SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K/A
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) February 9, 1998
----------------
UCI Medical Affiliates, Inc.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware
- --------------------------------------------------------------------------------
(State or Other Jurisdiction of Incorporation)
0-13265 59-2225346
------- ----------
(Commission File Number) (I.R.S. Employer Identification No.)
1901 Main Street, Suite 1200, Columbia, SC 29201
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(803) 252-3661
- --------------------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
N/A
- --------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
This Form 8-K/A amends the Form 8-K filed with the Securities and
Exchange Commission on February 17, 1998 by UCI Medical Affiliates, Inc., a
Delaware corporation ("UCI"), and is filed to disclose an amendment to the
Agreement reported in the initial filing of this Form 8-K, and to include the
financial statements required by Item 7 of Form 8-K.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Pursuant to the terms of an Acquisition Agreement and Plan of
Reorganization dated February 9, 1998 (the "Agreement"), by and among UCI
Medical Affiliates of Georgia, Inc., a South Carolina corporation (the
"Company"); UCI Medical Affiliates, Inc., a Delaware corporation ("UCI");
MainStreet Healthcare Corporation, a Delaware corporation (the "Seller");
MainStreet Healthcare Medical Group, P.C., a Georgia professional corporation
(the "MainStreet Georgia PC"); MainStreet Healthcare Medical Group, PC, a
Tennessee professional corporation (the "MainStreet Tennessee PC"); Prompt Care
Medical Center, Inc., a Georgia corporation ("Prompt Care"); Michael J. Dare
("Dare"); A. Wayne Johnson ("Johnson"); PENMAN Private Equity and Mezzanine
Fund, L.P., a Delaware limited partnership ("PENMAN"); and Robert G. Riddett,
Jr. ("Riddett"), the Company (a wholly-owned subsidiary of UCI) will acquire
substantially all of the assets of Seller associated with Seller's business for
a purchase price of $8,050,000, plus the assumption of approximately $685,000 of
Seller's line of credit, all as described in the Agreement. The Agreement was
amended pursuant to that certain First Amendment To Acquisition Agreement and
Plan of Reorganization dated April 15, 1998 (the "Amendment"), by and among the
Company; UCI; Seller; MainStreet Georgia PC; MainStreet Tennessee PC; Prompt
Care; Dare; Johnson; PENMAN ; and Riddett.
The purchase price will consist in part of a cash payment by the
Company at closing of $900,000 to an escrow agent appointed by Seller and the
delivery of a promissory note in the original principal amount of $350,000
executed by the Company in favor of the escrow agent. Such promissory note shall
bear interest at a rate of 6.5% per annum and shall be due and payable 90 days
after the date of closing. UCI shall guarantee the promissory note. The purchase
price received by the escrow agent shall be used to pay certain creditors of the
Seller identified to the escrow agent by the Seller.
The consideration payable by the Company in connection with this
acquisition was determined by arms-length negotiations between the Company and
the Seller. The funds used for the cash portion of the purchase price under the
Agreement, as amended, are expected to be provided from a cash distribution to
the Company from its parent company, UCI, out of the net proceeds expected to be
received by UCI from the sale by UCI of UCI common stock in a private placement
scheduled to close on or about the date of the closing of the Acquisition. The
successful completion of such private placement is a condition of closing under
the Agreement. The closing of the transactions contemplated by the Agreement is
scheduled to occur on or about April 24, 1998.
The balance of the purchase price shall consist of the issuance to
the Seller of shares of UCI common stock having an aggregate value of $6,800,000
(determined by the formula described below). Under the Agreement, the price per
share utilized in the formula for determining the
2
<PAGE>
number of shares of UCI common stock to be issued to the Seller is the average
of the closing prices of UCI's common stock for the trading days during the 30
calendar day period immediately prior to the closing, subject to a maximum price
per share of $3.125 and a minimum price per share of $2.375.
The issuance of the shares requires the prior approval of the
shareholders of UCI of (i) a proposed amendment to UCI's Certificate of
Incorporation to increase the number of authorized shares of the UCI common
stock from 10,000,000 to 30,000,000 shares, and (ii) the issuance of the shares
to the Seller as provided in the Agreement, as amended. The shareholders of UCI
will vote on these proposed resolutions at the next meeting of the shareholders
of UCI which is presently scheduled to be held on or about June 30, 1998. In the
event the shareholders of UCI fail to approve any of the required resolutions
necessary to issue the shares to the Seller as provided in the Amendment, the
transactions contemplated in the Agreement, as amended, shall be unwound and
each of the parties to the extent possible shall be restored to its position
held prior to the closing.
Seller provides non-medical management and administrative functions
for nine medical facilities in the State of Georgia and two medical facilities
located in the State of Tennessee. The medical services of the Georgia
facilities are provided by the MainStreet Georgia PC, and the medical services
of the Tennessee facilities are provided by the MainStreet Tennessee PC.
Pursuant to the Agreement, a Georgia professional corporation affiliated with
the Company will be incorporated prior to the date of the closing to purchase
substantially all of the assets (including patient records) of the MainStreet
Georgia PC for a purchase price of one hundred dollars. Similarly, pursuant to
the Agreement, a Tennessee professional corporation affiliated with the Company
will be incorporated prior to the date of the closing to purchase substantially
all of the assets (including patient records) of the MainStreet Tennessee PC for
a purchase price of one hundred dollars.
Pursuant to the Agreement, the Company will also assume all of the
Seller's equipment and real property leases related to such facilities. The
Company expects to continue the operations at such facilities in substantially
the same manner as they were conducted prior to the acquisition.
All descriptions of the Agreement, Amendment, and the other documents
noted herein are qualified in their entirety by reference to such documents
filed as Exhibits to this Current Report on Form 8-K/A.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(A) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
The consolidated financial statements for MainStreet
Healthcare Corporation, the business to be acquired by a wholly-owned
subsidiary of UCI Medical Affiliates, Inc., are included in this
report beginning on page 5.
3
<PAGE>
(B) PRO FORMA FINANCIAL INFORMATION.
The unaudited pro forma financial information prepared to
give effect to the acquisition and the private placement described
under Item 2 of this report on Form 8-K is included in this report
following the financial information included in response to Item 7(a)
above.
(C) EXHIBITS.
Exhibit 2 Acquisition Agreement and Plan of Reorganization
dated February 9, 1998, by and among UCI Medical
Affiliates of Georgia, Inc., a South Carolina
corporation; UCI Medical Affiliates, Inc., a Delaware
corporation; MainStreet Healthcare Corporation, a
Delaware corporation; MainStreet Healthcare Medical
Group, P.C., a Georgia professional corporation;
MainStreet Healthcare Medical Group, PC, a Tennessee
professional corporation; Prompt Care Medical Center,
Inc., a Georgia corporation; Michael J. Dare; A.
Wayne Johnson; PENMAN Private Equity and Mezzanine
Fund, L.P., a Delaware limited partnership; and
Robert G. Riddett, Jr. (Previously filed with the
initial filing of this Report on Form 8-K).
Exhibit 2.1 First Amendment To Acquisition Agreement and Plan
of Reorganization dated April 15, 1998, by and among
UCI Medical Affiliates of Georgia, Inc., a South
Carolina corporation; UCI Medical Affiliates, Inc., a
Delaware corporation; MainStreet Healthcare
Corporation, a Delaware corporation; MainStreet
Healthcare Medical Group, P.C., a Georgia
professional corporation; MainStreet Healthcare
Medical Group, PC, a Tennessee professional
corporation; Prompt Care Medical Center, Inc., a
Georgia corporation; Michael J. Dare; A. Wayne
Johnson; PENMAN Private Equity and Mezzanine Fund,
L.P., a Delaware limited partnership; and Robert G.
Riddett, Jr.
Exhibit 99 News release of UCI Medical Affiliates, Inc. dated
February 13, 1998. (Previously filed with the initial
filing of this Report on Form 8-K).
4
<PAGE>
UCI MEDICAL AFFILIATES, INC.
Contents
<TABLE>
<CAPTION>
Page
<S> <C>
MainStreet Healthcare Corporation Unaudited Consolidated Financial Statements,
for the three months and nine months ended December 31, 1997 and 1996:
Consolidated Balance Sheets ..................................................................................6
Consolidated Statements of Operations.........................................................................7
Consolidated Statements of Cash Flows.........................................................................8
Notes to Consolidated Financial Statements....................................................................9
MainStreet Healthcare Corporation Consolidated Financial Statements as of March
31, 1997 and for the period from February 6, 1996 (date of incorporation) to
March 31, 1997:
Independent Auditors' Report ................................................................................10
Consolidated Balance Sheet ..................................................................................11
Consolidated Statement of Operations.........................................................................12
Consolidated Statement of Stockholders' Deficit .............................................................13
Consolidated Statement of Cash Flows.........................................................................14
Notes to Consolidated Financial Statements...................................................................15
UCI Medical Affiliates Pro Forma Combined Financial Statements...........................................................24
Combined Condensed Balance Sheet at December 31, 1997........................................................25
Combined Condensed Statements of Operations and Accumulated Deficit for
three months ended December 31, 1997......................................................................26
Combined Condensed Statement of Operations and Accumulated Deficit for
fiscal year ended September 30, 1997......................................................................27
Notes to Combined Statements of Operations ..................................................................28
</TABLE>
5
<PAGE>
MainStreet Healthcare Corporation
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31, 1997 March 31, 1997
---------------- ----------------
ASSETS (unaudited) (audited)
<S> <C> <C>
Current assets:
Cash $84,340 $1,950
Accounts receivable, less allowances for contractural
adjustments and uncollectible accounts of $1,788,679 and
$1,258,571, respectively 1,486,930 1,110,019
Accounts receivable, stockholders 75,576
Redeemable preferred stock subscriptions receivable -- 750,000
Other receivables 17,995 110,658
Prepaid and other 101,686 44,010
Total current assets 1,766,527 2,016,637
Property and equipment, net 1,562,140 1,422,594
Intangible assets, net 1,708,799 1,968,252
Other assets 617,776 388,393
Total assets $5,655,242 $5,795,876
=============== =================
LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities:
Accounts payable $1,089,166 $695,411
Other accrued expenses and liabilities 1,339,398 615,237
Current portion of notes payable 372,052 357,053
Current portion of capital lease obligations 69,152 3,401
Stockholder loan 19,476 18,252
---------------
Total current liabilities 2,889,244 1,689,354
Notes payable, less current portion 589,777 751,261
Capital lease obligations, less current portion 91,075 14,183
--------------- -----------------
Total liabilities 3,570,096 2,454,798
Redeemable preferred stock, $.01 par value; 412 shares 412,000 --
authorized, no shares issued and outstanding
5% cumulative redeemable preferred stock, $1,000
redemption value; 6,000 authorized, 4,367 and 4,117 4,367,000 4,117,000
shares issued and outstanding
Class A nonvoting convertible common stock, $.01 par value; 5,000,000 shares
authorized, 276,000 and 268,000
shares issued and outstanding, respectively 696,015 696,015
STOCKHOLDER'S DEFICIT
Class B common stock, $.01 par value; 20,000,000 shares authorized, 6,460,452
and 5,875,000 shares issued and
outstanding, respectively 64,605 58,750
Additional paid-in capital 84,478 81,550
Accumulated deficit (3,538,952) (1,612,237)
--------------- -----------------
Total stockholder's deficit (3,389,869) (1,471,937)
-----------------
Total liabilities and stockholders' deficit $5,655,242 $5,795,876
=============== =================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
6
<PAGE>
MainStreet Healthcare Corporation
Consolidated Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
Three Months ended Nine Months Ended
December 31, December 31,
--------------------------------- -----------------------------------
1997 1996 1997 1996
-------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net patient service revenue $ 1,641,319 $ 1,039,691 $ 5,078,264 $ 2,107,199
Operating expenses:
Cost of affiliated physician 673,764 410,487 2,410,887 777,738
services
Clinic salaries, wages and benefits 541,798 309,222 1,789,758 604,091
Clinic rent and lease expense 140,030 48,763 426,453 120,820
Clinic supplies 160,243 136,262 515,767 270,277
Other clinic costs 197,259 106,818 671,126 197,666
General corporate expenses 256,828 127,365 724,258 201,485
Depreciation and amortization 28,051 29,610 252,462 100,867
Total expenses 1,997,973 1,168,527 6,790,711 2,272,944
-------------- --------------- --------------- ---------------
Operating loss (356,654) (128,836) (1,712,447) (165,745)
-------------- --------------- --------------- ---------------
Other income (expense):
Interest expense, net (102,320) (37,148) (214,268) (37,148)
-------------- ---------------
Loss before income taxes (458,974) (165,984) (1,926,715) (202,893)
-------------- --------------- --------------- ---------------
Income taxes -- -- -- --
-------------- --------------- --------------- ---------------
Net loss $ (458,974) $ (165,984) $ (1,926,715) $ (202,893)
============== =============== =============== ===============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
7
<PAGE>
MainStreet Healthcare Corporation
Consolidated Statements of Cash Flows
For the nine month period ended December
31, 1997 and the period from February 6, 1996
(incorporation) to December 31, 1996
(unaudited)
<TABLE>
<CAPTION>
1997 1996
---------------- ----------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $(1,926,715) $ (202,893)
Adjustments to reconcile net income to cash provided
by operating activities:
Depreciation and amortization 252,462 100,867
Intangible assets and organizational costs (108,001) --
(Increase) decrease in assets:
Accounts receivable, net (376,911) (307,187)
Other receivables 92,663 (9,898)
Prepaid expenses and other assets (57,676) (73,009)
Increase (decrease) in liabilities:
Accounts payable 393,755 455,631
Other accrued expenses and liabilities 764,161 161,276
---------------- ----------------
Net cash provided (used) by operating activities (966,262) 124,787
---------------- ----------------
INVESTING ACTIVITIES:
Acquisitions of businesses, net of cash acquired (80,000) (1,226,480)
Purchases of property and equipment (173,937) (306,826)
Net cash used by investing activities (253,937) (1,533,306)
---------------- ----------------
FINANCING ACTIVITIES:
Net proceeds from issuance of preferred stock 550,972 2,071,607
Proceeds from shareholder loans 1,224 1,370,300
Proceeds from issuance of common stock 4,235 65,810
Net borrowings under capital lease obligations 222,643 --
Receipt of preferred stock subscriptions 750,000 --
Repayments of notes payable (226,485) (317,523)
Repayments of shareholder loans -- (295,141)
---------------- ----------------
Net cash provided by financing activities 1,302,589 2,895,053
---------------- ----------------
Net increase in cash and cash equivalents 82,390 1,486,534
Cash and cash equivalents, beginning of period 1,950 --
---------------- ----------------
Cash and cash equivalents, end of period $ 84,340 $ 1,486,534
================ ================
Cash paid during the year:
Interest $ 90,757 $ 17,947
================ ================
Income taxes $ -- $ --
================ ================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
8
<PAGE>
MainStreet Healthcare Corporation
Notes to Consolidated Financial Statements
NOTE 1. BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared in
accordance with the requirements for interim financial statements and,
accordingly, they are condensed and omit disclosures which would substantially
duplicate those contained in the most recent audited financial statements. The
financial statements as of December 31, 1997 and for the interim periods ended
December 31, 1997 and 1996 are unaudited and, in the opinion of management,
include all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation. Year to date operating results for 1996 are
measured from the date of incorporation, February 6, 1996. Operating results for
the nine month or the three month periods ended December 31, 1997 are not
necessarily indicative of the results that may be expected for the fiscal year
ended March 31, 1998. The financial information as of March 31, 1997 has been
derived from the audited financial statements as of that date. For further
information, refer to the financial statements and the notes included in the
financial report of MainStreet Healthcare Corporation ("MHC").
NOTE 2. SUBSEQUENT EVENT
On February 9, 1998, management of MHC signed a definitive Acquisition Agreement
whereby UCI Medical Affiliates, Inc. agreed to purchase substantially all the
assets of MHC for $8,050,000, plus the assumption of certain capital lease
obligations and the assumption of MHC's debt under its existing line of credit
agreement with a financial institution. The acquisition of MHC by UCI Medical
Affiliates, Inc is conditioned upon a successful private placement of UCI
Medical Affiliates, Inc common stock with parties unrelated to the Acquisition
Agreement. The transaction is subject to approval by the stockholders of UCI
Medical Affiliates, Inc.
9
<PAGE>
KPMG Peat Marwick LLP 303 Peachtree Street, N.E.
Suite 2000
Atlanta, GA 30308
INDEPENDENT AUDITORS' REPORT
The Board of Directors
MainStreet Healthcare Corporation:
We have audited the accompanying consolidated balance sheet of MainStreet
Healthcare Corporation as of March 31, 1997, and the related consolidated
statements of operations, stockholders' deficit, and cash flows for the period
February 6, 1996 (date of incorporation) to March 31, 1997. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of MainStreet
Healthcare Corporation at March 31, 1997, and the results of its operations and
its cash flows for the period February 6, 1996 (date of incorporation) to March
31, 1997 in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that MainStreet Healthcare Corporation will continue as a going concern. As
discussed in note 1(b) to the consolidated financial statements, MainStreet
Healthcare Corporation has suffered recurring losses and has a working capital
deficiency that raises substantial doubt about its ability to continue as a
going concern. Management's plans in regard to these matters are also described
in note 1(b). The accompanying consolidated financial statements do not include
any adjustment that might result from the outcome of this uncertainty.
November 14, 1997, except
as to note 12(b), which is
as of February 3, 1998 /s/ KPMG Peat Marwick LLP
10
<PAGE>
MAINSTREET HEALTHCARE CORPORATION
Consolidated Balance Sheet
March 31, 1997
<TABLE>
<CAPTION>
Assets
------
<S> <C> <C>
Current assets:
Cash $ 1 ,950
Accounts receivable, less allowances for contractual adjustments
and uncollectible accounts of $1,258,571 1,110,019
Redeemable preferred stock subscriptions receivable (notes 4 and 11) 750,000
Other receivables 110,658
Prepaid and other 44,010
--------
Total current assets 2,016,637
Property and equipment, net (notes 3 and 6) 1,422,594
Intangible assets, net (notes 3 and 5) 1,968,252
Other assets 388,393
---------
Total assets $ 5,795,876
=========
Liabilities and Stockholders' Deficit
-------------------------------------
Current liabilities:
Accounts payable $ 695,411
Other accrued expenses and liabilities 615,237
Current portion of notes payable (notes 3 and 7) 357,053
Current portion of capital lease obligation (note 7) 3,401
Shareholder loan (note 8) 18,252
--------
Total current liabilities 1,689,354
Long-term liabilities:
Notes payable, less current portion (notes 3 and 7) 751,261
Capital lease obligation, less current portion (note 7) 14,183
----------
Total long-term liabilities 765,444
Total liabilities 2,454,798
Redeemable preferred stock, $.01 par value; 13,250 shares authorized,
no shares issued and outstanding -
5% cumulative redeemable preferred stock, $1,000 redemption value;
6,000 shares authorized, 3,367 shares issued and outstanding, 750
shares subscribed (notes 4, 11, and 12) 4,117,000
Class A nonvoting convertible common stock, $.01 par value;
5,000,000 shares authorized, 268,000 shares issued and outstanding 696,015
Stockholders' deficit (note 4):
Class B common stock, $.01 par value; 20,000,000 shares authorized,
5,875,000 shares issued and outstanding 58,750
Additional paid-in capital 81,550
Accumulated deficit (1,612,237)
----------
Total stockholders' deficit (1,471,937)
Total liabilities and stockholders' deficit $ 5,795,876
--------------
</TABLE>
See accompanying notes to consolidated financial statements.
