offering (the "IPO") Date (the "IPO
Date") of AMP, (or the Sale Merger of AMP's Shares other than the IPO ("Sale
or Merger Date"), Executive shall be paid by the Company a base salary of not
less than One Hundred Eighty Thousand Dollars, ($180,000.00) per annum.
INCENTIVE COMPENSATION
Executive shall participate in the Company's Executive Officers Performance
Plan with his annual "Target Bonus" not being less than 60% of his Base
Salary.
LEAVE-VACATION AND HOLIDAYS
Executive shall be entitled to leave of four (4) weeks per annum, to be
taken in accordance with Employer's regular vacation policies. Executive shall
be entitled to at least nine (9) paid holidays per annum in accordance with
Employer regular paid holidays policies.
BENEFITS
Health Insurance including major medical for personal, family and
dependents at customary rates for family coverage.
Life Insurance equivalent to three times Executive salary.
Disability insurance equivalent to 60% of Base Salary upon permanent
disability.
OTHER PAYMENTS:
Executive shall receive a minimum of $800 per month as an automobile
allowance.
Executive shall be reimbursed up to $250.00 per month for membership dues.
Executive shall be reimbursed for expenses of "continuing education"
including such reasonable travel as is required in connection therewith.
12
EXHIBIT 10.4
ANKLE & FOOT CENTERS OF AMERICA, L.L.C.
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of November 17, 1997 between Ankle & Foot Centers of
America, L.L.C. a Delaware limited liability corporation (the "Company"), and
Randy E. Johnson, (the "Executive"), and joined into for the purposes
hereinafter stated by American Medical Providers, Inc., a Delaware Corporation
("AMP").
In consideration of the premises and the respective covenants and
agreements of the parties herein contained, and intending to be legally bound
hereby, the parties agree as follows:
1. EMPLOYMENT. The Company hereby agrees to employ the Executive and the
Executive hereby agrees to serve the Company on the terms and conditions set
forth herein. In addition, the Executive and the Company hereby agree that
subject to and effective as of either of the following to occur: (a) the closing
of the proposed Initial Public Offering ("IPO") of American Medical Providers,
Inc., (formerly Podiatric Newco, Inc., ("AMP"), or (b) the sale or merger by
AMP of substantially all of the assets of AMP or by the Company's shareholders
of a controlling interest in AMP's stock, other than in connection with the IPO,
this Employment Agreement (the "Agreement") shall be assumed by "AMP")
and/or such company into which AMP is merged or by whom AMP is otherwise
acquired. Upon either of the events in (a) or (b) above, this Employment
Agreement shall supersede that certain letter agreement regarding employment
between the Company and Executive, dated as of August 5, 1996 (the "Prior
Agreement"), and the Prior Agreement shall thereupon automatically terminate
without further obligation by either Executive or the Company. Upon AMP's
assumption of this Agreement, all references to the Company herein shall
thereafter refer to AMP.
2. TERM OF EMPLOYMENT: DUTIES. From the period commencing on the date
hereof and ending immediately prior to the Effective Time (as defined in the S-1
registration filed by "AMP" in connection with its IPO (or in the event of a
sale or merger ("Sale or Merger") of the Company, as defined in the definitive
agreement associated therewith) the employment of the Executive shall be
governed by the terms and conditions set forth in the Prior Agreement. The term
of this Agreement (the "Term"), and Executive's employment with the Company
hereunder, shall commence at the Effective Time and, unless earlier terminated
in accordance with the terms hereof, shall continue until the third anniversary
of the Effective Time (such initial term of the Agreement referred to as the
"Initial Term"); PROVIDED, HOWEVER, that the Term shall automatically be
renewed for successive, additional three year periods at the end of the Initial
Term and each renewal term thereafter, unless either the Company or the
Executive provides at least one year's notice to the other of its intention not
to renew the Term; and PROVIDED, FURTHER, that if the "IPO", Sale, or Merger,
is terminated in accordance with its terms prior to the Effective Time or the
"IPO," the Sale or Merger is abandoned or otherwise does not close, (x) this
Agreement shall automatically terminate without further obligation by either
party hereto, (y) the terms and conditions set forth in this Agreement shall not
apply and (z) the employment of the Executive shall continue to be governed by
the terms and conditions set forth in the Prior Agreement.
During the Term, the Executive shall be employed as the Senior Vice
President, Regional Operations Officer of the Company, reporting to the
President and Chief Executive Officer of the Company, with the traditional
duties, responsibilities and authority of such office of companies similar in
size to the Company. The Executive agrees that he shall perform his duties
hereunder faithfully and to the best of his abilities and in furtherance of the
business of the Company and its subsidiaries and shall devote substantially all
of his business time, energy and attention to the business of the Company and
its subsidiaries.
3. COMPENSATION AND RELATED MATTERS.
(a) BASE SALARY. During the Term, the Company shall pay to the Executive
an initial annual base salary, (the "Base Salary") as set forth on Exhibit A,
payable in accordance with the Company's normal payroll practices or as the
Company and the Executive may otherwise agree. The Base Salary shall be reviewed
by the Company annually and shall be subject to discretionary increase by the
Company from
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time to time, but shall not be decreased from the rate in effect at any time and
from time to time during the Term.
(b) ANNUAL PERFORMANCE BONUS. Executive shall be entitled to participate
in the Company's Executive Officer Performance Bonus Plan or any similar or
successor annual bonus plan of the Company, (the "Performance Bonus Plan") and
to receive an annual performance bonus upon the achievement of one or more
annual performance goals, (the "Performance Goals") in accordance with the
terms of the Performance Bonus Plan; PROVIDED, that Executive's annual target
bonus under the Performance Bonus Plan (the "Annual Target Bonus") shall not
be less than 60% of the Base Salary in effect at the time the Performance Goals
for such plan year are established.
(c) LONG-TERM INCENTIVE. The Executive shall be eligible to participate
in any long-term incentive compensation and/or stock option plans maintained
from time to time by the Company. In addition, pursuant to prior action of the
Stock Option Committee of the Board, Executive has previously been granted an
option, (the "Market Option") to purchase Sixty-Five Thousand (65,000) shares
of the Company common stock, 001 par value, (the "Common Stock") at an
exercise price equal to the price to the public in connection with AMP's IPO,
with a term of 10 years from the date of grant. The Market Option will vest
twenty-five (25%) per annum on each of the first through fourth anniversaries of
the Effective Time; PROVIDED, that the Market Option will not become exercisable
in whole or in part in the event the Market Option is terminated in accordance
with its terms prior to the Effective Time or if the IPO, Sale or Merger is
abandoned or otherwise does not close; and PROVIDED, FURTHER, that the Market
Option shall be subject to the terms of the American Medical Providers, Inc.,
1997 Stock Incentive Plan and the stock option agreement to be entered into in
connection with the grant of the Market Option.
(d) BENEFITS. PERQUISITES AND EXPENSES. During the Term, the Executive
shall be eligible to participate in employee benefit and fringe benefit plans
and programs generally available to the executive officers of the Company and
such additional benefits as the Board may from time to time provide. In
addition, Executive shall be entitled to receive the personal benefits described
on Exhibit A hereto. Executive shall be entitled to reimbursement for business
expenses, including travel and entertainment; PROVIDED, that such reimbursement
shall be limited to reasonable and necessary expenses incurred by Executive in
connection with the performance of duties on behalf of the Company subject to:
(i) timely submission of a properly executed Company expense report form
accompanied by appropriate supporting documentation, and (ii) compliance with
Company policies and procedures governing business expense reimbursement and
reporting based upon principles and guidelines established by the Audit
Committee of the Board, including periodic audits by the Internal Audit
Department of the Company and/or the Audit Committee of the Board.
(e) RETIREMENT BENEFITS. The Executive shall be entitled to participate
in any Supplemental Executive Retirement Plan or any similar or successor plan,
(the "SERP") and in any tax qualified and any other supplemental pension plans
should such plans be generally available to the executive officers of the
Company.
4. TERMINATION OF EXECUTIVE. Prior to the expiration of the Term and
subject to the payment of any amounts required under Section 5, the Executive's
employment with the Company may be terminated, (a) by the Company for Cause, (as
defined herein) or without Cause, (b) by the Executive for or without Good
Reason (as defined herein), (c) by reason of the Executive's death or
Disability, (as defined herein) or (d) by the mutual written consent of the
parties hereto. For purposes of this Agreement:
(i) "Cause" means; (A) conviction of, plea of guilty, or voluntary
settlement of embezzlement, theft, or fraud involving the Company; (B)
actions which have had or will likely have a material adverse financial
effect on the Company as a whole for an extended period of time, where
appropriate evidence exists that such actions are directly attributable to
them; (i) gross management negligence or repeated ineptitude of the
Executive and/or; (ii) deliberate refusal of the Executive to follow the
instructions or directions of the Board; (C) conviction of or a plea of
guilty or NOLO CONTENDERE to a felony, other than a felony involving a
moving violation; (D) violation of the non-compete or confidentiality
provisions of this Agreement, PROVIDED that no such violation will be
deemed to have
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occurred if, within 30 days following receipt by Executive of a notice from
the Board identifying the violation, the Executive, (i) cures the
violation, and (ii) establishes that the violation was unintentional and
not reasonably likely to result in harm to the Company, in each case to the
reasonable satisfaction of the Board; (E) material incapacitation or
repeated absence from work due to reckless and self-abusive behavior or
conduct, such as alcoholism and/or drug abuse, which renders Executive
incapable of performing his duties; PROVIDED, that physical or mental
disability due to injury or disease shall not be grounds for termination
for Cause; (F) gross insubordination or persistent refusal to follow
reasonable instructions; or (G) inability to perform the duties of the
Executive's office or consistent failure to perform in accordance with
reasonable expectations due to incompetence, or due to repeated and
unexcused absence from work having a material adverse effect on the Company
provided that mere failure to achieve performance targets or expectations
(including without limitation, those set forth in the Performance Bonus
Plan) shall not in and of itself constitute Cause hereunder.
For purposes of this Agreement, the Board shall have 60 days to
terminate the Executive for Cause following the date on which the Board
discovers the existence of a specific set of facts that, in the aggregate,
then constitute Cause, after which period no Cause with respect to such
specific set of facts shall be deemed to exist; PROVIDED, that the
repetition or reoccurrence of the same or a similar set of facts shall
constitute separate ground for termination for Cause.
(ii) "Disability" means the Executive's absence from the full-time
performance of his duties with the Company for one hundred eighty (180)
days or more within any period of 12 consecutive months as a result of the
Executive's incapacity due to mental or physical illness; PROVIDED, that
during any period prior to the termination of Executive's employment by
reason of Disability in which Executive is absent from the full-time
performance of his duties with the Company due to Disability, the Company
shall continue to pay Executive his Base Salary at the rate in effect at
the commencement of such period of Disability;
(iii) "Good Reason" means, without the Executive's express written
consent, the occurrence of any of the following events:
(A) a reduction by the Company in the Executive's Base Salary or
Annual Target Bonus in effect from time to time; (B) a material
reduction in the aggregate level of participation in and/or compensation
and benefit opportunities under all other compensation and employee
benefit plans in which Executive is entitled to participate from time to
time; PROVIDED, HOWEVER,that changes affecting the participation in or
benefits under such plans (other than the Performance Bonus Plan, any
SERP and the benefits described in Exhibit (A)) with respect to
similarly situated executives of the Company shall not constitute Good
Reason hereunder; (C) a reduction in the Executive's titles, duties or
authority with the Company; (D) notification by the Company of its
intention not to renew this Agreement pursuant to the provisions of
Section 2; (E) the termination of the Executive's employment by the
executive for any reason within 12 months following a Change in Control
(as defined herein); (F) relocation of the Company's Corporate offices
by more than 25 miles from its present location at 3555 Timmons Lane,
Houston, Texas 77027; (G) a change in who Executive reports to occurs
or; (H) the termination, for any reason, other than death or disability
of the Employment of Jack N. McCrary as President and Chief Executive
Officer.
(iv) "Change in Control," means the occurrence of any one of the
following events:
(A) any "person", (as such term is defined in Section 3(a)(9) of
the Securities Exchange Act of 1934, (the "Exchange Act") and as used
in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) becomes an
Acquiring Person, (as such term is defined in the Company's Shareholder
Protection Rights Agreement to be adopted at the Effective Time) or any
person that is not bound by the Shareholder Agreement of the Company to
be entered into in connection with the Merger, (the "Shareholder
Agreement") becomes the beneficial owner (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Company representing 25% or more of the undiluted total voting power of
the Company's then outstanding securities eligible to vote for the
election of members of the Board, (the "Company Voting Securities");
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PROVIDED, HOWEVER, that no event described in the immediately preceding
clause shall be deemed to constitute a Change in Control by virtue of
any of the following: (i) an acquisition of Company Voting Securities by
the Company and/or one or more direct or indirect majority-owned
subsidiaries of the Company, (ii) an acquisition of Company Voting
Securities by any employee benefit plan sponsored or maintained by the
Company or any corporation controlled by the Company, (iii) an
acquisition by any underwriter temporarily holding securities pursuant
to an offering of such securities, or (iv) any acquisition by the
Executive or any "group", (as such term is defined in Rule 3d-5 under
the Exchange Act) of persons including the Executive; or
(B) Individuals who, at the beginning of any period of twenty-four
(24) consecutive months, constitute the Board, (the "Incumbent Board")
cease for any reason to constitute at least a majority thereof;
PROVIDED, HOWEVER, that any person becoming a director subsequent to the
beginning of such twenty-four (24) month period, whose election, or
nomination for election, by the Company's shareholders was approved by
either, (i) the Board consistent with the terms of the Shareholder
Agreement, during the period the Shareholder Agreement is in effect, or
(ii) a vote of at least 60% of the directors comprising the Incumbent
Board (either by a specific vote or by approval of the proxy statement
of the Company in which such person is named as a nominee for director,
without objection to such nomination) shall be, for purposes of this
paragraph (B), considered as though such person were a member of the
Incumbent Board; PROVIDED, FURTHER, that no individual initially elected
or nominated as a director of the Company as a result of an actual or
threatened election contest with respect to directors of any other
actual or threatened solicitation of proxies or consents by or on behalf
of any person other than the Board shall be deemed to be a member of the
Incumbent Board; or
(C) there is consummated a merger or consolidation of the Company
or a subsidiary thereof with or into any other corporation other than a
merger or consolidation which would result in the holders of the voting
securities of the Company outstanding immediately prior thereto holding
securities which, in combination with the ownership of any trustee or
other fiduciary holding securities under an employee benefit plan of the
Company, represent immediately after such merger or consolidation at
least 60% of the combined voting power of the then outstanding voting
securities of either the Company or the other entity which survives such
merger or consolidation or any parent of such other entity; or
(D) the stockholders of the Company approve, (i) a plan of
complete liquidation or dissolution of the Company, or (ii) an agreement
for the sale or disposition by the Company of all or substantially all
the Company's assets.
5. PAYMENTS UPON TERMINATION OF EXECUTIVE.
(a) If the employment of the Executive shall be terminated other than by
reason of death or Disability, (i) by the Company (other than for Cause), or
(ii) by the Executive for Good Reason, then the Company shall pay or provide to
the Executive, (or the Executive's beneficiary or estate):
(1) within thirty (30) days following the date of such termination of
employment ("Termination Date"), a lump-sum cash amount equal to the sum of,
(i) the Executive's unpaid Base Salary through the Termination Date, (ii) any
accrued but unpaid annual bonus under the Performance Bonus Plan in respect of
the annual bonus period preceding the bonus period in which the Termination Date
occurs, (iii) any unpaid reimbursable business expenses properly incurred
through the Termination Date, and (iv) a bonus payment equal to the Executive's
Annual Target Bonus in the year of termination, multiplied by a fraction the
numerator of which is the number of months in the bonus year of termination in
which the Executive has worked at least one day and the denominator of which is
12;
(2) within thirty (30) days following the Termination Date, a lump-sum
cash amount equal to the greater of; (A) the Executive's then Base Salary
payable over the remainder of the Term plus a bonus equal to the Executive's
Annual Target Bonus in the year of termination multiplied by a fraction the
numerator of which is the number of complete months remaining in the Term and
the denominator of which is 12, or (B)
4
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2.0 times the sum of: (i) the Executive's annual rate of Base Salary as of the
Termination Date plus, (ii) the Annual Target Bonus for the year in which the
Termination Date occurs, (in each such case, Executive's Base Salary and Annual
Target Bonus being determined without taking into account any reductions thereto
constituting Good Reason).
(3) for a period terminating on the earlier of; (A) the commencement of
the provision of substantially equivalent benefits by a new employer; or (B) the
later of, (i) the last day of the Term, or (ii) twenty-four (24) months
following the Termination Date, the Company shall continue to keep in full force
and effect, (or otherwise provide) all policies of medical, accident, disability
and life insurance with respect to the Executive and his dependents with
substantially the same level of coverage, upon substantially the same terms and
otherwise substantially to the same extent as such policies shall have been in
effect immediately prior to the Termination Date, and, as applicable, the
Company and the Executive shall share the costs of the continuation of such
insurance coverage in the same proportion as such costs were shared immediately
prior to the date of termination;
(4) for purposes of determining final average compensation, (or making any
similar calculation) and years of service, (for purposes of eligibility, vesting
and benefit accrual) under any tax-qualified or supplemental defined benefit
retirement plan, (including without limitation any SERP) Executive shall be
deemed to have remained employed by the Company hereunder until the end of the
Term and to have received his then current Base Salary and Annual Target Bonus
through the end of the Term; PROVIDED, that to the extent such benefits cannot
be accrued under and paid from any tax-qualified pension plan, such benefits
shall be accrued under and paid from any SERP or other supplemental plan.
(5) all options to purchase Common Stock held by the Executive shall
immediately become fully vested and exercisable and shall remain exercisable
until the later of; (A) the date that is 24 months following the Termination
Date; and (B) the expiration of the stated term of such options; and
(b) If the employment of the Executive shall be terminated, (i) by reason
of the Executive's death or Disability, (ii) by the Company for Cause, (iii) by
the Executive without Good Reason, or (iv) by the mutual written consent of the
parties hereto, (each a "Non-qualifying Termination"), then the Company shall
pay to the Executive (or the Executive's beneficiary or estate) within thirty
(30) days following the Termination Date a lump-sum cash amount equal to the sum
of the Executive's unpaid Base Salary through the Termination Date plus any
bonus payments which have been earned or become payable, to the extent not
theretofore paid, plus any unpaid reimbursable business expenses properly
incurred through the Termination Date. In addition, Executive (or the
Executive's beneficiary or estate) shall have no less than ninety days following
the termination of his employment pursuant to a Non-qualifying Termination to
exercise any outstanding options to the extent vested and exercisable as of the
Termination Date. If the employment of the Executive shall be terminated, by
reason of the Executive's death or Disability, for a period terminating on the
earlier of; (A) the commencement of the provision of substantially equivalent
benefits by a new employer; or (B) the later of, (i) the last day of the Term,
or (ii) twenty-four (24) months following the Termination Date, the Company
shall continue to keep in full force and effect, (or otherwise provide) all
policies of medical, accident, disability and life insurance with respect to the
Executive and his dependents with substantially the same level of coverage, upon
substantially the same terms and otherwise substantially to the same extent as
such policies shall have been in effect immediately prior to the Termination
Date, and, as applicable, the Company and the Executive shall share the costs of
the continuation of such insurance coverage in the same proportion as such costs
were shared immediately prior to the Termination Date;
5
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6. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Notwithstanding anything in this Agreement to the contrary, in the
event that any payment or distribution by the Company, by any affiliate of the
Company or by any person whose actions result in a change in control of the
Company, (to the extent the Company approves of the arrangements pursuant to
which the payment by such person is made to the Executive) to or for the benefit
of the Executive, (whether paid or payable or distributed or distributable
pursuant to the terms of the Agreement or otherwise, but determined without
regard to any additional payments required under this Section 6), (a
"Payment") would be subject to the excise tax imposed by Section 4999 of the
Code, or any interest or penalties are incurred by the Executive with respect to
such excise tax, (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the "Excise Tax") then
the Executive shall be entitled to receive an additional payment, (a "Gross-Up
Payment") in an amount such that, after payment by the Executive of all taxes,
(including any interest or penalties imposed with respect to such taxes)
including, without limitation, any income and employment taxes and Excise Tax,
imposed upon the Gross-Up Payment but before deduction for any federal, state or
local income or other tax upon the Payments, the Executive will retain a net
amount equal to the sum of, (i) the Payments, and (ii) an amount equal to the
product of any deductions, (or portions thereof) disallowed because of the
inclusion of the Gross-Up Payment in the Executive's adjusted gross income for
federal income tax purposes and the highest applicable marginal rate of federal
income taxation for the calendar year in which the Gross-Up Payment is to be
made. For purposes of determining the amount of the Gross-Up Payment, the
Executive shall be deemed to, (1) pay applicable federal income taxes at the
highest applicable marginal rates of federal income taxation (including
surcharges) for the calendar year in which the Gross-Up Payment is to be made,
(2) pay applicable state and local income taxes at the highest applicable
marginal rate of taxation, (including surcharges) for the calendar year in which
the Gross-Up Payment is to be made, net of the maximum reduction in federal
income taxes which could be obtained from deduction of such state and local
taxes, and (3) have otherwise allowable deductions for federal income tax
purposes at least equal to those disallowed because of the inclusion of the
Gross-Up Payment in the Executive's adjusted gross income.
