<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the registrant [ X ]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[X] Preliminary proxy statement.
[ ] Definitive proxy statement.
[ ] Definitive additional materials.
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12.
[ ] Confidential, for use of the Commission only (as permitted by
Rule 14a-6(e)(2)).
UCI MEDICAL AFFILIATES, INC.
(Name of Registrant as Specified in Its Charter)
Payment of filing fee (check the appropriate box):
[ ] No fee required.
[X ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction
applies: Common Stock
------------------
(2) Aggregate number of securities to which transaction
applies: 3,010,526 shares
------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
$8,050,000 assets acquired
819,933 liabilities assumed
----------
$8,869,933 total value of transaction
==========
(4) Proposed maximum aggregate value of transaction: $8,869,933
-------------
(5) Total fee paid: $1,774
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing by
registration statement number, or the form or schedule and the date
of its filing.
(1) Amount Previously Paid: _____________________________________
(2) Form, Schedule or Registration Statement No.: _______________
(3) Filing Party: _______________________________________________
(4) Date Filed: _________________________________________________
<PAGE>
PRELIMINARY PROXY STATEMENT DATED FEBRUARY 24, 1998
UCI MEDICAL AFFILIATES, INC.
1901 MAIN STREET, SUITE 1200
COLUMBIA, SOUTH CAROLINA 29201
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MONDAY, MARCH 30, 1998
TO THE STOCKHOLDERS OF UCI MEDICAL AFFILIATES, INC.:
The Annual Meeting of Stockholders of UCI Medical Affiliates, Inc., a
Delaware corporation ("UCI"), will be held on Monday, March 30, 1998 at 10:00
a.m., local time, at the Embassy Suites Hotel, 200 Stoneridge Drive, Columbia,
South Carolina 29210 for the following purposes:
A. In connection with the transaction in which UCI will acquire certain
assets and assume certain liabilities of MainStreet Healthcare Corporation, a
Delaware corporation, UCI stockholders will be asked:
1. To approve the issuance of shares of UCI common stock in
connection with the transaction.
2. To approve an amendment to the Amended and Restated
Certificate of Incorporation of UCI to increase the
authorized shares of UCI common stock from 10 million
shares to 30 million shares.
B. In connection with the Annual Meeting, UCI stockholders will be
asked:
1. To approve the election of three members of the UCI Board
of Directors, each to hold office for a three-year term
ending on the date of the annual meeting of stockholders
in the year 2001 and until such director's respective
successor shall have been duly elected and qualified.
2. To approve the adoption of the UCI 1997 Stock Incentive
Plan for officers, directors, employees and consultants.
3. To ratify the appointment of Price Waterhouse LLP as the
firm of independent auditors to audit the consolidated
financial statements of UCI and its subsidiaries for the
fiscal year ending September 30, 1998.
C. To transact such other business as may properly come before the
Annual Meeting or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record of UCI common stock at the close of
business on February 10, 1998 are entitled to notice of, and will be entitled to
vote at, the Annual Meeting or any adjournment or postponement thereof.
<PAGE>
BY ORDER OF THE BOARD OF DIRECTORS
M. F. McFarland, III, M.D.
CHAIRMAN OF THE BOARD
AND CHIEF EXECUTIVE OFFICER
March 5, 1998
TO ENSURE THAT YOUR SHARES ARE REPRESENTED AT THE ANNUAL MEETING, WE
URGE YOU TO COMPLETE, DATE AND SIGN THE ENCLOSED FORM OF PROXY AND MAIL IT
PROMPTLY IN THE POSTAGE-PAID ENVELOPE PROVIDED, WHETHER OR NOT YOU PLAN TO
ATTEND THE ANNUAL MEETING IN PERSON. YOUR PROXY CAN BE WITHDRAWN BY YOU AT ANY
TIME BEFORE IT IS VOTED.
----------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
REGULATOR HAS APPROVED THE SHARES OF UCI COMMON STOCK TO BE ISSUED IN THE
TRANSACTION, OR DETERMINED IF THIS PROXY STATEMENT IS ACCURATE OR ADEQUATE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The accompanying Proxy Statement is dated March 5, 1998,
and was first mailed to stockholders on March 6, 1998.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SUMMARY
<S> <C>
The Parties to the Acquisition....................................................................................1
Recommendations to Stockholders...................................................................................2
Risk Factors......................................................................................................2
The Acquisition...................................................................................................2
Annual Meeting Proposals..........................................................................................4
Markets and Market Prices.........................................................................................6
Selected Historical Financial Data of the Company.................................................................7
Selected Historical Financial Data of MHC.........................................................................8
Selected Pro Forma Financial Data of the Company..................................................................9
RISK FACTORS
Financial Status of MHC..........................................................................................10
Integration of Operations; Management of Growth..................................................................10
Financing as a Condition to Closing..............................................................................11
Dilution.........................................................................................................11
Resales of Common Stock and Market Volatility....................................................................13
Government Regulation............................................................................................13
Possible Nasdaq Delisting........................................................................................16
Competition......................................................................................................16
THE ACQUISITION
Description of the Acquisition...................................................................................18
Background .............................................................................................18
Reasons for the Acquisition.............................................................................19
Recommendation of the UCI Board.........................................................................20
Fairness Opinion........................................................................................20
Financing of the Acquisition............................................................................22
Certain Federal Income Tax Matters......................................................................23
Accounting Treatment....................................................................................23
Resales of Common Stock.................................................................................23
Absence of Dissenters' Rights...........................................................................24
Interests of Certain Persons in the Acquisition.........................................................24
Description of the Agreements....................................................................................25
Acquisition Agreement...................................................................................25
Related Agreements......................................................................................28
Non-Solicit Agreements.........................................................................28
Registration Rights Agreement..................................................................28
Shareholder Agreements.........................................................................28
FINANCIAL AND BUSINESS INFORMATION
Market Price and Dividend Information............................................................................29
Description of MHC...............................................................................................30
Unaudited Pro Forma Combined Condensed Financial Statements......................................................31
<PAGE>
THE ANNUAL MEETING
Business to Be Conducted at the Annual Meeting...................................................................37
Proposals to be Voted Upon..............................................................................37
Date, Time and Place of Meeting.........................................................................37
Record Date.............................................................................................37
Shares Outstanding and Entitled to Vote.................................................................38
Voting and Revocation of Proxies........................................................................38
Quorum..................................................................................................38
Vote Required...........................................................................................39
Solicitation of Proxies and Expenses....................................................................39
Description of Proposals.........................................................................................40
Share Issuance Proposal.................................................................................40
Authorized Capital Stock Proposal.......................................................................40
Election of Directors...................................................................................40
1997 Incentive Plan Proposal............................................................................41
Ratification of Auditors Proposal.......................................................................44
Directors and Executive Officers.................................................................................44
Directors...............................................................................................44
Executive Officers......................................................................................46
Section 16(a) Beneficial Ownership Reporting Compliance.................................................46
Board of Directors and Board Committees.................................................................46
Executive Compensation..................................................................................47
Director Compensation...................................................................................49
Employee Contracts......................................................................................50
Security Ownership of Certain Beneficial Owners and Management...................................................50
Certain Relationships and Related Party Transactions.............................................................52
ADDITIONAL INFORMATION
Cautionary Statement Concerning Forward-Looking Statements.......................................................56
Stockholder Proposals............................................................................................56
Other Matters....................................................................................................56
Annual Report....................................................................................................56
Where You Can Find More Information..............................................................................57
APPENDICES
Appendix A - Fairness Opinion...................................................................................A-1
Appendix B - Proposed Amendment to the UCI Certificate..........................................................B-1
Appendix C - MHC Historical Financial Statements................................................................C-1
</TABLE>
<PAGE>
SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS DOCUMENT, AND
MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. TO UNDERSTAND
THE PROPOSED TRANSACTION FULLY AND FOR A MORE COMPLETE DESCRIPTION OF THE LEGAL
TERMS OF THE TRANSACTION, YOU SHOULD READ CAREFULLY THIS ENTIRE DOCUMENT AND THE
DOCUMENTS TO WHICH WE HAVE REFERRED YOU. SEE "ADDITIONAL INFORMATION - WHERE YOU
CAN FIND MORE INFORMATION."
This Proxy Statement is being furnished to the holders of common stock,
par value $0.05 per share (the "Common Stock"), of UCI Medical Affiliates, Inc.,
a Delaware corporation ("UCI"), in connection with the solicitation of proxies
by the UCI Board of Directors (the "UCI Board") for use at the Annual Meeting of
Stockholders of UCI to be held Monday, March 30, 1998 at 10:00 a.m., local time,
at the Embassy Suites Hotel, 200 Stoneridge Drive, Columbia, South Carolina for
the following purposes:
o To approve certain proposals relating to the proposed
acquisition (the "Acquisition") by UCI and certain of
its affiliated entities of substantially all of the
assets and certain of the liabilities of MainStreet
Healthcare Corporation, a Delaware corporation
("MHC"), and its affiliated entities, and
o To approve certain proposals presented as part of the
regularly scheduled Annual Meeting of Stockholders of
UCI.