11
<PAGE>
MAINSTREET HEALTHCARE CORPORATION
Consolidated Statement of Operations
For the period February 6, 1996 (date of incorporation) to March 31, 1997
Net patient service revenue $ 3,665,982
---------
Operating expenses:
Cost of affiliated physician services 1,733,826
Clinic salaries, wages, and benefits 1,131,729
Clinic rent and lease expense (notes 7 and 8) 306,571
Clinic supplies 287,431
Other clinic costs 428,987
General corporate expenses (note 8) 571,499
Depreciation and amortization (notes 5 and 6) 217,029
Clinic start-up expenses 307,419
---------
Total expenses 4,984,491
Operating loss (1,318,509)
Interest expense, net (note 7) 161,774
Loss on clinic disposals (note 12(a)) 88,990
----------
Loss before income taxes (1,569,273)
Income taxes (note 9) -
----------
Net loss $ (1,569,273)
==========
See accompanying notes to consolidated financial statements.
12
<PAGE>
MAINSTREET HEALTHCARE CORPORATION
Consolidated Statement of Stockholders' Deficit
For the period February 6, 1996 (date of incorporation) to March 31, 1997
<TABLE>
<CAPTION>
Class B
Common Stock Additional Total
-------------------------------- Paid-in Accumulated Stockholder's
Shares Amount Capital Deficit Deficit
------ ------ ------- ------- -------
<S> <C> <C> <C> <C> <C>
Balance at February 6, 1996 - $ - - - -
Issuance of common stock 5,875,000 58,750 38,586 97,336
Accretion of difference
Between fair value and
guaranteed value of stock
issued in connection with
acquisition (note 3) - - 42,964 (42,964) -
Net loss - - - (1,569,273) (1,569,273)
--------- ----------- ------- ------------- -----------
Balance at March 31, 1997 5,875,000 $ 58,750 81,550 (1,612,237) (1,471,937)
========= ========== ======= ============ ==========
</TABLE>
See accompanying notes to consolidated financial statements.
13
<PAGE>
MAINSTREET HEALTHCARE CORPORATION
Consolidated Statement of Cash Flows
For the period February 6, 1996 (date of incorporation) to March 31, 1997
<TABLE>
<CAPTION>
<S><C> <C>
Operating activities:
Net loss $ (1,569,273)
Adjustments to reconcile net loss to net cash provided
(used) by operating activities:
Depreciation and amortization 217,029
Changes in operating assets and liabilities,
net of effects of acquisitions:
Accounts receivable, net (517,720)
Other receivables (110,658)
Prepaid expenses and other assets (64,010)
Accounts payable 580,688
Other accrued expenses and liabilities 615,237
-------------
Net cash used by operating activities (848,707)
-------------
Investing activities:
Acquisitions of businesses, net of cash acquired (note 3) (1,226,480)
Purchases of property and equipment (631,279)
------------
Net cash used by investment activities (1,857,759)
------------
Financing activities:
Net proceeds from issuance of preferred stock 2,071,607
Proceeds from shareholder loans 1,370,300
Proceeds from issuance of common stock 65,810
Net borrowings under capital lease obligations 17,584
Repayment of notes payable (423,363)
Repayment of shareholder loans (393,522)
----------
Net cash provided by financing activities 2,708,416
----------
Net increase in cash 1,950
Cash at beginning of period -
Cash at end of period $ 1,950
===============
Supplemental disclosure of cash flow information -
cash paid during the period for:
Interest $ 55,476
Income taxes -
</TABLE>
See accompanying notes to consolidated financial statements.
14
<PAGE>
MAINSTREET HEALTHCARE CORPORATION
Notes to Consolidated Financial Statements
March 31, 1997
(1) Organization and Basis of Presentation
(a) Description of Business
MainStreet Healthcare Corporation ("the Company") was
incorporated on February 6, 1996. The Company was organized
to purchase general practitioner outpatient clinics in
Georgia and Tennessee. After purchasing a clinic, the
Company focuses on centralizing fixed costs and reducing
the overall overhead of each outpatient clinic in order to
maximize income and cash flow. During the period from
February 6, 1996 to March 31, 1997, MainStreet acquired 12
primary care clinics.
(b) Basis of Presentation
The consolidated financial statements have been prepared on
the accrual basis of accounting and include the accounts of
the Company and the affiliated professional corporations
("Professional Corporations"). Through the clinic services
agreements between the Company and the Professional
Corporations, the Company has assumed full responsibility
for the operating expenses in return for the assignment of
the revenue of the professional corporations.
The Company has perpetual, unilateral control over the
assets and operations of the Professional Corporations, and
notwithstanding the lack of technical majority ownership of
the stock of such entities, consolidation of the various
professional corporations is necessary to present fairly
the financial position and results of operations of the
Company because of control by means other than ownership of
stock. Control by the Company is perpetual rather than
temporary because of (i) the length of the original terms
of the agreements, (ii) the successive extension periods
provided by the agreements, (iii) the continuing investment
of capital by the Company, (iv) the employment of the
nonphysician personnel, and (v) the nature of the services
provided to the Professional Corporations by the Company.
All intercompany accounts and transactions have been
eliminated in the consolidation.
The Company has experienced recurring losses since its
inception, including approximately $1,900,000 (unaudited)
from April 1, 1997 through December 31, 1997, and has a net
working capital deficiency of approximately $1,200,000
(unaudited) as of December 31, 1997. Management has entered
into a letter of intent to sell its operating clinics at an
amount that in its opinion would generate sufficient value
to satisfy all its outstanding debt obligations in either
cash or stock (see note 12(b)). The financial statements do
not include any adjustments that might result from the
outcome of this uncertainty.
(2) Summary of Significant Accounting Policies
(a) Property and Equipment
Property and equipment are recorded at cost, less
accumulated depreciation and amortization. Depreciation of
property and equipment is calculated using the
straight-line method over the estimated useful lives of the
assets.
15
<PAGE>
MAINSTREET HEALTHCARE CORPORATION
Notes to Consolidated Financial Statements
Equipment held under capital leases and leasehold improvements are
amortized on a straight-line basis over the shorter of the lease term
or estimated useful life of the assets.
(b) Intangible Assets
(1) Noncompete Agreements
In connection with certain clinic acquisitions,
the Company entered into noncompete agreements
with physicians. Such agreements are being
amortized using the straight-line method over the
terms of the agreements, generally three to five
years.
(2) Excess of Cost
Goodwill, which represents the excess of purchase
price over fair value of net assets acquired, is
amortized on a straight-line method over the
expected periods to be benefited, generally
fifteen years. The Company assesses the
recoverability of this intangible asset by
determining whether the amortization of the
goodwill balance over its remaining life can be
recovered through undiscounted future operating
cash flows of the acquired operation. The amount
of goodwill impairment, if any, is measured based
on projected discounted future operating cash
flows using a discount rate reflecting the
Company's average cost of funds. The assessment
of recoverability of goodwill will be impacted if
estimated future operating cash flows are not
achieved. In management's estimation, the
remaining amount of goodwill has continuing
value.
(c) Net Revenue
Patient revenue is recorded at established rates reduced by
allowances for doubtful accounts and contractual
adjustments. Contractual adjustments arise due to the terms
of certain reimbursement and managed care contracts. Such
adjustments represent the difference between charges at
established rates and estimated recoverable amounts and are
recognized in the period the services are rendered. Any
differences between estimated contractual adjustments and
actual final settlements under reimbursement contracts are
reported as contractual adjustments in the year final
settlements are made.
(d) Income Taxes
The Company accounts for income taxes using the asset and
liability method of Statement of Financial Accounting
Standards No. 109, ACCOUNTING FOR INCOME TAXES ("SFAS No.
109"). Under SFAS No. 109, deferred tax assets and
liabilities are recognized for the future tax consequences
attributable to differences between financial statement
carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred income tax assets and
liabilities are measured using enacted tax rates expected
to apply to taxable income in the years in which those
temporary differences are expected to be recovered or
settled. The effect on deferred income tax assets and
liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
16
<PAGE>
MAINSTREET HEALTHCARE CORPORATION
Notes to Consolidated Financial Statements
Prior to the merger of MainStreet Georgia with and into MainStreet
Delaware, as discussed in note 4, the Company was taxed as an S
Corporation under the Internal Revenue Code. As a result, the Company
has been taxed in a manner similar to a partnership for the period
prior to December 9, 1997, and has not provided any federal or state
income taxes as the results of operations were passed through to, and
the related income taxes became the individual responsibility of the
Company's shareholders.
(e) Impairment of Long-Lived Assets
Financial Accounting Standards No. 121 ("SFAS No. 121"),
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR
LONG-LIVED ASSETS TO BE DISPOSED OF, requires the Company
to review for the impairment of long-lived assets and
certain identifiable intangibles to be held and used by the
Company whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be
recoverable.
The statement also addresses the accounting for long-lived
assets that are expected to be disposed. SFAS No. 121 is
applicable for most long-lived assets, identifiable
intangibles, and goodwill related to those assets.
Management has determined that long-lived assets are fairly
stated in the accompanying consolidated balance sheet and
that no indicators of impairment are present.
(f) Redeemable Preferred Stock Offering Costs
Costs associated with the issuance of mandatory redeemable
preferred stock have been capitalized and are being
amortized using a straight-line method over five years and
are included in other assets in the accompanying
consolidated balance sheet (see note 5).
(g) Use of Estimates
Management of the Company has made certain estimates and
assumptions relating to the reporting of assets and
liabilities and the disclosure of contingent liabilities to
prepare these financial statements in conformity with
generally accepted accounting principles. Actual results
could differ from those estimates.
(3) Acquisitions
The Company acquired, through its wholly owned subsidiaries, certain
operating assets of 12 primary care physician clinics.
Simultaneous with each acquisition, the Company enters into long-term
clinic services agreements. Under these agreements, the Company manages
all aspects of the affiliated practice other than the provision of
medical services, which is controlled by the physician groups. For
providing services under the clinic services agreements, the physicians
receive compensation based on individually negotiated contracts.
Generally, the clinic service agreements cannot be terminated by the
physician group or the Company without cause, which includes material
default or bankruptcy of either party.
17
<PAGE>
MAINSTREET HEALTHCARE CORPORATION
Notes to Consolidated Financial Statements
The acquisitions have been accounted for by the purchase method of
accounting and, accordingly, the purchase price has been allocated to the
net assets acquired and the liabilities assumed based upon the fair
values at the dates of acquisition. In connection with the acquisitions,
the Company issued 268,000 shares of common stock in MainStreet
Healthcare Corporation. The Company guaranteed the fair market value of
the stock to be $5 per share at various dates in the future and recorded
the stock by discounting the guarantee price using a risk-based interest
rate of 15%. The difference between the fair value and guaranteed value
of stock issued in connection with the issuance of stock of $643,395 is
being accreted over the period from the date of issuance to the various
settlement dates through periodic charges to accumulated deficit. The
Company also issued $1,531,677 in notes payable. The excess of the
purchase price over the fair values of the net assets acquired was
$1,813,179 and has been recorded as goodwill and is being amortized using
a straight-line method over 15 years. The composition of acquisition of
businesses, net of cash acquired, is set forth below:
Working capital, other than cash $ 477,577
Property and equipment 862,916
Noncompete agreements 300,500
Excess of costs over fair value of assets acquired 1,813,179
Less:
Value of stock issued (696,015)
Value of notes payable issued (1,531,677)
Cash purchase price, net of cash acquired $1,226,480
==========
The operating results of the acquired clinics have been included in the
consolidated statement of operations from the respective dates of
acquisition.
(4) Reorganization
MainStreet Healthcare Corporation (MainStreet Georgia) was organized on
February 6, 1996 as a Georgia Corporation and was authorized 10,000,000
shares of no par common stock of which 5,375,000 shares were issued.
On December 4, 1996, MainStreet Healthcare Corporation (MainStreet
Delaware) was incorporated and was authorized 10,000,000 shares of no par
common stock. Effective December 9, 1996, the shareholders of MainStreet
Georgia exchanged their shares for equal shares in MainStreet Delaware
pursuant to a merger of MainStreet Georgia with and into MainStreet
Delaware.
On December 11, 1996, MainStreet Delaware amended and restated the
Certificate of Incorporation in order to give MainStreet Delaware the
authority to issue preferred stock and common stock as follows:
(a) 20,000 shares of Preferred Stock, par value $.01 per
share. MainStreet Delaware's Board of Directors has
the authority to fix the terms of the Preferred
Stock.
18
<PAGE>
MAINSTREET HEALTHCARE CORPORATION
Notes to Consolidated Financial Statements
(b) 5,000,000 shares of Class A Non-Voting Convertible
Common Stock, par value $.01 per share. One share of
Class A Non-Voting is convertible upon: (i) a
Qualified Public Offering; (ii) a sale of MainStreet
Delaware; or (iii) a sale of a majority of the Class
B Common Stock, into one fully paid and
non-assessable share of Class B Common Stock.
(c) 20,000,000 shares of Class B Common Stock, par value
$.01 per share.
The Class A and Class B common stocks are identical,
except with respect to voting rights, where the Class
A shares have no voting rights. The Class A shares
are nonvoting convertible into one share of Series B
stock upon: (i) a Qualified Public Offering; (ii) a
sale of the Company; or (iii) a sale of a majority of
the shares of Class B stock.
Effective December 12, 1996, MainStreet Delaware entered into a
recapitalization agreement. The shareholders of MainStreet Georgia
exchanged a total of 5,375,000 shares of no par common stock in
MainStreet Georgia and $948,026 of debt owed by MainStreet Georgia to the
shareholders for 2,350,000 shares of no par common stock and 927 shares
of five percent cumulative mandatory redeemable preferred stock in
MainStreet Delaware. In addition, Penman Private Equity and Mezzanine
Fund, L.P., (Penman) purchased 3,525,000 shares of Class B Common Stock
for $60,000 and 2,440 shares of five percent mandatory redeemable
preferred stock in MainStreet Delaware for $2,071,607, net of offering
expenses of $368,393. The preferred stock is mandatory redeemable on
December 12, 2001.
On March 21, 1997, Penman subscribed to 750 shares of the five percent
mandatory redeemable preferred stock for $750,000. On April 8, 1997, the
Company received $750,000 for the subscribed preferred stock.
(5) Intangible Assets Intangible assets consists of:
Excess of cost over fair value of assets acquired $1,813,179
Noncompete agreements 300,500
Less accumulated amortization (145,427)
--------
$1,968,252
=========
(6) Property and Equipment Property and equipment consists of:
Land $ 104,600
Buildings and improvements 406,635
Furniture and fixtures 181,621
Clinic equipment 559,451
Office equipment 193,843
Leasehold improvements 48,046
---------
1,494,196
Accumulated depreciation and amortization (71,602)
---------
$1,422,594
=========
19
<PAGE>
MAINSTREET HEALTHCARE CORPORATION
Notes to Consolidated Financial Statements
(7) Long-Term Debt and Leases
Long-term debt and capital leases consists of:
<TABLE>
<CAPTION>
<S> <C>
Notes payable to physician groups with interest rates ranging
from 7% to 10.5%, with payments
due at varying intervals through March 1, 2006 $ 1,108,314
Capital leases 17,584
----------
1,125,898
Less amounts due within one year 360,454
----------
$ 765,444
==========
</TABLE>
The following is a schedule of principal maturities of long-term debt,
including capital leases, as of March 31, 1997.
<TABLE>
<CAPTION>
<S> <C>
1998 $ 360,454
1999 360,717
2000 161,691
2001 37,929
2002 34,814
Thereafter 170,293
----------
Total $ 1,125,898
==========
</TABLE>
CAPITAL LEASES: The Company is the lessee of equipment under a
capital lease which expires during the next ten years. The related
equipment is being amortized over ten years and the related
amortization expense is included with depreciation expense in the
consolidated statement of operations.
The following is a schedule of future minimum lease payments under
the capital leases together with the present value of the net minimum
lease payments as of March 31, 1997.
<TABLE>
<CAPTION>
<S> <C>
1998 $ 6,045
1999 6,045
2000 6,045
2001 5,892
--------
Total minimum lease payments 24,027
Less amounts representing interest (6,443)
-------
Obligation under capital leases 17,584
Less current portion of capital lease obligations (3,401)
-------
Long-term obligations under capital leases $ 14,183
========
</TABLE>
Capitalized equipment leases included in equipment was $18,600 at
March 31, 1997. The imputed interest rate was 16.45% at March 31,
1997.
20
<PAGE>
MAINSTREET HEALTHCARE CORPORATION
Notes to Consolidated Financial Statements
OPERATING LEASES: Operating leases generally consist of short-term
lease agreements for professional office space where the medical practices are
located. These leases generally have five-year terms with renewal options. Lease
expense of $250,000 for 1997 consists of corporate office space, corporate
equipment and medical office space, and equipment for the operating practices.
The following is a schedule of future minimum lease payments under
noncancelable operating leases as of March 31, 1997.
<TABLE>
<CAPTION>
<S> <C>
1998 $ 512,353
1999 453,355
2000 426,199
2001 411,586
2002 258,130
Thereafter 76,757
----------
$ 2,138,380
=========
</TABLE>
(8) Related Party Transactions
The Chief Executive Officer and Chief Operating Officer of the
Company made loans to finance the Company's operations in the amounts of
$1,345,000 and $25,300, respectively, of which $20,000 and $500, respectively,
of contributed capital was converted to debt under the Reorganization discussed
in note 4. Of the $1,345,000, $927,000 was converted into preferred stock;
$21,026 was converted into Class B common stock; $378,722 was repaid during the
year; and the remainder of $18,252 is outstanding at March 31, 1997. Of the
$25,300, $10,500 was converted into Class B common stock, and $14,800 was repaid
during the year.
During the period ended March 31, 1997, the Company made payments of
$116,260 to related parties for rent expense in connection with the clinic
facilities. Also, the Company made principal and interest payments of $14,220 on
behalf of the Chief Executive and Operations Officers of the Company for the
corporate office location.
In the process of acquiring the physician clinic groups, the Company
paid $47,650 to a consultant who became an officer of the Company.
(9) Income Taxes
Because of operating losses, the Company has not provided any income
tax expense for the year ended March 31, 1997. The Company has operating loss
carryforwards, which may be used to reduce future taxable income, of
approximately $280,014 at March 31, 1997 which expire beginning in 2010.
The income tax recognition of temporary differences originating
before the Company became a C Corporation will reverse. Accordingly, an income
tax liability of $101,500 was recorded as of the date the Company became a C
Corporation.