(b) Subject to the provisions of Section 6(a), all determinations required
to be made under this Section 6, including whether and when a Gross-Up Payment
is required and the amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made by the public
accounting firm that is retained by the Company as of the date immediately prior
to the change in control, (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the Executive within fifteen
(15) business days of the receipt of notice from the Company or the Executive
that there has been a Payment, or such earlier time as is requested by the
Company, (collectively, the "Determination"). In the event that the Accounting
Firm is serving as accountant or auditor for the individual, entity or group
effecting the change in control, the Executive may appoint another nationally
recognized public accounting firm reasonably acceptable to the Company to make
the determinations required hereunder, (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All reasonable fees and expenses
of the Accounting Firm shall be borne solely by the Company and, subject to
applicable law and obligations to the Company's stockholders, the Company shall
enter into any agreement reasonably requested by the Accounting Firm that is
generally recognized as standard in connection with the performance of the
services hereunder. The Gross-Up Payment under this Section 6 with respect to
any Payment shall be made no later than thirty (30) days following the date of
such Payment. If the Accounting Firm determines that no Excise Tax is payable by
the Executive, it shall furnish the Executive with a written opinion to such
effect, and to the effect that failure to report the Excise Tax, if any, on the
Executive's applicable federal income tax return should not result in the
imposition of a negligence or similar penalty. The Determination by the
Accounting Firm shall be binding upon the Company and the Executive. As a result
of uncertainty in the application of Section 4999 of the Code at the time of the
Determination, it is possible that Gross-Up Payments which will not have been
made by the Company should have been made ("Underpayment") or Gross-Up
Payments are made by the Company which should not have been made,
("Overpayment") consistent with the calculations required to be made
hereunder. In the event that the Executive thereafter is required to make
payment of any additional Excise Tax, the Accounting Firm shall
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determine the amount of the Underpayment that has occurred and any such
Underpayment, (together with interest at the rate provided in Section
1274(b)(2)(B) of the Code) shall be promptly paid by the Company to or for the
benefit of the Executive. In the event the amount of the Gross-Up Payment
exceeds the amount necessary to reimburse the Executive for his Excise Tax, the
Accounting Firm shall determine the amount of the Overpayment that has been made
and any such Overpayment, (together with interest at the rate provided in
Section 1274(b)(2) of the Code) shall be promptly paid by the Executive to or
for the benefit of the Company. The Executive shall cooperate, to the extent his
reasonable expenses in connection therewith are reimbursed by the Company, with
any reasonable requests by the Company in connection with any contests or
disputes with the Internal Revenue Service in connection with the Excise Tax.
7. WITHHOLDING TAXES. The Company shall have the right to withhold from
any and all payments due to the Executive, (or his beneficiary or estate)
hereunder all taxes which, by applicable federal, state, local or other law, the
Company is required to withhold therefrom.
8. SUCCESSORS: BINDING AGREEMENT.
(a) This Agreement is personal in nature and none of the parties hereto
shall, without the consent of the other, assign, or transfer this Agreement or
any rights or obligations hereunder; PROVIDED, that in the event of the merger,
consolidation, transfer or sale of substantially all of the assets of the
Company with or to any other individual or entity, this Agreement shall, subject
to the provisions hereof, be binding upon and inure to the benefit of such
successor and such successor shall discharge and perform all the promises,
covenants, duties and obligations of the Company hereunder, all references
herein to the "Company" shall refer to such successor.
(b) This Agreement shall inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive shall
die while any amounts remain payable to the Executive hereunder, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to such person or persons appointed in writing by the
Executive to receive such amounts or, if no person is so appointed, to the
Executive's estate.
9. RESOLUTION OF DISPUTES; LEGAL FEES: NO MITIGATION.
(a) Except as provided in Sections 10 and 11, all disputes hereunder shall
be settled by final, binding arbitration, conducted before a panel of three (3)
arbitrators in Texas in accordance with the rules of the American Arbitration
Association then in effect. Judgment on the arbitration award may be entered in
any court having jurisdiction. The Company shall bear the expenses of such
arbitration.
(b) If any contest or dispute shall arise under this Agreement involving
termination of the Executive's employment with the Company or involving the
failure or refusal of the Company to perform fully in accordance with the terms
hereof, the Company shall advance and reimburse the Executive, on a current
basis, all legal fees and expenses, if any, incurred by the Executive in
connection with such contest or dispute; PROVIDED,that the Executive agrees to
return any advanced or reimbursed expenses to the extent the arbitrators, (or
the court, in the case of a dispute described in Section 10 or 11) determine
that the Company has prevailed as to the material issues raised in determination
of the dispute.
(c) The Company's obligation to make any payments provided for in this
Agreement to the Executive and otherwise to perform its obligations hereunder
shall not be affected by any setoff, counterclaim, recoupment, defense or other
claim, right or action which the Company may have against the Executive or
others. In no event shall the Executive be obligated to seek other employment or
take other action by way of mitigation of the amounts payable to the Executive
under any of the provisions of this Agreement, and such amounts shall not be
reduced whether or not the Executive obtains other employment.
10. NON-COMPETITION.
(a) DISCLOSURE. The Executive has disclosed to the Board, in writing, all
heathcare-related interests, investments, or business activities, whether as
proprietor, stockholder, partner, co-venturer, director, officer, employee,
independent contractor, agent, consultant, or in any other capacity or manner
whatsoever. The
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Executive shall notify the Board, in writing, of any changes in or additions to
such interests, activities or investments permitted in accordance with terms of
this Agreement, within 15 days of such change or addition.
(b) PROHIBITED ACTIVITY. Without the written consent of a majority of the
Independent Directors, the Executive may not engage in any of the following
actions during the period that is; (A) prior to the Executive's termination of
employment with the Company; (B) within two years following the termination of
his employment with the Company during the Initial Term if such termination is
by the Company for Cause or by the Executive other than for Good Reason; and (C)
within one year following his termination of employment during the Term but
after the Initial Term if such termination is by the Company for Cause or by the
Executive other than Good Reason.
(i) own, either directly or indirectly, any interest in any business that
competes with the "Primary Business" in which the Company or any subsidiary or
affiliate is engaged, within a radius of 20 miles from any site, facility, or
location which is owned, managed or operated by or affiliated with the Company
or any of its subsidiaries and affiliates, including Podiatric Physician
practices of any kind. For purposes of this Agreement, "Primary Business"
shall mean the delivery of Podiatric healthcare services in markets where the
Company or its subsidiaries own, operate or manage Physician Practices or
Ambulatory Surgery Centers. These Podiatric healthcare services can include but
are not limited to; (A) individual Podiatric Physician Practices and/or
Podiatric physician-based organizations such as primary care and specialty
clinics, Podiatric Physician-hospital organizations ("PMOs") or medical
service organizations ("MSOs"), or Podiatric Physician medical groups; and (B)
ambulatory programs such as home health care, ambulatory surgery, occupational
and sports medicine centers, and other diagnostic, rehabilitative and treatment
services for Podiatric patients. Some of these services, sites and facilities
may be located in satellite areas for the purpose of extending the Physician
Practice's geographic service area and to serve as access points and/or referral
sources for either the local delivery system or the Physician Practice's
geographic service area and to serve as access points and/or referral sources
for either the local delivery system or the Physician Practice's. The Board may
modify, from time to time, the definition of Primary Business to include any
additional Podiatric business or service activity in which the Company may
engage during the Term or to exclude any business or service in which the
Company ceases to engage. The definition of "Primary Business" may also be
modified to include any Podiatric business or service into which, as of the
Termination Date, the Company definitively intends to expand, regardless of
whether such expansion actually occurs after the Executive's termination. For
purposes of the preceding sentence, the date on which a modification of the
definition of "Primary Business" shall be effective shall be the date on which
the Executive is provided written notice of such modification, (the "Notice
Date") PROVIDED, HOWEVER,that no such modification as to which notice is
provided on or after the Termination Date shall be effective against the
Executive; and PROVIDED, FURTHER, that no such modification shall be effective
with respect to any interests, investments or business activities engaged in by
Executive prior to the Notice Date of such modification and properly disclosed
prior to such Notice Date pursuant to Section 10(a);
(ii) participate or serve, either directly or indirectly, whether as a
proprietor, stockholder, partner, co-venturer, director, officer, employee,
independent contractor, agent, consultant, or in any other capacity or manner
whatsoever in any business or service activity that competes with the Primary
Business;
(iii) directly or indirectly, solicit or recruit any individual employed
by the Company, its subsidiaries or affiliates for the purpose of being employed
by him or by any competitor of the Company on whose behalf he is acting as an
agent, representative or employee, or convey any confidential information or
trade secrets regarding other employees of the Company, its subsidiaries or
affiliates to any other person; or
(iv) directly or indirectly, influence or attempt to influence customers
of the Company or any of its subsidiaries or affiliates to direct their business
to any competitor of the Company; PROVIDED, HOWEVER, that neither, (i) the
"beneficial ownership" by Executive, either individually or as a member of a
"group," as such terms are used in Rule 13d under the Exchange Act, as a
passive investment, of not more than five percent (5%) of the voting stock of
any publicly held corporation, nor (ii) the beneficial ownership by
8
<PAGE>
Executive of any interest described in the first sentence of Section 10(a) and
properly and timely disclosed in accordance with the terms therewith, shall
alone constitute a violation of this Agreement.
In the event that the Executive engages in the conduct proscribed by this
Section 10, the Executive agrees to repay any lump-sum severance amount received
pursuant to Section 5 of this Agreement, and all outstanding stock options held
by the Executive shall expire as of the date of the Executive's commencement of
such proscribed conduct. It is further expressly agreed that the Company will or
would suffer irreparable injury if Executive were to compete with the Company or
any subsidiary or affiliate in violation of this Agreement and that the Company
would by reason of such competition be entitled to preliminary or injunctive
relief in a court of appropriate jurisdiction, and Executive further consents
and stipulates to the entry of such preliminary or injunctive relief in such a
court prohibiting Executive from competing with the Company or any subsidiary or
affiliate in violation of this Agreement upon an appropriate finding by such
court that Executive has violated this Section 10.
(c) UNENFORCEABLE PROVISIONS. It is the desire and the intent of the
parties that the provisions of this Section 10 shall be enforceable to the
fullest extent permissible under applicable law and public policy. Accordingly,
if this Section 10 or any portion thereof shall be adjudicated to be invalid or
unenforceable whether because of the duration and scope of the covenants set
forth herein or otherwise, the length and scope of the restrictions set forth in
this Section 10 shall be reduced to the extent necessary so that this covenant
may be enforced to the fullest extent possible under applicable law.
11. CONFIDENTIAL INFORMATION. The Executive acknowledges that in his
employment hereunder, and during prior periods of employment with the Company
and/or its subsidiaries, he has occupied and will continue to occupy a position
of trust and confidence. The Executive shall not, except as may be required to
perform his duties hereunder or as required by applicable law, until the
expiration of the applicable periods described in Section 10(b) or until such
information shall have become public other than by the Executive's unauthorized
disclosure, disclose to others or use, whether directly or indirectly, any
Confidential Information regarding the Company, its subsidiaries and affiliates.
"Confidential Information" shall mean information about the Company, its
subsidiaries and affiliates, and their respective clients and customers that is
not publicly disclosed by the Company or otherwise generally available to
members of the public seeking such information and that was learned by the
Executive in the course of his employment by the Company, its subsidiaries and
affiliates, including, (without limitation) any proprietary knowledge, trade
secrets, data, formulae, information and client and customer lists and all
papers, resumes, and records, (including computer records) of the documents
containing such Confidential Information. The Executive acknowledges that such
Confidential Information is specialized, unique in nature and of great value to
the Company, its subsidiaries and affiliates, and that such information gives
the Company, its subsidiaries and affiliates a competitive advantage. The
Executive agrees to deliver or return to the Company, at the Company's request
at any time or upon termination or expiration of his employment or as soon
thereafter as possible, all documents, computer tapes and disks, records, lists,
data, drawings, prints, notes and written information, (and all copies thereof)
furnished by the Company, its subsidiaries or affiliates or prepared by the
Executive during the term of his employment by the Company, its subsidiaries and
affiliates.
In the event that the Executive engages in any conduct proscribed by this
Section 11, the Executive agrees to repay any lump-sum severance amount received
pursuant to Section 5 of this Agreement, and all outstanding stock options held
by the Executive shall expire as of the date of the Executive's commencement of
such proscribed conduct. It is further expressly agreed that the Company will or
would suffer irreparable injury if Executive were to disclose or threaten to
disclose Confidential Information regarding the Company or any subsidiary or
affiliate in violation of this Agreement or otherwise fail to comply with the
provisions of this Section 11, and that the Company would, by reason of such
disclosure or threatened disclosure or other failure to comply, be entitled to
preliminary or permanent injunctive relief in a court of appropriate
jurisdiction, and Executive further consents and stipulates to the entry of such
preliminary or permanent injunctive relief in such a court prohibiting Executive
from disclosing Confidential Information in violation of this Agreement or
otherwise requiring Executive to comply with the provisions of this Section 11
upon an appropriate finding by such court that Executive has violated this
Section 11.
9
<PAGE>
12. NOTICE. For the purposes of this Agreement, any notices, demands and
all other communications required or permitted hereunder shall be in writing and
shall be deemed to have been duly given upon; (A) transmitter's confirmation of
a receipt of a facsimile transmission; (B) confirmed delivery by a standard
overnight carrier; or (C) the expiration of five business days after the day
when mailed by certified or registered mail, postage prepaid, addressed as
follows, (or at such other address as the parties hereto shall specify by like
notice);
If to Executive: Randy E. Johnson
3555 Timmons Lane, Suite 1550
Houston, TX 77027
If to Company: Ankle and Foot Centers of America,
LLC
or American Medical Providers, Inc.
3555 Timmons Lane, Suite 1550
Houston, Texas 77027
Attention: Chief Executive Officer
13. AMENDMENT WAIVER. No provisions of this Agreement may be waived,
modified or discharged unless such waiver, modification or discharge is agreed
to in a written document signed by the Executive and such officer of the
Company, as may be specifically designated by the Board. No waiver by either
party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement.
14. ENTIRE AGREEMENT. This Agreement and Exhibit A hereto set forth the
entire agreement of the parties hereto in respect of the subject matter
contained herein and supersede all prior agreements, promises, covenants,
arrangements, communications, representations or warranties, whether oral or
written, by any officer, employee or representative of any party hereto.
15. GOVERNING LAW: VENUE: VALIDITY. The interpretation, construction and
performance of this Agreement shall be governed by and construed and enforced in
accordance with the internal laws of the State of Texas without regard to the
principle of conflicts of laws and, at the election of the Executive, the venue
of any dispute arising under this Agreement shall be Texas. The invalidity or
unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement, which other
provisions shall remain in full force and effect.
16. HEADINGS. Section headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose.
17. SEVERABILITY. In the event that a court of competent jurisdiction
determines that any portion of this Agreement is in violation of any statute or
public policy, only the portions of this Agreement that violate such statute or
public policy shall be stricken. All portions of this Agreement that do not
violate any statute or public policy shall continue in full force and effect.
Further, any court order striking any portion of this Agreement shall modify the
stricken terms as narrowly as possible to give as much effect as possible to the
intentions of the parties under this Agreement.
10
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day of December, 1997.
Ankle and Foot Centers of America,
LLC.
By: /s/JACK N. McCRARY
Name: Jack N. McCrary
Title:
Executive:RANDY E. JOHNSON
Randy E. Johnson
Joined into for the purpose here above stated by American Medical
Providers, Inc., this day of December, 1997.
By: /s/JACK N. McCRARY
Name: Jack N. McCrary
Title:
11
<PAGE>
EXHIBIT A
COMPENSATION AND LEAVE POLICIES
BASE COMPENSATION
Commencing with the Initial Public Offering (the "IPO") Date (the "IPO
Date") of AMP, (or the Sale Merger of AMP's Shares other than the IPO ("Sale
or Merger Date"), Executive shall be paid by the Company a base salary of not
less than One Hundred Eighty Thousand Dollars, ($180,000.00) per annum.
INVENTIVE COMPENSATION
Executive shall participate in the Company's Executive Officers Performance
Plan with his annual "Target Bonus" not being less than 60% of his Base
Salary.
LEAVE-VACATION AND HOLIDAYS
Executive shall be entitled to leave of four (4) weeks per annum, to be
taken in accordance with Employer's regular vacation policies. Executive shall
be entitled to at least nine (9) paid holidays per annum in accordance with
Employer regular paid holidays policies.
BENEFITS
Health Insurance including major medical for personal, at no cost to
Executive family and dependents at customary rates for family coverage.
Life Insurance equivalent to three times Executive salary.
Disability insurance equivalent to 60% of Base salary upon permanent
disability.
OTHER PAYMENTS:
Executive shall be reimbursed up to $1,000 for the cost of an annual
physical.
Executive shall receive a minimum of $800 per month as an automobile
allowance.
Executive shall be reimbursed up to $250.00 per month for membership dues.
Executive shall be reimbursed for expenses of "continuing education"
including such reasonable travel, as is required in connection therewith.
12
EXHIBIT 10.12
FORM OF
STOCKHOLDER PROTECTION AGREEMENT
dated as of
February __, 1998
between
AMERICAN MEDICAL PROVIDERS, INC.
and
as Rights Agent
<PAGE>
FORM OF
STOCKHOLDER PROTECTION AGREEMENT
TABLE OF CONTENTS
PAGE
ARTICLE I - CERTAIN DEFINITIONS............................................ 1
1.1 Certain Definitions............................................ 1
ARTICLE II - THE RIGHTS.................................................... 6
2.1 Summary of Rights.............................................. 6
2.2 Legend on Stock Certificates................................... 6
2.3 Exercise Price; Exercise of Rights; Detachment of Rights....... 7
2.4 Adjustments to Exercise Price; Number of Rights; Securities
Purchasable.................................................... 9
2.5 Date On Which Exercise Is Effective............................ 12
2.6 Execution, Authentication, Delivery and Dating of Rights
Certificates................................................... 12
2.7 Registration, Registration of Transfer and Exchange............ 12
2.8 Mutilated, Destroyed, Lost and Stolen Rights Certificates...... 13
2.9 Persons Deemed Owners.......................................... 14
2.10 Delivery and Cancellation of Certificates...................... 14
2.11 Agreements of Rights Holders................................... 14
2.12 Consolidation, Merger or Sale or Transfer of Assets or
Earning Power.................................................. 15
2.13 Certificate of Adjusted Exercise Price or Number of Shares..... 16
ARTICLE III - THE RIGHTS AGENT............................................. 17
3.1 General........................................................ 17
3.2 Merger or Consolidation or Change of Name of Rights Agent...... 17
3.3 Duties of Rights Agent......................................... 18
ARTICLE IV - MISCELLANEOUS................................................. 21
4.1 Redemption, Termination and Exchange........................... 21
4.2 Provision in Event of Insufficient Shares of Series A
Preferred Stock................................................ 22
4.3 Issuance of New Rights Certificates............................ 22
4.4 Supplements and Amendments..................................... 23
4.5 Fractional Shares.............................................. 23
4.6 Transactions After the Separation Time......................... 23
4.7 Rights of Action............................................... 23
4.8 Holder of Rights Not Deemed a Stockholder...................... 24
4.9 Notice of Proposed Actions..................................... 24
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4.10 Notices........................................................ 24
4.11 Costs of Enforcement........................................... 25
4.12 Successors..................................................... 25
4.13 Benefits of this Agreement..................................... 25
4.14 Descriptive Headings........................................... 25
4.15 Governing Law.................................................. 25
4.16 Counterparts................................................... 25
4.17 Severability................................................... 26
EXHIBITS
Exhibit A Form of Certificate of Designation, Preferences and Rights
of Series A Junior Participating Preferred Stock
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<PAGE>
FORM OF
STOCKHOLDER PROTECTION AGREEMENT
This Stockholder Protection Agreement (the "Agreement"), is entered into
as of February __, 1998, between AMERICAN MEDICAL PROVIDERS, INC., a Delaware
corporation (the "Company") , and ___________________________________, as Rights
Agent (the "Rights Agent", which term shall include any successor Rights Agent
hereunder).
WHEREAS, on February __, 1998, the Board of Directors of the Company
adopted a stockholder protection plan designed to provide protection to the
Company's stockholders in the event any person should attempt to acquire a 15%
or greater equity interest in the Company at a price, under circumstances or on
terms that are not in the best interests of the Company and its stockholders;
WHEREAS, the Board of Directors of the Company has (a) authorized and
declared a dividend of one contingent preferred stock purchase right ("Right")
in respect of each share of Common Stock (as hereinafter defined) held of record
as of the close of business on _________________________ (the "Record Time") and
(b) authorized the issuance of one Right in respect of each share of Common
Stock that shall become outstanding after the Record Time and prior to the
Separation Time (as hereinafter defined);
WHEREAS, each Right entitles the holder thereof, after the Separation
Time, to purchase that number of Units (as hereinafter defined) of a share of
the Company's Series A Preferred Stock (as hereinafter defined) which equals the
quotient obtained by dividing the Exercise Price (as hereinafter defined) by
fifty percent (50%) of the Market Price (as hereinafter defined) per share of
Common Stock, pursuant to the terms and subject to the conditions set forth
herein; and
WHEREAS, the Company desires to appoint the Rights Agent to act on behalf
of the Company, and the Rights Agent is willing to so act, in connection with
the issuance, transfer, exchange and replacement of Rights Certificates (as
hereinafter defined), the exercise of Rights and other matters referred to
herein.