THE PARTIES TO THE ACQUISITION
PURCHASING ENTITIES
UCI MEDICAL AFFILIATES, INC.
UCI is a holding company that operates through its wholly-owned
subsidiary, UCI Medical Affiliates of South Carolina, Inc., a South Carolina
corporation ("UCI-SC"), providing nonmedical management and administrative
services for its network of 40 freestanding medical centers (the "UCI Centers")
located throughout South Carolina. In compliance with applicable laws governing
the corporate practice of medicine, all medical services at the UCI Centers are
provided by or under the supervision of Doctor's Care, P.A. ("DC-SC"), a South
Carolina professional corporation affiliated with UCI and UCI- SC. DC-SC was
formed and operates solely to fulfill the licensed medical provider
responsibilities associated with the UCI Centers pursuant to an administrative
services agreement between DC-SC and UCI-SC. UCI's executive offices are located
at 1901 Main Street, Suite 1200, Columbia, South Carolina 29201 and its
telephone number is (803) 252-3661.
UCI MEDICAL AFFILIATES OF GEORGIA, INC. ("UCI-GA")
UCI-GA is a South Carolina corporation and a wholly-owned subsidiary of
UCI formed solely for the purpose of acquiring the assets and liabilities of MHC
pursuant to the Acquisition. Following the closing of the Acquisition, UCI-GA
will perform the same functions with respect to the medical centers acquired
from MHC as are currently and will continue to be performed by UCI-SC with
respect to the UCI Centers.
DOCTOR'S CARE OF GEORGIA, P.C. ("DC-GA")
DOCTOR'S CARE OF TENNESSEE, P.C. ("DC-TN")
Each of DC-GA, a Georgia professional corporation, and DC-TN, a
Tennessee professional corporation (collectively, the "UCI-PCs), are to be
formed prior to the closing of the Acquisition for the
1
<PAGE>
purpose of acquiring the assets and liabilities of the MHC-PCs (defined below),
and thereafter will be operated solely to fulfill the licensed medical provider
responsibilities associated with the medical centers acquired by UCI-GA in the
Acquisition. These responsibilities, as well as various administrative,
management and support functions, will be carried out pursuant to an
administrative services agreement to be entered into between UCI-GA and each of
the UCI-PCs at the closing of the Acquisition.
FOR MORE INFORMATION RELATING TO UCI, UCI-SC, DC-SC AND UCI-GA
(COLLECTIVELY, THE "COMPANY") YOU SHOULD REVIEW THE DOCUMENTS REFERENCED IN
"ADDITIONAL INFORMATION - WHERE YOU CAN FIND MORE INFORMATION."
SELLING ENTITIES
MAINSTREET HEALTHCARE CORPORATION
MHC is a privately held corporation that provides nonmedical management
and administrative services for its network of 11 freestanding medical centers
(the "MHC Centers") located in Georgia and Tennessee. In compliance with
applicable laws governing the corporate practice of medicine, all medical
services at the MHC Centers are provided by or under the supervision of the two
professional corporations identified in the following paragraph. MHC's executive
offices are located at 2370 Main Street, Tucker, Georgia 30084 and its telephone
number is (770) 938-9355.
MAINSTREET HEALTHCARE MEDICAL GROUP, P.C. ("MHC-GA")
MAINSTREET HEALTHCARE MEDICAL GROUP, PC ("MHC-TN")
MHC-GA, a Georgia professional corporation, and MHC-TN, a Tennessee
professional corporation (collectively, the "MHC-PCs"), were formed and operate
solely to fulfill the licensed medical provider responsibilities associated with
the MHC Centers pursuant to administrative services agreements between each of
the MHC-PCs and MHC.
RECOMMENDATIONS TO STOCKHOLDERS
The UCI Board believes the Acquisition is in the best interests of the
Company and its stockholders and recommends, by the unanimous consent of all
directors, that you vote FOR the proposals related to the Acquisition, FOR the
amendment to UCI's Amended and Restated Certificate of Incorporation, FOR each
of the three nominees for director named in this Proxy Statement and FOR each of
the other proposals being submitted to you.
RISK FACTORS
For a description of certain things which you should consider in
connection with your vote on the proposals relating to the Acquisition, in
addition to the other information described in this document, see the
disclosures beginning on page 10 in this Proxy Statement under the heading "Risk
Factors."
THE ACQUISITION
The Acquisition Agreement and Plan of Reorganization dated February 9,
1998 (the "Acquisition Agreement") is the legal document that governs the
Acquisition. This agreement is summarized in this Proxy Statement under the
heading "The Acquisition - Description of the Agreements - Acquisition
Agreement."
2
<PAGE>
HOW THE ACQUISITION WILL BE COMPLETED
At the closing of the Acquisition, the following will take place:
o MHC will transfer to UCI-GA substantially all of the assets of MHC
in exchange for the following:
o assumption by UCI-GA of certain liabilities, including certain
line of credit and capital lease obligations of MHC aggregating
$819,933; and
o cash and stock having an aggregate value of $8.05 million, to be
exchanged in one of the following two combinations to be elected
by MHC on or before March 23, 1998:
o cash payment of $900,000 to MHC and issuance of Common Stock
to MHC valued at $7.15 million (as calculated pursuant to the
share price formula in the Acquisition Agreement); or
o cash payment of $1.25 million to certain creditors of MHC
(within 10 days following the closing) and issuance of Common
Stock to MHC valued at $6.8 million (as calculated pursuant to
the share price formula in the Acquisition Agreement).
Subject to a maximum of $3.125 per share and minimum of $2.375
per share, the price per share of Common Stock to be utilized in
the share price formula for the determination of the number of
shares of Common Stock to be issued to MHC under either of the
above alternatives will be the average of the closing prices of
the Common Stock as reported on the Nasdaq SmallCap Market for
the trading days during the 30 calendar day period ending on the
day before the closing.
The cash portion of the consideration to be paid by UCI-GA in the
Acquisition will be decreased dollar-for-dollar to the extent the
aggregate of the line of credit and lease obligations of MHC to
be assumed by UCI-GA at the closing date exceeds a designated
ceiling amount. The number of shares of Common Stock to be issued
in the Acquisition will be increased (pursuant to the share price
formula in the Acquisition Agreement) to the extent such line of
credit and lease obligations of MHC are less than the designated
ceiling and will be decreased (per the share price formula) to
the extent that any downward adjustment of the cash
consideration, as described above, exceeds the applicable cash
consideration.
o The MHC-PCs will transfer to the UCI-PCs all of the assets of the
MHC-PCs in exchange for the following:
o assumption by the UCI-PCs of the obligations of the MHC-PCs under
employment agreements with medical service providers; and
o cash payment of $100 to each of the MHC-PCs.
3
<PAGE>
RELATED AGREEMENTS
The Acquisition includes Non-Solicit Agreements and a Registration
Rights Agreement which are summarized in this Proxy Statement under the heading
"The Acquisition - Description of the Agreements Related Agreements."
FAIRNESS OPINION
In deciding to approve the Acquisition, the UCI Board considered, among
other things, advice from Dr. Oliver G. Wood, Jr., an independent consulting
economist. UCI's Board has received an opinion from Dr. Wood that as of the date
of his opinion the terms of the Acquisition are fair to UCI and its stockholders
from a financial point of view. Dr. Wood's opinion is attached as Appendix A to
this Proxy Statement. We encourage you to read it thoroughly.
FINANCING THE ACQUISITION
UCI intends to finance the cash portion of the consideration to be
issued in the Acquisition using a portion of the net proceeds expected to be
received by UCI in a private placement by UCI of $2.5 million of Common Stock
concurrently with the closing of the Acquisition. The closing of the private
placement is a condition to the closing of the Acquisition.
TAX TREATMENT
For U.S. federal income tax purposes, no income, gain or loss will be
recognized by UCI or the stockholders of UCI as a result of the Acquisition.
ACCOUNTING TREATMENT
The Acquisition is expected to be accounted for as a purchase in
accordance with generally accepted accounting principles.
RESALES OF COMMON STOCK
All of the shares of Common Stock to be issued in the Acquisition will
be considered "restricted securities" under federal and state securities laws.
Consequently, the transferability of such shares by their holders will be
limited during the two years following the closing of the Acquisition and will
remain limited thereafter to the extent such shares are held by affiliates of
UCI. To assist the holders of such shares in the public resale of such shares
during the year following the closing of the Acquisition, UCI has granted MHC
and its stockholders certain registration rights.
ABSENCE OF DISSENTERS' RIGHTS
UCI stockholders will not be entitled under Delaware law to seek
appraisal of their shares of Common Stock in connection with the Acquisition.
ANNUAL MEETING PROPOSALS
PROPOSAL TO APPROVE THE SHARE ISSUANCE
Because the number of shares of Common Stock to be issued in the
Acquisition will exceed 20 percent of the number of outstanding shares of Common
Stock prior to the Acquisition, approval by UCI
4
<PAGE>
stockholders of the issuance of the Common Stock is required under the rules of
the National Association of Securities Dealers, Inc. (the "NASD").