21
<PAGE>
MAINSTREET HEALTHCARE CORPORATION
Notes to Consolidated Financial Statements
Deferred income taxes determined in accordance with Statement 109
reflect the net tax effects of (a) temporary differences between carrying
amounts of assets and liabilities for financial reporting purposes and the
amounts used for income tax purposes and (b) operating loss and tax credit
carryforwards. In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all of the
deferred tax assets will not be realized. The ultimate realization of deferred
tax assets is dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible. Management
considers the scheduled reversal of deferred tax liabilities, projected future
taxable income, and tax planning strategies in making this assessment. Due to
the uncertainty of future realization, the Company's deferred tax assets are
subject to a valuation allowance that results in the recognition of no deferred
tax asset at March 31, 1997.
The tax effects of significant items comprising the Company's
deferred income taxes for March 31, 1997 are as follows:
<TABLE>
<CAPTION>
<S> <C>
Deferred tax assets:
Accrual to cash $ 207,000
Net operating loss carryforwards 106,400
Other 49,300
------------
362,700
Less valuation allowance ( 318,600)
--------
Net deferred tax assets 44,100
Deferred tax liabilities - depreciation (44,100)
------------
Net deferred taxes $ -
============
</TABLE>
The significant components of the deferred income tax expense
(benefit) for the period ended March 31, 1997 are as follows:
<TABLE>
<CAPTION>
<S> <C>
Deferred income tax benefit $ 420,100
Change in tax status from S Corporation
to C Corporation (101,500)
Increase in valuation allowance (318,600)
-------
Deferred income tax expense $ -
============
</TABLE>
(10) Contingencies
In addition to the general liability and malpractice insurance
carried by the individual physicians, the Company is insured with respect to
general liability and medical malpractice risks on a claims-made basis. To the
extent that any claims-made coverage is not renewed or replaced with equivalent
insurance, claims based on occurrences during the term of the coverage, but
reported subsequently, would be uninsured. Management anticipates that the
claims-made coverage currently in place will be renewed or replaced with
equivalent insurance as the term of such coverage expires.
22
<PAGE>
MAINSTREET HEALTHCARE CORPORATION
Notes to Consolidated Financial Statements
(11) Redeemable Preferred Stock
Five percent preferred stock is cumulative, mandatory redeemable
nonvoting shares issued in connection with the reorganization
described in note 4. The five percent dividend is payable when
declared by the Company. During 1997, the Company declared a dividend
of $47,046 based on the preferred stock issuance date of December 12,
1996. Upon sale of the Company or a Qualified Public Offering, the
Company will redeem the preferred stock at the redemption price which
is $1,000 per share plus the amount of accrued and unpaid dividends
at such date. The preferred shares are mandatory redeemable on
December 12, 2001. If the Company is unable or does not redeem the
preferred shares, the dividend rate will increase to nine percent.
The Company granted options to acquire up to 146,875 shares of Class
B common stock to officers of the Company, which are vested and are
exercisable at $5.50 per share.
(12) Subsequent Events
(a) Subsequent to March 31, 1997, the Company closed two
physician clinics which were purchased during the period.
The amount of the loss, including write-off of goodwill,
accounts receivable, and property and equipment, was
$88,990.
(b) The Company has signed a letter of intent dated February 3,
1998 for the sale of substantially all of its assets to UCI
Medical Affiliates Inc. ("UCI"). The consideration paid by
UCI to the Company for the assets, as defined in the letter
of intent, shall be $8,050,000 plus assumption of debt of
$685,000.
23
<PAGE>
PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma combined condensed financial
statements (the "Condensed Statements") have been prepared to give effect to the
acquisition and the private placement described under Item 2 of this report on
Form 8-K. The purchase method of accounting was used to give effect to all
transactions.
The Condensed Statements reflect certain assumptions regarding the
proposed acquisition (the "Acquisition") and the proposed private placement (the
"Private Placement") and are based on the historical consolidated financial
statements of the respective entities. The Condensed Statements, including the
notes thereto, are qualified in their entirety by reference to, and should be
read in conjunction with, the audited financial statements and the unaudited
interim financial statements, including the notes thereto, of UCI, which are
incorporated by reference in this report from the Form 10-KSB/A of UCI for the
year ended September 30, 1997 and the Form 10-QSB of UCI for the quarter ended
December 31, 1997, and the unaudited financial statements of MainStreet
Healthcare Corporation, a Delaware corporation ("MHC") as of and for the twelve
months ended September 30, 1997 and the unaudited interim financial statements
of MHC for the three months ended December 31, 1997, as presented in the pro
forma combined condensed financial statements.
The pro forma combined condensed balance sheet as of December 31,
1997 gives effect to the Acquisition and the Private Placement as if they had
occurred on December 31, 1997 and combines the unaudited balance sheets of UCI
and MHC as of that date.
The pro forma combined condensed statements of operations combine
UCI's historical results of operations for the three months ended December 31,
1997 and the fiscal year ended September 30, 1997 with MHC's historical results
of operations for the three months ended December 31, 1997 and the twelve months
ended September 30, 1997, respectively, giving effect to the Acquisition and the
Private Placement as if they had occurred on October 1, 1996.
After the consummation of the Acquisition, UCI will determine the
fair value of significant assets, liabilities and business operations acquired,
which may include the use of independent appraisals. In connection with
finalizing the purchase price allocation, UCI is currently evaluating the fair
value of assets acquired and liabilities assumed. Using this information, UCI
will make a final allocation of the excess purchase price, including allocation
to the intangibles other than goodwill. Accordingly, the purchase accounting
information is preliminary and has been made solely for the purpose of
developing such unaudited pro forma combined condensed financial information.
The Condensed Statements are presented for illustrative purposes only
and are not necessarily indicative of the financial position or results of
operations which would have actually been reported had the Acquisition occurred
as of December 31, 1997, or for the three months ended December 31, 1997, or for
the fiscal year ended September 30, 1997, nor are the Condensed Statements
necessarily indicative of future financial position or results of operations.
24
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
UCI MHC ADJUSTMENTS COMBINED
----------------- ------------------ ------------------ -----------------
<S> <C> <C> <C>
Assets
Cash and cash equivalents $ --- $ 84,340 $ (1,185,944) (a)
(84,340) (b)
1,656,000 (c) $ 470,056
Accounts receivable, net 6,862,480 1,486,930 (51,701) (b) 8,297,709
Medical supplies inventory 538,396 30,310 --- 568,706
Deferred taxes 334,945 --- --- 334,945
Prepaids and other assets 629,653 164,947 --- 794,600
-------------- ------------------ ------------------ -----------------
Total current assets 8,365,474 1,766,527 334,015 10,466,016
Property, plant and equipment,
net 4,474,621 1,562,140 (271,909) (b) 5,764,852
Deferred taxes 1,417,237 --- --- 1,417,237
Goodwill 8,437,440 1,515,883 3,644,658 (d) 13,597,981
Other assets 266,380 810,692 --- 1,077,072
-------------- ------------------ ------------------ -----------------
Total assets $22,961,152 $5,655,242 $ 3,706,764 $ 32,323,158
============== ================== ================== =================
Liabilities and Capital
Current portion - long-term debt $ 916,411 $ 441,204 $ (434,857) (b)
350,000 (a) $1,272,758
Current debt to employees 201,518 --- --- 201,518
Accounts payable 2,956,625 1,089,166 (1,089,166) (b) 2,956,625
Accrued payroll 676,107 373,433 (373,433) (b) 676,107
Other accrued liabilities 371,630 985,441 (483,385) (b) 873,686
-------------- ------------------ ------------------ -----------------
Total current liabilities 5,122,291 2,889,244 (2,030,841) 5,980,694
Long-term debt, net of current 7,833,551 680,852 (633,249) (b) 7,881,154
Non-current debt to employees 564,782 --- --- 564,782
-------------- ------------------ ------------------ -----------------
Total liabilities 13,520,624 3,570,096 (2,664,090) 14,426,630
-------------- ------------------ ------------------ -----------------
Preferred stock --- 4,779,000 (4,779,000) (b) ---
Common stock 302,608 760,620 (760,620) (b)
143,158 (a)
60,000 (c) 505,766
Paid-in capital 16,249,546 84,478 (84,478) (b)
6,656,842 (a)
1,596,000 (c) 24,502,388
Accumulated deficit (7,111,626) (3,538,952) 3,538,952 (b) (7,111,626)
-------------- ------------------ ------------------ -----------------
Total capital 9,440,528 2,085,146 6,370,854 17,896,528
-------------- ------------------ ------------------ -----------------
Total liabilities and capital $22,961,152 $5,655,242 $ 3,706,764 $ 32,323,158
============== ================== ================== =================
</TABLE>
25
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS AND
ACCUMULATED DEFICIT FOR THE THREE MONTHS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
UCI MHC ADJUSTMENTS COMBINED
--------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
Revenue $ 8,077,876 $ 1,641,319 $ --- $ 9,719,195
Operating costs 8,243,266 1,602,252 (78,750) (e)
(37,500) (f) 9,729,268
Operating margin (165,390) 39,067 116,250 (10,073)
General and administrative expenses 25,434 367,670 --- 393,104
Depreciation and amortization 406,168 28,051 86,009 (g)
5,000 (h) 525,228
Income (loss) from operations (596,992) (356,654) 25,241 (928,405)
Interest expense, net (279,351) (102,320) --- (381,671)
Gain (loss) on equipment (439) --- --- (439)
--------------- ---------------- -------------- -----------------
Income (loss) before income tax (876,782) (458,974) 25,241 (1,310,515)
Income tax benefit (558) --- --- (558)
--------------- ---------------- -------------- -----------------
Net income (loss) $ (877,340) $ (458,974) $ 25,241 $ (1,311,073)
=============== ================ ============== =================
Net income (loss) per common and
common equivalent share $ (0.15) --- (i) --- $ (0.13)
Weighted average common shares and
common share equivalents outstanding 6,041,980 --- (i) --- 10,255,138
</TABLE>
26
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
AND ACCUMULATED DEFICIT FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
UCI MHC ADJUSTMENTS COMBINED
--------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
Revenue $27,924,772 $ 6,008,442 $ --- $ 33,933,214
Operating costs 26,466,294 6,790,444 (315,000) (e)
(150,000) (f) 32,791,738
--------------- ---------------- --------------- ---------------
Operating margin 1,458,478 (782,002) 465,000 1,141,476
General and administrative expenses 153,445 1,420,580 --- 1,574,025
Depreciation and amortization 1,250,349 335,499 344,036 (g)
20,000 (h) 1,949,884
--------------- ---------------- --------------- ---------------
Income (loss) from operations 54,684 (2,538,081) 100,964 (2,382,433)
Interest expense, net (812,749) (273,721) --- (1,086,470)
Gain (loss) on equipment 8,809 (130,990) --- (122,181)
--------------- ---------------- --------------- ---------------
Income (loss) before income tax (749,256) (2,942,792) 100,964 (3,591,084)
Income tax benefit 665,530 --- --- 665,530
--------------- ---------------- --------------- ---------------
Net income (loss) $ (83,726) $ (2,942,792) $ 100,964 $ (2,925,554)
=============== ================ =============== ===============
Net income (loss) per common and
common equivalent share $ (.02) --- (i) --- $ (0.32)
Weighted average common shares and
common share equivalents outstanding 5,005,081 --- (i) --- 9,218,239
</TABLE>
27
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(a) The pro forma combined condensed balance sheet as of December 31,
1997 has been prepared to give effect to the Acquisition as if it had
occurred on December 31, 1997 at an aggregate purchase price of
$8,891,950. Pro forma adjustments reflect the following components of
the purchase price and its preliminary allocation:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PURCHASE PRICE COMPONENTS: PURCHASE PRICE PRELIMINARY ALLOCATION:
Common Stock valued at $6.8 million Accounts receivable............................. $1,435,229
allocated as follows:
Stated capital
(2,863,158 shares, $0.05 par value)............. $ 143,158 Inventory....................................... 30,310
Additional paid-in capital...................... 6,656,842 Furniture and equipment......................... 1,290,231
Lease liabilities assumed.......................... 556,006 Prepaids and other assets....................... 975,639
Note payable delivered at closing.................. 350,000 Goodwill........................................ 5,160,541
---------
Cash paid.......................................... 1,185,944
$8,891,950 $8,891,950
========= =========
</TABLE>
The presentation of purchase price components reflected above assumes
(i) the use of a share price of $2.375 in the share price formula of
the Acquisition Agreement (resulting in 2,863,158 shares issued), and
(ii) the selection by MHC of purchase price payment Alternative B as
set forth in this Proxy Statement under "The Acquisition -
Description of the Agreements - Acquisition Agreement Consideration
to be paid in the Acquisition."
(b) Not included in the assets and liabilities of MHC acquired in the
Acquisition are the following: certain deposits ($84,340), employee
receivables ($51,701), certain furniture and equipment ($271,909),
accounts payable ($1,089,166), long-term debt ($1,068,106), payroll
and other accrued liabilities ($856,818) and MHC stockholders' equity
($2,085,146).
(c) The pro forma financial statements assume that the $1.8 million
Private Placement will be fully subscribed, resulting in net proceeds
to UCI of $1,656,000 after payment of placement agent commissions and
expenses. Solely for purposes of these pro forma financial
statements, the Private Placement is assumed to result in the sale of
1,200,000 shares of Common Stock at a price of $1.50, and the
issuance of Common Stock purchase warrants for the purchase of
150,000 shares of Common Stock. The earnings per share computation
includes the shares issuable under these warrants.
The following reflects the effects of the Private Placement on the
pro forma financial statements:
<TABLE>
<CAPTION>
<S> <C>
$ 60,000 Common Stock (1,200,000 shares, par value $0.05 per share)
1,596,000 Additional paid-in capital
-----------
$ 1,656,000 Net increase in cash
</TABLE>
(d) Excess of acquisition cost over the fair values of net assets
acquired represents goodwill of $5,160,541, which when reduced by
acquired goodwill of $1,515,883 results in a $3,644,658 adjustment to
goodwill.
28
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(e) Net decrease in salaries paid to former corporate officers is $78,750
for three months and $315,000 annually.
(f) Net decrease in salaries for clinic based administrative personnel is
$37,500 for three months and $150,000 annually.
(g) Amortization of goodwill on a straight line basis over 15 years is
$86,009 for three months and $344,036 annually.
(h) Net increase in amortization expense related to building improvements
in leased real estate is $5,000 for three months and $20,000
annually.
(i) As a privately held corporation, MHC was not required to, and did
not, compute earnings per share.
29
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
UCI MEDICAL AFFILIATES, INC.
By: /S/ M. F. MCFARLAND III, M.D.
--------------------------------
M. F. McFarland III, M.D.
President
Date: April 17, 1998 By: /S/ JERRY F. WELLS, JR., C.P.A.
--------------------------------
Jerry F. Wells, Jr., C.P.A.
Executive Vice President of Finance and
Chief Financial Officer
30
<PAGE>
EXHIBIT INDEX
Exhibit 2 Acquisition Agreement And Plan of Reorganization dated
February 9, 1998, by and among UCI Medical Affiliates of
Georgia, Inc., a South Carolina corporation; UCI Medical
Affiliates, Inc., a Delaware corporation; MainStreet Healthcare
Corporation, a Delaware corporation; MainStreet Healthcare
Medical Group, P.C., a Georgia professional corporation;
MainStreet Healthcare Medical Group, PC, a Tennessee
professional corporation; Prompt Care Medical Center, Inc., a
Georgia corporation; Michael J. Dare; A. Wayne Johnson; PENMAN
Private Equity and Mezzanine Fund, L.P., a Delaware limited
partnership; and Robert G. Riddett, Jr. (Previously filed with
the initial filing of this Report on Form 8- K).
Exhibit 2.1 First Amendment to Acquisition Agreement And Plan of
Reorganization dated April 15, 1998, by and among UCI Medical
Affiliates of Georgia, Inc., a South Carolina corporation; UCI
Medical Affiliates, Inc., a Delaware corporation; MainStreet
Healthcare Corporation, a Delaware corporation; MainStreet
Healthcare Medical Group, P.C., a Georgia professional
corporation; MainStreet Healthcare Medical Group, PC, a
Tennessee professional corporation; Prompt Care Medical Center,
Inc., a Georgia corporation; Michael J. Dare; A. Wayne Johnson;
PENMAN Private Equity and Mezzanine Fund, L.P., a Delaware
limited partnership; and Robert G. Riddett, Jr.
Exhibit 99 News release of UCI Medical Affiliates, Inc. dated February
13, 1998 (Previously filed with the initial filing of this
Report on Form 8-K).
31
<PAGE>
Exhibit 2.1
First Amendment to Acquisition Agreement And Plan of Reorganization
dated April 15, 1998, by and among UCI Medical Affiliates of Georgia,
Inc., a South Carolina corporation; UCI Medical Affiliates, Inc., a
Delaware corporation; MainStreet Healthcare Corporation, a Delaware
corporation; MainStreet Healthcare Medical Group, P.C., a Georgia
professional corporation; MainStreet Healthcare Medical Group, PC, a
Tennessee professional corporation; Prompt Care Medical Center, Inc.,
a Georgia corporation; Michael J. Dare; A. Wayne Johnson; PENMAN
Private Equity and Mezzanine Fund, L.P., a Delaware limited
partnership; and Robert G. Riddett, Jr.
32
<PAGE>
FIRST AMENDMENT
TO
ACQUISITION AGREEMENT AND PLAN OF REORGANIZATION
This First Amendment To Acquisition Agreement and Plan of
Reorganization ("Amendment") is made as of this 15th day of April, 1998, by,
between and among UCI Medical Affiliates, Inc., a Delaware corporation ("UCI");
UCI Medical Affiliates of Georgia, Inc., a South Carolina corporation ("UCI of
GA"); MainStreet Healthcare Corporation, a Delaware corporation ("MainStreet");
MainStreet Healthcare Medical Group, P.C., a Georgia professional corporation
("MHMG-GA"); MainStreet Healthcare Medical Group, PC, a Tennessee professional
corporation ("MHMG-TN"); Prompt Care Medical Center, Inc., a Georgia corporation
("Prompt Care"); Michael J. Dare ("Dare"); A. Wayne Johnson ("Johnson"); PENMAN
Private Equity and Mezzanine Fund, L.P., a Delaware limited partnership
("PENMAN"); and Robert G. Riddett, Jr.
("Riddett").
INTRODUCTION.
-------------
Pursuant to that certain Acquisition Agreement and Plan of
Reorganization ("Agreement") dated February 9, 1998, by and among UCI, UCI of
GA, MainStreet, MHMG-GA, MHMG-TN, Prompt Care, Dare, Johnson, PENMAN, and
Riddett, MainStreet has agreed to sell substantially all of its assets to UCI of
GA. As set forth in the Agreement, the closing of the transactions described in
the Agreement is presently scheduled to be held on March 31, 1998.