NOW, THEREFORE, in consideration of the mutual covenants set forth herein,
the parties hereto agree as follows:
ARTICLE I - CERTAIN DEFINITIONS
I.1 CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who has (i) acquired or
obtained the right to acquire Beneficial Ownership of 15% or more of the
outstanding shares of Common Stock or (ii) has commenced or announced an
intention to commence a tender or exchange offer which would result in that
Person obtaining Beneficial Ownership of 15% or more of the outstanding shares
of Common Stock; PROVIDED, HOWEVER, that the term "Acquiring Person" shall not
include the Company, any wholly-owned Subsidiary of the Company, any employee
stock
<PAGE>
ownership or other employee benefit plan of the Company or of a Subsidiary of
the Company (a "Plan"), any Person holding Common Stock for or pursuant to the
terms of any such Plan or any Exempted Person. Notwithstanding the foregoing,
any Person who acquires the Beneficial Ownership of 15% or more of the shares of
Common Stock of the Company either (i) by reason of share purchases by the
Company reducing the number of shares of Common Stock outstanding (provided such
Person does not acquire additional shares of Common Stock), or (ii)
inadvertently, if such Person notifies the Board of Directors of such
inadvertent purchase within five business days and within two business days
after such notice divests itself of enough shares of Common Stock so as to no
longer have the Beneficial Ownership of 15% of the outstanding Common Stock,
will not be an Acquiring Person.
(b) "Affiliate," when used to indicate a relationship with a
specified Person, shall mean a Person that directly, or indirectly through one
or more intermediaries, controls, or is controlled by, or is under common
control with, such specified Person.
(c) "Associate" of a specified Person shall mean (i) any
corporation, partnership or other organization of which such specified Person is
an officer or partner or is, directly or indirectly, the Beneficial Owner of 10%
or more of any class of equity securities, (ii) any trust or other estate in
which such specified Person has a substantial beneficial interest or as to which
such specified Person serves as trustee or in a similar fiduciary capacity,
(iii) any relative or spouse of such specified Person, or any relative of such
spouse, who has the same home as such specified Person or who is a director or
officer of the Company or an Affiliate of the Company and (iv) any Person who is
a director, officer, partner or trustee of such specified Person or of any
corporation, partnership or other organization (other than the Company or any
wholly-owned Subsidiary of the Company) that is an Affiliate or Associate of
such specified Person.
(d) A Person shall be deemed the "Beneficial Owner", and to have
"Beneficial Ownership", of, and to "Beneficially Own", any securities as to
which such Person or any of such Person's Affiliates or Associates is or may be
deemed to be the Beneficial Owner pursuant to Rule 13d-3 or Rule 13d-5 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") (or pursuant to
any comparable or successor laws or regulations or, if such Rules shall be
rescinded and there shall be no comparable or successor laws or regulations,
pursuant to Rule 13d-3 or Rule 13d-5 as in effect on the date of this
Agreement), as well as any securities as to which such Person or any of such
Person's Affiliates or Associates has the right to become a Beneficial Owner
(whether such right is exercisable immediately or only after the passage of
time) pursuant to any agreement, arrangement or understanding, or upon the
exercise of conversion rights, exchange rights, rights (other than the Rights),
warrants or options, or otherwise; provided, however, that a Person shall not be
deemed the "Beneficial Owner" or to have "Beneficial Ownership", of or to
"Beneficially Own" any security (i) solely because such Person or any of such
Person's Affiliates or Associates has or shares the power to vote or direct the
voting of such security pursuant to a revocable proxy given in response to a
public proxy or consent solicitation made pursuant to, and in accordance with,
the applicable rules and regulations under the Exchange Act, except if such
power (or the arrangements relating thereto) is then reportable under Item 6 of
Schedule 13D under the Exchange Act (or any similar provision of a comparable or
successor report) or (ii) held for or
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<PAGE>
pursuant to the terms of any Plan; and provided, however, that nothing in this
paragraph 1.1(d) shall cause a Person engaged in business as an underwriter of
securities to be the Beneficial Owner of, to have Beneficial Ownership of, or to
Beneficially Own, any securities acquired through such Person's participation in
good faith in a firm commitment underwriting until the expiration of 40 days
after the date of such acquisition. For purposes of this Agreement, in
determining the percentage of the outstanding shares of Common Stock with
respect to which a Person is the Beneficial Owner, all shares as to which such
Person is deemed the Beneficial Owner shall be deemed outstanding.
(e) "Business Day" shall mean any day other than a Saturday, Sunday
or a day on which banking institutions in the City of New York are generally
authorized or obligated by law or executive order to close.
(f) "Close of Business" on any given day shall mean the time on such
date (or, if such date is not a Business Day, the time on the next succeeding
Business Day) at which the offices of the transfer agent for the Common Stock
(or, after the Separation Time, the offices of the Rights Agent) are closed to
the public.
(g) "Common Stock" shall mean the Class A Common Stock, par value
$0.001 per share, of the Company and the Class B Common Stock, par value $0.001
per share, of the Company.
(h) "Exempted Person" shall mean any Institutional Investor, any
Minority Investor and the Strategic Investor. Notwithstanding the foregoing, if
(i) any Institutional Investor or Minority Investor acquires Beneficial
Ownership of the outstanding Common Stock in excess of that percentage expressly
approved in writing by the Board of Directors of the Company or (ii) the
Strategic Investor acquires Beneficial Ownership of the outstanding Common Stock
in excess of the greater of 25% or the Minority Percentage, either (y) by reason
of share purchases by the Company reducing the number of shares of Common Stock
outstanding (provided such Exempted Person does not acquire additional shares of
Common Stock) or (z) inadvertently, if such Exempted Person notifies the Board
of Directors of such inadvertent purchase within five business days and within
two business days after such notice divests itself of enough shares of Common
Stock so as to no longer have the Beneficial Ownership of the outstanding Common
Stock in excess of the specified percentages, such Institutional Investor,
Minority Investor or Strategic Investor will not cease to be an Exempted Person.
(i) "Exercise Price" shall initially be $ , subject to adjustment
from time to time as provided in Section 2.4 hereof.
(j) "Expiration Time" shall be (i) the Close of Business on .
(k) "Institutional Investor" shall mean any Person (together with
such Institutional Investor's Affiliates and Associates) (i) who, with the
express written approval of the Board of Directors of the Company, acquires
aggregate Beneficial Ownership of 15% or more but
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<PAGE>
not more than 20% of the outstanding Common Stock of the Company, PROVIDED,
HOWEVER, that the Institutional Investor acquires such Beneficial Ownership in
the ordinary course of business and not with the purpose nor with the effect of
changing or influencing the control of the Company, nor in connection with or as
a participant in any transaction having such purpose or effect, including any
transaction subject to Rule 13d-3(b) of the Exchange Act, and (ii) who is: (A) a
broker or dealer registered under Section 15 of the Exchange Act; (B) a bank as
defined in Section 3(a)(6) of the Exchange Act; (C) an insurance company as
defined in Section 3(a)(19) of the Exchange Act; (D) an investment company
registered under Section 8 of the Investment Company Act of 1940; (E) an
investment adviser registered under Section 203 of the Investment Advisers Act
of 1940; (F) an employee benefit plan or pension fund which is subject to the
provisions of the Employee Retirement Income Security Act of 1974 or an
endowment fund; (G) a parent holding company, provided the aggregate amount held
directly by the parent, and directly and indirectly by its subsidiaries which
are not persons specified in Rule 13d-1(b)(ii)(A) through (F) of the Exchange
Act, does not exceed one percent of the securities of the subject class; or (H)
a group, provided that all the members are persons specified in Rule
13d-1(b)(ii)(A) through (G) of the Exchange Act.
(l) "Market Price" per share of Common Stock on any date of
determination shall mean the average of the daily closing prices per share of
Common Stock (determined as described below) on each of the 20 consecutive
Trading Days through and including the fifth Trading Day immediately preceding
such determination date; provided, however, that if the first public
announcement of an event described in Section 2.4 hereof occurs within such 20
Trading Day period, Market Price per share of Common Stock on such determination
date shall mean the average of the daily closing prices per share of Common
Stock on each Trading Day from and including the day after the date of such
announcement through and including the fifth Trading Day immediately preceding
such determination date. The closing price per share of Common Stock on any date
shall be the last sale price, regular way, or, in case no such sale takes place
on such date, the average of the closing bid and asked prices, regular way, for
each share of Common Stock, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange or, if the Common Stock is
not then listed or admitted to trading on the New York Stock Exchange, as
reported in the principal consolidated transaction reporting system with respect
to securities listed on the principal national securities exchange on which the
Common Stock is listed or admitted to trading or, if the Common Stock is not
then listed or admitted to trading on any national securities exchange, the
average of the high bid and low asked prices for each share of Common Stock in
the over-the-counter market, as reported by the National Association of
Securities Dealers, Inc. Automated Quotation System ("NASDAQ") or such other
system then in use, or, if on any such date the Common Stock is not then quoted
by any such organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the Common Stock
selected by the Board of Directors of the Company; provided, however, that if on
any such date the Common Stock is not listed or admitted for trading on a
national securities exchange or traded in the over-the-counter market, the
closing price per share of Common Stock on such date shall mean the fair value
per share of Common Stock on such date as determined in good faith by the Board
of Directors of the Company, after consultation with a nationally recognized
investment banking firm with respect to the fair value per share of Common
Stock. Market Price per share of Series A Preferred Stock on any date of
determination shall be determined in the same manner set forth above for Common
Stock, other than as provided in the second proviso thereto. If the Market Price
per share of Series A
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<PAGE>
Preferred Stock cannot be determined in the manner provided above, or if the
Series A Preferred Stock is not publicly held or listed or traded in a manner
described above, the Market Price per share of Series A Preferred Stock shall be
conclusively deemed to be an amount equal to 100 (as such number may be
appropriately adjusted for such events as subdivisions or combinations of stock,
stock dividends and recapitalizations with respect to the Common Stock occurring
after the date of this Agreement) multiplied by the Market Price per share of
Common Stock. If neither the Common Stock nor the Series A Preferred Stock is
publicly held or listed or traded, Market Price per share shall mean the fair
value per share as determined in good faith by the Board of Directors of the
Company, after consultation with a nationally recognized investment banking firm
with respect to the fair value per share of Series A Preferred Stock. Market
Price of a Unit shall be equal to the Market Price of one share of Series A
Preferred Stock divided by 100.
(m) "Minority Investor" shall mean any Person (together with such
Minority Investor's Affiliates and Associates) who, with the express, written
approval of the Board of Directors of the Company, acquires aggregate Beneficial
Ownership of 15% or more but less than 50% of the outstanding Common Stock of
the Company.
(n) "Minority Percentage" shall mean the greatest percentage of the
outstanding Common Stock Beneficially Owned by any single Minority Investor or
the greatest percentage which the Board has authorized any Minority Investor to
Beneficially Own without becoming an Acquiring Person.
(o) "Person" shall mean any individual, firm, partnership,
association, group (as such term is used in Rule 13d-5 under the Exchange Act,
as in effect on the date of this Agreement), corporation or other entity.
(p) "Series A Preferred Stock" shall mean the Series A Junior
Participating Preferred Stock, par value $0.001 per share, of the Company having
the rights, powers, privileges and restrictions, qualifications and limitations
set forth in the Certificate of Designation, Preferences and Rights of Series A
Junior Participating Preferred Stock in the form attached as EXHIBIT A.
[(q) "Series B Preferred Stock" shall mean the Series B Convertible
Preferred Stock, par value $0.10 per share, of the Company.]
(r) "Separation Time" shall mean the Close of Business on the tenth
Business Day after (i) a public announcement establishing that an Acquiring
Person has become such or (ii) a resolution by the Board of Directors stating
that the majority of the Board of Directors is aware that a Person has become an
Acquiring Person, provided that if the foregoing results in the Separation Time
being prior to the Record Time, the Separation Time shall be extended to the
Record Time.
(s) "Subsidiary" of any specified Person shall mean any corporation
or other
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<PAGE>
entity of which a majority of the voting power of the equity securities or a
majority of the equity interest is Beneficially owned, directly or indirectly,
or otherwise controlled by such Person.
(t) "Trading Day" shall mean a day on which the principal national
securities exchange or over-the-counter market on which the Common Stock is
listed or admitted to trading is open for the transaction of business or, if the
Common Stock is not then listed or admitted to trading on any national
securities exchange or over-the-counter market, a Business Day.
(u) "Voting Stock" shall mean (i) a Unit of Series A Preferred
Stock, (ii) a share of Common Stock and (iii) any other share of capital stock
of the Company entitled to vote generally in the election of directors or
entitled to vote together with the Common Stock in respect of any merger,
consolidation, sale of all or substantially all of the Company's assets,
liquidation, dissolution or winding up.
(v) A "Unit" of Series A Preferred Stock shall mean one
one-hundredth of a share of Series A Preferred Stock.
ARTICLE II - THE RIGHTS
II.1 SUMMARY OF RIGHTS. As soon as practicable after the date hereof, the
Company will mail to each holder of record of Common Stock as of the Record
Time, at such holder's address as shown by the records of the Company, a copy of
a Summary of Stockholder Protection Agreement in substantially the form attached
as EXHIBIT D.
II.2 LEGEND ON STOCK CERTIFICATES. Certificates for the Common Stock
issued after the Record Time but prior to the close of business on the
Separation Time shall evidence one Right for each share of Common Stock
represented thereby and shall have impressed on, printed on, written on or
otherwise affixed to them the following legend:
Until the earlier of the Separation Time or the Expiration Time (as such
terms are defined in the Stockholder Protection Agreement referred to
below), this certificate also evidences and entitles the holder hereof to
certain Rights as set forth in a Stockholder Protection Agreement, dated
as of October __, 1997 as amended, supplemented or otherwise modified from
time to time, (the "Stockholder Protection Agreement"), between American
Medical Providers, Inc. (the "Company") and __________________________ ,
the terms of which are hereby incorporated herein by reference and a copy
of which is on file at the principal executive offices of the Company.
Under certain circumstances, as set forth in the Stockholder Protection
Agreement, such Rights may expire, may become void (if they are
"Beneficially Owned" by an "Acquiring Person" or an "Affiliate" or
"Associate" thereof, as such terms are defined in the Stockholder
Protection Agreement, or a transferee of any of the foregoing) or may be
evidenced by separate certificates and may no longer be evidenced by this
certificate. The Company will mail or arrange for the mailing of a copy of
the Stockholder Protection Agreement to the holder of this certificate
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without charge within five days after the receipt of a written request
therefor.
Notwithstanding the absence of the foregoing legend, certificates representing
shares of Common Stock that are issued and outstanding at the Record Time shall
evidence one Right for each share of the Common Stock evidenced thereby.
II.3 EXERCISE PRICE; EXERCISE OF RIGHTS; DETACHMENT OF RIGHTS.
(a) Subject to the terms and conditions of this Agreement, after the
Separation Time, each Right will entitle the holder thereof to receive, upon the
exercise thereof and payment of the Exercise Price, that number of Units of
Series A Preferred Stock which equals the quotient obtained by dividing the
Exercise Price by fifty percent (50%) of the Market Price per share of Common
Stock at the Separation Time, which number and type of securities are subject to
adjustment as provided in Section 2.12 hereof and in Section 2.4 hereof. The
Company shall calculate the Exercise Price and provide the Rights Agent with
notice of such Exercise Price immediately after the Separation Time.
(b) Until the Separation Time, (i) no Right may be exercised and
(ii) each Right will be evidenced by the certificate for the associated share of
Common Stock (together, in the case of certificates issued prior to the Record
Time, with the letter or other communication mailed to each holder of record of
Common Stock pursuant to Section 2.1 hereof) and will be transferable and/or
convertible only together with, and will be transferred by a transfer or a
conversion of, such associated share (whether with or without such letter or
other communication)
(c) After the Separation Time and prior to the Expiration Time, and
subject to the provisions of clause (g) and the second paragraph of clause (h)
of this Section 2.3, the Rights (i) may be exercised and (ii) will be
transferable independently of the Common Stock. As soon as practicable following
the Separation Time, the Rights Agent will mail to each holder of record of
Common Stock as of the Separation Time (other than a holder known by the Rights
Agent to be an Acquiring Person or an Affiliate or Associate thereof), at such
holder's address as shown by the records of the Company (the Company hereby
agreeing to furnish copies of such records to the Rights Agent for this
purpose), (x) a certificate (a "Rights Certificate") in substantially the form
of EXHIBIT C hereto appropriately completed, representing the number of Rights
held by such holder at the Separation Time and having such marks of
identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
law or with any rule or regulation made pursuant thereto or with any rule or
regulation of any stock exchange or quotation system on which the Rights may
from time to time be listed or traded, or to conform to usage, and (y) a
disclosure statement describing the Rights.
(d) Subject to the provisions of clause (g) and the second paragraph
of clause (h) of this Section 2.3, Rights may be exercised on any Business Day
after the Separation Time and prior to the Expiration Time by submitting to the
Rights Agent the Rights Certificate evidencing such Rights with an Election to
Purchase (an "Election to Purchase") and certificate substantially in
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the form attached to the Rights Certificate duly completed, accompanied by
payment of the Exercise Price multiplied by the number of Rights being exercised
and a sum sufficient to cover any transfer tax or charge that may be payable in
respect of any transfer involved in the transfer or delivery of Rights
Certificates or the issuance or delivery of certificates for Series A Preferred
Stock or depositary receipts (or both) in a name other than that of the holder
of the Rights being exercised. Payment of the Exercise Price for the Units
purchased upon the exercise of the Rights hereunder shall be made by delivery to
the Company of (i) money order or check to the order of the Company, (ii) Common
Stock, (iii) Rights to purchase Units of the Company's Series A Preferred Stock
or (iv) in such other form as the determined by the Board of Directors of the
Company, in each case in an amount equal to the aggregate Exercise Price of such
Rights. For the purposes of the preceding sentence, (x) Common Stock shall be
valued at its Market Price and (y) Rights to purchase Units of the Company's
Series A Preferred Stock shall be valued at an amount equal to the fair market
value of the Units subject to the Rights (as determined by the Company's Board
of Directors) less the Exercise Price.
(e) Upon receipt of a Rights Certificate, with an Election to
Purchase and certificate duly executed accompanied by payment as set forth in
Section 2.3(d) above, and subject to the provisions of clause (g) and the second
paragraph of clause (h) of this Section 2.3, the Rights Agent will thereupon
promptly (i)(A) requisition from the Company's transfer agents certificates for
the number of shares of stock to be purchased (the Company hereby irrevocably
authorizing its transfer agents to comply with all such requisitions) and (B) if
the Company elects pursuant to Section 4.5 hereof not to issue certificates
representing fractional shares of stock, requisition from the depositary
selected by the Company cash or depositary receipts, as the case may be,
representing the fractional shares of stock to be purchased and (ii) after
receipt of such certificates or depositary receipts, deliver such certificates
or depositary receipts to or upon the order of the registered holder of such
Rights Certificate, registered in such name or names as may be designated by
such holder.
(f) If the holder of any Rights shall exercise fewer than all the
Rights evidenced by such holder's Rights Certificate, a new Rights Certificate
evidencing the Rights remaining unexercised will be issued by the Rights Agent
to such holder or to such holder's duly authorized assigns, subject to the
provisions of Section 4.5 hereof.
(g) Anything in this Agreement or in the Rights Certificates to the
contrary notwithstanding, Rights Beneficially owned by an Acquiring Person or an
Affiliate or Associate thereof or any transferee of any of the foregoing cannot
validly be transferred or exercised and shall be for all purposes void.
(h) The Company covenants and agrees that it will (i) cause to be
reserved and kept available until the Expiration Time out of its authorized and
unissued shares of capital stock a number of shares of Series A Preferred Stock
and/or Common Stock or other preferred stock or equity securities of the Company
satisfactory for delivery pursuant to Section 4.2 hereof, sufficient to permit
the exercise in full of all outstanding Rights; (ii) take all such action as may
be necessary to ensure that all shares delivered upon exercise of Rights shall,
at the time of delivery of the
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certificates for such shares (subject to payment of the Exercise Price) , be
duly and validly authorized, executed, issued and delivered and fully paid and
nonassessable; (iii) take all such action as may be necessary to comply with any
applicable requirements of the Securities Act of 1933, as amended (the
"Securities Act") , and the Exchange Act, and the rules and regulations
thereunder, and any other applicable law, rule or regulation, in connection with
the issuance of any shares upon exercise of Rights; (iv) use its best efforts to
cause all shares issued upon exercise of Rights to be listed on a national
securities exchange or traded in the over-the-counter market and quoted on
NASDAQ upon issuance; and (v) pay when due and payable any and all federal and
state transfer taxes and charges that may be payable in respect of the original
issuance or delivery of the Rights Certificates or of any shares issued upon the
exercise of Rights, provided that the Company shall not be required to pay any
transfer tax or charge that may be payable in respect of any transfer involved
in the transfer or delivery of Rights Certificates or the issuance or delivery
of certificates for shares in a name other than that of the holder of the Rights
being transferred or exercised.
The Company may temporarily suspend, at any time, the exercisability of
the Rights for such period of time as may be reasonably necessary to prepare and
file such documents and to perform such acts as are required to ensure
compliance with the Securities Act, the Exchange Act, the rules and regulations
thereunder, the "blue sky" laws of the various states and any other applicable
law, rule or regulation, as provided in clause (iii) above. The Company may also
suspend such exercisability for such period of time as may be reasonably
necessary to permit any registration statement or statements required by the
Securities Act or the Exchange Act or any registration or qualification required
by any other applicable law, rule or regulation, to be effective with respect to
any securities to be issued upon exercise of Rights. Upon any suspension of
exercisability, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended. Notwithstanding any
provision of this Agreement to the contrary, the Rights shall not be exercisable
in any jurisdiction if the requisite qualification in such jurisdiction shall
not have been obtained or the exercise thereof shall not be permitted under
applicable law.
II.4 ADJUSTMENTS TO EXERCISE PRICE; NUMBER OF RIGHTS; SECURITIES
PURCHASABLE.