PROPOSAL TO INCREASE THE AUTHORIZED CAPITAL STOCK
UCI's Amended and Restated Certificate of Incorporation (the "UCI
Certificate") currently authorizes 10 million shares of Common Stock. The
authorized capital stock proposal provides that the authorized shares of Common
Stock will be increased to 30 million shares. Any authorized but unissued shares
of Common Stock may be used by UCI for general corporate purposes, including for
possible future acquisitions. The increase in the authorized number of shares of
Common Stock is required to complete the Acquisition.
ELECTION OF UCI DIRECTORS
At the Annual Meeting, UCI stockholders will be asked to elect the
following three director nominees: Charles P. Cannon, A. Wayne Johnson and Ashby
M. Jordan, M.D.
PROPOSAL TO APPROVE THE 1997 STOCK INCENTIVE PLAN
The UCI Board has approved the UCI 1997 Stock Incentive Plan. At the
Annual Meeting, you will be asked to approve this plan.
PROPOSAL TO RATIFY AUDITORS
UCI has appointed Price Waterhouse LLP as the independent auditors of
the Company's consolidated financial statements for the fiscal year ending
September 30, 1998. At the Annual Meeting, you will be asked to ratify this
appointment.
RECORD DATE; VOTE REQUIRED FOR STOCKHOLDER APPROVAL OF THE PROPOSALS
Only holders of record of Common Stock at the close of business on
February 10, 1998 are entitled to notice of and to vote at the Annual Meeting.
Common Stock is entitled to one vote per share on each matter that is presented
for stockholder approval at the Annual Meeting.
The proposal to issue shares of Common Stock to MHC pursuant to the
Acquisition must be approved by the affirmative vote of the holders of a
majority of the total votes cast on the proposal.
The proposal to amend the UCI Certificate to increase the number of
authorized shares of Common Stock must be approved by the affirmative vote of
the holders of a majority of the outstanding shares of Common Stock.
The three nominees receiving the greatest number of votes cast
(although not necessarily a majority of the votes cast) in the election of
directors will be elected to the UCI Board.
The proposal to approve the adoption of the UCI 1997 Stock Incentive
Plan and the proposal to ratify auditors must each be approved by the
affirmative vote of the holders of a majority of the shares of Common Stock
represented in person or by proxy and entitled to vote at the Annual Meeting.
M.F. McFarland, III, M.D., Chairman and Chief Executive Officer of UCI,
and certain subsidiaries of Blue Cross Blue Shield of South Carolina ("BCBS")
have indicated to UCI that each of them intends to vote the shares of Common
Stock controlled by them in favor of each of the proposals scheduled to be
presented for stockholder approval at the Annual Meeting. In addition, each of
Dr. McFarland and
5
<PAGE>
such subsidiaries of BCBS have executed separate agreements with MHC in which
they have agreed to vote their shares in favor of the proposals relating to the
Acquisition presented for stockholder approval. As of the record date for the
Annual Meeting, these shares represented 52.3 percent of the outstanding Common
Stock.
ACCORDINGLY, IF DR. MCFARLAND AND SUCH SUBSIDIARIES OF BCBS VOTE AS
INDICATED, ALL OF THE PROPOSALS ARE ASSURED TO BE APPROVED, REGARDLESS OF THE
VOTES THAT MAY BE CAST BY ANY OTHER HOLDERS OF COMMON STOCK ENTITLED TO VOTE.
MARKETS AND MARKET PRICES
The Common Stock is traded on the Nasdaq SmallCap Market under the
symbol "UCIA". For information regarding the historical market price of the
Common Stock, see "Financial and Business Information - Market Price and
Dividend Information."
On February 12, 1998, the last trading day prior to the public
announcement of the Acquisition, the Common Stock closed at $2.3125 per share.
On March , 1998, the last trading day before the printing of this Proxy
Statement, the Common Stock closed at $ per share.
MHC is a privately held corporation, and there is no public trading
market for its securities.
6
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA OF THE COMPANY
In the tables below, we provide you with selected historical financial
data of the Company. We prepared this data using the consolidated financial
statements of the Company. When you read this selected historical consolidated
financial data, you should read the historical financial statements and
accompanying notes that the Company has included in its Annual Report on Form
10-KSB/A for the year ended September 30, 1997 (which accompanies this Proxy
Statement) and its Quarterly Report on Form 10-QSB for the three months ended
December 31, 1997. You can obtain these reports by following the instructions we
provide in this Proxy Statement under the heading "Additional Information -
Where You Can Find More Information."
It is also important that you read the unaudited pro forma combined
financial information and accompanying notes that we have included in this Proxy
Statement under the heading "Financial and Business Information - Unaudited Pro
Forma Combined Condensed Financial Statements."
<TABLE>
<CAPTION>
SUMMARY CONSOLIDATED THREE MONTHS ENDED FISCAL YEAR ENDED
STATEMENTS OF OPERATIONS DATA DECEMBER 31, 1997 SEPTEMBER 30, 1997
------------------------------- ------------------- -------------------
<S> <C> <C>
Revenues............................................. $ 8,077,876 $ 27,924,772
Income (loss) from operations........................ (596,992) 54,684
Net income (loss).................................... (877,340) (83,726)
Net income (loss) per common and common (0.15) (0.02)
equivalent share (basic)..........................
Weighted average common shares and common equivalent
shares outstanding................................ 6,041,980 5,005,081
SUMMARY CONSOLIDATED
BALANCE SHEET DATA DECEMBER 31, 1997 SEPTEMBER 30, 1997
-------------------- ------------------- -------------------
Working capital...................................... $ 3,243,183 $ 2,921,045
Total assets......................................... 22,961,152 20,863,532
Long-term debt, net.................................. 8,398,333 6,920,470
Capital.............................................. 9,440,528 9,488,497
</TABLE>
7
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA OF MHC
In the table below, we provide you with selected historical financial
data of MHC. We prepared this data using the consolidated financial statements
of MHC. When you read this selected historical combined financial data, it is
important that you read the historical financial statements of MHC and
accompanying notes that we have included as Appendix C to this Proxy Statement.
It is also important that you read the unaudited pro forma combined
financial information and accompanying notes that we have included in this Proxy
Statement under the heading "Financial and Business Information - Unaudited Pro
Forma Combined Condensed Financial Statements."
Summary Consolidated Statements Three Months Ended Fiscal Year Ended
of Operations Data December 31, 1997 March 31, 1997
------------------ ----------------- --------------
Revenues ......................... $1,641,319 $ 3,665,982
Income (loss) from operations..... (356,654) (1,318,509)
Net income (loss)................. (458,974) (1,569,273)
Note: MHC was not required to, and did not, compute earnings per share.
Summary Consolidated
Balance Sheet Data December 31, 1997 March 31, 1997
------------------ ----------------- --------------
Working capital................... $(1,122,717) $ 327,283
Total assets...................... 5,655,242 795,876
Long-term debt, net............... 680,852 765,444
Total stockholders' deficit....... (3,389,869) (1,471,937)
8
<PAGE>
SELECTED PRO FORMA FINANCIAL DATA OF THE COMPANY
(unaudited)
In the table below, we attempt to illustrate the financial results that
might have occurred if the Acquisition had been completed previously. Presented
is combined statement of operations information for the Company for the three
months ended December 31, 1997 and the fiscal year ended September 30, 1997 as
if the Acquisition and the Private Placement (as defined herein) had been
completed on October 1, 1996. Also presented is combined balance sheet
information for the Company as of December 31, 1997 as if the Acquisition and
the Private Placement had been completed on that date.
It is important to remember that this information is hypothetical, and
does not necessarily reflect the financial performance that would have actually
resulted if the Acquisition and the Private Placement had been completed on
those dates. It is also important to remember that this information does not
necessarily reflect future financial performance if the Acquisition and the
Private Placement actually occur.
Please see the information in this Proxy Statement under the heading
"Financial and Business Information - Unaudited Pro Forma Combined Condensed
Financial Statements" for a more detailed explanation of this analysis.
<TABLE>
<CAPTION>
SUMMARY PRO FORMA COMBINED THREE MONTHS ENDED Fiscal Year Ended
STATEMENT OF OPERATIONS DATA DECEMBER 31, 1997 September 30, 1997
------------------------------ ------------------- ------------------
<S> <C> <C>
Revenues............................................... $ 9,719,195 $ 33,933,214
Income (loss) from operations.......................... (928,405) (2,382,433)
Net income (loss)...................................... (1,311,073) (2,925,554)
Net income (loss) per common and common
equivalent share (basic)............................. (0.12) (0.31)
Weighted average common shares and common equivalent
shares outstanding................................... 10,526,759 9,489,860
SUMMARY PRO FORMA COMBINED
BALANCE SHEET DATA
Working capital........................................ $ 5,099,322
Total assets........................................... 32,587,158
Long-term debt, net.................................... 8,445,936
Capital................................................ 18,510,528
</TABLE>
9
<PAGE>
RISK FACTORS
Each UCI stockholder should carefully consider and evaluate the
following factors, among others, before voting.