The prior approval of the shareholders of UCI is a condition for the
issuance of certain shares of the common stock of UCI (the "Shares") which
represent a portion of the consideration to be delivered to MainStreet for the
transfer of the assets of MainStreet, all as set forth in the Agreement. As a
result of the review by the Securities and Exchange Commission of the
Preliminary Proxy Statement of UCI, the meeting of the shareholders of UCI, at
which it is anticipated that a majority of the shareholders of UCI will vote in
favor of all resolutions required to issue such Shares, cannot be held prior to
March 31, 1998. Also, pursuant to Sections 8.6.3 and 11.1.9 of the Agreement,
the successful completion of a private placement of the common stock of UCI
which is a condition precedent of the Closing cannot take place before March 31,
1998. As a result of the foregoing, the Parties desire to enter into this
Amendment whereby the Closing shall be postponed, and UCI shall not be required
to deliver the Shares until after such approval of the shareholders of UCI is
obtained which shall be after the date of Closing, all upon the terms and
conditions set forth herein.
Defined terms herein shall have the meanings ascribed to them in the
Agreement unless otherwise defined herein.
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<PAGE>
AGREEMENT.
----------
NOW, THEREFORE, in consideration of these premises and the mutual
covenants hereinafter set forth, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Section 1.1 of the Agreement is hereby deleted and the following
substituted in lieu thereof:
1.1 "Agreement" shall mean this Acquisition Agreement And
Plan of Reorganization, as amended, together with all schedules and
exhibits attached hereto, which are incorporated herein by reference.
2. Section 7.1 of the Agreement is hereby deleted and the following
substituted in lieu thereof:
7.1 MainStreet Consideration. Subject to Section 7.3 below,
the aggregate purchase price (the "Purchase Price") for the
MainStreet Assets will be Eight Million Fifty Thousand and No/100
($8,050,000) Dollars, plus the assumption of certain liabilities of
MainStreet as described in Section 7.2 below.
Such purchase price shall be payable as follows:
7.1.1 As set forth herein, UCI will tender to
MainStreet such number of Shares having an aggregate value
of Six Million Eight Hundred Thousand and No/100
($6,800,000.00) Dollars, as adjusted pursuant to Section
7.3 below as necessary.
7.1.2 In addition, UCI of GA at Closing will pay
to an escrow account established by the Parties (the
"Escrow Account"), the sum of Nine Hundred Thousand and
No/100 ($900,000) Dollars. The Escrow Account will be
established with an escrow agent ("Escrow Agent") appointed
by MainStreet pursuant to an escrow agreement acceptable to
MainStreet and UCI of GA which shall provide that the
escrowed funds shall be paid directly to certain creditors
of MainStreet as directed by MainStreet.
7.1.3 In addition, the sum of Three Hundred Fifty
Thousand and No/100 ($350,000) Dollars shall be due and
payable by UCI of GA to Escrow Agent on or before July 24,
1998, pursuant to the promissory note substantially in the
form attached hereto as Exhibit 7.1.3.
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<PAGE>
The Shares when issued, will be duly authorized, validly
issued, fully paid and non-assessable. For purposes hereof, the price
per share of the Shares utilized for determining the number of Shares
to be issued to MainStreet will be the average of the closing prices
of the $0.05 par value voting common stock of UCI as conclusively
determined by The Nasdaq Stock Market, Inc. for the trading days
during the thirty calendar day period immediately prior to Closing;
provided however, the price per share utilized for such determination
shall not be less than $2.375, nor more than $3.125 per share;
provided however, appropriate adjustments in the price per share
utilized shall be made in order to give effect to changes in the
number of outstanding shares as a result of stock dividends, stock
splits, reverse stock splits, consolidations, recapitalization or
other relevant change. The parties hereto acknowledge that the Shares
shall be issued to MainStreet pursuant to an exemption from
registration under the securities laws, such as Rule 506 of SEC
Regulation D, and the Shares shall be restricted shares subject to
Rule 144 of the Securities Act of 1933. The certificates evidencing
the Shares shall bear a restrictive legend in substantially the
following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
UNDER ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, PLEDGED,
TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF EXCEPT IN
ACCORDANCE WITH SUCH ACT AND THE RULES AND REGULATIONS
THEREUNDER AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES
LAWS. THE COMPANY WILL TRANSFER SUCH SECURITIES ONLY UPON
RECEIPT OF EVIDENCE SATISFACTORY TO THE COMPANY, WHICH MAY
INCLUDE AN OPINION OF COUNSEL, THAT THE REGISTRATION
PROVISIONS OF SUCH ACT HAVE BEEN COMPLIED WITH OR THAT SUCH
REGISTRATION IS NOT REQUIRED AND THAT SUCH TRANSFER WILL NOT
VIOLATE ANY APPLICABLE STATE SECURITIES LAWS.
3. Section 7.2.2 of the Agreement is hereby deleted and the following
substituted in lieu thereof:
7.2.2. The Parties hereby acknowledge and agree that UCI of
GA shall not assume or agree to pay, perform, or discharge any
liability or obligation of MainStreet which is not expressly set
forth above. As of the date of Closing, MainStreet shall be current
with respect to all payments then due and owing
35
<PAGE>
pursuant to the Assumed MainStreet Liabilities, and none of the
Assumed MainStreet Liabilities shall otherwise be in default or
subject to acceleration.
4. Section 7.3.1 of the Agreement is hereby deleted in its entirety.
5. Section 7.3.2 of the Agreement is hereby deleted and the following
substituted in lieu thereof:
7.3.2 In the event the aggregate outstanding balance of the
MainStreet Equipment Leases as of the date of Closing exceed the
amounts shown on Exhibit 7.2.1(a) attached hereto, and/or the
outstanding balance (less applicable lending hold-back amounts) of
MainStreet's line of credit obligation with Bank One, N.A. (formerly
NPL-LP. Inc.) as of the date of Closing exceeds Six Hundred
Eight-Five Thousand ($685,000) Dollars, such adjustment shall be
applied in the following order to the extent necessary: (i) first to
reduce the cash tendered by UCI of GA to the designated creditors of
MainStreet as set forth in Section 7.1 above, and (ii) second to
reduce the number of Shares to be delivered by UCI to MainStreet.
6. Section 7.3.3 of the Agreement is hereby deleted and the following
substituted in lieu thereof:
7.3.3 In the event the aggregate outstanding balance of the
MainStreet Equipment Leases as of the date of Closing is less than
the amounts shown on Exhibit 7.2.1(a) attached hereto, and/or the
outstanding balance (less applicable lending hold-back amounts) of
MainStreet's line of credit obligation with Bank One, N.A. (formerly
NPL-LP. Inc.) as of the date of Closing is less than Six Hundred
Eighty-Five Thousand ($685,000) Dollars, the purchase price and the
stock tendered by UCI and UCI of GA as set forth in Section 7.1
above, shall be increased by the aggregate amount such liabilities is
less than such limits.
7. Section 8.1 of the Agreement is hereby deleted and the following
substituted in lieu thereof:
8.1 Date of Closing. The closing of the sale and purchase
of the Assets and related transactions to be effective as of 11:59
p.m. on the date of Closing, and subject to the terms and conditions
of this Agreement, shall take place on April 24, 1998, commencing at
10:00 a.m. (local time), at the offices of Nexsen Pruet Jacobs &
Pollard, LLP, 1441 Main Street, Suite 1500, Columbia, South Carolina
or such other time and place as may be mutually agreed upon in
writing by the parties (the "Closing"). In the event Closing set
forth in this Section 8 is changed to a different date, all
references in this Agreement to Closing shall be deemed to refer to
the time and date agreed upon by the parties, in the manner set forth
herein.
36
<PAGE>
8. Section 8.3.8 of the Agreement is hereby deleted and the following
substituted in lieu thereof:
8.3.8 MainStreet shall execute and deliver to UCI an
Investment Letter substantially in the form attached hereto as
Exhibit 8.3.8(a), and each of the security holders of MainStreet
(including without limitation the Class B Shareholders) shall execute
and deliver to UCI an Investment Letter substantially in the form
attached hereto as Exhibit 8.3.8(b) (collectively the "Investment
Letter").
9. Section 8.4.1 of the Agreement is hereby deleted and the following
substituted in lieu thereof:
8.4.1 UCI shall execute and deliver to MainStreet the
Conditional Delivery Agreement, substantially in the form attached
hereto as Exhibit 8.4.1.
10. Section 8.4.2 of the Agreement is hereby deleted in its entirety.
11. Section 8.7.13 of the Agreement is hereby deleted and the
following substituted in lieu thereof:
8.7.13 Board of Directors. As of the date of the
Stockholder Approval as defined in Section 8.9 of the Agreement,
Johnson shall be appointed or elected to the Board of Directors of
UCI. Also, to the extent permitted by law, as long as MainStreet or
PENMAN is the holder of record of not less than five (5%) of the
issued and outstanding shares of the common stock of UCI, a
representative of PENMAN shall be invited to attend, at PENMAN's
expense, all meetings of the Board of Directors of UCI occurring
after the date of such Stockholder Approval. For so long as such
representative of PENMAN is entitled to such invitation as set forth
above, such representative of PENMAN shall be given notice of all
meetings of the Board of Directors of UCI at the same time such
notices are given to the directors of UCI, and, to the extent
permitted by law, shall be entitled to all information generally made
available to the directors of UCI. Such representative shall not be
entitled to vote on any matter.
12. Section 8 of the Agreement is hereby amended to add the following
section:
8.9 Approval of Shareholders of UCI. The Parties hereto
acknowledge that the issuance of the Shares to MainStreet requires
the prior approval of the shareholders of UCI of (i) the amendment to
UCI's Certificate of Incorporation to increase the number of
authorized shares of the common stock, $0.05 par value, of UCI from
10,000,000 to 30,000,000 shares; and (ii) the issuance of the Shares
37
<PAGE>
to MainStreet (collectively the "Stockholder Approval").
Notwithstanding anything to the contrary contained herein, UCI shall
(a) use its reasonable best efforts as promptly as reasonably
possible to respond to and clear all comments of the SEC with respect
to the proxy statement, mail the proxy statement to its stockholders,
hold the stockholders meeting and obtain the Stockholder Approvals
(the "UCI Actions"), and (b) not take any unreasonable action which
would result in any unreasonable delay in completing the UCI Actions.
If the Stockholder Approval is not obtained by July 1, 1998,
MainStreet shall have the option, exercisable by written notice to
UCI on or before July 8, 1998 to either (x) require UCI to continue
to use its reasonable best efforts to complete the UCI Actions no
later than July 31, 1998, or (y) unwind the transactions as herein
provided (an "Unwind Event"). In the case of an Unwind Event or if
the Stockholder Approval has not been obtained by July 31, 1998, UCI
and the Transferees, on the one hand, and the Transferors and the
Class B Shareholders, on the other hand, shall immediately take all
actions in their best efforts to restore the Parties to the positions
they had respectively prior to the Closing including, without
limiting the generality of the foregoing (A) UCI shall and shall
cause the Transferees to return to the respective Transferors all
Assets transferred by them at the Closing and/or the proceeds
thereof, (B) the Transferors and the Class B Shareholders shall
return or cause to be returned to UCI and the respective Transferees
any cash consideration received at the Closing or paid to the escrow
agent as set forth in Section 7.1 above, and (C) all documents
delivered at Closing shall be returned to the Party who made the
delivery.
13. Except as otherwise set forth in the Schedule of Exceptions, each
of the Transferors and Class B Shareholders severally and not jointly represent,
warrant, and covenant to UCI and the Transferees that the representations and
warranties contained in Section 9 of the Agreement are true, correct and
complete as of the date of this Amendment and that any disclosure or schedules
required to make such representations or warranties accurate and complete upon
the date hereof have been incorporated in the schedules and exhibits which are a
part of this Amendment.
14. UCI and UCI of GA, jointly and severally, represent, warrant, and
covenant to the Transferors and Class B Shareholders that the representations
and warranties contained in Section 10 of the Agreement are true, correct and
complete as of the date of this Amendment with the exception that Section 10.4
is hereby deleted in its entirety and the following substituted in lieu thereof:
10.4 Capitalization. UCI is authorized to issue: (i) Ten
Million (10,000,000) shares of UCI Common Stock of which 6,099,241
shares are issued and outstanding as of the date hereof; and (ii) Ten
Million (10,000,000) shares of Preferred Stock, $0.01 par value per
share, none of which is issued and outstanding. Following the
approval of the shareholders of UCI as contemplated
38
<PAGE>
in Section 8.9, UCI shall amend its Certificate of Incorporation to
authorize Thirty Million (30,000,000) shares of UCI common stock. All
of the Shares to be issued in the transaction described herein shall
be duly authorized for issuance pursuant to this Agreement, and, when
issued upon the consummation of the transactions and issuance
contemplated hereby, shall be validly issued, fully paid,
nonassessable and not subject to preemptive rights.
15. Section 11.1.10 of the Agreement is hereby deleted and the
following substituted in lieu thereof:
11.1.10 Approval of Nasdaq. The Parties acknowledge that in
accordance with the NASD Marketplace Rules, the issuance of the
Shares to MainStreet as contemplated herein requires the prior
approval of the shareholders of UCI. Pursuant to the terms and
conditions set forth herein, the Parties desire to close the
transactions described in the Agreement with the understanding that
the issuance of the Shares shall not occur until the shareholders of
UCI approve the required amendment to the Certificate of
Incorporation of UCI and approve the issuance of such Shares. As
such, the Parties hereto agree that the written consent of Nasdaq to
the closing of the transactions contemplated by the Agreement prior
to the approval of the shareholders of UCI in accordance with this
Amendment shall be required as a condition of Closing.
16. Section 11 of the Agreement is hereby amended to add the
following section:
11.3 Effect of Closing. It is expressly understood and
agreed that upon consummation of the Closing there shall be no
conditions to the obligations of UCI to effect the issuance and
delivery of the Shares to MainStreet pursuant to the Conditional
Delivery Agreement except as set forth therein.
17. Section 13.6.1 of the Agreement is hereby deleted and the
following substituted in lieu thereof:
13.6.1 Holdback Shares. As of the date of issuance of the
Shares as set forth herein, MainStreet for itself and on behalf of
Johnson shall be deemed to have directed UCI to withhold from
issuance to MainStreet such number of Shares having an aggregate
value equal to Three Hundred Thousand and No/100 ($300,000.00). The
withheld Shares are herein referred to as the "Holdback Shares." For
all purposes of this Section 13.6, including the price per share
utilized for determination of the number of Holdback Shares, shall be
the price per share utilized in Section 7.1 above. The Parties hereto
acknowledge and agree that such Holdback Shares are intended to be a
portion of such Shares distributable to Johnson upon the ultimate
liquidation or other distribution by MainStreet. Until
39
<PAGE>
such distribution occurs, it is agreed that such Holdback Shares
shall be an asset of MainStreet and available to satisfy claims of
UCI and the Transferees against MainStreet under this Agreement.
After such distribution, any Holdback Shares held in escrow as of
such date shall be deemed to be an asset of Johnson, and Johnson will
receive the Holdback Shares subject to the escrow. The Holdback
Shares shall be issued to MainStreet but delivered to Nexsen Pruet
Jacobs & Pollard, LLP ("Escrow Agent") to be held in escrow along
with the stock powers relating thereto executed by MainStreet,
subject to the terms and conditions hereinafter set forth. The
liability of Johnson under the indemnification provisions of this
Section 13 shall be recovered at the indemnified party's sole
discretion either from Johnson individually, or following
distribution to him, from such Holdback Shares, or both. Such
indemnified party shall not be required to make a claim for any
Holdback Shares prior to asserting a claim against Johnson
individually. As used in this Section 13.6, "J/MS" means MainStreet
until the Holdback Shares are distributed to Johnson, and Johnson
thereafter.
18. Sections 16.1.1.2 and 16.1.1.3 of the Agreement are hereby
deleted and the following substituted in lieu thereof:
16.1.1.2 By UCI of GA. In the event that Closing has not
been completed by April 30, 1998 as a result of the non-satisfaction
or non-fulfillment in any material respect of any of the conditions
upon Transferees' obligations specified in Section 11.1 (which has
not been previously waived by Transferees), then UCI of GA shall be
entitled at its option to terminate this Agreement by notice to the
other Parties; provided however, that UCI of GA shall not be entitled
to terminate this Agreement if the non-satisfaction or
non-fulfillment of any such condition resulted from or was
proximately caused by UCI or any Transferee's breach of this
Agreement or was frustrated or made impossible by the wrongful act or
failure to act of UCI or any Transferee.
16.1.1.3 By MainStreet. In the event that Closing has not
been completed by April 30, 1998 as a result of the non-fulfillment
or non-satisfaction in any material respect of any of the conditions
upon Transferors' obligations specified in Section 11.2 (which has
not been previously waived by Transferors), then MainStreet shall be
entitled at its option to terminate this Agreement by notice to the
other Parties; provided however, that MainStreet shall not be
entitled to terminate this Agreement if the non-satisfaction or
non-fulfillment of any such condition resulted from or was
proximately caused by any Class B Shareholder or Transferor's breach
of this Agreement or was frustrated or made impossible by the
wrongful act or failure to act of any Class B Shareholder or
Transferor.
40
<PAGE>
19. Exhibit 7.2.1(b) of the Agreement is hereby deleted, and Exhibit
7.2.1(b) attached hereto shall be substituted in lieu thereof.
20. Exhibit 8.3.8 of the Agreement is hereby deleted, and Exhibits
8.3.8(a) and 8.3.8(b) attached hereto shall be substituted in lieu thereof.
21. Exhibit 8.3.20 of the Agreement is hereby deleted, and Exhibit
8.3.20 attached hereto shall be substituted in lieu thereof.
22. Exhibit 8.4.4 of the Agreement is hereby deleted, and Exhibit
8.4.4 attached hereto shall be substituted in lieu thereof.
23. Exhibit 9.14 of the Agreement is hereby deleted, and Exhibit 9.14
attached hereto shall be substituted in lieu thereof.
24. Exhibit 9.19.1 of the Agreement is hereby deleted, and Exhibit
9.19.1 attached hereto shall be substituted in lieu thereof.
25. The parties hereto acknowledge and agree that neither UCI nor UCI
of GA shall be responsible for assuring MainStreet or its security holders that
the transaction contemplated in the Agreement will qualify as a "C"
Reorganization under Section 368(a)(1)(C) of the Code.
26. Except as otherwise modified hereby, the terms and provisions of
the Agreement shall remain in full force and effect. This Amendment may be
executed in any number of counterparts, all of which taken together shall
constitute one Amendment, and any party hereto may execute this Amendment by
signing any such counterpart. The authorized attachment of counterpart signature
pages shall constitute execution by the Parties. This Amendment shall be
governed by and construed in accordance with the laws of the State of South
Carolina. No
[REMAINDER OF PAGE INTENTIONALLY BLANK]
41
<PAGE>
provision of this Amendment shall be interpreted against any Party because such
Party or its legal representative drafted such provision.
IN WITNESS WHEREOF, the parties have executed this First Amendment To
Acquisition Agreement and Plan of Reorganization under seal with the corporate
parties acting by and through their duly authorized officers, effective as of
the date first above written.
UCI MEDICAL AFFILIATES, INC. MAINSTREET HEALTHCARE
CORPORATION
By: /S/ JERRY F. WELLS, JR. By: /S/ ROBERT G. RIDDETT, JR.