(a) If the Company shall at any time after the Record Time and prior
to the Expiration Time (i) declare or pay a dividend on Common Stock payable in
Common Stock (or other capital stock), (ii) subdivide the outstanding Common
Stock or (iii) combine the outstanding Common Stock into a smaller number of
shares of Common Stock, the Exercise Price and number of Rights outstanding, or,
if the payment or effective date therefor shall occur after the Separation Time,
the securities purchasable upon exercise of Rights shall be adjusted in the
manner set forth below. If the Exercise Price and number of Rights are to be
adjusted, (x) the Exercise Price in effect after such adjustment will be equal
to the Exercise Price in effect immediately prior to such adjustment divided by
the number of shares of Common Stock (or other capital stock) (the "Expansion
Factor") that a holder of one share of Common Stock immediately prior to such
dividend, subdivision or combination would hold thereafter as a result thereof
and (y) each Right held prior to such adjustment will become that number of
Rights equal to the Expansion Factor, and the adjusted number of Rights will be
deemed to be distributed among the shares of Common Stock
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with respect to which the original Rights were associated (if they remain
outstanding) and the shares issued in respect of such dividend, subdivision or
combination, so that each such share of Common Stock will have exactly one Right
associated with it. If the securities purchasable upon exercise of Rights are to
be adjusted, the securities purchasable upon exercise of each Right after such
adjustment will be the securities that a holder of the securities purchasable
upon exercise of one Right immediately prior to such dividend, subdivision or
combination would hold immediately thereafter. If after the Record Time and
prior to the Expiration Time the Company shall issue any shares of capital stock
other than Common Stock in a transaction of a type described in the first
sentence of this Section 2.4 (a) or shall issue any Voting Stock in a
reclassification of the Common Stock (including any such reclassification in
connection with a consolidation or merger in which the Company is the continuing
or surviving corporation), shares of such capital stock shall be treated herein
as nearly equivalent to shares of Common Stock as may be practicable and
appropriate under the circumstances and the Company and the Rights Agent agree
to amend this Agreement to effect such treatment.
If the Company shall at any time after the Record Time and prior to the
Separation Time issue any shares of Common Stock otherwise than in a transaction
referred to in the preceding paragraph or in Section 2.4 (b) hereof, each such
share of Common Stock so issued shall automatically have one new Right
associated with it, which Right shall be evidenced by the certificate
representing such share.
(b)(i) If the Company shall at any time after the Record Time and
prior to the Expiration Time (A) declare or pay any dividend on the Series A
Preferred Stock payable in Voting Stock, (B) subdivide the outstanding Series A
Preferred Stock, (C) combine the outstanding Series A Preferred Stock into a
smaller number of shares of Series A Preferred Stock or (D) issue Voting Stock
in a reclassification of the Series A Preferred Stock (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation), then, and in each such
event, the number and kind of Units of Series A Preferred Stock or other
securities issuable upon the exercise of a Right on such date shall be
proportionately adjusted so that the holder of any Right exercised on or after
such date shall be entitled to receive, upon the exercise thereof and payment of
the Exercise Price, the aggregate number and kind of Units of Series A Preferred
Stock or other securities or other property, as the case may be, that, if such
Right had been exercised immediately prior to such date and at a time when such
Right was exercisable and the transfer books of the Company were open, such
holder would have owned upon such exercise and would have been entitled to
receive by virtue of such dividend, subdivision, combination or
reclassification. If an event occurs on or prior to the Separation Time that
would require an adjustment under this Section 2.4(b)(i), the adjustment
provided for in this Section 2.4(b)(i) shall be made prior to giving effect to
Section 2.3(a) or Section 2.12 hereof.
(ii) If the Company shall at any time after the Record Time and
prior to the Expiration Time fix a record date for the making of a distribution
to all holders of Series A Preferred Stock (including any such distribution made
in connection with a consolidation or merger in which the Company is the
surviving corporation) of securities or assets (other than a distribution solely
of Voting Stock for which an adjustment is required under Section 2.4 (b)(i)
hereof or a
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regular quarterly cash dividend), the Exercise Price to be in effect after such
record date shall be determined by multiplying the Exercise Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be equal to the difference of the Market Price per share of Series A
Preferred Stock on such record date minus the fair market value of the portion
of the securities or assets to be so distributed applicable to one share of
Series A Preferred Stock, and the denominator of which shall be equal to such
Market Price per share of Series A Preferred Stock. Such adjustments shall be
made successively whenever such a record date is fixed, and if such a
distribution is not so made, the Exercise Price shall be adjusted to be the
Exercise Price that would then be in effect if such record date had not been
fixed. If the Company fixes a record date for the making of a distribution of
both Voting Stock and other securities or assets (other than a regular quarterly
cash dividend), such that the provisions of Section 2.4(b)(i) and Section
2.4(b)(ii) hereof would otherwise be applicable, then the provisions of each
such section shall be applicable to each such distribution, respectively,
according to the terms of each such section. If an event occurs on or prior to
the Separation Time that would require an adjustment under this Section
2.4(b)(ii), the adjustment provided for in this Section 2.4(b)(ii) shall be made
prior to giving effect to Section 2.3(a) or Section 2.12 hereof.
(c) Each adjustment made pursuant to this Section 2.4 shall be made
as of (i) the record date for the applicable issuance and distribution, in the
case of an adjustment made pursuant to Section 2.4(b) above, and (ii) the
payment or effective date for the applicable dividend, subdivision or
combination, in the case of an adjustment made pursuant to Section 2.4(a) above.
(d) Each adjustment to the Exercise Price made pursuant to this
Section 2.4 shall be calculated to the nearest cent. Whenever an adjustment to
the Exercise Price is made pursuant to this Section 2.4, the Company shall (i)
promptly prepare a certificate setting forth such adjustment and a brief
statement of the facts accounting for such adjustment, (ii) promptly file with
the Rights Agent and with the transfer agent for the Series A Preferred Stock,
if any, and the transfer agent for the Common Stock, a copy of such certificate
and (iii) mail a brief summary thereof to each holder of Rights.
(e) Irrespective of any adjustment or change in the securities
purchasable upon exercise of the Rights, the Rights Certificates theretofore and
thereafter issued may continue to express the securities so purchasable that
were expressed in the initial Rights Certificates issued hereunder.
II.5 DATE ON WHICH EXERCISE IS EFFECTIVE. Each person in whose name any
certificates for shares are issued upon the exercise of Rights shall for all
purposes be deemed to have become the holder of record of the shares represented
thereby on, and such certificate shall be dated, the date upon which the Rights
Certificate evidencing such Rights was duly surrendered and payment of the
Exercise Price for such Rights (and any applicable taxes and other governmental
charges payable by the exercising holder hereunder) was made; provided, however,
that if the date of such surrender and payment is a date upon which the stock
transfer books of the Company are closed, such person shall be deemed to have
become the record holder of such shares on, and such certificate shall be dated,
the next succeeding Business Day on which the stock transfer books of
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the Company are open.
II.6 EXECUTION, AUTHENTICATION, DELIVERY AND DATING OF RIGHTS
CERTIFICATES.
(a) The Rights Certificates shall be executed on behalf of the
Company by its Chairman of the Board, President or one of its Vice Presidents,
under its corporate seal reproduced thereon attested by its Secretary or one of
its Assistant Secretaries. The signature of any of these officers on the Rights
certificates may be manual or facsimile.
Rights Certificates bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall bind
the Company, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the countersignature and delivery of such Rights
Certificates.
Promptly after the Company learns of the Separation Time, the Company will
notify the Rights Agent of such Separation Time and will deliver Rights
Certificates executed by the Company to the Rights Agent for countersignature,
and the Rights Agent shall manually countersign and deliver such Rights
Certificates to the holders of the Rights pursuant to Section 2.3(c) hereof. No
Rights Certificate shall be valid for any purpose until manually countersigned
by the Rights Agent.
(b) Each Rights Certificate shall be dated the date of
countersignature thereof.
II.7 REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE.
(a) The Company will cause to be kept a register (the "Rights
Register") in which, subject to such reasonable regulations as it may prescribe,
the Company will provide for the registration and transfer of Rights. The Rights
Agent is hereby appointed "Rights Registrar" for the purpose of maintaining the
Rights Register for the Company and registering Rights and transfers of Rights
as herein provided. If the Rights Agent shall cease to be the Rights Registrar,
the Rights Agent will have the right to examine the Rights Register at all
reasonable times.
After the Separation Time and prior to the Expiration Time, upon surrender
for registration of transfer or exchange of any Rights Certificate, and subject
to the provisions of Sections 2.3(g) and 2.7(c) hereof, the Company will
execute, and the Rights Agent will countersign and deliver, in the name of the
holder or the designated transferee or transferees, as required pursuant to the
holder's instructions, one or more new Rights Certificates evidencing the same
aggregate number of Rights as did the Rights Certificate so surrendered.
(b) Subject to the provisions of Section 2.3(g) hereof, all Rights
issued upon any registration of transfer or exchange of Rights Certificates
shall be the valid obligations of the Company, and such Rights shall be entitled
to the same benefits under this Agreement as the Rights surrendered upon such
registration of transfer or exchange.
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(c) Every Rights Certificate surrendered for registration of
transfer or exchange shall be duly endorsed, or be accompanied by a written
instrument of transfer in form satisfactory to the Company or the Rights Agent,
as the case may be, duly executed by the holder thereof or such holder's
attorney-in-fact duly authorized in writing. As a condition to the issuance of
any new Rights Certificate under this Section 2.7, the Company may require the
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in relation thereto.
II.8 MUTILATED, DESTROYED, LOST AND STOLEN RIGHTS CERTIFICATES.
(a) If any mutilated Rights Certificate is surrendered to the Rights
Agent prior to the Expiration Time, the Company shall execute and the Rights
Agent shall countersign and deliver in exchange therefor a new Rights
Certificate evidencing the same number of Rights as did the Rights Certificate
so surrendered.
(b) If there shall be delivered to the Company and the Rights Agent
prior to the Expiration Time (i) evidence to their satisfaction of the
destruction, loss or theft of any Rights Certificate and (ii) such security or
indemnity as may be required by them to save each of them and any of their
agents harmless, then, in the absence of notice to the Company or the Rights
Agent that such Rights Certificate has been acquired by a bona fide purchaser,
the Company shall execute and upon its request the Rights Agent shall
countersign and deliver, in lieu of any such destroyed, lost or stolen Rights
Certificate, a new Rights Certificate evidencing the same number of Rights as
did the Rights Certificate so destroyed, lost or stolen.
(c) As a condition to the issuance of any new Rights Certificate
under this Section 2.8, the Company may require the payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in relation
thereto and any other expenses (including the fees and expenses of the Rights
Agent) connected therewith.
(d) Subject to the provisions of section 2.3(g) hereof, every new
Rights Certificate issued pursuant to this Section 2.8 in lieu of any destroyed,
lost or stolen Rights Certificate shall evidence an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Rights Certificate shall be at any time enforceable by anyone, and shall
be entitled to all the benefits of this Agreement equally and proportionately
with any and all other Rights duly issued hereunder.
II.9 PERSONS DEEMED OWNERS. Prior to due presentment of a Rights
Certificate (or, prior to the Separation Time, the associated Common Stock
certificate) for registration of transfer, the Company, the Rights Agent and any
agent of the Company or the Rights Agent may deem and treat the person in whose
name such Rights Certificate (or, prior to the Separation Time, such Common
Stock certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby for all purposes whatsoever. As used in this Agreement, unless
the context otherwise requires, the term "holder" of any Right shall mean the
registered holder of such Rights (or, prior to the Separation Time, the
associated shares of Common Stock).
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II.10 DELIVERY AND CANCELLATION OF CERTIFICATES. All Rights Certificates
surrendered upon exercise or for redemption, registration or transfer or
exchange shall, if surrendered to any person other than the Rights Agent, be
delivered to the Rights Agent and, in any case, shall be promptly cancelled by
the Rights Agent. The Company may at any time deliver to the Rights Agent for
cancellation any Rights Certificates previously countersigned and delivered
hereunder that the Company may have acquired in any manner whatsoever, and all
Rights Certificates so delivered shall be promptly cancelled by the Rights
Agent. No Rights Certificates shall be countersigned in lieu of or in exchange
for any Rights Certificates cancelled as provided in this Section 2. 10, except
as expressly permitted by this Agreement. The Rights Agent shall destroy all
cancelled Rights Certificates and deliver a certificate of destruction to the
Company.
II.11 AGREEMENTS OF RIGHTS HOLDERS. Every holder of Rights by accepting
such Rights consents and agrees with the Company and the Rights Agent and with
every other holder of Rights that:
(a) prior to the Separation Time, each Right will be transferable
only together with, and will be transferred by a transfer, conversion or
exchange of, the associated share of Common Stock;
(b) after the Separation Time, the Rights Certificates will be
transferable only on the Rights Register as provided herein;
(c) each Right Beneficially Owned by an Acquiring Person or an
Affiliate or Associate thereof or any transferee of any of the foregoing cannot
validly be transferred or exercised and shall for all purposes be void; to
effectuate the foregoing, each Rights Certificate shall be transferable or
exercisable only if the holder so transferring or exercising shall certify, for
the benefit of all holders of Rights, that such holder is not an Acquiring
Person or an Affiliate or Associate of an Acquiring Person and that, to the best
of such holder's knowledge, no Rights evidenced by such Rights Certificates have
ever been Beneficially Owned by an Acquiring Person or an Affiliate or Associate
of an Acquiring Person;
(d) prior to due presentment of a Rights Certificate (or, prior to
the Separation Time, the associated Common Stock certificate) for registration
of transfer, the Company, the Rights Agent and any agent of the Company or the
Rights Agent may deem and treat the person in whose name the Rights Certificate
(or, prior to the Separation Time, the associated Common Stock certificate) is
registered as the absolute owner thereof and of the Rights evidenced thereby
(notwithstanding any notations of ownership or writing on such Rights
Certificate or the associated Common Stock certificate made by anyone other than
the Company or the Rights Agent) for all purposes whatsoever, and neither the
Company nor the Rights Agent shall be affected by any notice to the contrary;
and
(e) any shares of Series B Common Stock presented for conversion
into Class A Common Stock (in accordance with the terms and specifications
governing such a conversion) (i) after the Record Time and prior to the earlier
of the Separation Time or the Expiration Time, shall
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automatically be deemed to include the Rights associated with such shares of
Series B Common Stock or (ii) after the earlier of the Separation Time or the
Expiration Time, shall not include the Rights that were, prior to the Separation
Time, associated with such shares of Series B Common Stock; and
(f) any shares of Class A Common Stock issued upon the conversion of
Series B Common Stock (in accordance with the terms and specifications governing
such a conversion) (i) after the Record Time and prior to the earlier of the
Separation Time or the Expiration Time, shall be issued with one associated
Right for each share of Class A Common Stock so issued or (ii) after the earlier
of the Separation Time or the Expiration Time, shall be issued without any
Rights associated with the shares of Class A Common Stock so issued; and
(g) after the Record Time and prior to the earlier of the Separation
Time and the Expiration Time, the Rights associated with any share of Series B
Common Stock surrendered for the purposes of conversion into Class A Common
Stock (in accordance with the terms and specifications governing such a
conversion) shall automatically terminate, on the date of such a conversion; and
(h) this Agreement may be supplemented or amended from time to time
pursuant to Section 4.4 or the last sentence of the first paragraph of Section
2.4(a) hereof.
II.12 CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR EARNING
POWER. Subject to the terms and conditions of this Agreement, if after the
Separation Time, directly or indirectly, (a) the Company shall consolidate with,
or merge with and into, any other Person, (b) any Person shall consolidate with
the Company, or merge with and into the Company and the Company shall be the
continuing or surviving corporation of such merger and, in connection with such
merger, all or part of the Common Stock shall be changed into or exchanged for
stock or other securities of any Person (including the Company) or cash or any
other property, or (c) the Company shall sell or otherwise transfer (or one or
more of its Subsidiaries shall sell or otherwise transfer), in one or more
transactions, assets or earning power aggregating fifty percent (50%) or more of
the assets or earning power of the Company and its Subsidiaries (taken as a
whole) to any Person other than the Company or one or more of its wholly-owned
Subsidiaries, then, and in each such case, proper provision shall be made so
that (i) each holder of a Right (except as otherwise provided herein) shall
thereafter have the right to receive, upon the exercise thereof at any time
prior to the Expiration Time and payment of the then current Exercise Price, in
accordance with the terms of this Agreement, such number of validly authorized
and issued, fully paid and nonassessable shares of common stock of such Person
or of that Affiliate or Associate of such Person which has the greatest
aggregate market value, determined in the same manner as the Market Price per
share of Common Stock is determined pursuant to Section 1.1(1) hereof, of
outstanding shares of publicly traded common stock (other than common stock held
by its Affiliates, officers, directors or employee benefit plans, or Associates
of the foregoing) as shall be equal to the result obtained by dividing the then
current Exercise Price by fifty percent (50%) of the Market Price per share of
Common Stock on the date of consummation of such consolidation, merger, sale or
transfer of a share of the common stock that the holder of a Right shall have
the right to receive; (ii) the issuer of
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such common stock shall thereafter be liable for, and shall assume, by virtue of
such consolidation, merger, sale or transfer, all the obligations and duties of
the Company pursuant to this Agreement; (iii) the term "Company" shall
thereafter be deemed to refer to such issuer; and (iv) such issuer shall take
such steps (including, but not limited to, the reservation of a sufficient
number of shares of its common stock) in connection with such consummation as
may be necessary to ensure that the provisions hereof shall thereafter be
applicable, as nearly as reasonably may be, in relation to the shares of common
stock thereafter deliverable upon the exercise of the Rights. The Company shall
not enter into any transaction of the kind referred to in this Section 2.12 if
at the time of such transaction there are any rights, warrants, instruments or
securities outstanding or any agreements or arrangements that, as a result of
the consummation of such transaction, would eliminate or substantially diminish
the benefits intended to be afforded by the Rights. The Company shall not
consummate any such consolidation, merger, sale or transfer unless such issuer
shall have a sufficient number of authorized shares of its common stock that
have not been issued or reserved for issuance to permit the exercise in full of
the Rights in accordance with this Section 2.12 and unless prior thereto the
Company and such issuer shall have executed and delivered to the Rights Agent a
supplemental agreement providing for the terms set forth in this Section 2.12
and further providing that, as soon as practicable after the date of any
consolidation, merger or sale of assets mentioned in this Section 2.12, such
issuer will (i) prepare and file a registration statement under the Securities
Act with respect to the Rights and the securities purchasable upon exercise of
the Rights on an appropriate form, and will use its best efforts to cause such
registration statement to (A) become effective as soon as practicable after such
filing and (B) remain effective (with a prospectus at all times meeting the
requirements of the Securities Act) until the Expiration Time; and (ii) will
deliver to holders of the Rights historical financial statements for such issuer
and each of its Affiliates that comply in all respects with the requirements for
registration on Form 10 under the Exchange Act. The provisions of this Section
2.12 shall similarly apply to successive mergers or consolidations or sales or
other transfers.
II.13 CERTIFICATE OF ADJUSTED EXERCISE PRICE OR NUMBER OF SHARES. Whenever
an adjustment is made as provided in Sections 2.4 and 2.12 hereof, the Company
shall promptly (a) prepare a certificate setting forth such adjustment, and a
brief statement of the facts accounting for such adjustment, (b) file with the
Rights Agent and with the transfer agent for the Series A Preferred Stock, if
any, and the transfer agent for the Common Stock a copy of such certificate and
(c) mail a brief summary thereof to each holder of a Rights Certificate (or, if
prior to the Separation Time, to each holder of a certificate representing
shares of Common Stock) in accordance with Section 4.10 hereof. Notwithstanding
the foregoing sentence, the failure of the Company to make such certification or
to give such notice shall not affect the validity or the force and effect of
such adjustment. Any adjustment to be made pursuant to Sections 2.4 and 2.12
hereof shall be effective as of the date of the event giving rise to such
adjustment. The Rights Agent shall be fully protected in relying on any such
certificate and on any adjustment therein contained and shall not be deemed to
have knowledge of any adjustment unless and until it shall have received such
certificate.
ARTICLE III - THE RIGHTS AGENT
III.1 GENERAL.
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(a) The Company hereby appoints the Rights Agent to act as agent for
the Company in accordance with the terms and conditions hereof, and the Rights
Agent hereby accepts such appointment. The Company agrees to pay to the Rights
Agent reasonable compensation for all services rendered by it hereunder and,
from time to time, on demand of the Rights Agent, its reasonable expenses and
counsel fees and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability or expense incurred without
negligence, bad faith or willful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in connection with the acceptance
and administration of this Agreement, including the costs and expenses of
defending against any claim of liability.
(b) The Rights Agent shall be protected and shall incur no liability
for or in respect of any action taken, suffered or omitted by it in connection
with its administration of this Agreement in reliance upon any certificate for
Series A Preferred Stock, Rights Certificate, certificate for or other
securities of the Company, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement or other paper or document believed by it to be genuine
and to be signed, executed and, where necessary, verified or acknowledged, by
the proper person or persons, or otherwise upon the advice of counsel as set
forth in Section 3.3 hereof.
III.2 MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT.
(a) Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Rights Agent
or any successor Rights Agent is a party, or any corporation succeeding to the
stockholder services business of the Rights Agent or any successor Rights Agent,
will be the successor to the Rights Agent under this Agreement without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, provided that such corporation would be eligible for appointment
as a successor Rights Agent under the provisions of Section 3.4 hereof. In case
at the time such successor Rights Agent succeeds to the agency created by this
Agreement any of the Rights Certificates have been countersigned but not
delivered, any such successor Rights Agent may adopt the countersignature of the
predecessor Rights Agent and deliver such Rights Certificates so countersigned;
and in case at that time any of the Rights Certificates have not been
countersigned, any successor Rights Agent may countersign such Rights
Certificates either in the name of the predecessor Rights Agent or in the name
of the successor Rights Agent; and in all such cases such Rights Certificates
will have the full force provided in the Rights Certificates and in this
Agreement.