FINANCIAL STATUS OF MHC
MHC has experienced losses and operating deficits since its inception
in February 1996. UCI expects that following the Acquisition, the operations
associated with the assets acquired in the Acquisition may continue to
experience losses and require the infusion of substantial capital to build those
operations to a profitable state. Although UCI management believes that the
assets acquired from MHC in the Acquisition are valuable to the Company's
operations and are expected to contribute to long-term profitability and
enhanced stockholder value, there can be no assurance that such expectations can
be realized or that UCI can achieve profitability following the Acquisition.
In addition, following the Acquisition, MHC will continue to have
various repayment obligations to its third-party creditors. To the extent that
MHC is unable to satisfy its obligations to such creditors, MHC could be forced
to file for protection under applicable bankruptcy laws or could be placed into
an involuntary bankruptcy proceeding by its creditors. In such event, the
transfer of assets to UCI pursuant to the Acquisition could come under review of
a bankruptcy trustee, who could seek to characterize the transfer in the
Acquisition as a preference that could be set aside under applicable bankruptcy
law, requiring UCI and MHC to reverse the transactions comprising the
Acquisition. Pursuant to the Acquisition Agreement, MHC, the MHC-PCs and certain
of the MHC stockholders represent and warrant that they will not hinder, delay,
defraud or avoid any obligation to any past, present or future creditor in the
transactions contemplated by the Acquisition Agreement; that the consideration
to be received by MHC and the MHC-PCs is more than a reasonably equivalent value
in exchange for the transfer of the assets of MHC and the MHC-PCs; that each of
MHC and the MHC-PCs is currently solvent and will not be rendered insolvent as a
result of the transactions contemplated by the Acquisition Agreement; and that
neither MHC nor any of the MHC-PCs has initiated, nor does it intend to initiate
or expect to have initiated against it as debtor, any proceeding under federal
or any state's bankruptcy, insolvency or similar laws. Additionally, MHC and the
MHC-PCs have represented and warranted to UCI-GA that MHC and the MHC-PCs shall,
as and when due, use their reasonable best efforts within eleven months after
the closing of the Acquisition to pay all valid liabilities of MHC and the
MHC-PCs which are not assumed by the Company. The Company's remedy for any
breach of the foregoing by MHC, the MHC-PCs or the MHC stockholders is subject
to certain limitations which apply to all breaches of the Acquisition Agreement.
See "The Acquisition - Description of Agreements - Acquisition Agreement -
Representations, Indemnifications and Holdback Shares." Although MHC has
represented that it intends to satisfy its third-party creditor obligations
following the Acquisition, in the event of a set-aside pursuant to applicable
bankruptcy law, the expected benefits to UCI from the Acquisition would not be
achieved and, subject to a possible recovery under the applicable
indemnification provisions of the Acquisition Agreement, the transaction costs
associated with the Acquisition would not be recoverable by UCI, thereby
adversely affecting UCI's operations.
INTEGRATION OF OPERATIONS; MANAGEMENT OF GROWTH
In determining that the Acquisition is in the best interests of the
Company, the UCI Board addressed the cost savings, operating efficiencies, and
other synergies that may result from the consummation of the Acquisition. The
consolidation of functions and the integration of departments, systems and
procedures will present significant management challenges requiring the
dedication of management resources that will temporarily detract attention from
the day-to-day business of the Company following the Acquisition. The
difficulties of assimilation may be increased by the necessity of coordinating
geographically separated organizations, integrating personnel with disparate
business backgrounds and combining different corporate cultures. The process of
combining the MHC assets may
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cause an interruption of, or a loss of momentum in, the Company's business,
which could have an adverse effect on the revenues and operating results of the
combined Company, at least in the near term. There can be no assurance that the
combined entity will be able to retain all of its key management and other
operating personnel or that the combined entity will realize any of the other
anticipated benefits of the Acquisition.
FINANCING AS A CONDITION TO CLOSING
One of the conditions to the Company's obligation to close the
Acquisition is the concurrent closing by UCI of a $2.5 million private placement
of Common Stock (the "Private Placement"). See "The Acquisition - Description of
the Acquisition - Financing of the Acquisition." The placement agent engaged by
UCI in connection with the Private Placement has not provided any indication to
UCI that the Private Placement as described in this Proxy Statement will not
close as scheduled at the closing of the Acquisition. Nevertheless, as of the
date of this Proxy Statement, no subscription agreement or other binding
agreement for the sale of securities in the Private Placement has been delivered
to UCI by any potential investor, and UCI is not currently in negotiation with
any potential investors in contemplation of the Private Placement. There can be
no assurance that UCI will be able to close the Private Placement concurrently
with the anticipated closing of the Acquisition, currently scheduled for March
31, 1998, if at all, or that the structure and amount of any such Private
Placement will not vary substantially from the contemplated structure and amount
described in this Proxy Statement. In the event UCI is unable to close the
Private Placement concurrently with the anticipated closing of the Acquisition,
UCI will be faced with having to seek alternative sources of financing to close
the Acquisition as scheduled, or will have to reach an agreement with MHC and
its affiliated entities to delay the closing of the Acquisition as necessary to
complete the Private Placement or an alternative financing arrangement. There
can be no assurance that if faced with such circumstances the Company could
obtain alternative financing on satisfactory terms or obtain the agreement of
MHC to delay the closing of the Acquisition. Any delay in the closing of the
Acquisition would subject the Company to additional transaction costs, which
could be substantial. Furthermore, the terms of any alternative financing
arrangement made necessary by the failure to close the Private Placement could
be substantially less attractive to UCI and its stockholders than the terms of
the Private Placement as currently contemplated by UCI and described in this
Proxy Statement.
DILUTION
VOTING CONTROL
Depending upon the purchase price alternative selected by MHC under the
Acquisition Agreement, up to 3,010,526 shares of Common Stock may be issued to
MHC in the Acquisition. In addition, assuming the sale of Common Stock in the
Private Placement at a price of $2.3125 per share (the closing price of the
Common Stock on the day prior to the public announcement of the Acquisition) up
to 1,081,081 shares of Common Stock may be issued to investors in the Private
Placement. Such additional shares of Common Stock issued in the Acquisition and
in the Private Placement would represent, in the aggregate, approximately 40.3
percent of the number of shares of Common Stock outstanding immediately after
the closing of such transactions. Furthermore, to the extent the price per share
of the Common Stock expected to be sold in the Private Placement is lower than
the assumed price referenced above, a larger number of shares would be issued in
the Private Placement. Accordingly, the Acquisition and the Private Placement
will have the effect of substantially reducing the percentage voting interest in
UCI represented by a share of the Common Stock immediately prior to the closing
of such transactions.
As of the date of this Proxy Statement, Companion HealthCare
Corporation ("CHC") and Companion Property and Casualty Company ("CP&C"), each a
wholly-owned subsidiary of BCBS (individually, a "BCBS Subsidiary," and
collectively, the "BCBS Subsidiaries"), own in the aggregate 2,624,623 shares,
or 43.37 percent, of the outstanding Common Stock. Under various agreements
between UCI and the BCBS Subsidiaries (the "Anti-Dilution Agreements"), the BCBS
Subsidiaries have the right at any time to purchase from UCI such number of
shares of the voting stock of UCI as is
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necessary for BCBS and its affiliated entities, as a group, to maintain an
aggregate ownership of 47 percent of the outstanding voting stock of UCI. To the
extent either of the BCBS Subsidiaries exercises such right in conjunction with
a sale of voting stock by UCI, the price to be paid by the BCBS Subsidiary is
the average price to be paid by the other purchasers in such sale. Otherwise,
the price is the average closing bid price of the UCI voting stock on the ten
trading days immediately preceding the election by the BCBS Subsidiary to
exercise its purchase rights. Consequently, to the extent any of the BCBS
Subsidiaries elect to exercise any or a portion of their rights under the
Anti-Dilution Agreements following the Acquisition and the Private Placement,
the sale of shares of Common Stock to such BCBS Subsidiary will have the effect
of further reducing the percentage voting interest in UCI represented by a share
of the Common Stock immediately prior to such sale.
The substantial ownership of Common Stock by the BCBS Subsidiaries, MHC
and other affiliates of the Company following the Acquisition and the Private
Placement will provide them with the ability to exercise substantial influence
in the election of directors and other matters submitted for approval by the UCI
stockholders. As a result, it may be difficult for other stockholders of UCI to
successfully oppose matters which are presented by such entities for action by
stockholders, or to take actions which are opposed by such entities. Such
ownership may also have the effect of delaying, deterring or preventing a change
in control of UCI without the consent of such entities. In addition, sales of
Common Stock by such entities could result in another stockholder obtaining
control over UCI.