Its: Executive Vice President and CFO Its: President
UCI MEDICAL AFFILIATES OF MAINSTREET HEALTHCARE MEDICAL
GEORGIA, INC. GROUP, P.C., a Georgia corporation
By: /S/ JERRY F. WELLS, JR. By: /S/ A. WAYNE JOHNSON
Its: Executive Vice President and CFO Its: Chairman and Secretary
PENMAN PRIVATE EQUITY AND MAINSTREET HEALTHCARE
MEZZANINE FUND, L.P. MEDICAL GROUP, PC, a Tennessee
corporation
By: PENMAN Asset Management, L.P.
Its: General Partner
By: /S/ KEVIN J. PENNINGTON By: /S/ A. WAYNE JOHNSON
-------------------------------- ----------------------
Kelvin J. Pennington Its: Chairman and Secretary
Its: General Partner
PROMPT CARE MEDICAL CENTER, INC.
/S/ ROBERT G. RIDDETT, JR. By: /S/ A. WAYNE JOHNSON
Robert G. Riddett, Jr. Its: Chairman and Secretary
/S/ MICHAEL J. DARE
Michael J. Dare
/S/ A. WAYNE JOHNSON
A. Wayne Johnson
42
<PAGE>
Exhibit 7.1.3
Promissory Note
[See Attached]
43
<PAGE>
PROMISSORY NOTE
$350,000.00 Columbia, S.C.
April 24, 1998
FOR VALUE RECEIVED, UCI Medical Affiliates of Georgia, Inc., a South
Carolina corporation (the "Borrower"), hereby promises to pay, in lawful money
of the United States of America, to the order of S. Friedman & Associates, P.C.
("Escrow Agent") as escrow agent under that certain Escrow Agreement by and
between MainStreet Healthcare Corporation ("MHC"), Borrower and Escrow Agent
dated the hereof, the principal sum of Three Hundred Fifty Thousand and No/100
($350,000.00) Dollars.
Interest shall accrue from the date hereof on the principal balance
outstanding hereunder from time to time until paid in full at the fixed simple
rate per annum equal to six and one-half (6.5%) percent calculated based upon a
360-day year and the actual number of days elapsed. All principal and interest
payable hereunder shall be due and payable on July 24, 1998. Payments hereunder
shall be made to the Escrow Agent at Suite 1550, 1050 Crown Pointe Pkwy.,
Atlanta, Georgia 30338, or at such other place as the Escrow Agent may designate
from time to time in writing.
Notwithstanding the foregoing, upon the occurrence of a default in
the payment when due of any amount at any time owed hereunder, the interest rate
applicable hereunder shall be increased by an additional four percentage points
(4.0%); provided, however, that in no event shall the interest accruing under
this Note exceed the highest lawful rate.
The occurrence of the following shall constitute an "Event of
Default" under the Note: Borrower fails to pay when due any principal or
interest payment hereunder. Upon the occurrence of an Event of Default as
hereinabove defined, then at any time thereafter the Escrow Agent may declare
the entire remaining principal balance due hereunder, together with all accrued
interest thereon, immediately due and payable.
This Note is executed pursuant to, and is subject to, that certain
Acquisition Agreement and Plan of Reorganization dated February 9, 1998, by and
between among others Borrower and MHC, as amended (the "Acquisition Agreement").
Borrower may prepay this Note at any time without fee or penalty. Borrower
expressly waives any right of setoff with respect to any obligation which may be
owed to it under the Acquisition Agreement.
The invalidity of any provision of this Note shall not affect the
validity of any other provision hereof. The acceptance after maturity of any
payment with respect to this Note shall not constitute a waiver of the right of
Escrow Agent to demand the payment in full of any unpaid balance. No delay or
failure on the part of the Escrow Agent in the exercise of any right or remedy
shall operate as a waiver thereof, and no single exercise of any right or remedy
shall preclude Escrow Agent from the exercise of any other or further rights or
remedies.
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<PAGE>
In the event this Note is placed in the hands of an attorney for
collection, all expenses of the Escrow Agent incurred in connection with the
repayment of this Note, including reasonable attorneys' fees, shall be added to
the principal amount of this Note and collected as a part hereof. This Note
shall be governed by and construed in accordance with the laws of the State of
South Carolina. Jurisdiction and venue for the enforcement of this Note shall be
exclusively in the courts for the State of South Carolina.
Borrower expressly waives demand, presentment, protest and notice of
non-payment or dishonor and all other notices or demands whatsoever (except for
notices expressly set forth herein), and such parties agree to remain bound
hereby until all amounts due hereunder are paid in full, notwithstanding any
extension of time for payment which may be granted, even though the period of
extension be indefinite.
EXECUTED this 24th day of April, 1998.
UCI MEDICAL AFFILIATES OF GEORGIA,
INC. (SEAL)
By:_____________________________________
Its:_________________________________
Notice Address for Borrower:
1901 Main Street, Suite 1200
Columbia, South Carolina 29201
Attn: Jerry F. Wells, Jr.
[GUARANTY ATTACHED HERETO]
45
<PAGE>
GUARANTY
The undersigned UCI Medical Affiliates, Inc., a Delaware corporation
("UCI"), hereby irrevocably and unconditionally guarantees the proper and timely
performance and/or full and timely payment of each and every term and obligation
of UCI Medical Affiliates of Georgia, Inc., a South Carolina corporation ("UCI
of GA"), contained in the foregoing Promissory Note in the original principal
amount of Three Hundred Fifty Thousand and No/100 ($350,000.00) Dollars dated
April 24, 1998 (the "Note") executed by UCI of GA in favor of S. Friedman &
Associates, P.C. ("Escrow Agent") as escrow agent under that certain Escrow
Agreement by and between MainStreet Healthcare Corporation, UCI of GA, and
Escrow Agent dated April 24, 1998. This guaranty is a guarantee of payment and
not of collection and shall not be changed or affected by any act or statement
of UCI of GA, the invalidity or unenforceability of the Note, or any amendment
or termination of the Note. The holder of the Note shall not be required to seek
enforcement against UCI of GA or resort to any other remedy and may proceed
directly against the undersigned. The undersigned waives any right of
subrogation with respect to any payments made under this Guaranty. The
undersigned hereby waives presentment, demand, protest, notice of non-payment,
notice of default, notice of compromise or surrender, any right or setoff, any
other demand or notice whatsoever in connection with this Guaranty, and any
other right which would release the undersigned at law or equity from its
obligations under the Guaranty. In the event this Guaranty is placed in the
hands of an attorney for collection, all expenses of the prevailing party,
including reasonable attorney's fees, shall be added to this Guaranty and
collected as a part hereof. This Guaranty shall be governed by and construed in
accordance with the laws of the State of South Carolina.
IN THE PRESENCE OF: UCI MEDICAL AFFILIATES, INC.
________________________________ By:________________________________
(Witness) Its:____________________________
________________________________
(Witness)
46
Exhibit 7.2.1(b)
MainStreet Real Estate Leases
[See Attached]
47
<PAGE>
EXHIBIT 7.2.1(B) CONTINUED
EXHIBIT 7.2.1(B)
LIST OF MAINSTREET
REAL ESTATE LEASES
<TABLE>
<CAPTION>
(4/98-3/99) (4/99-3/00)
Predicated Predicated
Month Month Type of FY 1999 FY 2000
Practice Location # Lessor Started Ending Lease Expense Exense
- ----------------- - ------ ------- ------ ----- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Stone Mountain 003 Dr. Harold Holloway May-96 Apr-01 Standard 34,733.16 34,733.16
1324 Rockbridge Rd 130 Mockingbird Dr.
Stone Mt., GA Amercus, GA 31709
30087
Covington 004 Dr. Edward R. Bailey Apr-96 Mar-01 Standard 36,000.00 36,000.00
4168 Tate Street 1840 Ridgemill Terr
Covington, GA Dacula, GA 30211
30209
Lawrenceville 005 Dr. M.T. Bagheri Nov-97 Oct-99 Standard 30,557.85 16,334.61
719 Scenic Hwy 719 Scenic Hwy
Suite B & C Suite A
Lawrenceville, GA Lawrenceville, Ga
30045 30045
Knoxville (West) 007 Lay Properties Dec-96 Nov-01 Standard 91,006.00 91,006.00
10412 Kingston Pike 1453 N Campbell
Knoxville, TN Start Rd.
37912 Knoxville, TN 37932
Knoxville (North) 007 Lay Properties Dec-96 Nov-01 Standard 54,000.00 54,000.00
108B Inskip Drive 1453 N Campbell
Knoxville, TN Start Rd
37912 Knoxville, TN 37932
Austell 008 BAC Properties Jan-97 Dec-01 Standard 54,000.00 54,000.00
1678 Mulkey Road 1676 Mulkey Road
Suites A&B Suite D
Austell, GA 30001 Austell, GA 30001
Snellville 010 Robert Robinson Jan-97 Dec-02 Standard 58,710.00 58,710.00
2270 Oak Road P.O. Box 6279
Snellville, GA Fernandina Beach, FL
30278 32035
Conyers 011 Dr. Ellis/Petit Jan-97 Dec-02 Standard 54,000.00 54,000.00
1491 Old Salem Rd Partnership
Conyers, GA 30208 535 Cooper Road
Loganville, GA 30052
</TABLE>
<TABLE>
<CAPTION>
(4/00-3/01) (4/01-3/02) (4/02-Forward)
Predicated FY Predicated FY Future
Practice Location # Lessor 2001 Expenses 2002 Expenses Obligation)
- ----------------- - ------ ------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Stone Mountain 003 Dr. Harold Holloway 34,733.16 2,894.43 n/a
1324 Rockbridge Rd 130 Mockingbird Dr.
Stone Mt., GA Amercus, GA 31709
30087
Covington 004 Dr. Edward R. Bailey 36,000.00 n/a n/a
4168 Tate Street 1840 Ridgemill Terr
Covington, GA Dacula, GA 30211
30209
Lawrenceville 005 Dr. M.T. Bagheri n/a n/a n/a
719 Scenic Hwy 719 Scenic Hwy
Suite B & C Suite A
Lawrenceville, GA Lawrenceville, Ga
30045 30045
Knoxville (West) 007 Lay Properties 91,006.00 60,672.00 n/a
10412 Kingston Pike 1453 N Campbell
Knoxville, TN Start Rd.
37912 Knoxville, TN 37932
Knoxville (North) 007 Lay Properties 54,000.00 36,000.00 n/a
108B Inskip Drive 1453 N Campbell
Knoxville, TN Start Rd
37912 Knoxville, TN 37932
Austell 008 BAC Properties 54,000.00 54,000.00 n/a
1678 Mulkey Road 1676 Mulkey Road
Suites A&B Suite D
Austell, GA 30001 Austell, GA 30001
Snellville 010 Robert Robinson 58,710.00 58,710.00 44,032.50
2270 Oak Road P.O. Box 6279
Snellville, GA Fernandina Beach, FL
30278 32035
Conyers 011 Dr. Ellis/Petit 54,000.00 54,000.00 40,500.00
1491 Old Salem Rd Partnership
Conyers, GA 30208 535 Cooper Road
Loganville, GA 30052
</TABLE>
48
<PAGE>
EXHIBIT 7.2.1(B) CONTINUED
<TABLE>
<CAPTION>
(4/98-3/99) (4/99-3/00)
Predicated Predicated
Month Month Type of FY 1999 FY 2000
Practice Location # Lessor Started Ending Lease Expense Exense
- ----------------- - ------ ------- ------ ----- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Auburn 012 Columbia Barrow Jan-98 Dec-98 Standard 8,937.00 n/a
12 Seventh Street Med Ctr.
Auburn, GA 30203 316 North Broad St
Winder, GA 30680
Snapfinger 014 Mildred L. Davis Mar-97 Monthly Oral 1,100.00 n/a
5014 Snapfinger 3551 Knotsberry Lane (Per Month)
Woods Duluth, GA 30135
Decatur, GA 30035
Univ. Diagnostics 015 Dr. Robert F. Eaves Apr-95 Annual Sublease 12,000.00 n/a
2390 Main Street 5394 Leather Stking
Tucker, GA 30084 Lane
Stone Mtn. GA 30087
</TABLE>
49
<PAGE>
<TABLE>
<CAPTION>
(4/00-3/01) (4/01-3/02) (4/02-Forward)
Predicated FY Predicated FY Future
Practice Location # Lessor 2001 Expenses 2002 Expenses Obligation)
- ----------------- - ------ ------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Auburn 012 Columbia Barrow n/a n/a n/a
12 Seventh Street Med Ctr.
Auburn, GA 30203 316 North Broad St
Winder, GA 30680
Snapfinger 014 Mildred L. Davis n/a n/a n/a
5014 Snapfinger 3551 Knotsberry Lane
Woods Duluth, GA 30135
Decatur, GA 30035
Univ. Diagnostics 015 Dr. Robert F. Eaves n/a n/a n/a
2390 Main Street 5394 Leather Stking
Tucker, GA 30084 Lane
Stone Mtn. GA 30087
</TABLE>
Exhibit 8.3.8(a)
Form of Investment Letter for MainStreet
[See Attached]
50
<PAGE>
INVESTMENT LETTER
April ____, 1998
TO: UCI Medical Affiliates, Inc.
1901 Main Street, Suite 1200
Columbia, SC 29201
Attn: President
RE: Issuance of Common Stock in UCI Medical Affiliates, Inc.
Dear Sir:
In connection with the transactions contemplated in that certain
Acquisition Agreement and Plan of Reorganization dated as of February 9, 1998,
as amended, by and among others MainStreet Healthcare Corporation, a Delaware
corporation ("Transferee"), and UCI Medical Affiliates, Inc., a Delaware
corporation (the "Company"), upon the satisfaction of certain conditions set
forth in the Agreement, as amended, including but not limited to the approval of
the shareholders of the Company, the Company shall issue to Transferee _________
___________________________ shares (the "Shares") of the Company's common stock,
$0.05 par value. In consideration of your agreement to issue the Shares to
Transferee, the Transferee hereby represents and warrants to you and hereby
covenants and agrees with you, as follows:
1. Transferee has carefully read this Investment Letter and, to the
extent Transferee believes necessary, has discussed with Transferee's counsel
and other professional advisor(s) the representations, warranties, covenants and
agreements which Transferee makes by signing it, and any applicable limitations
upon Transferee's transfer of the Shares issuable thereunder. Transferee
acknowledges that Transferee has not relied upon the legal counsel or
accountants for the Company regarding the Shares or the transactions
contemplated by this Investment Letter, and Transferee has been advised to
engage separate legal counsel and accountants to represent Transferee's
individual interest and advise Transferee regarding the structure of and risks
associated with such transactions.
2. Transferee understands that as a publicly traded company, the
Company files with the Securities and Exchange Commission (the "SEC") various
reports, including quarterly and annual financial statements, annual reports to
shareholders, and proxy statements, and that all of such reports, statements and
information are available to the public, including Transferee, from the SEC and
directly from the Company (collectively the "Documents"). Transferee has been
given the opportunity to obtain copies of such Documents and to ask questions
of, and receive answers from, representatives of the Company with respect to the
Company and the Shares, concerning the terms and conditions of the transfer of
the Shares by the Company to Transferee, and has been given the opportunity to
obtain such additional information necessary to verify the accuracy of any
information provided to Transferee by the Company in order for Transferee to
evaluate the merits and risks of an investment in the
51
<PAGE>
Company to the extent that the Company possesses such information or could
acquire it without unreasonable effort or expense. Transferee has been furnished
with all information concerning the Shares and the Company that Transferee
desires.
Transferee further acknowledges that Transferee is executing and
delivering this Investment Letter solely on the basis of information contained
in the Documents and not on the basis of any information, representations, or
agreements made by any other person, and that no representations or warranties
of any nature have been made to Transferee with respect to the ultimate economic
consequences or tax consequences of Transferee's investment in the Company.
Transferee acknowledges that any forecasted financial data which may have been
given to Transferee is for illustration purposes only and no assurance is given
that actual results will correspond with the results contemplated in any such
data.
3. Transferee is _____ or is not _____ (initial one) an "accredited
investor" as that term is defined in Rule 501 of Regulation D promulgated by the
SEC under the Securities Act of 1933, as amended (the "1933 Act"). For this
purpose, Transferee understands that an "accredited investor" includes:
(i) any individual who: (A) has a net worth (with spouse) in excess
of $1 million; or (B) has had an individual income in excess of
$200,000 (or joint income with spouse in excess of $300,000) in each
of the two most recent years and who reasonably expects the same
income level for the current year; or (C) who is an executive officer
or director of the Company;
(ii) any entity in which all of the equity owners or partners are
"accredited investors;" or
(iii) any corporation or partnership with total assets in excess of
$5,000,000 that was not formed for the specific purpose of purchasing
the securities subscribed hereunder.
4. Transferee considers himself/herself/itself to be a sophisticated
investor in companies similarly situated to the Company, and Transferee has such
knowledge and experience in financial and business matters as to be capable of
evaluating the merits and risks of the prospective investment in the Shares. Any
information Transferee may have furnished to you with respect to Transferee's
status as a sophisticated investor, Transferee's business experience or
Transferee's financial position is correct.
5. If Transferee is an individual, Transferee's current state of
residency is the state reflected in Transferee's current address as set forth on
the signature page hereof, and Transferee has no present intention of moving
from such state of residency. If Transferee is an entity, Transferee's state of
incorporation or organization are as set forth on the signature page hereof. If
Transferee is an entity which does not meet the classification set forth under
Section 3 (iii) above, each of Transferee's equity owners and/or partners has
the same state of residence as the Transferee's state of incorporation or
organization and none of Transferee's
52
<PAGE>
equity owners and/or partners has any present intention of moving from such
state of residency.
6. Transferee has been advised and acknowledges that the issuance of
the Shares will not be registered under the 1933 Act, in reliance upon the
exemption(s) from registration promulgated thereunder. Transferee also
acknowledges that the issuance of the Shares will not be registered under the
securities laws of any state. Consequently, Transferee agrees that the Shares
cannot be resold unless they are registered under the 1933 Act and applicable
state securities laws, or unless an exemption from such registration
requirements is available.
7. Transferee understands and acknowledges that, except as
specifically set forth in that certain Registration Rights Agreement to be
delivered in connection with the issuance of the Shares, the Company is under no
obligation to register the Shares for public sale or to comply with the
conditions of Rule 144 promulgated by the SEC under the 1933 Act or to take any
other action necessary in order to make available any exemption for the
subsequent transfer of the Shares without registration.
8. Transferee is purchasing the Shares solely for Transferee's own
account and not as nominee for, representative of, or otherwise on behalf of any
other person. Transferee is purchasing the Shares with the intention of holding
the Shares for investment, with no present intention of participating, directly
or indirectly, in a subsequent public distribution of the Shares unless
registered under the 1933 Act and applicable state securities laws, or unless an
exemption from such registration requirements is available. Transferee shall not
make any sale, transfer or other disposition of the Shares in violation of state
or federal law.
9. Transferee has been advised and acknowledges that there is
currently no active public or private market for the Shares and that no active
market for the Shares may develop. Transferee is aware that Transferee's
investment in the Company is speculative and involves a high degree of risk of
loss arising from, among other things, substantial market, operational,
competitive and other risks, and having made Transferee's own evaluation of the
risks associated with this investment, Transferee is aware and Transferee has
been advised that Transferee must bear the economic risks of a purchase of the
Shares indefinitely.