(b) In case at any time the name of the Rights Agent is changed and
at such time any of the Rights Certificates shall have been countersigned but
not delivered, the Rights Agent may adopt the countersignature under its prior
name and deliver Rights Certificates so countersigned; and in case at that time
any of the Rights Certificates shall not have been
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countersigned, the Rights Agent may countersign such Rights Certificates either
in its prior name or in its changed name; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.
III.3 DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the duties and
obligations imposed by this Agreement upon the following terms and conditions,
by all of which the Company and the holders of Rights Certificates, by their
acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be
legal counsel for the Company), and the opinion of such counsel will be full and
complete authorization and protection to the Rights Agent as to any action taken
or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement
the Rights Agent deems it necessary or desirable that any fact or matter be
proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by a person believed by the Rights Agent to
be the Chairman of the Board, the President or any Vice President and by the
Chief Financial Officer or the Secretary or any Assistant Secretary of the
Company and delivered to the Rights Agent; and such certificate will be full
authorization to the Rights Agent for any action taken or omitted by it in good
faith under the provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent will be liable hereunder only for its own
negligence, bad faith or willful misconduct.
(d) The Rights Agent will not be liable for or by reason of any of
the statements of fact or recitals contained in this Agreement or in the
certificates for Series A Preferred Stock or the Rights Certificates (except its
countersignature thereof) and will not be required to verify any of the
foregoing, and all such statements and recitals are and will be deemed to have
been made by the Company only.
(e) The Rights Agent will not be under any responsibility in respect
of the validity of this Agreement or the execution and delivery hereof (except
the due authorization, execution and delivery hereof by the Rights Agent) or in
respect of the validity or execution of any certificate for Series A Preferred
Stock or Rights Certificate (except its countersignature thereof); nor will it
be responsible for any breach by the Company of any covenant or condition
contained in this Agreement or in any Rights Certificate; nor will it be
responsible for any change in the exercisability of the Rights (including the
Rights becoming void pursuant to Section 2.3(g) hereof) or any adjustment
required under the provisions of Section 2.4 hereof or responsible for the
manner, method or amount of any such adjustment or the ascertaining of the
existence of facts that would require any such adjustment (except with respect
to the exercise of Rights after receipt of the certificate contemplated by
Section 2.4 describing any such adjustment); nor will it by any act hereunder be
deemed to make any representation or warranty as to the authorization or
reservation
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of any shares of Series A Preferred Stock to be issued pursuant to this
Agreement or any Rights or as to whether any shares of Series A Preferred Stock
will, when issued, be duly and validly authorized, executed, issued and
delivered and fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge
and deliver or cause to be performed, executed, acknowledged and delivered all
such further and other acts, instruments and assurances as may reasonably be
required by the Rights Agent for the carrying out or performing by the Rights
Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
person believed by the Rights Agent to be the Chairman of the Board, the
President or any Vice President or the Chief Financial Officer or the Secretary,
any Assistant Secretary of the Company or any other person designated in writing
by such persons, and to apply to such persons for advice or instructions in
connection with its duties, and it shall not be liable for any action taken or
omitted by it in good faith in accordance with instructions of any such person.
Any application by the Rights Agent for written instructions from the Company
may, at the option of the Rights Agent, set forth in writing any action proposed
to be taken or omitted by the Rights Agent with respect to its duties or
obligations under this Agreement and the date on and/or after which such action
shall be taken or omitted and the Rights Agent shall not be liable for any
action taken or omitted in accordance with a proposal included in any such
application on or after the date specified therein (which date shall not be less
than ten business days after the date any such officer actually receives such
application, unless any such officer shall have consented in writing to any
earlier date) unless, prior to taking or omitting any such action, the Rights
Agent has received written instructions in response to such application
specifying the action to be taken or omitted.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in Series A Preferred Stock,
Rights or other securities of the Company or become pecuniarily interested in
any transaction in which the Company may be interested, or contract with or lend
money to the Company or otherwise act fully and freely as though it were not
Rights Agent under this Agreement. Nothing herein shall preclude the Rights
Agent from acting in any other capacity for the Company or for any other legal
entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent will not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct, provided reasonable care was exercised in the selection
and continued employment thereof.
(j) CHANGE OF RIGHTS AGENT. The Rights Agent may resign and be
discharged from its duties under this Agreement upon 90 days,' prior notice (or
such lesser notice as is acceptable to the Company) in writing mailed to the
Company and to each transfer agent of the Series A Preferred Stock and the
Common Stock, if any, by registered or certified mail, and at the
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expense of the Company to the holders of the Rights in accordance with Section
4.10. The Company may remove the Rights Agent upon 30 days' prior notice in
writing, mailed to the Rights Agent and to each transfer agent of the Series A
Preferred Stock and the Common Stock, if any, by registered or certified mail,
and to the holders of the Rights in accordance with Section 4.10. If the Rights
Agent should resign or be removed or otherwise become incapable of acting, the
Company will appoint a successor to the Rights Agent. If the Company fails to
make such appointment within a period of 30 days after such removal or after it
has been notified in writing of such resignation or incapacity by the resigning
or incapacitated Rights Agent or by the holder of any Rights (which holder
shall, with such notice, submit such holder's Rights Certificate for inspection
by the Company), then the holder of any Rights may apply to any court of
competent jurisdiction for the appointment of a now Rights Agent. Any successor
Rights Agent, whether appointed by the Company or by such a court, shall be a
corporation organized and doing business under the laws of the United States or
the State of California, New Jersey or New York, in good standing, having its
principal office in the State of California, New Jersey or New York, that is
authorized under such laws to exercise the powers of the Rights Agent
contemplated by this Agreement and is subject to supervision or examination by
federal or state authority and which has at the time of its appointment as
Rights Agent a combined capital and surplus of at least $50,000,000. After
appointment, the successor Rights Agent will be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as Rights
Agent without further act or deed; but the predecessor Rights Agent shall
deliver and transfer to the successor Rights Agent any property at the time held
by it hereunder, and execute and deliver any further assurance, conveyance, act
or deed necessary for the purpose. Not later than the effective date of any such
appointment, the Company will file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Series A Preferred Stock
and the Common Stock, if any, and mail a notice thereof in writing to the
holders of the Rights in accordance with Section 4.10. Failure to give any
notice provided for in this Section 3.4, however, or any defect therein, shall
not affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.
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ARTICLE IV - MISCELLANEOUS
IV.1 REDEMPTION, TERMINATION AND EXCHANGE.
(a) The Board of Directors of the Company may, at its option, at any
time prior to the earlier of the Separation Time or the Expiration Time redeem
all but not less than all of the then outstanding Rights at a redemption price
of $.01 per Right, as such amount may be appropriately adjusted to reflect any
stock split, stock dividend or similar transaction occurring after the date
hereof (the "Redemption Price"). The Company may, at its option, pay the
Redemption Price in cash, shares of Common Stock (based on the Market Price at
the time of redemption) or any other form of consideration deemed appropriate by
the Board of Directors.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights, evidence of which shall have been
filed with the Rights Agent, and without any further action and without any
notice, the Rights will terminate and the only right thereafter of the holders
of Rights shall be to receive the Redemption Price for each Right so held.
Promptly after the action of the Board of Directors ordering the redemption of
the Rights, the Company shall give notice of such redemption to the Rights Agent
and the holders of the then outstanding Rights. Any notice that is mailed in the
manner herein provided shall be deemed given, whether or not the holder receives
such notice. Each such notice of redemption will state the method by which the
payment of the Redemption Price will be made.
(c)(i) The Board of Directors of the Company may, at its option, at
any time after any Person becomes an Acquiring Person, exchange all or part of
the then outstanding and exercisable Rights (which shall not include Rights that
have become void pursuant to the provisions of Section 2.3(g) and the second
paragraph of Section 2.3(h) hereof) for shares of Common Stock at an exchange
ratio of which equals the quotient obtained by dividing the Exercise Price by
the Market Price per share of Common Stock per Right, appropriately adjusted
pursuant to Section 2.4 hereof (such exchange ratio being hereinafter referred
to as the "Exchange Ratio"). Notwithstanding the foregoing, the Board of
Directors shall not be empowered to effect such exchange at any time after any
Person (other than the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or any such Subsidiary, or any entity holding Common
Stock for or pursuant to the terms of any such plan), together with all
Affiliates and Associates of such Person, becomes the Beneficial Owner of 50% or
more of the Common Stock then outstanding.
(ii) Immediately upon the action of the Board of Directors of
the Company ordering the exchange of any Rights pursuant to paragraph (c)(i) of
this Section 4.1 and without any further action and without any notice, the
right to exercise such Rights shall terminate and the only right thereafter of a
holder of such Rights shall be to receive that number of shares of Common Stock
equal to the number of such Rights held by such holder multiplied by the
Exchange Ratio. The Company shall promptly give public notice of any such
exchange; PROVIDED, HOWEVER, that (i) the failure to give, or any defect in,
such notice shall not affect the validity of such exchange. The Company promptly
shall mail a notice of any such exchange to all of the holders of
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such Rights at their last addresses as they appear upon the registry books of
the Rights Agent. Any notice which is mailed in the manner herein provided shall
be deemed given, whether or not the holder receives the notice. Each such notice
of exchange will state the method by which the exchange of Common Stock for
Rights will be effected and, in the event of any partial exchange, the number of
Rights which will be exchanged. Any partial exchange shall be effected pro rata
based on the number of Rights (other than Rights which have become void pursuant
to the provisions of Section 2.3(g) and the second paragraph of Section 2.3(h)
hereof) hold by each holder of Rights.
(iii) In the event that there shall not be sufficient Common
Stock issued but not outstanding or authorized but unissued to permit any
exchange of Rights as contemplated in accordance with this Section 4.1(c), the
Company shall take all such action as may be necessary to authorize additional
shares of Common Stock for issuance upon exchange of the Rights. In the event
the Company shall, after good faith effort, be unable to take all such action as
may be necessary to authorize such additional Common Stock, the Company shall
substitute, for each share of Common Stock that would otherwise be issuable upon
exchange of a Right, a number of shares of Series A Preferred Stock or fraction
thereof having a current market price per share equal to the Market Price per
share of one share of Common Stock as of the date of issuance of such shares of
Preferred Stock or fraction thereof.
(iv) The Company shall not be required to issue fractions of a
share of Common Stock or to distribute certificates which evidence fractional
shares of Common Stock. In lieu of such fractional shares, there shall be paid
to the registered holders of the Rights with regard to which such fractional
shares of Common Stock would otherwise be issuable, either (i) evidence of such
fractional shares by depository receipts, in accordance with the terms of
Section 4.5 hereof or (ii) an amount in cash equal to the same fraction of the
Market Price of a whole share of Common Stock based upon the date of exchange
pursuant to this Section 4.1(c), subject to the terms of Section 4.6 hereof.
IV.2 PROVISION IN EVENT OF INSUFFICIENT SHARES OF SERIES A PREFERRED
STOCK. If there shall not be sufficient authorized but unissued shares or
reserved shares of Series A Preferred Stock of the Company to permit the
exercise in full of the Rights in accordance with the terms hereof, the Company,
with respect to each Right being exercised and to the extent necessary, may make
adequate provision to substitute for the delivery of Units or shares or
fractions of shares of Series A Preferred Stock (i) cash, (ii) Common Stock, or
other preferred stock or equity securities of the Company, (iii) debt securities
of the Company, (iv) other assets or (v) any combination of the foregoing,
having an aggregate value equal to the Market Price of the Units of Series A
Preferred Stock that would have been purchasable upon exercise of such Right in
the absence of this Section 4.2, or may reduce the Exercise Price.
IV.3 ISSUANCE OF NEW RIGHTS CERTIFICATES. Notwithstanding any of the
provisions of this Agreement or of the Rights to the contrary, the Company may,
at its option, issue new Rights Certificates evidencing Rights in such form as
may be approved by its Board of Directors to reflect any adjustment or change in
the number or kind or class of shares of stock purchasable upon
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exercise of Rights made in accordance with the provisions of this Agreement.
IV.4 SUPPLEMENTS AND AMENDMENTS. Prior to the Separation Time, the Company
and the Rights Agent, upon receipt of the certificate described hereinbelow,
shall, if the Company so directs, supplement or amend any provision of this
Agreement in any respect without the approval of any holders of Rights. From and
after the Separation Time, the Company and Rights Agent, upon receipt of the
certificate described hereinbelow, shall, if the Company so directs, supplement
or amend this Agreement without the approval of any holders of Rights (i) to
cure any ambiguity, (ii) to correct or supplement any provision contained herein
that may be defective or inconsistent with any other provisions herein, (iii) to
shorten or lengthen any time period hereunder, other than the time period during
which the Rights may be exercised, or (iv) to change or supplement the
provisions hereunder in any manner that the Company may deem necessary or
desirable and which shall not materially and adversely affect the interests of
the holders of Rights (other than an Acquiring Person or an Affiliate or
Associate of an Acquiring Person). Upon delivery of a certificate from an
appropriate officer of the Company stating that the proposed supplement or
amendment is in compliance with the terms of this Section 4.4, the Rights Agent
shall execute such supplement or amendment. Prior to the Separation Time, the
interests of the holders of Rights shall be deemed coincident with the interests
of the holders of Common Stock.
IV.5 FRACTIONAL SHARES. If the Company elects not to issue certificates
representing fractional shares of Series A Preferred Stock or other securities
(pursuant to Section 4.2 hereof) upon exercise of Rights, the Company may, in
lieu thereof, either (i) evidence such fractional shares by depositary receipts
issued pursuant to an appropriate agreement between the Company and a depositary
selected by it, provided that such agreement shall provide that the holders of
the depositary receipts shall have all of the rights, privileges and preferences
to which they are entitled as Beneficial Owners of such stock, or (ii) subject
to Section 4.6 hereof, pay an amount in cash equal to the same fraction of the
Market Price of a Unit of Series A Preferred Stock.
IV.6 TRANSACTIONS AFTER THE SEPARATION TIME. After the Separation Time and
prior to the Expiration Time, the Company shall not engage in any transaction
not in the ordinary course of business that would eliminate or otherwise
diminish in any material respect the benefits intended to be afforded by this
Agreement to the holders of Rights (other than Acquiring Persons or Affiliates
or Associates thereof, or Persons who may become any of the foregoing). Without
limiting the foregoing, after the Separation Time and prior to the Expiration
Time, the Company shall not (i) sell or issue to an Acquiring Person or any
Affiliate or Associate thereof, any rights, options, warrants or convertible
securities on terms similar to, or that materially adversely affect the value
of, the Rights, or (ii) sell or issue to an Acquiring Person or any Affiliate or
Associate thereof, Series A Preferred Stock, Common Stock or shares of any other
class of capital stock if such sale or issue is intended to or would materially
adversely affect the value of the Rights.
IV.7 RIGHTS OF ACTION. Subject to the terms of this Agreement, rights of
action in respect of this Agreement, other than rights of action vested solely
in the Rights Agent, are vested in the respective holders of the Rights (other
than Acquiring Persons or Affiliates or Associates thereof); and any holder of
any Rights (other than Acquiring Persons or Affiliates or Associates thereof),
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without the consent of the Rights Agent or of the holder of any other Rights,
may, on such holder's own behalf and for such holder's own benefit and the
benefit of other holders of Rights, enforce, and may institute and maintain any
suit, action or proceeding against the Company to enforce, or otherwise act in
respect of, such holder's right to exercise such holder's Rights in the manner
provided in such holder's Rights Certificate and in this Agreement. Without
limiting the foregoing or any remedies available to the holders of Rights, it is
specifically acknowledged that the holders of Rights would not have an adequate
remedy at law for any breach of this Agreement and will be entitled to specific
performance of the obligations under, and injunctive relief against actual or
threatened violations of, the obligations of any Person subject to this
Agreement.
IV.8 HOLDER OF RIGHTS NOT DEEMED A STOCKHOLDER. No holder, as such, of any
Right shall be entitled to vote, receive dividends or be deemed for any purpose
the holder of Series A Preferred Stock or any other securities that may at any
time be issuable on the exercise of such Rights, nor shall anything contained
herein or in any Rights Certificate be construed to confer upon the holder of
any Rights, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 4.9 hereof), or to receive dividends
or subscription rights, or otherwise, until such Rights shall have been
exercised in accordance with the provisions hereof.
IV.9 NOTICE OF PROPOSED ACTIONS. If the Company shall propose after the
Separation Time and prior to the Expiration Time to effect a liquidation, a
consolidation or merger with or a sale of all or substantially all of its assets
to any other Person or a reclassification of the Series A Preferred Stock, then,
in each such case, the Company shall give to each holder of a Right, in
accordance with Section 4.10 hereof, a notice of such proposed action, which
shall specify the date on which such action is to take place, and such notice
shall be so given at least 20 Business Days prior to the date of the taking of
such proposed action.
IV.10 NOTICES. Notices or demands authorized or required by this Agreement
to be given or made by the Rights Agent or by the holder of any Rights to or on
the Company shall be sufficiently given or made if delivered or sent by first
class mail, postage prepaid, addressed (until another address is filed in
writing with the Rights Agent) an follows:
American Medical Providers, Inc.
3555 Timmons Lane, Suite 1550
Houston, TX 77027
Attention: Chief Financial Officer
Any notice or demand authorized or required by this Agreement to be given or
made by the Company or by the holder of any Rights to or on the Rights Agent
shall be sufficiently given or made if delivered or sent by first class mail,
postage prepaid, addressed (until another address is filed in writing with the
Company) as follows:
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Attention:
Notices or demands authorized or required by this Agreement to be given or made
by the Company or the Rights Agent to or on the holder of any Rights shall be
sufficiently given or made if delivered or sent by first class mail, postage
prepaid, addressed to such holder at the address of such holder as it appears
upon the Rights Register or, prior to the Separation Time, on the registry books
of the transfer agent for the Common Stock. Any notice which is mailed in the
manner herein provided shall be deemed given, whether or not the holder receives
the notice.
IV.11 COSTS OF ENFORCEMENT. The Company agrees that if the Company or any
other Person the securities of which are purchasable upon exercise of Rights
fails to fulfill any of its obligations pursuant to this Agreement, then the
Company or such Person will reimburse the holder of any Rights for the costs and
expenses (including legal fees) incurred by such holder in actions to enforce
such holder's rights pursuant to any Rights or this Agreement.
IV.12 SUCCESSORS. All the covenants and provisions of this Agreement by or
for the benefit of the Company or the Rights Agent shall bind and inure to the
benefit of their respective successors and assigns hereunder.
IV.13 BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be
construed to give to any Person other than the Company, the Rights Agent and the
holders of the Rights any legal or equitable right, remedy or claim under this
Agreement, and this Agreement shall be for the sole and exclusive benefit of the
Company, the Rights Agent and the holders of the Rights.
IV.14 DESCRIPTIVE HEADINGS. Descriptive headings appear herein for
convenience of reference only and shall not control or affect the meaning or
construction of any of the provisions hereof.
IV.15 GOVERNING LAW. This Agreement and each Right issued hereunder shall
be deemed to be a contract made under the laws of the State of Texas and for all
purposes shall be governed by, and construed in accordance with, the laws of
such state without regard to the laws of such state as to choice or conflict of
laws.
IV.16 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, but all such counterparts shall together constitute one and the
same instrument.
IV.17 SEVERABILITY. If any term or provision hereof or the application
thereof to any circumstance shall, in any jurisdiction and to any extent, be
invalid or unenforceable, such term or
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provision shall be ineffective as to such jurisdiction to the extent of such
invalidity or unenforceability without invalidating or rendering unenforceable
the remaining terms and provisions hereof or the application of such terms or
provision to circumstances other than those as to which it is held invalid or
unenforceable.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested as of the date first above set forth.
AMERICAN MEDICAL PROVIDERS, INC.
___________________________________________
By: Jack McCrary
Title: Chairman, President and Chief
Executive Officer
Attest:
______________________________________
By: Wayne A. Bertsch
Title:Senior Vice President and Chief
Financial Officer
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_________________________________________
By:
Title:
Witness:
___________________________________
By:________________________________
________________________________
Signature page of the Stockholder
Protection Agreement, dated as of October
___ , 1997, between American Medical
Providers, Inc. and ______________________
as Rights Agent
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Exhibit A
FORM OF
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
OF SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of
AMERICAN MEDICAL PROVIDERS, INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
We, Jack N. McCrary, Chairman, President and Chief Executive Officer,
and Wayne A. Bertsch, Senior Vice President and Chief Financial Officer, of
American Medical Providers, Inc. a corporation organized and existing under
the General Corporation Law of the State of Delaware, in accordance with
provisions of Section 103 thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by
the Certificate of Incorporation of the said Corporation, the said Board of
Directors on October , 1997, adopted the following resolution creating a series
of shares of Preferred Stock designated as Series A Junior Participating
Preferred Stock:
NOW THEREFORE BE IT RESOLVED, that a series of the Company's Preferred
Stock consisting of shares of Preferred Stock be, and hereby is,
designated as Series A Junior Participating Preferred Stock, par value
$0.001 per share (the "Series A Preferred"), and that the Series A
Preferred shall have the designations, powers, preferences, rights and
qualifications, limitations and restrictions substantially as set forth in
the Certificate of Designation, Preferences and Rights of Series A Junior
Participating Preferred Stock (the "Series A Certificate") attached hereto
as EXHIBIT .
That said Certificate states that the Board of Directors does hereby fix
and herein state and express such designations, powers, preferences and relative
and other special rights and qualifications, limitations and restrictions
thereof as follows (all terms used herein which are defined in the Certificate
of Incorporation shall be deemed to have the meanings provided therein).