FIXED SHARE PRICE RANGE IN ACQUISITION CONSIDERATION
The price of Common Stock provided in the Acquisition Agreement for
purposes of determining the number of shares of Common Stock to be issued in the
Acquisition (the "Formula Price") is the average of the closing prices of the
Common Stock as reported on the Nasdaq SmallCap Market for the trading days
during the 30 calendar day period ending on the day before the closing of the
Acquisition, subject to a maximum of $3.125 per share and a minimum of $2.375
per share. This range will not be adjusted in the event of any increases or
decreases in the Formula Price or in the actual market price of the Common Stock
occurring prior to the closing of the Acquisition. The Formula Price and the
actual market price of the Common Stock may vary within this range and may fall
below or rise above such range prior to the closing of the Acquisition. Such
variations may be the result of changes in the business, operations, or
prospects of the Company; market assessments of the likelihood that the
Acquisition will be consummated; the timing of the Acquisition; the prospects of
the Acquisition and post-Acquisition operations; regulatory considerations;
general market and economic conditions; and other factors. Consequently, there
can be no assurance that the Formula Price or the actual market price of the
Common Stock at the closing will be within the range established in the
Acquisition Agreement. The closing of the Acquisition is expected to occur on
March 31, 1998, the day after the Annual Meeting, but the closing may be
extended upon mutual agreement of the parties to the Acquisition. To the extent
that the Formula Price is above $3.125 per share, the $3.125 per share price
will be utilized in determining the number of shares to be issued, which number
would exceed the number of shares that would have been issued had such upper
limit on the Formula Price not been in effect. In such event, the issuance of
additional shares in the Acquisition could be viewed as resulting in some degree
of economic dilution of the Common Stock held by stockholders immediately prior
to the Acquisition.
EARNINGS AND BOOK VALUE PER SHARE
On a pro forma basis, the closing of the Acquisition and the Private
Placement will have a dilutive effect on earnings per share of UCI for the
fiscal year ended September 30, 1997 (from $(0.02) per share to $(0.31) per
share) and an anti-dilutive effect for the three-month period ended December 31,
1997 (from $(0.15) per share to $(0.12) per share). These pro forma amounts are
based on the assumptions reflected in the notes to the Unaudited Pro Forma
Combined Condensed Financial Statements included elsewhere in this Proxy
Statement and, consequently, may not be reflective of all of the actual cost
savings or other synergies, if any, or the related expenses that may be realized
or incurred by the Company as a result of the Acquisition and the Private
Placement. The extent of dilution to UCI stockholders with respect to future
earnings per share and book value per
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share will depend on the actual results achieved by the Company following the
Acquisition and the Private Placement as compared to the results that could have
been achieved by the Company on a stand-alone basis over the same period in the
absence of such transactions. No assurance can be given as to such future
results, and, accordingly, as to whether the Acquisition and the Private
Placement will ultimately be dilutive to UCI stockholders with respect to future
earnings per share or book value per share.
RESALES OF COMMON STOCK AND MARKET VOLATILITY
Depending upon the purchase price alternative selected by MHC under the
Acquisition Agreement, up to 3,010,526 shares of Common Stock may be issued to
MHC in the Acquisition. In addition, assuming the sale of Common Stock in the
Private Placement at a price of $2.3125 per share (the closing price of the
Common Stock on the day prior to the public announcement of the Acquisition) up
to 1,081,081 shares of Common Stock may be issued to investors in the Private
Placement. Such additional shares of Common Stock issued in the Acquisition and
in the Private Placement would represent, in the aggregate, approximately 40.3
percent of the number of shares of Common Stock outstanding immediately after
the closing. Furthermore, Common Stock purchase warrants are expected to be
issued in the Private Placement on the basis of one warrant for every two shares
sold. Although the shares to be issued in connection with both the Acquisition
and the Private Placement will be considered "restricted securities" under
applicable securities laws, thereby limiting the resale of such shares into the
public market, the holders of shares to be issued in the Acquisition have been
granted, and the purchasers of shares in the Private Placement may be granted,
registration rights which entitle or will entitle such holders to have all or a
portion of such shares registered for sale into the public market. To the extent
that such holders do not exercise such registration rights, all of such shares
will nevertheless become eligible for sale in the public market in accordance
with the Securities and Exchange Commission's Rule 144 or Rule 145 one year
following the closing of the Acquisition and the Private Placement, with certain
volume and manner of sale limitations continuing only for one year thereafter
(except as to shares held by persons deemed to be affiliates of UCI). In
addition, if the proposed amendment to the UCI Certificate is approved by the
stockholders at the Annual Meeting, UCI will increase by 20 million the number
of shares of Common Stock available for issuance. Sales of substantial amounts
of Common Stock, or the availability of substantial amounts of Common Stock for
future sale, could adversely affect the prevailing market price of the Common
Stock.
As of the date of this Proxy Statement, approximately 2,624,453 shares,
or 43.4 percent, of the outstanding Common Stock is held by nonaffiliates of
UCI. Trading in the Common Stock has historically been very limited, and there
can be no assurance that an active trading market for the Common Stock will
develop or be sustained. Because of the limited trading liquidity in the Common
Stock, the market price of the Common Stock has been vulnerable to significant
fluctuations in response to very limited market trading in such shares. The
market price of the Common Stock will remain subject to significant fluctuations
in response to such factors as well as in response to operating results and
other factors affecting the stock market generally. The stock market in recent
years has experienced price and volume fluctuations that often have been
unrelated or disproportionate to the operating performance of companies. These
fluctuations, as well as general economic and market conditions, may adversely
affect the market price of the Common Stock in the future.
GOVERNMENT REGULATION
As participants in the health care industry, the Company's and MHC's
operations and relationships are subject to extensive and increasing regulation
by a number of governmental entities at the federal, state and local levels.
LIMITATIONS ON THE CORPORATE PRACTICE OF MEDICINE
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Federal law and the laws of many states, including Georgia, South
Carolina and Tennessee, generally specify who may practice medicine and limit
the scope of relationships between medical practitioners and other parties.
Under such laws, business corporations such as UCI, UCI-SC, UCI-GA and MHC are
prohibited from practicing medicine or exercising control over the provision of
medical services. In order to comply with such laws, all medical services at the
UCI Centers and the MHC Centers are provided by or under the supervision of
DC-SC or, as applicable, the MHC-PCs, which have contracted with UCI-SC or MHC,
as applicable, to provide the medical direction of the related medical centers.
DC-SC and the MHC-PCs are organized so that all physician services are offered
by the physicians who are employed by DC-SC or the MHC-PCs, as applicable. None
of UCI, UCI-SC, UCI-GA or MHC employ practicing physicians as practitioners,
exert control over any physician's decisions regarding medical care or represent
to the public that it offers medical services. UCI-SC has entered into an
administrative services agreement with DC-SC, and MHC has entered into an
administrative services agreement with the MHC-PCs, for the performance by
UCI-SC and MHC, as applicable, of all administrative, management and support
functions of their respective medical centers. As set forth in the Acquisition
Agreement, DC-GA and DC-TN will purchase all of the assets, including the
medical records and physician employment agreements, of MHC-GA and MHC-TN,
respectively. As part of the Acquisition, UCI-GA will enter into an
administrative services agreement with each of DC-GA and DC-TN which will
replace similar agreements currently in place between each of the MHC-PCs and
MHC. UCI- SC believes that the services it provides to DC-SC and the services
UCI-GA will provide to the UCI-PCs, which currently result, or after the
Acquisition will result, in control over the assets of DC-SC, or the UCI- PCs,
as applicable, and mandate financial statement consolidation under generally
accepted accounting principles do not and will not constitute the practice of
medicine under applicable laws. Accordingly, UCI believes that it is not in
violation of applicable state laws relating to the practice of medicine, and
will not be in violation of such laws following or as a consequence of the
Acquisition.
Nevertheless, because of the unique structure of the relationships
between UCI-SC and DC-SC and between MHC and the MHC-PC's, many aspects of UCI's
and MHC's business operations have not been the subject of state or federal
regulatory interpretation. There can be no assurance that a review by the courts
or regulatory authorities of the business currently conducted by any or all of
the Company, MHC or the MHC-PCs or proposed to be conducted by the Company
following the Acquisition will not result in a determination that could
adversely affect the operations of any or all of them or that the healthcare
regulatory environment will not change so as to restrict the existing operations
or proposed expansion of the Company's business.
THIRD PARTY REIMBURSEMENTS
Approximately five percent of the revenues of the Company and
approximately 15 percent of the revenues of MHC are derived from payments made
by government-sponsored health care programs (principally, Medicare and
Medicaid). As a result, any change in reimbursement regulations, policies,
practices, interpretations or statutes could adversely affect their operations.
There are also state and federal civil and criminal statutes imposing
substantial penalties, including civil and criminal fines and imprisonment, on
healthcare providers that fraudulently or wrongfully bill governmental or other
third-party payors for healthcare services. Each of the Company and MHC believes
it is in material compliance with such laws, but there can be no assurance that
their activities prior to, or the Company's activities following, the
Acquisition will not be challenged or scrutinized by governmental authorities.