10. Transferee is aware that the Company may offer and sell
additional shares of common stock in the future, thereby diluting Transferee's
percentage equity ownership of the Company.
11. Transferee acknowledges that the Shares were not offered to
Transferee by means of any form of general or public solicitation or general
advertising, or publicly disseminated advertisements or sales literature,
including (i) any advertisement, article, notice or other communication
published in any newspaper, magazine, or similar media, or broadcast over
television or radio, or (ii) any seminar or meeting to which Transferee, or any
of Transferee's officers, directors, shareholders, agents, or affiliates, was
invited by any of the foregoing means of communications.
53
<PAGE>
12. Transferee understands and agrees that the Company and all
current and future shareholders of the Company are relying on the agreements and
representations contained herein. Transferee understands fully the meaning and
legal consequences of the provisions herein, and agrees to indemnify and hold
harmless the Company, and each other person, if any, subject to liability
because of such person's connection with the Company, against all actions,
claims, losses, damages and liabilities arising out of or based upon any false
representation or warranty herein, or any breach by the undersigned of any
provision hereof, and to reimburse the Company and each such other person for
any legal and other expenses incurred by the Company and each such other person
in connection with investigating, defending, and, if appropriate, settling any
action, claim, loss, damage or liability.
13. In connection with the purchase of the Shares by Transferee,
Transferee has not and will not pay, and has no knowledge of the payment of, any
commission or other direct or indirect remuneration to any person or entity for
soliciting or otherwise coordinating the purchase of the Shares, except to such
persons or entities as are duly licensed and/or registered to engage in
securities offering and selling activities (or are exempt from such licensing
and/or registration requirements) in the state(s) in which such activities have
taken place in connection with the transaction contemplated by this Investment
Letter.
14. Transferee has been advised and agrees that there will be placed
on any certificates representing the Shares, or any substitution(s) thereof, a
legend stating in substance the following (and including any restrictions or
conditions that may be required by any applicable state law), and Transferee has
been advised and further agrees that the Company will refuse to permit the
transfer of the Shares out of Transferee's name in the absence of compliance
with the terms of such legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE SECURITIES LAWS AND
MAY NOT BE SOLD, PLEDGED, TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF EXCEPT
IN ACCORDANCE WITH SUCH ACT AND THE RULES AND REGULATIONS THEREUNDER AND IN
ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THE COMPANY WILL TRANSFER SUCH
SECURITIES ONLY UPON RECEIPT OF EVIDENCE SATISFACTORY TO THE COMPANY, WHICH MAY
INCLUDE AN OPINION OF COUNSEL, THAT THE REGISTRATION PROVISIONS OF SUCH ACT HAVE
BEEN COMPLIED WITH OR THAT SUCH REGISTRATION IS NOT REQUIRED AND THAT SUCH
TRANSFER WILL NOT VIOLATE ANY APPLICABLE STATE SECURITIES LAWS.
15. Transferee has full power and authority to execute and deliver
this Investment Letter and has obtained the requisite corporate, governmental,
and third party approvals and consents necessary to execute and deliver this
Investment Letter.
16. Transferee confirms that the representations Transferee has
previously made to the Company and those contained in this Investment Letter are
correct and complete as of the
54
<PAGE>
date hereof, and that if there should occur any material change in such
representations prior to the receipt of the Shares by Transferee, Transferee
agrees that Transferee will immediately furnish such revised or corrected
representations or information to the Company.
This Investment Letter shall be binding upon Transferee and his/her
heirs, executors, administrators, successors, representatives and assigns and
shall enure to the benefit of the Company, and its successors and assigns. This
Investment Letter shall be governed and construed in accordance with the laws of
the State of South Carolina.
IN WITNESS WHEREOF, Transferee has executed this Investment Letter as
of the date set forth opposite Transferee's signature below.
TRANSFEREE:
MAINSTREET HEALTHCARE
CORPORATION
By:__________________________________
Print Name:__________________________
Title:_______________________________
Date: April ____, 1998
_____________________________________
(Street Address)
_____________________________________
(City, State, Zip Code)
55
Exhibit 8.3.8(b)
Form of Investment Letter for Security Holders of MainStreet
[See Attached]
56
<PAGE>
INVESTMENT LETTER
April ____, 1998
TO: UCI Medical Affiliates, Inc.
1901 Main Street, Suite 1200
Columbia, SC 29201
Attn: President
RE: Issuance of Common Stock in UCI Medical Affiliates, Inc.
Dear Sir:
In connection with the transactions contemplated in that certain
Acquisition Agreement and Plan of Reorganization dated as of February 9, 1998,
as amended, by and among others MainStreet Healthcare Corporation, a Delaware
corporation ("MainStreet"), and UCI Medical Affiliates, Inc., a Delaware
corporation (the "Company"), upon the satisfaction of certain conditions set
forth in the Agreement, as amended, including but not limited to the approval of
the shareholders of the Company, the Company shall issue to MainStreet _________
___________________ shares (the "Shares") of the Company's common stock, $0.05
par value. In consideration of your agreement to issue the Shares to MainStreet,
the undersigned security holder of MainStreet (the "Shareholder") hereby
represents and warrants to you and hereby covenants and agrees with you, as
follows:
1. Shareholder has carefully read this Investment Letter and, to the
extent Shareholder believes necessary, has discussed with Shareholder's counsel
and other professional advisor(s) the representations, warranties, covenants and
agreements which Shareholder makes by signing it, and any applicable limitations
upon MainStreet's transfer of the Shares. Shareholder acknowledges that
Shareholder has not relied upon the legal counsel or accountants for the Company
regarding the Shares or the transactions contemplated by this Investment Letter,
and that Shareholder and MainStreet have been advised to engage separate legal
counsel and accountants to represent Shareholder's and MainStreet's individual
interests and advise Shareholder and MainStreet, respectively, regarding the
structure of and risks associated with such transactions.
2. Shareholder understands that as a publicly traded company, the
Company files with the Securities and Exchange Commission (the "SEC") various
reports, including quarterly and annual financial statements, annual reports to
shareholders, and proxy statements, and that all of such reports, statements and
information are available to the public, including Shareholder and MainStreet,
from the SEC and directly from the Company (collectively the "Documents").
Shareholder and MainStreet have been given the opportunity to obtain copies of
such Documents and to ask questions of, and receive answers from,
representatives of the Company with respect to the Company and the Shares,
concerning the terms and conditions of the transfer of the Shares by the Company
to MainStreet, and have been given the opportunity to obtain such additional
information necessary to verify the accuracy of any information
57
<PAGE>
provided to Shareholder or MainStreet by the Company in order for Shareholder
and MainStreet to evaluate the merits and risks of an investment in the Company
to the extent that the Company possesses such information or could acquire it
without unreasonable effort or expense. Shareholder has been furnished with all
information concerning the Shares and the Company that Shareholder desires.
Shareholder further acknowledges that Shareholder is executing and
delivering this Investment Letter solely on the basis of information contained
in the Documents and not on the basis of any information, representations, or
agreements made by any other person, and that no representations or warranties
of any nature have been made to Shareholder or, to the best of Shareholder's
knowledge, MainStreet with respect to the ultimate economic consequences or tax
consequences of MainStreet's investment in the Company. Shareholder acknowledges
that any forecasted financial data which may have been given to Shareholder or
MainStreet is for illustration purposes only and no assurance is given that
actual results will correspond with the results contemplated in any such data.
3. Shareholder is _____ or is not _____ (initial one) an "accredited
investor" as that term is defined in Rule 501 of Regulation D promulgated by the
SEC under the Securities Act of 1933, as amended (the "1933 Act"). For this
purpose, Shareholder understands that an "accredited investor" includes:
(i) any individual who: (A) has a net worth (with spouse) in excess
of $1 million; or (B) has had an individual income in excess of
$200,000 (or joint income with spouse in excess of $300,000) in each
of the two most recent years and who reasonably expects the same
income level for the current year; or (C) who is an executive officer
or director of the Company;
(ii) any entity in which all of the equity owners or partners are
"accredited investors;" or
(iii) any corporation or partnership with total assets in excess of
$5,000,000 that was not formed for the specific purpose of purchasing
the securities subscribed hereunder.
4. Shareholder considers himself/herself/itself to be a sophisticated
investor in companies similarly situated to the Company, and Shareholder has
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of the prospective investment in the Shares.
Any information Shareholder may have furnished to you with respect to
Shareholder's status as a sophisticated investor, Shareholder's business
experience or Shareholder's financial position is correct.
5. If Shareholder is an individual, Shareholder's current state of
residency is the state reflected in Shareholder's current address as set forth
on the signature page hereof, and Shareholder has no present intention of moving
from such state of residency. If Shareholder is an entity, Shareholder's state
of incorporation or organization are as set forth on the signature page hereof.
If Shareholder is an entity which does not meet the classification set forth
under
58
<PAGE>
Section 3 (iii) above, each of Shareholder's equity owners and/or partners has
the same state of residence as the Shareholder's state of incorporation or
organization and none of Shareholder's equity owners and/or partners has any
present intention of moving from such state of residency.
6. Shareholder and MainStreet have been advised and Shareholder
acknowledges that the issuance of the Shares will not be registered under the
1933 Act, in reliance upon the exemption(s) from registration promulgated
thereunder. Additionally, Shareholder and MainStreet have been advised and
Shareholder acknowledges that the issuance of the Shares will not be registered
under the securities laws of any state. Consequently, Shareholder agrees that
the Shares cannot be resold unless they are registered under the 1933 Act and
applicable state securities laws, or unless an exemption from such registration
requirements is available.
7. Shareholder and MainStreet have been advised and Shareholder
understands and acknowledges that, except as specifically set forth in that
certain Registration Rights Agreement to be delivered in connection with the
issuance of the Shares, the Company is under no obligation to register the
Shares for public sale or to comply with the conditions of Rule 144 promulgated
by the SEC under the 1933 Act or to take any other action necessary in order to
make available any exemption for the subsequent transfer of the Shares without
registration.
8. To the best of Shareholder's knowledge, MainStreet is purchasing
the Shares solely for MainStreet's own account and not as nominee for,
representative of, or otherwise on behalf of any other person. To the best of
Shareholder's knowledge, MainStreet is purchasing the Shares with the intention
of holding the Shares for investment, with no present intention of
participating, directly or indirectly, in a subsequent public distribution of
the Shares unless registered under the 1933 Act and applicable state securities
laws, or unless an exemption from such registration requirements is available.
9. Shareholder and MainStreet have been advised and Shareholder
acknowledges that there is currently no active public or private market for the
Shares and that no active market for the Shares may develop. Shareholder is
aware that MainStreet's investment in the Company is speculative and involves a
high degree of risk of loss arising from, among other things, substantial
market, operational, competitive and other risks, and having made Shareholder's
own evaluation of the risks associated with this investment, Shareholder is
aware and Shareholder and MainStreet have been advised that MainStreet must bear
the economic risks of a purchase of the Shares indefinitely.
10. Shareholder and MainStreet have been advised and Shareholder is
aware that the Company may offer and sell additional shares of common stock in
the future, thereby diluting MainStreet's percentage equity ownership of the
Company.
11. Shareholder acknowledges that the Shares were not offered to
MainStreet by means of any form of general or public solicitation or general
advertising, or publicly disseminated advertisements or sales literature,
including (i) any advertisement, article, notice or other communication
published in any newspaper, magazine, or similar media, or broadcast
59
<PAGE>
over television or radio, or (ii) any seminar or meeting to which Shareholder
or, to the best of Shareholder's knowledge, MainStreet, or any of its officers,
directors, other shareholders, agents, or affiliates, was invited by any of the
foregoing means of communications.
12. Shareholder understands and agrees that the Company and all
current and future shareholders of the Company are relying on the agreements and
representations contained herein. Shareholder understands fully the meaning and
legal consequences of the provisions herein, and agrees to indemnify and hold
harmless the Company, and each other person, if any, subject to liability
because of such person's connection with the Company, against all actions,
claims, losses, damages and liabilities arising out of or based upon any false
representation or warranty herein, or any breach by the undersigned of any
provision hereof, and to reimburse the Company and each such other person for
any legal and other expenses incurred by the Company and each such other person
in connection with investigating, defending, and, if appropriate, settling any
action, claim, loss, damage or liability.
13. In connection with the purchase of the Shares by MainStreet,
Shareholder has not paid and will not pay, and has no knowledge of the payment
by MainStreet or any other person or entity of, any commission or other direct
or indirect remuneration to any person or entity for soliciting or otherwise
coordinating the purchase of the Shares, except to such persons or entities as
are duly licensed and/or registered to engage in securities offering and selling
activities (or are exempt from such licensing and/or registration requirements)
in the state(s) in which such activities have taken place in connection with the
transaction contemplated by this Investment Letter.
14. Shareholder and MainStreet have been advised and Shareholder
agrees that there will be placed on any certificates representing the Shares, or
any substitution(s) thereof, a legend stating in substance the following (and
including any restrictions or conditions that may be required by any applicable
state law), and Shareholder and MainStreet have been advised and Shareholder
further agrees that the Company will refuse to permit the transfer of the Shares
out of MainStreet's name in the absence of compliance with the terms of such
legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE SECURITIES LAWS AND
MAY NOT BE SOLD, PLEDGED, TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF EXCEPT
IN ACCORDANCE WITH SUCH ACT AND THE RULES AND REGULATIONS THEREUNDER AND IN
ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THE COMPANY WILL TRANSFER SUCH
SECURITIES ONLY UPON RECEIPT OF EVIDENCE SATISFACTORY TO THE COMPANY, WHICH MAY
INCLUDE AN OPINION OF COUNSEL, THAT THE REGISTRATION PROVISIONS OF SUCH ACT HAVE
BEEN COMPLIED WITH OR THAT SUCH REGISTRATION IS NOT REQUIRED AND THAT SUCH
TRANSFER WILL NOT VIOLATE ANY APPLICABLE STATE SECURITIES LAWS.
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<PAGE>
15. Shareholder has full power and authority to execute and deliver
this Investment Letter and has obtained the requisite corporate, governmental,
and third party approvals and consents necessary to execute and deliver this
Investment Letter.
16. Shareholder confirms that the representations Shareholder has
previously made to the Company and those contained in this Investment Letter are
correct and complete as of the date hereof, and that if there should occur any
material change in such representations prior to the receipt of the Shares by
MainStreet, Shareholder agrees that Shareholder will immediately furnish such
revised or corrected representations or information to the Company.
This Investment Letter shall be binding upon Shareholder and his/her
heirs, executors, administrators, successors, representatives and assigns and
shall enure to the benefit of the Company, and its successors and assigns. This
Investment Letter shall be governed and construed in accordance with the laws of
the State of South Carolina.
IN WITNESS WHEREOF, Shareholder has executed this Investment Letter
as of the date set forth opposite Shareholder's signature below.
SHAREHOLDER:
_______________________________________
(Print name of Shareholder here)
_______________________________________
Date: April ____, 1998 (Signature of Shareholder or authorized
representative)
_______________________________________
(Street Address)
_______________________________________
(City, State, Zip Code)
61
Exhibit 8.3.20
Form of Legal Opinion of Transferors' and Class B Shareholders' Counsel
[See Attached]
62
<PAGE>
[Letterhead of S. Friedman & Associates, P.C.]
[Date of Closing]
UCI Medical Affiliates of Georgia, Inc.
Suite 1200
1901 Main Street
Columbia, South Carolina 29201
RE: Transfer of Assets of MainStreet Healthcare Corporation
(the "Seller") to UCI Medical Affiliates of Georgia, Inc.
(the "Buyer")
Ladies and Gentlemen:
We have acted as special counsel to Seller, MainStreet Healthcare
Medical Group, P.C., a Georgia corporation ("MHMG of GA"); MainStreet Healthcare
Medical Group, PC, a Tennessee corporation ("MHMG of TN"); Prompt Care Medical
Center, Inc., a Tennessee corporation ("Prompt Care"); A. Wayne Johnson
("Johnson"); Robert G. Riddett, Jr. ("Riddett"); Michael J. Dare ("Dare"); and
Penman Private Equity And Mezzanine Fund, L.P. ("Penman") in connection with the
Acquisition Agreement And Plan of Reorganization executed on February 9, 1998
(the "Agreement") by and among the Seller; MHMG-GA; MHMG-TN; Prompt Care;
Johnson; Riddett; Dare; Penman; Buyer; and UCI Medical Affiliates, Inc, as
amended by that certain First Amendment To Acquisition Agreement And Plan of
Reorganization dated , 1998 (the "Amendment"). This opinion is furnished
pursuant to the Closing requirements of Section 8.3.20 of the Agreement. All
capitalized terms used in this opinion letter that are not otherwise defined
herein shall have the meanings ascribed to them in the Agreement.
EXAMINATIONS
In our capacity as counsel to Seller, MHMG-GA, MHMG-TN, Johnson,
Dare, Riddett, Penman, and Prompt Care and for purposes of this opinion, we have
examined the following documents:
(i) Certain corporate records of Seller, MHMG-GA, MHMG-TN, and Prompt
Care including their respective articles of incorporation (or charter), bylaws,
and selected minutes;
(ii) The Agreement, Amendment, and all documents, instruments,
statements, and certificates required to be delivered by Seller, MHMG-GA,
MHMG-TN,
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Prompt Care, Johnson, Riddett, Dare, or Penman at Closing thereunder
(collectively the "Ancillary Documents");
(iii) Such other documents, records, and matters of law as we have
deemed necessary and appropriate to render the opinion set forth in this letter,
subject to the limitations, assumptions, and qualifications noted below.
As to questions of fact material to our opinions expressed herein, we
have, when relevant facts were not independently established, relied upon
certificates of, and information received from, officers of Seller, MHMG-GA,
MHMG-TN, Prompt Care, Johnson, Riddett, Dare, and Penman and upon the
representations and warranties of Seller, MHMG-GA, MHMG-TN, Prompt Care,
Johnson, Riddett, Dare, and Penman contained in the Agreement and Amendment. In
this regard, the certificates of officers of Seller, MHMG-GA, MHMG-TN, and
Prompt Care upon which we are relying are the certificates to be delivered at
Closing as required by the Agreement, Amendment, and certain officer's
certificates which has been delivered in advance of this opinion letter. We have
also relied upon certificates and other documents from, and conversations with,
public officials. We have not independently investigated or verified the facts
represented in such certificates, information, representations, or warranties
and do not opine as to the accuracy of any such fact.
OPINIONS
Based upon our review of the foregoing and subject to the
limitations, assumptions, and qualifications as set forth herein, it is our
opinion that, as of the date of this letter:
1. Seller is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Delaware, with the requisite
corporate power and authority to own or lease its properties and assets, to
conduct its business to the extent now being conducted, and to enter into and
perform its obligations under the Agreement, Amendment, and the Ancillary
Documents.
2. MHMG-GA is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Georgia, with the requisite
corporate power and authority to own or lease its properties and assets, to
conduct its business to the extent now being conducted, and to enter into and
perform its obligations under the Agreement, Amendment, and the Ancillary
Documents.