Section (a) DESIGNATION AND AMOUNT. The shares of such series shall be
designated as "Series A Junior Participating Preferred Stock" (the "Series A
Preferred Stock") and the number of shares constituting such series shall be
_________________. Such number of shares of Series A Preferred Stock may be
increased or decreased by resolution of the Board of Directors; provided, that
no decrease shall reduce the number of shares of Series A Preferred Stock to a
number less than the number of shares of Series A Preferred Stock then
outstanding plus the number of shares of Series A Preferred Stock reserved for
issuance upon the exercise of outstanding options, rights or warrants
<PAGE>
or upon the conversion of any outstanding securities issued by the Corporation
convertible or exercisable into Series A Preferred Stock.
Section (b) DIVIDENDS AND DISTRIBUTIONS.
(A) Subject to the prior and superior rights of the holders of any shares
of any series of preferred stock ranking prior and superior to the shares of
Series A Preferred Stock with respect to dividends, the holders of shares of
Series A Preferred Stock shall be entitled to receive, when, as and if declared
by the Board of Directors out of funds legally available for the purpose,
dividends payable in cash in an amount per share (rounded to the nearest cent),
subject to the provision for adjustment hereinafter set forth, equal to 100
times the aggregate per share amount of all cash dividends, and 100 times the
aggregate per share amount (payable in kind) of all non-cash dividends or other
distributions (other than a dividend payable in shares of the Class A Common
Stock, par value $0.001 per share, of the Corporation (the "Class A Common
Stock") or the Class B Common Stock, par value $0.001 per share of the
Corporation (the "Class B Common Stock") or a subdivision of the outstanding
shares of Class A Common Stock or Class B Common Stock (collectively, the
"Common Stock") (by reclassification or otherwise)), declared on the Common
Stock since the first issuance of any share or fraction of a share of Series A
Preferred Stock. In the event the Corporation shall at any time after (the
"Rights Declaration Date") (i) declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding Common Stock or (iii)
combine the outstanding Common Stock into a smaller number of shares, then in
each such case the amount to which holders of shares of Series A Preferred Stock
were entitled immediately prior to such event under the preceding sentence shall
be adjusted by multiplying such amount by a fraction the numerator of which is
the number of shares of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the Series
A Preferred Stock as provided in paragraph (A) above immediately after it
declares a dividend or distribution on the Common Stock (other than a dividend
payable in shares of Common Stock).
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Preferred Stock from the date of issue of such shares of
Series A Preferred Stock. Accrued but unpaid dividends shall not bear interest.
Dividends paid on the shares of Series A Preferred Stock in an amount less than
the total amount of such dividends shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders of shares of
Series A Preferred Stock entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be no more than 30 days
prior to the date fixed for the payment thereof.
Section (c) VOTING RIGHTS. The holders of shares of Series A Preferred
Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth, each
share of Series A
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<PAGE>
Preferred Stock shall entitle the holder thereof to 100 votes on all matters
submitted to a vote of the stockholders of the Corporation. In the event the
Corporation shall at any time after the Rights Declaration Date (i) declare any
dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock, or (iii) combine the outstanding Common Stock into a
smaller number of shares, then in each case the number of votes per share to
which holders of shares of Series A Preferred Stock were entitled immediately
prior to such event shall be adjusted by multiplying such number by a fraction
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(B) Except as otherwise provided herein or by law, the holders of shares
of Series A Preferred Stock and the holders of shares of Common Stock shall vote
together as one class on all matters submitted to a vote of stockholders of the
Corporation.
(C) Except as otherwise provided herein or provided by law, the holders of
shares of Series A Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for taking any corporate
action.
Section (d) CERTAIN RESTRICTIONS.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Series A Preferred Stock outstanding shall have
been paid in full, the Corporation shall not
(i) declare or pay dividends on, make any other distribution on, or
redeem or purchase or otherwise acquire for consideration any shares of
stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends on or make any other distributions on
any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred Stock,
except dividends paid or distributions made ratably on the Series A
Preferred Stock and all such stock ranking on a parity with respect to the
particular dividend or distribution in proportion to the total amounts to
which the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred Stock,
provided that the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such parity stock in exchange for shares
of any stock of the Corporation ranking junior (both as to dividends and
upon dissolution, liquidation or winding up) to the Series A Preferred
Stock;
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<PAGE>
(iv) purchase or otherwise acquire for consideration any shares of
Series A Preferred Stock, or any shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up)
with the Series A Preferred Stock, except in accordance with a purchase or
offer made in writing or by publication (as determined by the Board of
Directors) to all holders of such shares upon such terms as the Board of
Directors, after consideration of the respective annual dividend rates and
other relative rights and preferences of the respective series and
classes, shall determine in good faith will result in fair and equitable
treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
Section (e) REACQUIRED SHARES. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
to be created by resolution or resolutions of the Board of Directors, subject to
the conditions and restrictions on issuance set forth herein.
Section (f) LIQUIDATION, DISSOLUTION OR WINDING UP.
(A) Upon any liquidation (voluntary or otherwise), dissolution or winding
up of the Corporation, no distribution shall be made to the holders of shares of
stock ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Preferred Stock unless, prior thereto, the holders
of shares of Series A Preferred Stock shall have received $100 per share, plus
an amount equal to accrued and unpaid dividends and distributions thereon,
whether or not declared, to the date of such payment (the "Series A Liquidation
Preference"). Following the payment of the full amount of the Series A
Liquidation Preference, no additional distributions shall be made to the holders
of shares of Series A Preferred Stock unless, prior thereto, the holders of
shares of Common Stock shall have received an amount per share (the "Common
Stock Liquidation Amount') equal to the quotient obtained by dividing (i) the
Series A Liquidation Preference by (ii) 100 (as appropriately adjusted an set
forth in subparagraph C below to reflect such events as stock splits, stock
dividends and recapitalization with respect to the Common Stock) (such number in
clause (ii), the "Adjustment Number"). Following the payment of the full amount
of the Series A Liquidation Preference and the Common Stock Liquidation Amount
in respect of all outstanding shares of Series A Preferred Stock and Common
Stock, respectively, holders of Series A Preferred Stock and holders of shares
of Common Stock shall receive their ratable and proportionate share of remaining
assets to be distributed in the ratio of the Adjustment Number to 1 with respect
to such Preferred Stock and Common Stock, on a per share basis, respectively.
(B) In the event, however, that there are not sufficient assets available
to permit payment in full of the Series A Liquidation Preference and the
liquidation preferences of all other
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<PAGE>
series of preferred stock, if any, which rank on a parity with the Series A
Preferred Stock, then such remaining assets shall be distributed ratably to the
holders of the Series A Preferred Stock and the holders of such parity shares in
proportion to their respective liquidation preferences.
(C) In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, (iii) combine the
outstanding Common Stock into a smaller number of shares, (iv) reclassify the
Common Stock or (v) effect a recapitalization of the Common Stock, then in each
such case the Adjustment Number in effect immediately prior to such event shall
be adjusted by multiplying such Adjustment Number by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
Section (g) CONSOLIDATION, MERGER, ETC. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
Series A Preferred Stock shall at the same time be similarly exchanged or
changed in an amount per share (subject to the provision for adjustment
hereinafter set forth) equal to 100 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time after the Rights Declaration Date
(i) declare any dividend on Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding Common Stock, or (iii) combine the outstanding Common
Stock into a smaller number of shares, then in each such case the amount set
forth in the preceding sentence with respect to the exchange or change of shares
of Series A Preferred Stock shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
Section (h) NO REDEMPTION. The shares of Series A Preferred Stock
shall not be redeemable.
Section (i) RANKING. The Series A Preferred Stock shall rank junior to all
other series of the Corporation's preferred stock, if any, as to the payment of
dividends and the distribution of assets, unless the terms of any such series
shall provide otherwise. Nothing in this Certificate shall limit the power of
the Board of Directors to create a new series of preferred stock ranking senior
to the Series A Preferred Stock in any respect.
Section (j) AMENDMENT. The Amended and Restated Certificate of
Incorporation of the Corporation shall not be further amended in any manner
which would materially alter or change the powers, preferences or special rights
of the Series A Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of two-thirds or more of the outstanding shares
of Series A Preferred Stock, voting separately as a class.
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<PAGE>
Section (k) FRACTIONAL SHARES. Series A Preferred Stock may be issued in
fractions of a share, which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series A Preferred Stock.
IN WITNESS WHEREOF, we have executed and subscribed this Certificate and
do affirm the foregoing as true under the penalties of perjury this day of
October, 1997.
__________________________________________
Jack N. McCrary
Chairman, President and Chief Executive
Officer
Attest:
________________________________________
Wayne A. Bertsch, Senior Vice President
and Chief Financial Officer
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EXHIBIT 10.18
LEASE AGREEMENT
This LEASE AGREEMENT (this "Agreement") is made and entered into
effective as of, January 19,1997 (the "Effective Date") by and between Doctors
Hospital 1997, LP a Texas limited partnership doing business as Doctors Hospital
Tidwell (the "Hospital" or "Owners"), and, American Medical Providers, Inc. or
its nominee ("Lessee").
RECITALS:
A. Owner owns a general acute care hospital located at 510 West Tidwell,
Houston, Texas 77091, (the Facility.) containing operating rooms, surgery
suites, a preop area, and a recovery room (collectively, the "Surgery Areas").
B. Lessee is a corporation organized under the laws of the State of
Texas, and will be authorized to do business in Texas at the Commencement Date
(as defined herein) of this Agreement and Lessee has entered into certain
Business Purchase Agreements pursuant to which Lessee is purchasing certain
practice assets from Physicians (the "Affiliated Physicians")who are thereafter
entering into employment agreements with a regional group practice limited
liability corporation ("RGP") which will enter into a management agreement with
Lessee or its wholly owned subsidiary corporation.
C. Lessee desires to use the Surgery Area for the purpose of providing
ambulatory surgical services to patients of the RGP's Affiliated Physicians (as
defined hereinabove), on the terms and conditions set forth in this Agreement,
and Owner desires to allow such use.
AGREEMENTS:
NOW, THEREFORE, in consideration of the premises and the terms and
conditions contained in this Agreement, the mutuality and adequacy of which are
forever acknowledged, the parties do agree as follows, intending to be legally
bound:
1. LEASE OF PREMISES. Owner hereby leases and lets to Lessee, for use by
RGP, Affiliated Physicians and Lessee, and Lessee hereby leases and takes from
Owner, the Surgery Area, or so much thereof as is needed by Lessee (the
"Premises"), located in Owner's Facility located in Houston, Texas which
Facility is situated on that certain tract or parcel of real property (the
"Land"), situated in the state of Texas and being more fully described on
Exhibit A attached hereto and made a part hereof for all purposes, during the
following times:
<PAGE>
(a) Forty Eight (48) hours per quarter (the "Base Hours"), which shall
be (be at such times and such increments as is mutually agreed to by the
parties) on weekdays other than holidays,( unless mutually agreed
otherwise, and which shall be scheduled by Lessee in advance in
accordance with Owner's scheduling procedure but in not less than 4 hour
blocks unless otherwise agreed to by Lessee.
(b) Additional time, which shall be scheduled by Lessee in advance in
accordance with Owner's scheduling procedure, and hold-over time
(collectively, "Additional Time") as needed by Lessee.
A floor plan depicting the design of the Premises is attached hereto as Exhibit
B and made a part hereof for all purposes. Owner hereby grants Lessee, RGP,
Affiliated Physicians, and their respective assignees, subtenants, agents,
employees, invitees, and other visitors, a nonexclusive license for the term of
this Lease to use the Surgery Area and the common areas of the Facility and the
Land.
2. TERM AND TERMINATION.
(a) TERM. This Agreement shall be in force for an initial term of
one year commencing on the Commencement Date and, upon notice by Lessee
or Owner at least thirty (30) days before the end of the initial term or
any renewal term, may be renewed for successive renewal terms of one
year each, unless sooner terminated in accordance with the terms and
conditions of this Agreement.
(b) TERMINATION. Agreement may be sooner terminated only on the
occurrence of one of the following:
(i) TERMINATION BY AGREEMENT. If Owner and Lessee mutually
agree in writing, this Agreement may be terminated on the terms
and date stipulated.
(ii) TERMINATION FOR DEFAULT. If either party shall give
written notice to the other that the other party has
substantially defaulted in the performance of any obligation
under this Agreement, and such default shall not have been cured
within fifteen (15) days following the giving of such notice, the
party giving the notice shall have the right to immediately
terminate this Agreement by written notice.
(iii) LEGISLATIVE, REGULATORY OR ADMINISTRATIVE CHANGE. In
the event of a change in the Medicare or Medicaid laws,
regulations or general instructions or interpretations, the
adoption of new state or federal legislation, or a change in any
third party reimbursement system, any of which materially affects
the manner in which either party may perform or be compensated
for its services under this Agreement, the parties may either
immediately terminate this Agreement or propose a new service
arrangement or basis for compensation for the services furnished
pursuant to this Agreement. If such notice of new service
arrangement or basis for compensation is given and if the parties
are unable within ninety (90) days thereafter to agree upon a new
service arrangement or basis for compensation, either party may
terminate this Agreement by ninety (90) days notice to the other
on any future date specified in such notice.
<PAGE>
(c) For purposes of this Agreement "Commencement Date" shall mean
the date which is the latter of the following events to have occurred: (a) the
Initial Public Offering date for American Medical Providers, Inc in its sale of
stock to the public as contemplated in its registration statement filed with the
Securities Exchange Commission; (b) the date this Agreement is approved by
Lessee's board of directors, or the date the board of managers for the RGP has
approved this Agreement.
3. USE. The Surgery Area shall be used by Lessee, RGP, or Affiliated
Physicians for the sole purpose of providing ambulatory surgical services and
related services for the benefit of RGP's or Affiliated Physicians' patients.
4. RENT. Lessee agrees to pay Owner (a) an annual base rental beginning
on the Commencement Date of One Hundred Five Thousand Six Hundred Dollars
($105,600.) payable in equal monthly installments of Eight Thousand Eight
Hundred Dollars ($8,800), which amounts are subject to adjustment as provided in
this Section, with the first installment to be paid on the Commencement Date and
subsequent installments each succeeding month, and (b) an additional rental
charge of One Hundred Thirty Seven Dollars ($137.00) for each quarter hour (or
part thereof) of Additional Time, payable monthly, with the first payment to be
paid forty-five (45) days after the month containing the Commencement Date and
subsequent installments after each succeeding month. The Base Rental shall be
adjusted for the following:
(a) If an Affiliated Physician (as of the Effective Date) of
Lessee dies, becomes permanently disabled, or moves away from the
Houston metropolitan area, the Lessee shall have the option, upon 10
days notice to Owner, to reduce the number of Base Hours, (and
correspondingly the Base Rental) in proportion to the collections of
such Affiliated Physician to the collections of the RGP over the prior
two months relating to services rendered to their respective patients.
For purposes of this Agreement, a disability is a documented illness or
incapacity that keeps or is expected to keep an individual from resuming
his full-time professional practice for at least ninety (90) days;
provided, however, that such ninety (90) day period shall not be deemed
to be broken if the individual returns to work for no more than three
consecutive working days during any given attempt to resume his or her
regular work schedule.
(b) If an Affiliated Physician discharges his obligations to RGP
or Lessee through bankruptcy, the Lessee shall have the option, upon 10
days notice to Owner, to reduce the number of Base Hours, (and
correspondingly the Base Rental) in proportion to the collections of
such Affiliated Physician to the collections of the RGP over the prior
two months relating to services rendered to their respective patients.
<PAGE>
(c) If the Premises are not available for Lessee at scheduled
times, the base rental shall be reduced by $140.00 for each quarter hour
(or part thereof). During any block of time scheduled by Lessee if the
turn around time (defined to be the time between surgeries required by
Owner to clean and make the Surgery space available for the next
surgery) is in excess of twenty minutes, then Lessee shall be given
credit against the Base Rental for such period by $140.00 for each
quarter hour (or part thereof) in excess of 20 minutes, and such
turn-around time shall not reduce the numbers of Base Hours available to
Lessee.
(d) If Lessee attempts to schedule at least the number of hours
set forth in Section l (a) in accordance with Owner's scheduling
procedure and the Premises are not available for that number of hours,
the base rental shall be reduced by $140. for each quarter hour (or part
thereof) of the shortfall.
All rent shall be payable by Lessee to Owner at the Facility. All rent shall be
prorated for the number of days Lessee is actually in possession of the Surgery
Area during the first and last months of the term of this Agreement.
5. OPERATION OF SURGERY AREA. Owner shall provide the facilities
reasonably necessary and appropriate for the provision of ambulatory surgical
services at the Surgery Area, including but not limited to all personnel
staffing, supplies and disposable supplies and equipment, including surgery
trays, operating room equipment, as well as pre-operating and recovery
equipment, personnel and space. Owner (or the landlord from which Owner leases
the Facility) shall be responsible for all costs of repairs, maintenance and
improvements, utility expenses, normal janitorial services, refuse disposal, and
all other costs and expenses reasonably incurred in conducting business at the
Facility during the term of this Agreement, including but not limited to related
real or personal property lease cost payments and expenses, taxes, utilities and
insurance.
6. EQUIPMENT. Owner shall at Owner's expense provide all equipment
reasonably necessary and appropriate for the provision of ambulatory surgical
services at the Surgery Area. Owner shall not be required to purchase any
additional equipment which is not already present in the Facility. Lessee, RGP
and Affiliated Physicians shall have access to and use of any medical equipment
located in the Surgery Area throughout the term; provided, however, that title
to the Facility and all equipment other than items placed in the location by
them shall at all times be and remain in Owner or, if applicable, the entity
from which Owner leases the Facility and/or equipment. Should Lessee from time
to time during the term of this Agreement desire Owner to provide additional
patient care other equipment for use at the Surgery Area or to replace used or
obsolete equipment, Lessee shall make such requests or recommendations to Owner,
which shall implement reasonably necessary or appropriate requests. Owner shall
maintain all tangible assets and properties of the Facility in as good a state
of operating condition and repair as they are on the Commencement Date, except
for ordinary depreciation, wear, and tear.
<PAGE>
7. PERSONNEL Owner shall at Owner's expense provide all personnel
traditionally provided and reasonably necessary and appropriate for the
provision of ambulatory surgical services at the Surgery Area.
8. SUPPLIES. Owner shall obtain and provide all supplies traditionally
provided in surgeries, including but not limited to those described in section 5
above, and shall ensure that the Surgery Area is at all times adequately stocked
with supplies. Lessee, RGP or Affiliated Physicians shall have the right to
purchase any unique items of supplies, including but not limited to screws,
prosthesis, and implants from Owner at its cost, or alternatively may purchase
all such items independent of Owner and make them available for their respective
patients. Lessee, RGP and Affiliated Physicians shall have access to and use of
any supplies reasonably necessary and appropriate for the provision of
ambulatory surgery services at the Surgery Area.
9. LICENSES. Owner has and shall maintain possession of all licenses
necessary for the provision of ambulatory surgery services at the Facility, and
all such licenses are and shall remain in full force and effect. To Owner's
knowledge, no material violations are or have been recorded in respect of such
licenses, and no proceeding is pending or, to the knowledge of Owner,
threatened, seeking the revocation or limitation of any of such licenses.
10. MEDICARE/MEDICAID PROGRAMS. Owner is and shall remain a Provider
under existing provider agreements with the applicable Medicare and Medicaid
authorities. Owner shall file timely all reports required to be filed in
connection with an state and federal Medicare and Medicaid programs. Owner shall
have the sole right to bill for facility fees for all Medicare and Medicaid
patients, and no portion of such fee shall be paid to Lessee, RGP, or its
Affiliated Physicians.
11. MANAGED CARE NETWORK. Owner will use its commercially reasonable
best efforts to ensure the continued participation of the Facility in all its
existing managed care programs.
12. PROFESSIONAL SERVICES. Lessee. RGP or Affiliated Physicians shall
provide professional services to patients in compliance at all times with
ethical standards, laws and regulations applying to the medical profession.
Lessee shall ensure that each physician associated with Lessee to provide
services at the Surgery Area is licensed in the State of Texas. Lessee shall
have complete control of and responsibility for the selection and compensation
of its physician members and other health care professional employees and shall
further be responsible for the payment of all payroll taxes, employee benefits,
and ad other taxes or charges now or hereafter applicable to them. Any
Professionals associated with Lessee, RGP, or Affiliated Physicians, including
but not limited to Podiatrists, that perform surgery in the Facility, must be
credentialed in accordance with Owner's medical staff bylaws, rules and
regulations.Owner is hereby granted the first right to supply professional
anesthesia services to the RGP Affiliated Physicians at the Surgery Area
provided it is able to meet the price for such services which Lessee has secured
a proposal from an independent third party for the provision of such services.
Owner will be given ten days to agree to the compensation for such professional
anesthesia services as proposed by Lessee, and failing such agreement by Owner,
Lessee shall be able thereafter to contract for anesthesia professional services
independent of Owner..
<PAGE>
13. BILLING AND COLLECTION FOR PROFESSIONAL SERVICES. Lessee on behalf
of RGP and Affiliated Physicians shall be entitled to bill patients and third
party payers for a professional services furnished by the RGP and its Affiliated
Physicians at the Surgery Area and to collect payments for those billings.
14. BILLING AND COLLECTION FOR FACILITY SERVICES. Lessee recognizes the
expertise and experience of Owner in billing and collecting for all the Facility
Services that shall be provided to patients by Lessee at the Surgery Area. To
that end, Lessee, RGP or Affiliated Physicians shall have the option of
collecting such Facility fees itself or have the Owner bill patients (other than
Medicare and Medicaid patients referred to in section 10 above, which shall be
billed by Owner under all such circumstances) for all Facility Services provided
by RGP or its Affiliated Physicians at the Surgery Area and to collect payments
for those billings. Lessee shall provide Owner with at least 30 days prior
notice should it desire to have Owner bill and collect for such Facility
Services and any compensation to be paid therefore to Owner shall be mutually
acceptable to both parties. If there is a failure to mutually agree on such
compensation the Lessee will be required to bill for all such Facility Services.