ANTI-KICKBACK LAWS
Certain provisions of the Social Security Act, commonly referred to as
the "Anti-kickback Statute," prohibit the offer, payment, solicitation or
receipt of any form of remuneration in return for the referral of Medicare or
state health program patients or patient care opportunities, or in return for
the recommendation, arrangement, purchase, lease or order of items or services
that are covered by Medicare or state health programs. Many states have adopted
similar prohibitions against payments intended to induce referrals of Medicaid
and other third-party payor patients. Although each of the Company and
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MHC believes that it is not in violation of the Anti-kickback Statute or similar
state statutes, their operations prior to, and the Company's operations
following, the Acquisition will not fit within any of the existing or proposed
federal safe harbors.
SELF-REFERRAL LAWS
Significant prohibitions against physician referrals were enacted by
the U.S. Congress in the Omnibus Budget Reconciliation Act of 1993. Subject to
certain exemptions, a physician or a member of his immediate family is
prohibited from referring Medicare or Medicaid patients to an entity providing
"designated health services" in which the physician has an ownership or
investment interest or with which the physician has entered into a compensation
arrangement. While each of the Company and MHC believes it is currently in
compliance with such legislation, future regulations following the Acquisition
could require the Company to modify the form of its relationships with physician
groups. Some states have also enacted similar self-referral laws, and the
Company believes it is likely that more states will follow. Each of the Company
and MHC believes that its practices fit within exemptions contained in such
laws. Nevertheless, expansion of the operations of the Company following the
Acquisition to certain additional jurisdictions may require structural and
organizational modifications of the Company's relationships with physician
groups to comply with new or revised state statutes. Such modifications could
adversely affect the operations of the Company following the Acquisition.
ANTITRUST LAWS
Because each of the UCI-PCs and the MHC-PCs is a separate legal entity,
each may be deemed a competitor subject to a range of antitrust laws which
prohibit anti-competitive conduct, including price fixing, concerted refusals to
deal and division of market. The Company believes it is in compliance with such
state and federal laws which may affect its development of integrated healthcare
delivery networks, but there can be no assurance that a review of the Company's
business by courts or regulatory authorities either prior to or following the
Acquisition will not result in a determination that could adversely affect the
operations of the Company following the Acquisition.
HEALTHCARE REFORM
As a result of the continued escalation of healthcare costs and the
inability of many individuals to obtain health insurance, numerous proposals
have been or may be introduced in the U.S. Congress and in state legislatures
relating to healthcare reform. There can be no assurance as to the ultimate
content, timing or effect of any healthcare reform legislation, nor is it
possible at this time to estimate the impact of potential legislation, which may
be material, on the Company following the Acquisition.
REGULATION OF RISK ARRANGEMENTS AND PROVIDER NETWORKS
Federal and state laws regulate insurance companies, health maintenance
organizations and other managed care organizations. Generally, these laws apply
to entities that accept financial risk. Certain of the risk arrangements entered
into by the Company and MHC could possibly be characterized by some states as
the business of insurance. Each of the Company and MHC, however, believes that
the acceptance of capitation payments by a healthcare provider does not
constitute the conduct of the business of insurance. Many states also regulate
the establishment and operation of networks of healthcare providers. Generally,
these laws do not apply to the hiring and contracting of physicians by other
healthcare providers. Each of the Company and MHC believes that it is in
compliance with these laws in the states in which it currently does business,
but there can be no assurance that future interpretations of these laws by the
regulatory authorities in Georgia, South Carolina, Tennessee or the states in
which the Company may expand following the Acquisition will not require
licensure of the Company's operations as an insurer or provider network or a
restructuring of some or all of the Company's operations. In the event the
Company is required to become licensed under these laws, the licensure process
can be lengthy and time consuming and, unless the regulatory authority permits
the Company to continue to operate while the
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licensure process is progressing, the Company could experience a material
adverse change in its business while the licensure process is pending. In
addition, many of the licensing requirements mandate strict financial and other
requirements which the Company may not immediately be able to meet. Further,
once licensed, the Company would be subject to continuing oversight by and
reporting to the respective regulatory agency.
POSSIBLE NASDAQ DELISTING
The Common Stock is currently listed for trading on the Nasdaq SmallCap
Market. The continued trading of the Common Stock on the Nasdaq SmallCap Market
is conditioned upon the Company meeting certain quantitative and qualitative
requirements regarding assets, capital, earnings surplus, stock price and
corporate governance features. During 1997, the NASD expanded the quantitative
and qualitative listing criteria for all companies listed on the Nasdaq Stock
Market and placed additional corporate governance listing standards on companies
currently listed on the Nasdaq SmallCap Market. These new requirements for
continued listing became effective as to the Company on February 23, 1998. UCI
has been notified by the Nasdaq Stock Market that the Company is not currently
in compliance with the new requirements for continued listing as a consequence
of its failure to meet the requirement of at least $2 million in net tangible
assets. As of December 31, 1997, the Company had net tangible assets of
approximately $1 million. Upon completion of the Acquisition and the Private
Placement, the Company expects that its net tangible assets will exceed the $2
million requirement, such that the Company would then be in compliance with the
Nasdaq Stock Market net tangible assets requirement as well as with all other
applicable listing requirements. The Company has submitted a proposed plan of
compliance to the Nasdaq Stock Market indicating its proposed timetable for
satisfying the new listing requirements. As of the date of this Proxy Statement,
the Company has not received confirmation from the Nasdaq Stock Market that the
Company's proposed compliance program will be satisfactory. To the extent that
the Company is unable to satisfy the new maintenance criteria, the Common Stock
will be subject to being delisted, and trading in the Common Stock thereafter,
if any, will likely be conducted in the over-the-counter market. As a
consequence of any such delisting, it is expected that stockholders of UCI will
find it more difficult to dispose of, or to obtain accurate quotations as to the
market value of, the Common Stock. In addition, any such delisting will make the
Common Stock substantially less attractive as collateral for margin and purpose
loans, for investment by financial institutions under their internal policies or
state legal investment laws, as consideration in the financing of future
acquisitions of other medical practices by the Company, and for issuance by the
Company in future capital raising transactions. Although following a delisting,
the Common Stock may be eligible for quotation on the over-the-counter bulletin
board, the Company is informed that the NASD may presently be considering higher
standards for permitting quotations of securities on such bulletin board,
thereby foreclosing this trading market to UCI stockholders as well.
UCI believes that the Acquisition and the concurrent Private Placement
will enable the Company to satisfy the new listing criteria of the Nasdaq Stock
Market. UCI does not presently have in place any other plan to bring about
compliance with such criteria. Consequently, UCI believes that it is critically
important that the Acquisition and the concurrent Private Placement be completed
as proposed in this Proxy Statement in order to preserve the listing of the
Common Stock on the Nasdaq SmallCap Market.
COMPETITION
The UCI Centers and the MHC Centers face competition, in varying
degrees, from hospital emergency rooms, private doctor's offices and other
competing freestanding medical centers. Some of these providers have financial
resources which are greater than those of the Company. In addition, traditional
sources of medical services, such as hospital emergency rooms and private
physicians, have had, in the past, a higher degree of recognition and acceptance
by patients than centers such as those operated by UCI and MHC. Following the
Acquisition, the Company intends to change the name under which the MHC Centers
publicly conduct business. While the Company's management believes that
following the Acquisition the MHC Centers will be able to compete on the basis
of accessibility, including evening and
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weekend hours, a non-appointment policy, the attractiveness to large employers
and third-party payors of the Company's state-wide network, and on the basis of
a competitive fee schedule, there can be no assurance that the MHC Centers will
be able to compete successfully in the future, or that the proposed change in
the name of such centers will not adversely affect the operations of such
centers.
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THE ACQUISITION
DESCRIPTION OF THE ACQUISITION
BACKGROUND
The Company has experienced significant growth in the last few years as
a result of acquisitions of medical practices. Management has sought to increase
the Company's bargaining power with insurance payors and to lower operating
costs through negotiated discounts on medical supplies by enhancing the
Company's negotiating leverage through the clout associated with an expanding
number of medical practices under the Company's control and an expanding number
of medical providers employed by the Company. In this regard, several
out-of-state acquisition targets have been evaluated by the Company over the
past few years.
In the third calendar quarter of 1997, A. Wayne Johnson, Chairman and
Chief Executive Officer of MHC, contacted M.F. McFarland, III, M.D., Chairman
and Chief Executive Officer of UCI, to discuss the potential benefits of a
combination of UCI and MHC. Following their initial discussions, a determination
was reached by the two executives to informally exchange information about their
respective companies. In September 1997, several meetings took place among Dr.
McFarland, Mr. Johnson, Jerry F. Wells, Jr., Executive Vice President of Finance
and Chief Financial Officer of UCI, and Robert G. Riddett, Jr., President of
MHC. During these meetings, the possible combination of UCI and MHC was
discussed and analyzed at length in the context of both the existing operations
of the respective companies and the potential growth and estimated synergies
that could result.