3. MHMG-TN is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Tennessee, with the requisite
corporate power and authority to own or lease its properties and assets, to
conduct its business to the extent now being conducted, and to enter into and
perform its obligations under the Agreement, Amendment, and Ancillary Documents.
4. Penman is a limited partnership duly organized, validly existing,
and in good standing under the laws of the State of Delaware, with the requisite
power and authority to
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own or lease its properties and assets, to conduct its business to the extent
now being conducted, and to enter into and perform its obligations under the
Agreement, Amendment, and Ancillary Documents.
5. Neither the execution and delivery of the Agreement, Amendment,
and the Ancillary Documents, nor the consummation of the transactions
contemplated thereby, constitute or, with the giving of notice or passage of
time or both, would constitute a violation of or a default under or conflict
with any term or provision of Seller, MHMG-GA, MHMG-TN, or Prompt Care's
respective Articles of Incorporation or Bylaws or, to the best of our knowledge,
any of the material terms, conditions or provisions of any material agreement or
instrument known to us to which Seller, MHMG-GA, MHMG-TN, Prompt Care, Johnson,
Riddett, Dare, and Penman and upon the representations and warranties of Seller,
MHMG-GA, MHMG-TN, Prompt Care, Johnson, Riddett, Dare, and Penman is a party, or
by which Seller, MHMG-GA, MHMG-TN, Prompt Care, Johnson, Riddett, Dare, or
Penman is or may be bound, or constitute a violation of any statute, law or
ordinance or any rule, regulation, order of any governmental authority or any
judicial decree, or to the best of our knowledge, require Seller, MHMG-GA,
MHMG-TN, Prompt Care, Johnson, Riddett, Dare, or Penman to obtain the consent or
approval of any governmental authority (except for consents, approvals, or
re-issuances described in or required by the Agreement or Amendment), lending
institution, or other third party except for such consents as have been obtained
by Seller, MHMG-GA, MHMG-TN, Prompt Care, Johnson, Riddett, Dare, or Penman and
delivered to you in advance of this opinion letter.
6. All actions and proceedings necessary to be taken by or on the
behalf of Seller, MHMG-GA, MHMG-TN, Prompt Care, Johnson, Riddett, Dare, and
Penman in connection with the Agreement, Amendment, and the Ancillary Documents
to which it is a party and necessary to make the same effective have been duly
and validly taken. The Agreement, Amendment, and the Ancillary Documents to
which it is a party have been duly and validly executed and delivered by Seller,
MHMG-GA, MHMG-TN, Prompt Care, Johnson, Riddett, Dare, and Penman and constitute
legal, valid, and binding obligations of Seller, MHMG-GA, MHMG-TN, Prompt Care,
Johnson, Riddett, Dare, and Penman enforceable in accordance with their
respective terms.
7. To the best of our knowledge, there are no actions, suits, claims,
or proceedings pending or threatened against Seller, MHMG-GA, MHMG-TN, Prompt
Care, Johnson, Riddett, Dare, or Penman before any federal, state, county,
municipal or other court, arbitrator, or other tribunal nor are there any
judgments, decrees, awards, regulations or orders of any such court, arbitrator,
or other tribunal outstanding against Seller, MHMG-GA, MHMG-TN, Prompt Care,
Johnson, Riddett, Dare, or Penman which if adversely determined would prohibit
or materially call into question the consummation of the transactions
contemplated by the Agreement, Amendment, or the Ancillary Documents.
8. Universal Diagnostics, Inc. ("Universal") is a Georgia corporation
whose Articles of Incorporation were filed with the Georgia Secretary of State
on January 27, 1997, but no further steps have been taken to organize Universal,
including but not limited to the
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<PAGE>
issuance of stock. Universal owns no assets and owes no liabilities and has no
interest in the Assets to be sold to Buyer hereunder or in the proceeds thereof.
9. Prompt Care owns no assets and owes no liabilities and has no
interest in the Assets to be sold to Buyer hereunder or in the proceeds thereof.
10. To the best of our knowledge, MainStreet has no Subsidiaries, and
has never had any Subsidiaries, other than Prompt Care and Universal and does
not control, directly or indirectly, or have any direct or indirect equity
participation or any equity interest in any corporation, partnership, trust,
venture, business, enterprise, firm or other business association other than
Prompt Care or Universal.
11. The sales, transfers, assignments, and conveyances of the
MainStreet Assets, MHMG-GA Assets, and MHMG-TN Assets pursuant to and as
contemplated in the Agreement and Amendment are not transactions covered by the
bulk transfer laws of the States of Georgia and Tennessee.
ASSUMPTIONS
In rendering these opinions we have assumed without investigation or
independent verification the following:
(a) The authenticity of any document or other instrument submitted to
us as an original, the conformity to the originals of any document or other
instrument submitted to us as a copy, the legal capacity of natural persons and
the genuineness of all signatures on such originals or copies (other than
signatures of Seller, MHMG-GA, MHMG-TN, Prompt Care, Johnson, Riddett, Dare, and
Penman).
(b) All documents executed by a party other than Seller, MHMG-GA,
MHMG-TN, Prompt Care, Johnson, Riddett, Dare, and Penman were duly and validly
executed and delivered by such party in the proper exercise of their corporate,
governmental, or individual powers, as the case may be, and are legal, valid and
binding obligations of such party enforceable against such party in accordance
with their respective terms or are otherwise effective at the date hereof.
(c) The absence of fraud, duress, or breach of fiduciary duty in the
inducement or effectuation of the subject transactions (in this connection we
affirm that we have no knowledge of the existence of any such fraud, duress, or
breach of fiduciary duty).
QUALIFICATIONS
These opinions are limited by and subject to the following
qualifications:
(a) Except as to opinion number 11 above, these opinions are strictly
limited in scope and application to the laws of the United Sates of America and
the laws of the State of
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<PAGE>
Georgia. No opinion is expressed: as to the laws of any other jurisdiction;
regarding the extent to which or manner in which such other laws are applicable
to matters herein addressed; whether opinions herein stated are, in whole or in
part, superseded or invalidated by the application of such other laws; or as to
the application of choice of law provisions in any documents or of any
jurisdiction.
(b) The opinions expressed herein are subject to and may be affected
or limited by, and we do not purport to express any opinion herein concerning,
federal or state securities law and federal or state antitrust or related laws.
(c) Opinions expressed "to the best of our knowledge" are based upon
inquiry of Seller, MHMG-GA, MHMG-TN, Prompt Care, Johnson, Riddett, Dare, and
Penman, or officers of the relevant entity or entities as to the subject matter
thereof, but without independent investigation or verification of any kind.
While no independent investigations or verifications have been conducted by us,
we have no knowledge of facts in material conflict with such opinions.
(d) The opinions expressed herein are based upon applicable laws,
statutes, ordinances, rules and regulations as exist on this date, and we
express no opinion as to the effect which any future amendments, changes,
additions, or modifications thereof may have on the future performance or
validity of the Agreement, Amendment, or the Ancillary Documents, or on the
consummation of the transactions contemplated by the Agreement, Amendment, and
the Ancillary Documents. We assume no obligation to update or supplement our
opinion to reflect any facts or circumstances which may hereafter come to our
attention or changes in law which may hereafter occur.
(e) The enforceability of the Agreement, Amendment, and the Ancillary
Documents, and the availability of certain rights and remedies provided therein,
are subject to, and may be affected or limited by the following: (i) the
provisions of applicable liquidation, conservatorship, insolvency, bankruptcy,
reorganization, moratorium, rearrangement and other similar laws, including
court decisions interpreting such laws; (ii) all other applicable federal or
state laws, constitutional requirements, statutes, ordinances, judicial
decisions, rules and regulations affecting creditors' rights generally,
including, without limitation, fraudulent conveyances, violable preferences,
non-judicial foreclosures and self-help remedies; (iii) general principles of
equity (regardless of whether such enforceability is considered in equity of at
law); (iv) the power of courts to deny enforcement of remedies generally based
upon public policy; (v) by the requirement that a party act with reasonableness
and in good faith to the extent required by the applicable law; and (vi) such
other matters of law which do not materially interfere with the practical
realization of the benefits intended to be conferred under the Agreement,
Amendment, and the Ancillary Documents.
(f) We express no opinion as to the enforceability of any provisions
in the Agreement, Amendment, or the Ancillary Documents: (i) purporting to waive
or affect any rights to notices which may not be waived under applicable law;
(ii) relating to delay or omission of enforcement of remedies; (iii) with
respect to severability, exculpation, and set off
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<PAGE>
rights; or (iv) respecting indemnification rights which may be limited under
applicable securities or other law.
(g) We express no opinion as to the title of any party to its
properties or the priority or absence of any liens or encumbrances thereon or
claims thereto.
(h) These opinions are provided to you as legal opinions only, and
not as guaranties or warranties of the matters discussed herein or of any
transaction or obligation.
We are furnishing this opinion letter for the sole and exclusive
benefit of the addressee and its counsel, and this opinion letter is not to be
relied upon or used by, or circulated, quoted or otherwise distributed to, any
other person without the prior written consent of the undersigned.
68
Exhibit 8.4.1
Form of Conditional Delivery Agreement
[See Attached]
69
<PAGE>
CONDITIONAL DELIVERY AGREEMENT
This Conditional Delivery Agreement ("Agreement") is made as of this
_____ day of April, 1998, by, between and among UCI Medical Affiliates, Inc., a
Delaware corporation ("UCI"); UCI Medical Affiliates of Georgia, Inc., a South
Carolina corporation ("UCI of GA"); and MainStreet Healthcare Corporation, a
Delaware corporation ("MainStreet").
INTRODUCTION.
In connection with the closing on the date hereof of the transfer of
substantially all of the assets of MainStreet to UCI of GA (the "Closing") as
contemplated by that certain Acquisition Agreement and Plan of Reorganization
dated February 9, 1998, by and among UCI; UCI of GA; MainStreet; MainStreet
Healthcare Medical Group, P.C., a Georgia professional corporation; MainStreet
Healthcare Medical Group, PC, a Tennessee professional corporation; Prompt Care
Medical Center, Inc., a Georgia corporation; Michael J. Dare; A. Wayne Johnson;
PENMAN Private Equity and Mezzanine Fund, L.P., a Delaware limited partnership;
and Robert G. Riddett, Jr., as amended (the "Acquisition Agreement"), the
parties hereto desire to provide for the issuance in consideration thereof of
_______________________ (_____________________) shares of the $0.05 par value
voting common stock of UCI to MainStreet (the "Shares"), pursuant to the terms
and conditions set forth in the Acquisition Agreement and herein.
The parties hereto acknowledge and agree that the prior approval of
the shareholders of UCI (in accordance with applicable Marketplace Rules of the
National Association of Securities Dealers, Inc. and as necessary to amend the
Certificate of Incorporation of UCI) is a condition for the issuance of the
Shares which represent a portion of the consideration to be delivered to
MainStreet for the assets of MainStreet, all as set forth in the Acquisition
Agreement. As a result of the review by the Securities and Exchange Commission
of the Preliminary Proxy Statement of UCI relating to the meeting of the
shareholders of UCI at which such shareholder approval is to be solicited, such
meeting cannot be held prior to the scheduled date of Closing. As a result of
the foregoing, the parties hereto desire to enter into this Agreement whereby
upon satisfaction of the conditions set forth herein UCI shall deliver the
Shares to MainStreet, all upon the terms and conditions set forth herein.
AGREEMENT.
NOW, THEREFORE, in consideration of these premises and the mutual
covenants hereinafter set forth, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
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<PAGE>
1. Issuance of Shares. Upon satisfaction of the conditions set forth
in Section 2 below, UCI shall tender to MainStreet the Shares as contemplated by
Section 7.1 of the Acquisition Agreement. At such time, UCI shall deliver a copy
of the instructions to the transfer agent of UCI's common stock instructing the
transfer agent to issue certificates evidencing the Shares to MainStreet and
will do all things necessary to cause the issuance of the Shares and the prompt
delivery of the certificates representing the Shares to MainStreet by the
transfer agent. The transfer agent shall be instructed to deliver a certificate
evidencing the HoldBack Shares to Nexsen Pruet Jacobs & Pollard, LLP pursuant to
Section 13.6.1 of the Acquisition Agreement. The Shares, when issued, shall be
duly authorized, validly issued, fully paid and non-assessable and not subject
to preemptive rights. The parties hereto acknowledge that the Shares shall be
issued to MainStreet pursuant to an exemption from registration under the
securities laws, such as Rule 506 of SEC Regulation D, and the Shares shall be
restricted shares subject to Rule 144 of the Securities Act of 1933. The
certificates evidencing the Shares shall bear a restrictive legend in
substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE SECURITIES LAWS AND
MAY NOT BE SOLD, PLEDGED, TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF EXCEPT
IN ACCORDANCE WITH SUCH ACT AND THE RULES AND REGULATIONS THEREUNDER AND IN
ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. THE COMPANY WILL TRANSFER SUCH
SECURITIES ONLY UPON RECEIPT OF EVIDENCE SATISFACTORY TO THE COMPANY, WHICH MAY
INCLUDE AN OPINION OF COUNSEL, THAT THE REGISTRATION PROVISIONS OF SUCH ACT HAVE
BEEN COMPLIED WITH OR THAT SUCH REGISTRATION IS NOT REQUIRED AND THAT SUCH
TRANSFER WILL NOT VIOLATE ANY APPLICABLE STATE SECURITIES LAWS.
2. Conditions. The obligation of UCI to issue the Shares shall be
subject, to the extent not waived by UCI, to the satisfaction of each of the
following conditions:
A. Approval of Shareholders of UCI. The shareholders of UCI
approve (i) the amendment to UCI's Certificate of Incorporation to increase the
number of authorized shares of the common stock, $0.05 par value, of UCI from
10,000,000 to 30,000,000 shares (the "Charter Amendment"); and (ii) the issuance
of the Shares to MainStreet.
B. Filing of Amendment to Charter. Upon the approval of the
Charter Amendment, UCI shall cause the filing with the Delaware Secretary of
State of the Charter Amendment, which UCI agrees shall be filed no more than
three (3) business days after the
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<PAGE>
approval of such Charter Amendment by the shareholders of UCI as contemplated in
Section 2(A)(i) above.
C. Bringdown of Investment Letters. MainStreet and each of the
security holders of MainStreet (including without limitation the Class A and
Class B shareholders of MainStreet) shall execute and deliver to UCI an
affirmation, in form and substance acceptable to UCI, that each of the
representations and warranties set forth in such entity or person's Investment
Letter, executed and delivered to UCI at Closing pursuant to Section 8.3.8 of
the Acquisition Agreement, is true and accurate in all material respects as of
the date of the issuance of the Shares as set forth in Section 1 above.
3. Registration Rights Agreement. Prior to the issuance of the Shares
to MainStreet, UCI, MainStreet and each of the security holders of MainStreet
(including without limitation the Class A and Class B shareholders of
MainStreet) shall execute and deliver the registration rights agreement
substantially in the form attached as Exhibit 8.4.2 to the Acquisition
Agreement.
4. Failure of Conditions. In the event that as of July 1, 1998 for
any reason any of the conditions set forth in Section 2 (the "Conditions") are
not met, MainStreet shall have the option, exercisable by written notice to UCI
on or before July 8, 1998 to either (i) require UCI to continue to use its
reasonable best efforts to complete the Conditions no later than July 31, 1998,
or (ii) unwind the transactions as herein provided (an "Unwind Event"). In the
case of an Unwind Event or if the Conditions have not been met by July 31, 1998,
the parties to the Acquisition Agreement shall immediately take all actions in
their best efforts to restore the parties to the respective positions they held
prior to the closing of the transactions contemplated in the Acquisition
Agreement. In this connection, without limiting the generality of the foregoing,
each party to the Acquisition Agreement shall (a) undertake all such actions
necessary so that, to the greatest extent reasonably practicable, all
liabilities and assets transferred from any party in the Acquisition are
transferred back to such party, (b) shall execute and deliver any and all deeds,
bills of sale, assignments, assumptions, and other instruments of conveyance or
assumption as shall be reasonably required to return such liabilities and
assets, and (c) perform such other acts as set forth in the Acquisition
Agreement concerning the unwinding of the transactions contemplated in the
Acquisition Agreement. The Transferees will use commercially reasonable efforts
to hold separate and segregate the Assets until the conditions set forth in
Section 2 above are satisfied. In the event for any reason a party (the Maker")
is unable to return to any other party (the "Holder") any assets (including any
cash) or liabilities received by or from the Holder pursuant to the Acquisition
Agreement, the Maker shall immediately execute and delivery to the Holder a
promissory note (the "Note") in favor of the Holder in an original principal
amount equal to, with respect to any party, the excess, if any, of the amount of
the fair market value of any and all assets which are not returned by such party
as set forth above over the fair market value of any and all liabilities which
are not returned by such party in each case taking into account the terms of the
Acquisition Agreement. Such Note shall bear interest at the then "Prime Rate" as
listed in the Money Rates Section of the Wall Street Journal, and all interest
and principal thereunder shall be due and payable one month after the date of
execution of such Note.
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<PAGE>
5. Subject to Acquisition Agreement. This Agreement is made, executed
and delivered in connection with the Acquisition Agreement, and is subject to
all the terms, provisions, and conditions thereof. To the extent of any conflict
between the terms hereof and thereof, the terms of the Acquisition Agreement
shall be controlling.
6. Miscellaneous. In the event any provision hereof is held to be
invalid or unenforceable, such invalidity or unenforceability shall not affect
the validity or enforceability of any other provision hereof. This Agreement
contains the entire agreement of the parties hereto with respect to the subject
matter hereof, and no representations, inducements, promises or agreements, oral
or otherwise, not expressly set forth herein shall be of any force or effect. No
amendment to this Agreement shall be binding upon any of the parties hereto
unless said amendment is in writing and signed by the party against whom
enforcement of said amendment is sought. No party hereto shall assign this
Agreement or any interest or obligation herein. All titles or captions of the
paragraphs set forth in this Agreement are inserted only as a matter of
convenience and for reference and in no way define, limit, extend or describe
the scope of this Agreement, or the intent of any provision hereof. All
references to Sections and Exhibits shall mean the Sections and Exhibits of this
Agreement unless otherwise specified. Time is of the essence of this Agreement.
This Agreement shall be governed by and construed in accordance with the laws of
the State of South Carolina. No provision of this Agreement shall be interpreted
against any party because such party or its legal representative drafted such
provision. All rights and remedies of a party hereunder shall be cumulative and
in addition to such rights and remedies as may be available to a party at law or
equity. This Agreement may be executed simultaneously in several counterparts,
each of which shall be deemed an original but which together shall constitute
one and the same original.
IN WITNESS WHEREOF, the parties have executed this Conditional
Delivery Agreement under seal with the corporate parties acting by and through
their duly authorized officers, effective as of the date first above written.
UCI MEDICAL AFFILIATES, INC. MAINSTREET HEALTHCARE
CORPORATION
By:_________________________________ By:______________________________
Its:_____________________________ Its:_____________________________
UCI MEDICAL AFFILIATES OF
GEORGIA, INC.