In the event Lessee elects to have Owner bill and collect for such Facility
Services.
Owner shall establish and maintain credit, billing, tracking, rebilling,
follow-up, and collection policies and procedures and shall use commercially
reasonable best efforts to bill and collect timely all facility fees for all
billable Facility Services provided under this Agreement; shall be at least as
diligent and timely in billing and collecting facility fees under this Agreement
as Lessee is in billing and collecting facility fees for billable Facility
Services provided by Owner outside this Agreement; and shall not write off any
facility fees for billable Facility Services provided under this Agreement
without the consent of Lessee, which consent shall not be unreasonably withheld.
In the event Lessee elects to have Owner bill and collect for such
Facility Services, Lessee will furnish Owner with all information necessary to
enable Owner to perform the services set forth in this Section and Lessee shall
cooperate, and shall cause its employees to cooperate, with Owner in every
reasonable respect to allow Owner to perform its duties under this Section.
Should Lessee Elect to have Owner bill and collect for such Facility
Services, within fifteen (15) days after each calendar month Owner shall pay
Lessee (i) the full amount of all facility fees collected during the month for
all billable Facility Services provided under this Agreement, less (ii) the
amount, if any, of rent remaining unpaid for that month and, if applicable, for
prior months. Owner shall submit regular reports to Lessee as agreed upon by the
parties that set forth the total revenues for Facility Services billed and
collected by Owner on behalf of Lessee during the reporting period. Owner shall
make available to Lessee and its authorized agents and accountants for
inspection at reasonable times and under reasonable circumstances the following
items with respect to Owner's business and financial records, tax returns,
working papers, files, and memoranda of its public accountants and outside legal
counsel for the purpose of making an accounting review; and the results of any
legal or financial audit. This Section shall survive the termination of this
Agreement until all facility fees for billable Facility Services provided under
this Agreement have been either collected and paid to Lessee or, with the
consent of Lessee, written off.
<PAGE>
15. TAXES. Owner shall be liable for all taxes levied against the
Surgery Area (including personal property and trade fixtures in the Surgery
Area) during the term of this Agreement, including any special assessments
imposed on or against the property for the construction or improvements thereof.
16. REPAIRS. Owner shall be responsible for the maintenance of the
Surgery Area and shall keep the Surgery Area in good repair. Lessee shall
promptly give Owner notice of any conditions that might require repair or
maintenance by Owner and may confer with Owner regarding how and by whom such
repairs and maintenance will be performed. Owner and Lessee shall keep the
Surgery Area clean and orderly.
17. INSURANCE. Lessee shall at all times during the term of this
Agreement maintain and keep in force professional liability insurance of the
type and in the amount customarily carried by similar professional parties to
RGP and Affiliated Physicians with respect to their performance of similar
services with Owner being named as an insured as its interests may appear, and
Owner shall at all times during the term of this Agreement maintain and keep in
force general comprehensive liability and all other insurance of the types and
in the amounts customarily carried by similar parties with respect to their
operations. Policies shall be placed with insurance companies authorized and
licensed to issue such policies in the State of Texas and reasonably acceptable
to the parties. Each party shall provide the other with a copy of the insurance
policies upon request.
18. CASUALTY DAMAGE. . If the Facility shall be destroyed or
substantially damaged so as to impair the operating integrity of the Surgery
Area, the rent shall be abated from the date of the destruction or substantial
damage until the damage is completely repaired and the operating integrity of
the Surgery Area is restored. If the damage can not be repaired within a period
of ninety (90) days, Lessee shall have the option to terminate this Agreement.
Notice of Lessee's election must be given within thirty (30) days of the date of
the substantial damage.
19. CONDEMNATION. If the whole Facility shall be taken in any
condemnation or eminent domain proceeding or shall be voluntarily conveyed in
Lieu thereof, this Agreement shall terminate on the date Lessee ceases to
provide services at the Surgery Area. If a part of the Facility shall be taken
by condemnation or eminent domain proceedings or shall be voluntarily conveyed
in lieu thereof so as to materially affect the efficient operation of the
Surgery Center, Lessee shall have the option to terminate this Agreement as of
the date of such taking by giving written notice of termination to Owner.
20. SUPERIOR LEASES OR LIENS. Lessee accepts this Agreement subject and
subordinate to any lease or lien upon Owner or the Facility.
<PAGE>
21. INDEMNIFICATION. To the extent not covered by insurance, each party
agrees to defend, indemnify, and hold the other party harmless from and against
any loss, claim, suit, expense or obligation arising out of or resulting from
the indemnifying party's negligence, errors, omissions, or malfeasance in the
performance of its responsibilities under this Agreement.
22. COMPLIANCE WITH LAWS AND STANDARDS. Lessee agrees that the Surgery
Area shall be used in compliance with all applicable governmental statutes and
regulations and all valid rules and regulations of any federal, state, or local
governmental subdivision or agency and all applicable standards of the
Facility's appropriate accreditation organization.
23. PATIENTS. The parties agree that the benefits to either party
hereunder do not require, are not payment for, and are not in any way contingent
upon the admission, referral, or any other arrangement for the provision of any
item or service offered by either party to any of the other party's patients in
any facility owned or operated by either party.
24. WAIVER. No waiver by Owner or Lessee of any default or breach of any
term, covenant, condition, agreement, provision or stipulation herein contained
shall be treated as a waiver of any subsequent default or breach of the same or
any other term, condition, covenant, agreement, provision or stipulation hereof.
The rights and remedies of the parties shall be cumulative and in addition to
any other right afforded by law. The exercise of any right or remedy shall not
impair Owner's or Lessee's right to any other remedy.
25. NOTICES. Any notices or other communications to Owner or Lessee
required or permitted to be given under this Agreement must be in writing and
shall be effectively given if delivered to the addressees for Owner and Lessee
set forth below, or if sent by United States certified mail, return receipt
requested, to such addresses:
To Owner Doctor's Hospital 1997 L.P.
d.b.a. Doctor's Hospital Tidwell
Houston, Texas
To Lessee: American Medical Providers, Inc.
or Nominee
C/O American Medical Providers
3555 Timmons Lane, Suite 1550
Houston, Texas. 77027
Any notice mailed shall be deemed to have been given on the second business day
following the date of deposit of such item, postage paid, in a depository of the
United States Postal Service in the continental United States. Notice effected
other than by mail shall be deemed to have been given at the time of actual
delivery. Either party shall have the right to change its address to which
notices shall thereafter be sent to any other address in the continental United
States by giving the other written notice thereof.
<PAGE>
26. ASSIGNMENT. Neither party may assign any of its rights and
obligations under this Agreement without the prior written consent of
the other party, except that Lessee may assign all such of its rights to
a wholly owned subsidiary.
27. MISCELLANEOUS.
(a) The parties intend to act and perform as independent
contractors, and nothing in this Agreement is intended and nothing shall
be construed to create an employer/employee, partnership, joint venture
or other type of relationship, or to allow either to exercise control or
direction over the manner or method by which the other performs the
services that are the subject matter of this Agreement.
(b) The terms, provisions, covenants, and conditions contained in
this Agreement shall apply to, inure to the benefit of, and be binding
upon, the parties, their respective heirs, representatives, successors,
and permitted assigns.
(c) All exhibits, attachments, instruments, and addenda referred to
in this Agreement shall be considered a part of this Agreement for all
purposes with the same force and effect as if copied at full length in
this Agreement. The captions or headings of paragraphs in this Agreement
are inserted for convenience only and shall not be considered in
construing the provisions of this Agreement if any questions of intent
should arise.
(d) If any clause or provision of this Agreement is illegal, invalid,
or unenforceable under present or future laws effective during the term
of this Agreement, then it is the intention of the parties that the
remainder of this Agreement shall not be affected thereby, and it is
also the intention of both parties that in lieu of each clause or
provision that is illegal, invalid, or unenforceable, there shall be
added as part of this Agreement a clause or provision with similar terms
to such illegal, invalid, or unenforceable clause or provision as may be
possible, legal, and enforceable.
(e) This Agreement shall be governed by the laws of the State of
Texas, and any and all actions as may be brought under this Agreement,
or in connection with this Agreement, shall be brought in Harris County,
Texas.
(f) This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, but which together shall
constitute one and the same instrument.
(g) This Agreement may not be altered, changed or amended except by
an instrument in writing signed by both of the parties hereof, and any
amendment only become effective when such amendment is signed in writing
by both parties.
(h) This Agreement constitutes the entire agreement of the parties
with respect to the subject matter hereof and supersedes all prior
agreements, whether written or oral.
<PAGE>
EXECUTED effective as of the 19th day of January 1998..
Mid-America Equities, L.P, a
Texas limited partnership
By: /s/GLEN MARSHALL
Name: Glen Marshall
Title: VP of Normandy Community
Hospital Management, It
General Partner
American Medical Providers, Inc.
By: /s/JACK McCRAY
Name: Jack McCray
Title:______________________________
EXHIBIT 10.19
LEASE AGREEMENT
This LEASE AGREENMENT (this "Agreement") is made and entered into effective as
of, January 19,1997 (the "Effective Date") by and between MidAmerica Equities,
L.P., a Texas limited partnership doing business as Normandy Community Hospital,
(the "Hospital" or "Owners"), and, American Medical Providers, Inc. or its
nominee ("Lessee").
RECITALS:
A. Owner owns a general acute care hospital located 7840 Natural Bridge Road,
St. Louis, Missouri 63121 (the Facility.) containing operating rooms, surgery
suites, a pre op area, and a recovery room (collectively, the "Surgery Areas").
B. Lessee is a corporation organized under the laws of the State of Texas, and
will be authorized to do business in Missouri at the Commencement Date (as
defined herein) of this Agreement and Lessee has entered into certain Business
Purchase Agreements pursuant to which Lessee is purchasing certain practice
assets from Physicians (the "Affiliated Physicians")who are thereafter entering
into employment agreements with a regional group practice limited liability
corporation ("RGP") which will enter into a management agreement with Lessee or
its wholly owned subsidiary corporation.
C. Lessee desires to use the Surgery Area for the purpose of providing
ambulatory surgical services to patients of the RGP's Affiliated Physicians (as
defined hereinabove), on the terms and conditions set forth in this Agreement,
and Owner desires to allow such use.
AGREEMENTS:
NOW, THEREFORE, in consideration of the premises and the terms and
conditions contained in this Agreement, the mutuality and adequacy of which are
forever acknowledged, the parties do agree as follows, intending to be legally
bound:
1. LEASE OF PREMISES. Owner hereby leases and lets to Lessee, for use by
RGP, Affiliated Physicians and Lessee, and Lessee hereby leases and takes from
Owner, the Surgery Area, or so much thereof as is needed by Lessee (the
"Premises"), located in Owner's Facility located in St. Louis Missouri, which
Facility is situated on that certain tract or parcel of real property (the
"Land"), situated in the state of Missouri and being more fully described on
Exhibit A attached hereto and made a part hereof for all purposes, during the
following times:
<PAGE>
(a) Forty Eight (48) hours per quarter (the "Base Hours"), which shall
be between the hours of 7:30:00 a.m. and 2:00 p.m. on weekdays other
than holidays, unless mutually agreed otherwise, and which shall be
scheduled by Lessee in advance in accordance with Owner's scheduling
procedure but in not less than 4 hour blocks unless otherwise agreed to
by Lessee.
(b) Additional time, which shall be scheduled by Lessee in advance in
accordance with Owner's scheduling procedure, and hold-over time
(collectively, "Additional Time") as needed by Lessee.
A floor plan depicting the design of the Premises is attached hereto as Exhibit
B and made a part hereof for all purposes. Owner hereby grants Lessee, RGP,
Affiliated Physicians, and their respective assignees, subtenants, agents,
employees, invitees, and other visitors, a nonexclusive license for the term of
this Lease to use the Surgery Area and the common areas of the Facility and the
Land.
2. TERM AND TERMINATION.
(a) TERM. This Agreement shall be in force for an initial term of one year
commencing on the Commencement Date and, upon notice by Lessee or Ownerat least
thirty (30) days before the end of the initial term or any renewal term, may be
renewed for successive renewal terms of one year each, unless sooner terminated
in accordance with the terms and conditions of this Agreement.
(b) TERMINATION. Agreement may be sooner terminated only on the occurrence
of one of the following:
(i) TERMINATION BY AGREEMENT. If Owner and Lessee mutually agree
in writing, this Agreement may be terminated on the terms and date
stipulated.
(ii) TERMINATION FOR DEFAULT. If either party shall give written
notice to the other that the other party has substantially defaulted in
the performance of any obligation under this Agreement, and such default
shall not have been cured within fifteen (15) days following the giving
of such notice, the party giving the notice shall have the right to
immediately terminate this Agreement by written notice.
(iii) LEGISLATIVE, REGULATORY OR ADMINISTRATIVE CHANGE. In the
event of a change in the Medicare or Medicaid laws, regulations or
general instructions or interpretations, the adoption of new state or
federal legislation, or a change in any third party reimbursement
system, any of which materially affects the manner in which either party
may perform or be compensated for its services under this Agreement, the
parties may either immediately terminate this Agreement or propose a new
service arrangement or basis for compensation for the services furnished
pursuant to this Agreement. If such notice of new service arrangement or
basis for compensation is given and if the parties are unable within
ninety (90) days thereafter to agree upon a new service arrangement or
basis for compensation, either party may terminate this Agreement by
ninety (90) days notice to the other on any future date specified in
such notice.
<PAGE>
(c) For purposes of this Agreement "Commencement Date" shall
mean the date which is the latter of the following events to have
occurred: (a) the Initial Public Offering date for American Medical
Providers, Inc in its sale of stock to the public as contemplated in its
registration statement filed with the Securities Exchange Commission;
(b) the date this Agreement is approved by Lessee's board of directors,
or the date the board of managers for the RGP has approved this
Agreement.
3. USE. The Surgery Area shall be used by Lessee, RGP, or Affiliated
Physicians for the sole purpose of providing ambulatory surgical services and
related services for the benefit of RGP's or Affiliated Physicians' patients.
4. RENT. Lessee agrees to pay Owner (a) an annual base rental beginning
on the Commencement Date of One Hundred Five Thousand Six Hundred Dollars
($105,600.) payable in equal monthly installments of Eight Thousand Eight
Hundred Dollars ($8,800), which amounts are subject to adjustment as provided in
this Section, with the first installment to be paid on the Commencement Date and
subsequent installments on the same day of each succeeding month, and (b) an
additional rental charge of One Hundred Thirty Seven Dollars ($137..00) for each
quarter hour of Additional Time, payable monthly with the first payment to be
paid forty five (45) days after the month containing the Commencement Date and
subsequent installments 45 days after the end of each successive month . The
Base Rental shall be adjusted for the following:
(a) If an Affiliated Physician (as of the Effective Date) of Lessee
dies, becomes permanently disabled, or moves away from the St.
Louis metropolitan area, the Lessee shall have the option, upon
10 days notice to Owner, to reduce the number of Base Hours,
(and correspondingly the Base Rental) in proportion to the
collections of such Affiliated Physician to the collections of
the RGP over the prior two months relating to services rendered
to their respective patients. For purposes of this Agreement, a
disability is a documented illness or incapacity that keeps or
is expected to keep an individual from resuming his full time
professional practice for at least ninety (90) days; provided,
however, that such ninety (90) day period shall not be deemed to
be broken if the individual returns to work for no more than
three consecutive working days during any given attempt to
resume his or her regular work schedule.
(b) If an Affiliated Physician discharges his obligations to RGP or
Lessee through bankruptcy, the Lessee shall have the option,
upon 10 days notice to Owner, to reduce the number of Base
Hours, (and correspondingly the Base Rental) in proportion to
the collections of such Affiliated Physician to the collections
of the RGP over the prior two months relating to services
rendered to their respective patients.
<PAGE>
(c) If the Premises are not available for Lessee at scheduled times,
the base rental shall be reduced by $140.00 for each quarter
hour (or part thereof). During any block of time scheduled by
Lessee if the turn around time (defined to be the time between
surgeries required by Owner to clean and make the Surgery space
available for the next surgery) is in excess of twenty minutes,
then Lessee shall be given a credit against the Base Rental for
such period by $140.00 for each quarter hour (or part thereof)
in excess of 20 minutes, and such turn-around time shall not
reduce the numbers of Base Hours available to Lessee.
(d) If Lessee attempts to schedule at least the number of hours set
forth in Section l (a) in accordance with Owner's scheduling
procedure and the Premises are not available for that number of
hours, the base rental shall be reduced by $140. for each
quarter hour (or part thereof) of the shortfall.
All rent shall be payable by Lessee to Owner at the Facility. All rent shall be
prorated for the number of days Lessee is actually in possession of the Surgery
Area during the first and last months of the term of this Agreement.
5. OPERATION OF SURGERY AREA. Owner shall provide the facilities
reasonably necessary and appropriate for the provision of ambulatory surgical
services at the Surgery Area, including but not limited to all personnel
staffing, supplies and disposable supplies and equipment, including surgery
trays, operating room equipment, as well as pre-operating and recovery
equipment, personnel and space. Owner (or the landlord from which Owner leases
the Facility) shall be responsible for all costs of repairs, maintenance and
improvements, utility expenses, normal janitorial services, refuse disposal, and
all other costs and expenses reasonably incurred in conducting business at the
Facility during the term of this Agreement, including but not limited to related
real or personal property lease cost payments and expenses, taxes, utilities and
insurance.
6. EQUIPMENT. Owner shall at Owner's expense provide all equipment
reasonably necessary and appropriate for the provision of ambulatory surgical
services at the Surgery Area. Owner shall not be required to purchase any
additional equipment which is not already present in the Facility. Lessee, RGP
and Affiliated Physicians shall have access to and use of any medical equipment
located in the Surgery Area throughout the term; provided, however, that title
to the Facility and all equipment other than items placed in the location by
them shall at all times be and remain in Owner or, if applicable, the entity
from which Owner leases the Facility and/or equipment. Should Lessee from time
to time during the term of this Agreement desire Owner to provide additional
patient care other equipment for use at the Surgery Area or to replace used or
obsolete equipment, Lessee shall make such requests or recommendations to Owner,
which shall implement reasonably necessary or appropriate requests. Owner shall
maintain all tangible assets and properties of the Facility in as good a state
of operating condition and repair as they are on the Commencement Date, except
for ordinary depreciation, wear, and tear.
<PAGE>
7. PERSONNEL OWNER shall at Owner's expense provide all personnel
traditionally provided and reasonably necessary and appropriate for the
provision of ambulatory surgical services at the Surgery Area.
8. SUPPLIES. Owner shall obtain and provide all supplies traditionally
provided in surgeries, including but not limited to those described in section 5
above, and shall ensure that the Surgery Area is at all times adequately stocked
with supplies. Lessee, RGP or Affiliated Physicians shall have the right to
purchase any unique supplies, including but not limited to, any screws,
implants, or prostheses from Owner at its cost, or alternatively may purchase
all such items independent of Owner and make them available for their respective
patients. Lessee, RGP and Affiliated Physicians shall have access to and use of
any supplies reasonably necessary and appropriate for the provision of
ambulatory surgery services at the Surgery Area.
9. LICENSES. Owner has and shall maintain possession of all licenses
necessary for the provision of ambulatory surgery services at the Facility, and
all such licenses are and shall remain in full force and effect. To Owner's
knowledge, no material violations are or have been recorded in respect of such
licenses, and no proceeding is pending or, to the knowledge of Owner,
threatened, seeking the revocation or limitation of any of such licenses.
10. MEDICARE/MEDICAID PROGRAMS. Owner is and shall remain a Provider
under existing provider agreements with the applicable Medicare and Medicaid
authorities. Owner shall file timely all reports required to be filed in
connection with an state and federal Medicare and Medicaid programs. Owner shall
have the sole right to bill for facility fees for all Medicare and Medicaid
patients, and no portion of such fee shall be paid to Lessee, RGP, or its
Affiliated Physicians.
11. MANAGED CARE NETWORK. Owner will use its commercially reasonable
best efforts to ensure the continued participation of the Facility in all its
existing managed care programs.
12. PROFESSIONAL SERVICES. Lessee. RGP or Affiliated Physicians shall
provide professional services to patients in compliance at all times with
ethical standards, laws and regulations applying to the medical profession.
Lessee shall ensure that each physician associated with Lessee to provide
services at the Surgery Area is licensed in the State of Missouri. Lessee shall
have complete control of and responsibility for the selection and compensation
of its physician members and other health care professional employees and shall
further be responsible for the payment of all payroll taxes, employee benefits,
and ad other taxes or charges now or hereafter applicable to them. Any
Podiatrist associated with Lessee, RGP, or Affiliated Physicians that perform
professional services, including surgery, in the Facility must be credentialed
in accordance with the Owner's medical staff bylaws, rules and regulations.Owner
is hereby granted the first right to supply professional anesthesia services to
the RGP Affiliated Physicians at the Surgery Area provided it is able to meet
the price for such services which Lessee has secured a proposal from an
independent third party providing such services. Owner will be given 10 days to
agree to the compensation for such professional anesthesia services as proposed
by Lessee, and failing such agreement by Owner, Lessee will be able thereafter
to contract for anesthesia professional services independent of Owner.
<PAGE>
13. BILLING AND COLLECTION FOR PROFESSIONAL SERVICES. Lessee on behalf
of RGP and Affiliated Physicians shall be entitled to bill patients and third
party payers for a professional services furnished by the RGP and its Affiliated
Physicians at the Surgery Area and to collect payments for those billings.