The content and findings from the September 1997 meetings were
discussed with the UCI Board at its regularly scheduled September 1997 meeting
in the context of potential growth opportunities and the enhancement of
long-term value for the UCI stockholders.
During October 1997, Dr. McFarland and Mr. Johnson authorized the
continued exploration of combination possibilities at an expanded level,
involving only a few members of senior management from each company. Thereafter,
Mr. Wells notified Mr. Johnson of the kinds of additional information UCI would
need to conduct more in-depth due diligence with respect to MHC. Following the
receipt and review by UCI of this information from MHC, meetings among the top
executive officers of UCI and MHC were held in October and November of 1997 to
discuss and clarify the information provided, and to give UCI the opportunity to
provide MHC with UCI's preliminary business plan and ideas for a possible
acquisition of MHC by UCI.
Through a series of telephone conversations in November 1997, Dr.
McFarland and Mr. Wells discussed with and recommended to the UCI Board that UCI
pursue the acquisition of the MHC medical practices. As part of such
conversations, Dr. McFarland and Mr. Wells reported to the UCI Board members on
the course of negotiations related to the proposed acquisition, summarized the
results of the due diligence that had been conducted on MHC, discussed the
potential benefits and risks of the proposed acquisition, provided their
respective views of the business and financial condition of MHC, and responded
to questions from the directors.
At the regularly scheduled December 1997 UCI Board meeting, results of
due diligence to date, forecasts for combined operations, and purchase price
negotiation details were presented by Dr. McFarland and Mr. Wells to the UCI
Board. Following extensive deliberation, UCI's Board unanimously approved
proceeding with the proposed acquisition of MHC in accordance with the
objectives that had been set forth by UCI senior management.
In January 1998, the UCI Board engaged the services of Dr. Oliver G.
Wood, Jr., an independent consulting economist, to conduct a financial analysis
of the proposed acquisition and to render an opinion as to the fairness of the
proposed acquisition to UCI and its stockholders from a financial point of view.
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A letter of intent relating to the proposed acquisition was negotiated
in the first week of February 1998 among top management officials of both
companies, outside counsel and financial advisors. Over the course of the same
period, Dr. McFarland and Mr. Wells continued to hold discussions with members
of the UCI Board and provided board members with oral and written information
regarding the proposed acquisition. The letter of intent and the form of a
definitive acquisition agreement, including additional supporting agreements,
was unanimously approved by the UCI Board in the first week of February 1998.
During the first week of February 1998, Dr. Wood provided an oral
indication to the Company of his initial assessment that the proposed
acquisition was fair to UCI and its stockholders from a financial point of view.
Dr. Wood subsequently confirmed in writing his opinion to the effect that, as of
February 9, 1998 and based on and subject to certain matters stated in his
opinion, the proposed acquisition was fair from a financial point of view to UCI
and its stockholders.
On February 9, 1998, the definitive Acquisition Agreement was executed
by UCI and MHC.
During December of 1997, senior management of MHC provided the members
of the Board of Directors of MHC (the "MHC Board") with information on the
status of the discussions and negotiations with UCI and due diligence on UCI. A
meeting of the MHC Board was held on February 6, 1998. Prior to that meeting,
each director of MHC was provided with materials outlining and analyzing the
proposed acquisition. At the meeting of the MHC Board, MHC senior management
presented to the MHC Board the background of the proposed acquisition, the
outline of the terms and conditions of the proposed acquisition, a financial
analysis of the proposed acquisition, and the potential benefits and risks of
the proposed acquisition. MHC senior management also responded to questions from
directors. During the first week of February 1998, the MHC Board approved the
form of a definitive purchase agreement and related documentation, subject to
finalization by MHC management and its legal advisors.
On February 13, 1998, UCI issued a press release announcing the
Acquisition. Following the date of the press release and continuing through the
date of this Proxy Statement, UCI and MHC continued to meet to exchange
information and to prepare for the anticipated consummation of the Acquisition.
REASONS FOR THE ACQUISITION
The UCI Board and UCI senior management believe that the terms of the
Acquisition are fair to, and in the best interests of, UCI and the UCI
stockholders. In reaching its determination to approve the Acquisition, the UCI
Board identified and analyzed the following factors and potential benefits,
among others, relating to the Acquisition:
o alternatives for growth in the healthcare business, including internal
development, which the UCI Board viewed as less advantageous due to
UCI's limited development resources as well as the uncertainty of the
success of such development efforts, none of which appeared to present
the opportunity that an acquisition of MHC presented;
o the strategic value of further developing a multi-state presence for the
Company;
o the competitive advantage gained by increasing the medical provider base
in negotiating insurance reimbursement rates and discounts to medical
supply costs;
o the expectation that the assets of MHC represented a complementary
business and that the Acquisition may be viewed favorably by investors
due to such complementary nature;
o the benefits of enjoying economies of scale by combining the two
companies and eliminating certain duplications of overhead;
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o information concerning the Company's and MHC's respective prospects,
financial performance, financial condition, assets and operations;
o the financial terms of the Acquisition and its effect on future
earnings;
o the opinion of Dr. Oliver G. Wood Jr. that the terms of the Acquisition
are fair, from a financial point of view, to UCI, as well as the
underlying financial analysis of Dr. Wood presented in connection with
such opinion; and
o a review with UCI's outside legal counsel of the terms of the
Acquisition Agreement and related agreements.
Following its deliberations concerning such factors, the UCI Board
concluded that the Acquisition may increase the long-term prospects of the
Company for continued growth, may increase stockholder value and was in the best
interests of UCI and its stockholders from both a financial and strategic
perspective.
The UCI Board also considered a variety of potentially negative factors
in its deliberations concerning the Acquisition, including: (i) the possible
dilutive effect of the issuance of Common Stock in the Acquisition; (ii) the
charges expected to be incurred in connection with the Acquisition, including
the transaction costs and costs of integrating the businesses of the companies;
(iii) the risk that, despite the efforts of the combined company, key personnel
of MHC may not be retained by the Company and the MHC assets may continue to be
unprofitable; and (iv) the risk that other benefits sought to be obtained by the
Acquisition might not be obtained.
In view of the wide variety of factors, both positive and negative,
considered by the UCI Board, the UCI Board did not find it practical to, and did
not quantify or otherwise assign relative weights to the specific factors
considered. In addition, individual members of the UCI Board may have given
different weights to the various factors considered.
RECOMMENDATION OF THE UCI BOARD
THE UCI BOARD HAS APPROVED THE ACQUISITION AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED BY THE ACQUISITION AGREEMENT BY THE UNANIMOUS CONSENT
OF ALL DIRECTORS AND HAS DETERMINED THAT THE TERMS OF THE ACQUISITION AGREEMENT
AND RELATED AGREEMENTS ARE FAIR TO, AND THAT THE ACQUISITION IS IN THE BEST
INTERESTS OF, UCI AND ITS STOCKHOLDERS AND, THEREFORE, RECOMMENDS THAT THE
HOLDERS OF COMMON STOCK VOTE FOR THE PROPOSALS RELATING TO THE ACQUISITION.
YOUR PROXY WILL BE SO VOTED UNLESS YOU SPECIFY OTHERWISE.
FAIRNESS OPINION
Dr. Oliver G. Wood, Jr. has delivered his opinion to the effect that
the terms of the Acquisition are fair, from a financial point of view, to UCI
and its stockholders.
The full text of the written opinion of Dr. Wood, dated February 9,
1998, is attached as Appendix A to this Proxy Statement and describes the
assumptions made, matters considered and limits on the review undertaken. UCI
stockholders are urged to read the opinion in its entirety. Dr. Wood's opinion
is directed to the fairness, from a financial point of view, of the terms of the
Acquisition to UCI and does not constitute a recommendation of the Acquisition
over other courses of action that may be available to UCI or constitute a
recommendation to any holder of Common Stock concerning how such holder should
vote
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with respect to the proposals relating to the Acquisition. The summary of the
opinion of Dr. Wood set forth in this Proxy Statement is qualified in its
entirety by reference to the full text of such opinion.
In arriving at his opinion, Dr. Wood (i) reviewed the terms and
conditions of the Acquisition, including drafts of the Acquisition Agreement and
agreements ancillary to the Acquisition Agreement; (ii) analyzed certain
financial aspects of the Acquisition and consideration to be paid by UCI and
UCI-GA in connection with the Acquisition, (iii) reviewed and analyzed publicly
available historical business and financial information relating to UCI, as
presented in documents filed with the Securities and Exchange Commission (the
"SEC") as well as historical financial information relating to MHC provided to
him by UCI and MHC; (iv) analyzed selected non-public financial and operating
results of operations of UCI and MHC; (v) analyzed the financial conditions and
prospects of UCI and MHC; (vi) reviewed and analyzed public information,
including certain stock market data and financial information of selected
companies with operating and financial characteristics similar to those of UCI
and MHC; (vii) reviewed the trading history of the Common Stock, including such
stock's performance in comparison to market indices and to selected companies
with operating and financial characteristics similar to those of UCI; (viii)
conferred with the management teams of UCI and MHC; (ix) reviewed public
financial and transaction information relating to multiples paid in selected
merger and acquisition transactions similar to the Acquisition or relevant
portions thereof; and (x) conducted such other financial analyses and
investigations as deemed necessary or appropriate for the purposes of his
opinion.