By:_________________________________
Its:_____________________________
73
Exhibit 8.4.4
Form of Legal Opinion of Transferees' Counsel
[See Attached]
74
<PAGE>
[Letterhead of Nexsen Pruet Jacobs & Pollard, LLP]
[Date of Closing]
MainStreet HealthCare Corporation
2370 Main Street
Tucker, Georgia 30084
RE: Transfer of Assets of MainStreet HealthCare Corporation
(the "Seller") to UCI Medical Affiliates of Georgia, Inc.
(the "Buyer")
Ladies and Gentlemen:
We have acted as special counsel to Buyer; UCI Medical Affiliates,
Inc. ("UCI"); Doctor's Care of Georgia, P.C. ("DC of GA"); and Doctor's Care of
Tennessee, P.C. ("DC of TN") in connection with the Acquisition Agreement And
Plan of Reorganization executed on February 9, 1998 (the "Agreement") by and
among the Buyer; Seller; UCI; MainStreet HealthCare Medical Group, P.C., a
Georgia corporation; MainStreet HealthCare Medical Group, PC, a Tennessee
corporation; Prompt Care Medical Center, Inc., a Tennessee corporation; A. Wayne
Johnson; Robert G. Riddett, Jr.; Michael J. Dare; and Penman Private Equity And
Mezzanine Fund, L.P., as amended by that certain First Amendment To Acquisition
Agreement And Plan of Reorganization dated , 1998 (the "Amendment"). This
opinion is furnished pursuant to the Closing requirements of Section 8.4.4 of
the Agreement. All capitalized terms used in this opinion letter that are not
otherwise defined herein shall have the meanings ascribed to them in the
Agreement.
EXAMINATIONS
In our capacity as counsel to Buyer, UCI, DC of GA, and DC of TN, and
for purposes of this opinion, we have examined the following documents:
(i) Certain corporate records of Buyer, UCI, DC of GA, and
DC of TN, including their respective articles of incorporation (or charter),
bylaws, and selected minutes;
(ii) The Agreement, Amendment, and all documents,
instruments, statements, and certificates required to be delivered by Buyer,
UCI, DC of GA, or DC of TN at Closing thereunder (collectively the "Ancillary
Documents");
(iii) Such other documents, records, and matters of law as
we have deemed necessary and appropriate to render the opinion set forth in this
letter, subject to the limitations, assumptions, and qualifications noted below.
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<PAGE>
As to questions of fact material to our opinions expressed herein, we
have, when relevant facts were not independently established, relied upon
certificates of, and information received from, officers of Buyer, UCI, DC of
GA, and DC of TN and upon the representations and warranties of Buyer and UCI
contained in the Agreement and Amendment. In this regard, the certificates of
officers of Buyer, UCI, DC of GA, and DC of TN upon which we are relying are the
certificates to be delivered at Closing as required by the Agreement, Amendment,
and certain officer's certificates which has been delivered in advance of this
opinion letter. We have also relied upon certificates and other documents from,
and conversations with, public officials. We have not independently investigated
or verified the facts represented in such certificates, information,
representations, or warranties and do not opine as to the accuracy of any such
fact.
OPINIONS
Based upon our review of the foregoing and subject to the
limitations, assumptions, and qualifications as set forth herein, it is our
opinion that, as of the date of this letter:
1. Buyer is a corporation duly organized, validly existing, and in
good standing under the laws of the State of South Carolina, with the requisite
corporate power and authority to own or lease its properties and assets, to
conduct its business to the extent now being conducted, and to enter into and
perform its obligations under the Agreement, Amendment, and the Ancillary
Documents.
2. UCI is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Delaware, with the requisite corporate
power and authority to own or lease its properties and assets, to conduct its
business to the extent now being conducted, and to enter into and perform its
obligations under the Agreement, Amendment, and the Ancillary Documents.
3. DC of GA is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Georgia, with the requisite
corporate power and authority to own or lease its properties and assets, to
conduct its business to the extent now being conducted, and to enter into and
perform its obligations under the Ancillary Documents.
4. DC of TN is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Tennessee, with the requisite
corporate power and authority to own or lease its properties and assets, to
conduct its business to the extent now being conducted, and to enter into and
perform its obligations under the Ancillary Documents.
5. Neither the execution and delivery of the Agreement, Amendment,
and the Ancillary Documents, nor the consummation of the transactions
contemplated thereby, constitute or, with the giving of notice or passage of
time or both, would constitute a violation of or a default under or conflict
with any term or provision of Buyer, UCI, DC of GA or DC of TN's respective
Articles of Incorporation or Bylaws or, to the best of our knowledge, any of the
material terms, conditions or provisions of any material agreement or instrument
known to
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us to which Buyer, UCI, DC of GA, or DC of TN is a party, or by which Buyer,
UCI, DC of GA, or DC of TN is or may be bound, or constitute a violation of any
statute, law or ordinance or any rule, regulation, order of any governmental
authority or any judicial decree, or to the best of our knowledge, require
Buyer, UCI, DC of GA, or DC of TN to obtain the consent or approval of any
governmental authority (except for consents, approvals, or re-issuances
described in or required by the Agreement or Amendment), lending institution, or
other third party except for such consents as have been obtained by Buyer, UCI,
DC of GA, or DC of TN and delivered to you in advance of this opinion letter.
6. All actions and proceedings necessary to be taken by or on the
behalf of Buyer, UCI, DC of GA, and DC of TN in connection with the Agreement,
Amendment, and the Ancillary Documents to which it is a party and necessary to
make the same effective have been duly and validly taken. The Agreement,
Amendment, and the Ancillary Documents to which it is a party have been duly and
validly executed and delivered by Buyer, UCI, DC of GA, and DC of TN and
constitute legal, valid, and binding obligations of Buyer, UCI, DC of GA, and DC
of TN enforceable in accordance with their respective terms.
7. To the best of our knowledge, there are no actions, suits, claims,
or proceedings pending or threatened against Buyer, UCI, DC of GA, or DC of TN
before any federal, state, county, municipal or other court, arbitrator, or
other tribunal nor are there any judgments, decrees, awards, regulations or
orders of any such court, arbitrator, or other tribunal outstanding against
Buyer, UCI, DC of GA, or DC of TN which if adversely determined would prohibit
or materially call into question the consummation of the transactions
contemplated by the Agreement, Amendment, or the Ancillary Documents.
ASSUMPTIONS
In rendering these opinions we have assumed without investigation or
independent verification the following:
(a) The authenticity of any document or other instrument submitted to
us as an original, the conformity to the originals of any document or other
instrument submitted to us as a copy, the legal capacity of natural persons and
the genuineness of all signatures on such originals or copies (other than
signatures of Buyer, UCI, DC of GA, and DC of TN).
(b) All documents executed by a party other than Buyer, UCI, DC of
GA, and DC of TN were duly and validly executed and delivered by such party in
the proper exercise of their corporate, governmental, or individual powers, as
the case may be, and are legal, valid and binding obligations of such party
enforceable against such party in accordance with their respective terms or are
otherwise effective at the date hereof.
(c) The absence of fraud, duress, or breach of fiduciary duty in the
inducement or effectuation of the subject transactions (in this connection we
affirm that we have no knowledge of the existence of any such fraud, duress, or
breach of fiduciary duty).
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QUALIFICATIONS
These opinions are limited by and subject to the following
qualifications:
(a) These opinions are strictly limited in scope and application to
the laws of the United Sates of America and the laws of the State of South
Carolina. No opinion is expressed: as to the laws of any other jurisdiction;
regarding the extent to which or manner in which such other laws are applicable
to matters herein addressed; whether opinions herein stated are, in whole or in
part, superseded or invalidated by the application of such other laws; or as to
the application of choice of law provisions in any documents or of any
jurisdiction.
(b) The opinions expressed herein are subject to and may be affected
or limited by, and we do not purport to express any opinion herein concerning,
federal or state securities law and federal or state antitrust or related laws.
(c) Opinions expressed "to the best of our knowledge" are based upon
inquiry of UCI, Buyer, DC of GA, and DC of TN, or officers of the relevant
entity or entities as to the subject matter thereof, but without independent
investigation or verification of any kind. While no independent investigations
or verifications have been conducted by us, we have no knowledge of facts in
material conflict with such opinions.
(d) The opinions expressed herein are based upon applicable laws,
statutes, ordinances, rules and regulations as exist on this date, and we
express no opinion as to the effect which any future amendments, changes,
additions, or modifications thereof may have on the future performance or
validity of the Agreement, Amendment, or the Ancillary Documents, or on the
consummation of the transactions contemplated by the Agreement, Amendment, and
the Ancillary Documents. We assume no obligation to update or supplement our
opinion to reflect any facts or circumstances which may hereafter come to our
attention or changes in law which may hereafter occur.
(e) The enforceability of the Agreement, Amendment, and the Ancillary
Documents, and the availability of certain rights and remedies provided therein,
are subject to, and may be affected or limited by the following: (i) the
provisions of applicable liquidation, conservatorship, insolvency, bankruptcy,
reorganization, moratorium, rearrangement and other similar laws, including
court decisions interpreting such laws; (ii) all other applicable federal or
state laws, constitutional requirements, statutes, ordinances, judicial
decisions, rules and regulations affecting creditors' rights generally,
including, without limitation, fraudulent conveyances, violable preferences,
non-judicial foreclosures and self-help remedies; (iii) general principles of
equity (regardless of whether such enforceability is considered in equity of at
law); (iv) the power of courts to deny enforcement of remedies generally based
upon public policy; (v) by the requirement that a party act with reasonableness
and in good faith to the extent required by the applicable law; and (vi) such
other matters of law which do not materially interfere with the practical
realization of the benefits intended to be conferred under the Agreement,
Amendment, and the Ancillary Documents.
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(f) We express no opinion as to the enforceability of any provisions
in the Agreement, Amendment, or the Ancillary Documents: (i) purporting to waive
or affect any rights to notices which may not be waived under applicable law;
(ii) relating to delay or omission of enforcement of remedies; (iii) with
respect to severability, exculpation, and set off rights; or (iv) respecting
indemnification rights which may be limited under applicable securities or other
law.
(g) We express no opinion as to the title of any party to its
properties or the priority or absence of any liens or encumbrances thereon or
claims thereto.
(h) These opinions are provided to you as legal opinions only, and
not as guaranties or warranties of the matters discussed herein or of any
transaction or obligation.
We are furnishing this opinion letter for the sole and exclusive
benefit of the addressee and its counsel, and this opinion letter is not to be
relied upon or used by, or circulated, quoted or otherwise distributed to, any
other person without the prior written consent of the undersigned.
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Exhibit 9.14
LITIGATION
MainStreet Healthcare Corporation v. Theodore K. Schock, D.O. and Cherylene T.
Johnson, Civil Action File No. 98-0078, Superior Court of Walton County,
Georgia. Filed January 1998. This is a suit to enforce a restrictive covenant.
Dr. Schock threatened to file a counterclaim for a claimed unpaid bonus. This
matter has been settled with MainStreet allowing Dr. Schock to practice within
the restricted territory and with Dr. Schock forgiving MainStreet's remaining
payments of $100,000.00 due under the Asset Purchase Agreement. This Settlement
Agreement has been executed and the dismissal will be filed shortly.
Paul Brewer, individually and as Administrator of the Estate of Alma Joan Brewer
v. Harold Holloway, D.O. and MainStreet Healthcare, Corp., Civil Action No.
97-VS-127611-A, State Court of Fulton County, Georgia. Filed in or about May
1997. This is a medical malpractice case arising from the treatment and death of
Mrs. Brewer prior to the purchase of Dr. Holloway's practice. This liability was
not assumed. Plaintiff's counsel has submitted an order dismissing MainStreet.
Physician Sales and Services, Inc. v. MainStreet Healthcare, Inc., Civil Action
No. 97-CV-12575, Superior Court of DeKalb County, Georgia. Filed
October/November 1997. This is a suit on account for supplies (although it is
alleged that equipment was included) in the amount of $190,915.13. This amount
is unsecured. The answer was timely filed and included a counterclaim for an
accounting. MainStreet has been remitting $10,000.00 per month since November
1997 and stopped mid-January. MainStreet disputes the amount owed and has
demanded an accounting. MainStreet does not believe that payments in the amount
of $97,000.00 made in 1997 have been credited properly. MainStreet believes that
part of the amount claimed can be attributed to amounts owed by a South Georgia
practice prior to its acquisition by MainStreet.
Kay Gillon-Martin v. MainStreet Healthcare Corporation, Civil Action No.
97-1383-5, Superior Court of DeKalb County, Georgia. Filed December 9, 1997.
This is a suit to collect a fee in the amount of $36,000.00 allegedly owed to
Plaintiff for the recruitment of physicians. MainStreet has filed an answer and
denies that any amount is owed. MainStreet denies that it had an agreement with
Plaintiff.
Deborah K. Gilmore v. MainStreet Healthcare Corporation and A. Wayne Johnson,
Case No. 97M057144, Magistrate Court of DeKalb County, Georgia. Filed September
30, 1997. This suit has been settled and a dismissal with prejudice will be
filed soon by the Plaintiff.
Pro-Scribe Services, L.L.C. v. MainStreet Healthcare Corporation, Civil Action
File No. 97SCV853, State Court of Lowndes County, Georgia. Filed October 10,
1997. This suit has been settled and a dismissal with prejudice was filed in
November, 1997.
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Exhibit 9.14 (Continued)
Georgia Power Federal Credit Union, Plaintiff v. Patricia Oakenson,
Defendant,/MainStreet Healthcare Corporation, Garnishee, Case No. 98G67092,
State Court of DeKalb County, Georgia. Filed January 15, 1998. This is a
garnishment action of a former employee's wages. An answer indicating such will
be filed.
Aalar, Ltd. d/b/a Atlanta Rent-a-Car v. Joseph Harris, Sr. v. MainStreet
Healthcare, Garnishee, Civil Action File No. 97G-63191, State Court of DeKalb
County, Georgia. Judgment against garnishee entered April 7, 1997. Judgment
satisfied.
Aalar, Ltd. d/b/a Atlanta Rent-a-Car v. MainStreet Healthcare Corporation v.
NationsBank, N.A., Garnishee, Case No. 97VX0031484AA, State Court of Fulton
County, Georgia. This garnishment has been paid and satisfied in full.
Smithkline Beecham Clinical Labs c/o Hays & Potter, P.C. v. MainStreet
Healthcare Corporation, Case No. 98A31833-3, State Court of DeKalb County,
Georgia. This is a suit on account in the amount of $17,682.56 plus interest.
This amount is unsecured. The answer was timely filed and included a
counterclaim for an accounting. MainStreet believes that part of the amount
claimed can be attributed to amounts owed by a South Georgia practice prior to
its acquisition by MainStreet.
J&C Health Services, Inc. v. MainStreet Healthcare Corporation, Case No.
98A20556-2, State Court of DeKalb County, Georgia. This suit is on account in
the amount of $24,000.00 for placement of two physicians. MainStreet maintains
that less than $24,000.00 is owed (approximately $16,000.00). MainStreet has not
been served yet.
CLAIMS
Karmeletta Oppenheimer; Ms. Oppenheimer has made demand for damages arising from
an alleged breach of confidentiality, among other additional related claims. No
suit has been filed.
Tracey Hunter; Ms. Hunter made a claim of sexual harassment and hostile work
environment against MainStreet Healthcare Corporation and Harold Holloway, D.O.
This claim has been resolved.
L. Lanier Allen, M.D.; Dr. Allen's claims concern the termination of the Asset
Purchase Agreement, the Employment Agreement and all other agreements between
him and MainStreet Healthcare Corporation. Dr. Allen owns 8000 shares of Class A
stock in MainStreet Healthcare Corporation. A settlement has been proposed that
would require MainStreet to return all of the assets and pay Dr. Allen
$20,000.00, and Dr. Allen to return all of the stock. The settlement has been
consummated except the transfer of the 8,000 shares to MainStreet and the tender
of $20,000 to Allen. It is anticipated to occur shortly after Closing.
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Exhibit 9.14 (Continued)
Gary Klein, M.D.; This is a dispute concerning the termination of Dr. Klein's
Employment Agreement. Dr. Klein claims he is owed $30,000 severance plus bonus
and additional compensation.
Imperial Capital Corporation f/k/a/ Avco Leasing Services, Inc.; This is a claim
to certain computer equipment originally leased by Gwinnett Family Medicine,
P.C. and Dr. David J. Ellis. MainStreet did not assume the lease(s) in question.
Durr Medical Corporation; This is a claim on account for $23,023.73. Payments
have been made on a semi-regular basis.
Frank T. Corker; This is a claim against MainStreet for default of the Asset
Purchase Agreement in the amount of $25,000.00. An additional, and final,
payment of $25,000.00 is due August 1998.
Dennis R. Thomas, M.D.; Dr. Thomas previously sold his practice to MainStreet
Healthcare Corporation. The arrangement was terminated and certain assets have
been transferred to Dr. Thomas (See Exhibit 9.11.3). Dr. Thomas still is owed
$20,000.00 by MainStreet, at which time he will tender his 20,000 shares of
Class A common stock.
Besse Medical Supply; This is a claim on account in the amount of $1,693.97 for
medical supplies purchased by the Thomaston practice in June or July 1997.
MainStreet Healthcare Corporation was responsible for all payables up through
August, 1997. MainStreet is disputing this claim since the items purchased by
the Thomaston practice were specifically for flue vaccines that could not be
used until after September, at which time MainStreet would not benefit from the
purchase of these supplies. It is anticipated that MainStreet will make a claim
of offset against the payment to Dr. Thomas stated above.
82
Exhibit 9.19.1
INSURANCE
<TABLE>
<CAPTION>
Insurance Coverage: Carrier: Policy Agent Address Phone
------------------ ------- ------ ----- ------- -----
<S> <C> <C> <C> <C> <C>
1. MalPractice Insurance Mag Mutual Ins. Co. 104620 Tom Harkins 8 Piedmon Ctr 404 842 5600
Atlanta, GA 30355
2. Business Liability State Farm Ins. 91-M1-1254-4 Robert Giganti 3145 Tucker Norcross Rd. 770 491 3999
Insurance Tucker, GA 30084
3. Worker's Compensation State Farm Ins. 91-ES-4565-1 Robert Giganti 3145 Tucker Norcross Rd. 770 491 3999
Tucker, GA 30084
4. Group Health Insurance
Georgia United Healthcare Ins. Co. BPL 29200-25120 David Asbury 1360 Peachtree St. 404 846 3000
Atlanta, GA 30309
Tennessee The Principal Financial Group N3698-3393 N/A 3025 West College 800-843-1371
Grand Isle, NB 68803 ex. 4334
5. Group Life Insurance
Georgia United Healthcare Ins. Co. BPL 29200-25120 David Asbury 1360 Peachtree St. 404 846 3000
Atlanta, GA 30309
Tennessee The Principal Financial BPL 29200-25120 N/A 3025 West College 800-843-1371
Group Grand Isle, NB 68803 ex. 4334
6. Group Dental Insurance The Guardian Co. G-318872 David Asbury 1360 Peachtree St. 404 846 3000
Atlanta, GA 30309
</TABLE>
83