14. BILLING AND COLLECTION FOR FACILITY SERVICES. Lessee recognizes the
expertise and experience of Owner in billing and collecting for all the Facility
Services that shall be provided to patients by Lessee at the Surgery Area. To
that end, Lessee, RGP or Affiliated Physicians shall have the option of
collecting such Facility fees itself or have the Owner bill patients (other than
Medicare and Medicaid patients referred to in section 10 above which shall be
billed by Owner under all such circumstances) for all Facility Services provided
by RGP or its Affiliated Physicians at the Surgery Area and to collect payments
for those billings. Lessee shall provide Owner with at least 30 days prior
notice should it desire to have Owner bill and collect for such Facility
Services and any compensation to be paid to Owner shall be mutually acceptable
to both parties. If there is a failure to mutually agree on such compensation,
the Lessee is required to bill for such services. In the event Lessee elects to
have Owner bill and collect for such Facility Services.
Owner shall establish and maintain credit, billing, tracking, rebilling,
follow up, and collection policies and procedures and shall use commercially
reasonable best efforts to bill and collect timely all facility fees for all
billable Facility Services provided under this Agreement; shall be at least as
diligent and timely in billing and collecting facility fees under this Agreement
as Lessee is in billing and collecting facility fees for billable Facility
Services provided by Owner outside this Agreement; and shall not write off any
facility fees for billable Facility Services provided under this Agreement
without the consent of Lessee, which consent shall not be unreasonably withheld.
In the event Lessee elects to have Owner bill and collect for such
Facility Services, Lessee will furnish Owner with all information necessary to
enable Owner to perform the services set forth in this Section and Lessee shall
cooperate, and shall cause its employees to cooperate, with Owner in every
reasonable respect to allow Owner to perform its duties under this Section.
Should Lessee Elect to have Owner bill and collect for such Facility
Services, within fifteen (15) days after each calendar month Owner shall pay
Lessee (i) the full amount of all facility fees collected during the month for
all billable Facility Services provided under this Agreement, less (ii) the
amount, if any, of rent remaining unpaid for that month and, if applicable, for
prior months. Owner shall submit regular reports to Lessee as agreed upon by the
parties that set forth the total revenues for Facility Services billed and
collected by Owner on behalf of Lessee during the reporting period. Owner shall
make available to Lessee and its authorized agents and accountants for
inspection at reasonable
<PAGE>
times and under reasonable circumstances the following items with respect to
Owner's business and financial records, tax returns, working papers, files, and
memoranda of its public accountants and outside legal counsel for the purpose of
making an accounting review; and the results of any legal or financial audit.
This Section shall survive the termination of this Agreement until all facility
fees for billable Facility Services provided under this Agreement have been
either collected and paid to Lessee or, with the consent of Lessee, written off.
15. TAXES. Owner shall be liable for all taxes levied against the
Surgery Area (including personal property and trade fixtures in the Surgery
Area) during the term of this Agreement, including any special assessments
imposed on or against the property for the construction or improvements thereof.
16. REPAIRS. Owner shall be responsible for the maintenance of the
Surgery Area and shall keep the Surgery Area in good repair. Lessee shall
promptly give Owner notice of any conditions that might require repair or
maintenance by Owner and may confer with Owner regarding how and by whom such
repairs and maintenance will be performed. Owner and Lessee shall keep the
Surgery Area clean and orderly.
17. INSURANCE. Lessee shall at all times during the term of this
Agreement maintain and keep in force professional liability insurance of the
type and in the amount customarily carried by similar professional parties to
RGP and Affiliated Physicians with respect to their performance of similar
services with Owner being named as an insured as its interest may appear, and
Owner shall at all times during the term of this Agreement maintain and keep in
force general comprehensive liability and all other insurance of the types and
in the amounts customarily carried by similar parties with respect to their
operations. Policies shall be placed with insurance companies authorized and
licensed to issue such policies in the State of Missouri and reasonably
acceptable to the parties. Each party shall provide the other with a copy of the
insurance policies upon request.
18. CASUALTY DAMAGE. . If the Facility shall be destroyed or
substantially damaged so as to impair the operating integrity of the Surgery
Area, the rent shall be abated from the date of the destruction or substantial
damage until the damage is completely repaired and the operating integrity of
the Surgery Area is restored. If the damage can not be repaired within a period
of ninety (90) days, Lessee shall have the option to terminate this Agreement.
Notice of Lessee's election must be given within thirty (30) days of the date of
the substantial damage.
19. CONDEMNATION. If the whole Facility shall be taken in any
condemnation or eminent domain proceding or shall be voluntarily conveyed in
Lieu thereof, this Agreement shall terminate on the date Lessee ceases to
provide services at the Surgery Area. If a part of the Facility shall be taken
by condemnation or eminent domain proceedings or shall be voluntarily conveyed
in lieu thereof so as to materially affect the efficient operation of the
Surgery Center, Lessee shall have the option to terminate this Agreement as of
the date of such taking by giving written notice of termination to Owner.
<PAGE>
20. Superior Leases or Liens. Lessee accepts this Agreement subject and
subordinate to any lease or lien upon Owner or the Facility.
21. INDEMNIFICATION. To the extent not covered by insurance, each party
agrees to defend, indemnify, and hold the other party harmless from and against
any loss, claim, suit, expense or obligation arising out of or resulting from
the indemnifying party's negligence, errors, omissions, or malfeasance in the
performance of its responsibilities under this Agreement.
22. COMPLIANCE WITH LAWS AND STANDARDS. Lessee agrees that the Surgery
Area shall be used in compliance with all applicable governmental statutes and
regulations and all valid rules and regulations of any federal, state, or local
governmental subdivision or agency and all applicable standards of the
Facility's appropriate accreditation organization.
23. PATIENTS. The parties agree that the benefits to either party
hereunder do not require, are not payment for, and are not in any way contingent
upon the admission, referral, or any other arrangement for the provision of any
item or service offered by either party to any of the other party's patients in
any facility owned or operated by either party.
24. WAIVER. No waiver by Owner or Lessee of any default or breach of any
term, covenant, condition, agreement, provision or stipulation herein contained
shall be treated as a waiver of any subsequent default or breach of the same or
any other term, condition, covenant, agreement, provision or stipulation hereof.
The rights and remedies of the parties shall be cumulative and in addition to
any other right afforded by law. The exercise of any right or remedy shall not
impair Owner's or Lessee's right to any other remedy.
25. NOTICES. Any notices or other communications to Owner or Lessee
required or permitted to be given under this Agreement must be in writing and
shall be effectively given if delivered to the addressees for Owner and Lessee
set forth below, or if sent by United States certified mail, return receipt
requested, to such addresses:
To Owner Mid-American Equities, L.P.
d.b.a. Normandy Community Hospital
7840 Natural Bridge Road
St. Louis, Mo. 63121
To Lessee: American Medical Providers, Inc. or Nominee
C/O American Medical Providers
3555 Timmons Lane, Suite 1550
Houston, Texas. 77027
Any notice mailed shall be deemed to have been given on the second business day
following the date of deposit of such item, postage paid, in a depository of the
United States Postal Service in the continental United States. Notice effected
other than by mail shall be deemed to have been given at the time of actual
delivery. Either party shall have the right to change its address to which
notices shall thereafter be sent to any other address in the continental United
States by giving the other written notice thereof.
<PAGE>
26. ASSIGNMENT. Neither party may assign any of its rights and
obligations under this Agreement without the prior written consent of the other
party, except that Lessee may assign this Agreement to a wholly owned
subsidiary..
27. MISCELLANEOUS.
(a) The parties intend to act and perform as independent contractors,
and nothing in this Agreement is intended and nothing shall be construed to
create an employer/employee, partnership, joint venture or other type of
relationship, or to allow either to exercise control or direction over the
manner or method by which the other performs the services that are the subject
matter of this Agreement.
(b) The terms, provisions, covenants, and conditions contained in this
Agreement shall apply to, inure to the benefit of, and be binding upon, the
parties, their respective heirs, representatives, successors, and permitted
assigns.
(c) All exhibits, attachments, instruments, and addenda referred to in
this Agreement shall be considered a part of this Agreement for all purposes
with the same force and effect as if copied at full length in this Agreement.
The captions or headings of paragraphs in this Agreement are inserted for
convenience only and shall not be considered in construing the provisions of
this Agreement if any questions of intent should arise.
(d) If any clause or provision of this Agreement is illegal, invalid, or
unenforceable under present or future laws effective during the term of this
Agreement, then it is the intention of the parties that the remainder of this
Agreement shall not be affected thereby, and it is also the intention of both
parties that in lieu of each clause or provision that is illegal, invalid, or
unenforceable, there shall be added as part of this Agreement a clause or
provision with similar terms to such illegal, invalid, or unenforceable clause
or provision as may be possible, legal, and enforceable.
(e) This Agreement shall be governed by the laws of the State of Texas,
and any and all actions as may be brought under this Agreement, or in connection
with this Agreement, shall be brought in Harris County, Texas.
(f) This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but which together shall constitute one and
the same instrument.
(g) This Agreement may not be altered, changed or amended except by an
instrument in writing signed by both of the parties hereof, and any amendment
only become effective when such amendment is signed in writing by both parties.
<PAGE>
(h) This Agreement constitutes the entire agreement of the parties with
respect to the subject matter hereof and supersedes all prior agreements,
whether written or oral.
<PAGE>
EXECUTED effective as of the 19th day of January 1998..
Doctors Hospital 1997, L.P., a
Texas limited partnership
By: /s/WILTON M. BURT
Name: Wilton M. Burt
Title: Senior Vice President
American Medical Providers, Inc.
By: JACK McCRAY
Name: Jack McCray
Title:___________________________________
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports and all references to our Firm included in this registration statement
on Form S-1 filed by American Medical Providers, Inc.
ARTHUR ANDERSEN LLP
Houston, Texas
February , 1998
EXHIBIT 99.5
ANKLE AND FOOT CENTERS OF AMERICA, LLC
AMERICAN MEDICAL PROVIDERS, INC.
FORM OF UNITS
RESCISSION FORM
NOTICE TO THE OFFEREES OF THE AMERICAN MEDICAL PROVIDERS, INC. RESCISSION OFFER:
THIS UNITS RESCISSION FORM MUST BE FULLY EXECUTED AND RECEIVED BY ANKLE & FOOT
CENTERS OF AMERICA, LLC ("AFC") TOGETHER WITH THE PROMISSORY NOTE(S) ("AFC
PROMISSORY NOTES") AND CERTIFICATE(S) OF MEMBERSHIP INTERESTS IN AFC ("AFC
MEMBERSHIP INTERESTS") BEING RESCINDED, NO LATER THAN MARCH , 1998 AT 5:00
P.M. (THE "EXPIRATION DATE") IN ORDER FOR AN INVESTOR TO ACCEPT AFC'S AND
AMERICAN MEDICAL PROVIDERS, INC.'S (THE "COMPANY") OFFER OF RESCISSION (THE
"UNITS RESCISSION OFFER"). FAILURE TO DELIVER THIS UNITS RESCISSION FORM BY
THE EXPIRATION DATE WILL EVIDENCE THE INVESTOR'S INTENTION TO REJECT THE
RESCISSION OFFER. AN EXPLANATION OF THE ALTERNATIVE RIGHTS OF THE INVESTORS IN
THE EVENT THEY ACCEPT OR REJECT THE RESCISSION OFFER ARE SET FORTH ON THE COVER
PAGES AND IN THE PROSPECTUS DATED MARCH , 1998. SEE "UNITS RESCISSION
OFFER."
This Units Rescission Offer relates to a rescission offer with respect to
$1.425 million principal amount of AFC Promissory Notes and 25,000 membership
interests ("AFC Units") of AFC. The AFC Units were offered and sold by AFC, a
principal stockholder of American Medical Providers, Inc. (the "Company"), to
16 investors in reliance on certain exemptions from registration under the
Securities Act of 1933 (the "Securities Act"). Because certain of the AFC Units
were offered and sold after the Company's registration statement for its initial
public offering was filed with the Securities and Exchange Commission (the
"Commission") by AFC and because, as part of your investment in the AFC Units,
you were given the option by the Company to purchase shares in the Company's
underwritten initial public offering, an argument can be made that the
consummation of the Company's public offering of Common Stock will cause such
exemptions to be retroactively unavailable.
NOTICE TO RESIDENTS OF TEXAS:
AN INVESTOR IN AFC UNITS MAY NOT SUE ON HIS OR HER PURCHASE UNDER SECTION
33 OF THE TEXAS SECURITIES ACT UNLESS (I) HE OR SHE ACCEPTS THE UNITS RESCISSION
OFFER BUT DOES NOT RECEIVE THE AMOUNT OF THE OFFER IN WHICH CASE HE OR SHE MAY
SUE WITHIN 3 YEARS AFTER THE SALE OR (II) HE OR SHE REJECTS THE OFFER IN WRITING
WITHIN 30 DAYS OF RECEIPT AND EXPRESSLY RESERVES IN THE REJECTION HIS RIGHT TO
SUE, IN WHICH CASE HE OR SHE MAY SUE WITHIN ONE YEAR AFTER HE SO REJECTS.
COMPLETE AND SIGN ONLY ONE OF THE TWO FOLLOWING SECTIONS:
I.__ACCEPTANCE OF UNITS RESCISSION OFFER
ACCEPT UNITS RESCISSION OFFER. The undersigned has received and had the
opportunity to review the attached Prospectus which sets forth the terms of a
Units Rescission Offer of AFC. The undersigned acknowledges and understands that
if he or she elects to accept the Units Rescission Offer by completing this
section entitled "Acceptance of Units Rescission Offer," then the AFC Units
purchased by the undersigned as part of AFC's Bridge Financing (the "Bridge
Financing") will be repurchased by AFC and he or she will no longer by entitled
to any rights as a security holder of AFC by virtue of previously investing in
AFC Units as part of the Bridge Financing. The undersigned will be paid the
purchase price for each AFC Unit equal to $95,000 for the AFC Promissory Note
and $5,000 for AFC membership interests plus a statutory rate of interest on the
total $100,000 investment beginning on the date of the undersigned's purchase of
his or her AFC Unit(s). The undersigned understands and acknowledges that such
repayment shall be made promptly following the closing of the Company's initial
public offering, but in no event more than 30 days after the receipt of the AFC
Promissory Note and certificates representing the membership
<PAGE>
EXHIBIT 99.5
(CONTINUED)
certificates purchased in the Bridge Financing. The payment by AFC for the Units
Rescission Offer will be made at Bank of America of Texas, 3 Greenway Plaza
East, Houston, Texas 77046. The undersigned understands and acknowledges that
the repayment shall satisfy in full all claims or potential claims of the
undersigned in connection with his or her purchase of AFC Units including, but
not limited to any claims under federal or state securities laws for the offer
and sale of AFC Units. In addition, the undersigned acknowledges that he or she
will not retain the right to have Class A Common Stock of the Company set aside
to purchase at the initial public offering price of such shares. The
undersigned, being a holder of AFC Units, hereby elects to accept the Units
Rescission Offer to rescind his or her investment in the AFC Unit(s) purchased
under the terms set forth in the Prospectus dated February 17, 1998.
Number of AFC Units
Subject to Acceptance of Rescission: ________________________
- -------------------- ---------------------------------------------------------
(Date) (Signature)
II. REJECTION OF UNITS RESCISSION OFFER
REJECT UNITS RESCISSION OFFER.__The undersigned has received and had the
opportunity to review the attached Prospectus which sets forth the terms of a
Units Rescission Offer of AFC. The undersigned acknowledges and understands that
if he or she elects to reject the Units Rescission Offer by completing this
section entitled "Rejection of Units Rescission Offer," the undersigned will
continue to hold AFC Unit(s) including the AFC Promissory Note(s) and AFC
membership interests purchased pursuant to the Bridge Financing. Upon
consummation of the Company's initial public offering and with respect to each
full AFC Unit, the AFC Promissory Note will be repurchased for $95,000 and
membership interests purchased in the Bridge Financing will be repurchased for
$71,667 cash. The undersigned understands and acknowledges that such repayment
shall satisfy in full all claims or potential claims of the undersigned in
connection with his or her purchase of AFC Units including, but not limited to
any claims under federal or state securities laws for the offer and sale of AFC
Units. In addition, the undersigned will not retain the right to have any Class
A Common Stock set aside to purchase at the Company's initial public offering
price. The undersigned, being a holder of AFC Units hereby elects to reject the
Units Rescission Offer, under the terms set forth in the Prospectus dated
February 17, 1998.
Number of AFC Units
Subject to Acceptance of Rescission:__$________________________
- -------------------- ---------------------------------------------------------
(Date) (Signature)
EXHIBIT 99.6
AMERICAN MEDICAL PROVIDERS, INC.
PRACTICE OWNER
FORM OF
RESCISSION FORM
NOTICE TO THE OFFEREES OF THE AMERICAN MEDICAL PROVIDERS, INC. RESCISSION OFFER:
THIS PRACTICE OWNER RESCISSION FORM MUST BE FULLY EXECUTED AND RECEIVED BY
AMERICAN MEDICAL PROVIDERS, INC., NO LATER THAN MARCH , 1998 AT 5:00 P.M. (THE
"EXPIRATION DATE") IN ORDER FOR YOU TO ACCEPT THE COMPANY'S OFFER OF
RESCISSION ("PRACTICE OWNER RESCISSION OFFER"). FAILURE TO DELIVER THIS
PRACTICE OWNER RESCISSION FORM BY THE EXPIRATION DATE WILL EVIDENCE YOUR
INTENTION TO REJECT THE PRACTICE OWNER RESCISSION OFFER. AN EXPLANATION OF THE
ALTERNATIVE RIGHTS OF THE INVESTORS IN THE EVENT THEY ACCEPT OR REJECT THE
PRACTICE OWNER RESCISSION OFFER ARE SET FORTH ON THE COVER PAGES OF THE
PROSPECTUS DATED MARCH , 1998.
COMPLETE AND SIGN ONLY ONE OF THE TWO FOLLOWING SECTIONS:
This Practice Owner Rescission Offer relates to an offer by American
Medical Providers, Inc. (the "Company") to rescind a potential non-binding
offer to sell Class A common stock, par value $.001 per share, of the Company
("Common Stock"), made on certain dates between November 5, 1997 and February
11, 1998 to the 13 holders of certain operating assets of, or the stock of
entities holding certain operating assets of, twelve podiatric practices (the
"Practice Owners"). None of these negotiations or letters of intent involved the
initial Affiliated Practices. The Company has determined that the Practice Offer
may not have satisfied the requirements of the Securities Act of 1933, as
amended (the "Securities Act"), because no prospectus was distributed to the
Practice Owners as required by the Securities Act.
NOTICE TO RESIDENTS OF TEXAS:
A PRACTICE OWNER MAY NOT SUE ON HIS OR HER PURCHASE UNDER SECTION 33 OF THE
TEXAS SECURITIES ACT UNLESS HE OR SHE REJECTS THE OFFER IN WRITING WITHIN 30
DAYS OF RECEIPT AND EXPRESSLY RESERVES IN THE REJECTION HIS RIGHT TO SUE, IN
WHICH CASE HE OR SHE MAY SUE WITHIN ONE YEAR AFTER HE SO REJECTS.
I. ACCEPTANCE OF PRACTICE OWNER RESCISSION OFFER
ACCEPT PRACTICE OWNER RESCISSION OFFER. The undersigned has received and
had the opportunity to review the attached Prospectus which sets forth the terms
of a Practice Owner Rescission Offer of the Company. The undersigned
acknowledges and agrees that if he or she elects to accept the Company's
Practice Owner Rescission Offer by completing this section entitled "Acceptance
of Practice Owner Rescission Offer," the undersigned's non-binding letter of
intent with the Company and any other related documents shall be cancelled and
rendered null and void. In that case, all negotiations between the Company and
the undersigned concerning the possible acquisition of assets or stock of the
undersigned's podiatric practice would not continue. The undersigned understands
and acknowledges that upon delivery of this Practice Owner Rescission Form with
this section entitled "Acceptance of Practice Owner Rescission Offer"
completed, he or she releases the Company in full from all claims or potential
claims of the undersigned in connection with the offer to sell Class A Common
Stock of the Company to the undersigned including, but not limited to, any
claims under federal or state securities laws for the offer of Class A Common
Stock. The undersigned, being an owner of a podiatric practice to whom the
Company made an offer to purchase shares of the Company's Class A Common Stock,
hereby elects to accept the Practice Owner Rescission Offer, under the terms set
forth in the Prospectus dated February 17, 1998.
- --------------------------------------- ---------------------------------------
(Date) (Signature)
<PAGE>
EXHIBIT 99.6
(CONTINUED)
II. REJECTION OF PRACTICE OWNER RESCISSION OFFER
REJECT PRACTICE OWNER RESCISSION OFFER.__The undersigned has received and
had the opportunity to review the attached Prospectus which sets forth the terms
of a Practice Owner Rescission Offer of the Company. The undersigned
acknowledges and understands that if he or she elects to reject the Company's
Practice Owner Rescission Offer by completing this section entitled "Rejection
of Practice Owner Rescission Offer," any further negotiations between the
Company and the undersigned with respect to the undersigned's podiatric practice
will not recommence until after the completion of the Company's initial public
offering. The undersigned understands and acknowledges that upon delivery of
this Practice Owner Rescission Form with this section entitled "Rejection of
Practice Owner Rescission Offer" completed, he or she releases the Company in
full from all claims or potential claims of the undersigned in connection with
the offer to sell Class A Common Stock of the Company to the undersigned
including, but not limited to, any claims under federal or state securities laws
for the offer of Class A Common Stock. The undersigned, being an owner of a
podiatric practice to whom the Company made an offer to purchase shares of the
Company's Class A Common Stock, hereby elects to reject the Practice Owner
Rescission Offer, under the terms set forth in the Prospectus dated February 17,
1998.
- --------------------------------------- ---------------------------------------
(Date) (Signature)