In connection with his review, Dr. Wood assumed and relied on the
accuracy and completeness of the information he reviewed for the purpose of his
opinion and did not assume any responsibility for independent verification of
such information or for any independent evaluation or appraisal of the assets of
UCI or MHC. With respect to UCI's and MHC's non-public financial and operating
data, Dr. Wood assumed that they had been reasonably prepared on bases
reflecting the best currently available estimates and judgments of the
managements of UCI and MHC. Dr. Wood expressed no opinion with respect to such
non-public financial and operating data or the assumptions on which they were
based. Dr. Wood's opinion was necessarily based upon business, market, economic
and other conditions as they existed on, and could be evaluated as of, the date
of his opinion. Dr. Wood's opinion does not imply any conclusion as to the
likely trading range of the Common Stock following the consummation of the
Acquisition, which may vary depending on, among other factors, changes in
interest rates, dividend rates, financial and operating performance of UCI
market conditions, general economic conditions and other factors that generally
influence the price of securities.
Dr. Wood's analysis focused primarily upon the purchase prices and
implied transaction multiples paid in selected merger and acquisition
transactions involving physician practices. Included in the transactions relied
upon by Dr. Wood were mergers and acquisitions involving InPhyNet Medical
Management/MedPartners, Inc., AHI Healthcare Systems, Inc./FPA Medical
Management, Inc., ReadiCare, Inc./HealthSouth Corp., Sterling Healthcare Group,
Inc./FPA Medical Management, Inc., Caremark International, Inc./MedPartners,
Inc. and Pacific Physician Services, Inc./MedPartners, Inc. The weighted average
acquisition value-to-target net sales multiplier of the indicated transactions
was 1.017:1. Also considered by Dr. Wood were the acquisition value-to-target
net sales multipliers for the pending HealthSouth Corp./Company Doctor
acquisition (1.74:1) and the weighted average acquisition value-to-target net
patient revenue multiplier for six recently completed physician practice
acquisitions by the Company (0.823:1). Applying the same analysis, Dr. Wood
calculated an acquisition value-to-target net patient revenue multiplier for the
Acquisition of 1.301:1. In making his evaluation, Dr. Wood also considered
certain other factors, including, among other things, the changing dynamics of
the medical care consumer price index and its reflection of competitive
pressures in the healthcare industry, the potential for various synergies and
cost reductions in consolidation of selected marketing, operations and
administrative activities of the Company and MHC, the potential for growth in
certain geographic areas of MHC and various risks associated with the
Acquisition.
No company used in the comparable transaction analyses conducted by Dr.
Wood is identical to UCI or MHC, and no acquisition used in such analyses is
identical to the Acquisition. Accordingly, any
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such analysis of the consideration to be paid by UCI in connection with the
Acquisition involves complex considerations and judgments concerning differences
in the potential financial and operating characteristics of the comparable
companies and acquisitions and other factors in relation to the trading and
acquisition values of the comparable companies.
The preparation of a fairness opinion is not susceptible to partial
analysis or summary description. Dr. Wood believes that his analyses and the
summary set forth above must be considered as a whole and that selecting
portions of his analyses and the factors considered by him, without considering
all analyses and factors, could create an incomplete view of the processes
underlying the analysis set forth in his opinion. Dr. Wood has not indicated
that any of the analyses which he performed had a greater significance than any
other.
In determining the appropriate analyses to conduct and when performing
those analyses, Dr. Wood made numerous assumptions with respect to industry
performance, general business, financial, market and economic conditions and
other matters, many of which are beyond the control of UCI and MHC. The analyses
which Dr. Wood performed are not necessarily indicative of actual values of
actual future results, which may be significantly more or less favorable than
suggested by such analyses. Such analyses were prepared solely as part of Dr.
Wood's analysis of the fairness, from a financial point of view, to UCI of the
terms of the Acquisition. The analyses do not purport to be appraisals or to
reflect the prices at which a company might actually be sold or the prices at
which any securities may trade at the present time or any time in the future.
Dr. Wood is engaged in the general business of providing valuations of
businesses and securities in connection with private placements and valuations
for corporations and other purposes. Dr. Wood was engaged by UCI primarily
because of his regional reputation in performing valuations and financial
analyses of the kind provided in connection with the Acquisition. Prior to the
engagement of Dr. Wood by UCI in connection with the matters discussed above,
neither UCI, MHC nor any affiliate of such companies had any material
relationship with Dr. Wood.
UCI entered into an agreement with Dr. Wood pursuant to which Dr. Wood
agreed to act as UCI's financial advisor in connection with the Acquisition and
to evaluate the fairness, from a financial point of view, of the terms of the
Acquisition to UCI and its stockholders. As compensation for his services, Dr.
Wood will receive approximately $10,000, plus reimbursement of certain
out-of-pocket expenses, payable without regard to the financial analyses
presented or the conclusions reached in the opinion rendered.
FINANCING OF THE ACQUISITION
UCI has engaged Laidlaw Global Securities, Inc. ("Laidlaw") as its
financial advisor to assist UCI in the private offering and sale of
approximately $2.5 million of Common Stock (the "Private Placement") scheduled
to close concurrently with the closing of the Acquisition. Warrants for the
purchase of Common Stock are expected to be attached to the shares sold in the
Private Placement on the basis of one warrant for every two shares of Common
Stock. The price per share of Common Stock in the Private Placement and the
exercise price of the attached warrants have not yet been determined and will be
subject to matters to be negotiated among UCI, Laidlaw and the investor or
investors in the Private Placement. UCI expects the net proceeds to UCI from the
sale of Common Stock in the Private Placement (after payment of related
commissions and expenses) will be approximately $2,270,000.
UCI intends to finance the cash portion of the consideration to be
issued in the Acquisition using a portion of the net proceeds expected to be
received by UCI in the Private Placement. Although the closing of the Private
Placement is a condition to the closing of the Acquisition, the definitive terms
of the Private Placement are subject to a number of factors not within the
complete control of UCI, including negotiations with third parties. There can be
no assurance that UCI's expectations regarding the Private Placement will be
realized, or that the Private Placement will be completed on schedule or in the
manner
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contemplated by UCI as described in this Proxy Statement. See "Risk Factors -
Financing as a Condition to Closing."
The shares of Common Stock and the attached warrants to be sold in the
Private Placement are expected to be issued pursuant to exemptions from the
registration requirements of federal and state securities laws. Consequently,
the transferability of such securities will be restricted following the Private
Placement. UCI may enter into a registration rights agreement with the investor
or investors in the Private Placement that will provide the investor or
investors with certain registration rights. See "Risk Factors Dilution - Voting
Control" and "Risk Factors - Resales of Common Stock and Market Volatility."
CERTAIN FEDERAL INCOME TAX MATTERS
For U.S. federal income tax purposes, no income, gain or loss will be
recognized by UCI or the stockholders of UCI as a result of the Acquisition.
ACCOUNTING TREATMENT
In accordance with generally accepted accounting principles, the
Acquisition will be accounted for as a purchase of certain assets and an
assumption of certain liabilities of MHC and its affiliated entities with the
Company treated as the acquiror for accounting purposes in accordance with
Accounting Principles Board Opinion No. 16, "Business Combinations," as amended.
Representatives of Price Waterhouse LLP are expected to be present at
the Annual Meeting. Such representatives will have the opportunity to make a
statement if they desire to do so and are expected to be available to respond to
appropriate questions.
RESALES OF COMMON STOCK
All shares of Common Stock to be issued in connection with the
Acquisition and the Private Placement will be deemed to be "restricted
securities" as that term is defined in Rule 144 under the Securities Act of
1933, as amended (the "1933 Act"). As a consequence, such shares may not be
sold, pledged or otherwise transferred by the stockholders receiving such shares
except in transactions permitted by the resale provisions of Rule 145 under the
1933 Act (with respect to shares issued in the Acquisition) and Rule 144 under
the 1933 Act (with respect to persons purchasing such shares in the Private
Placement and persons who are or become affiliates of UCI), or as otherwise
permitted under the 1933 Act. See "Risk Factors - Resales of Common Stock and
Market Volatility."
In general, under Rule 145 (with respect to shares received in the
Acquisition) and Rule 144 (with respect to shares received in the Private
Placement) during the first year following the closing of the Acquisition or the
Private Placement, as applicable, any person receiving shares of Common Stock in
either of such transactions would be able to sell or otherwise transfer such
shares only pursuant to an effective registration statement under the 1933 Act
or in compliance with an exemption from the registration requirements of the
1933 Act. During the second year following the receipt of such shares, such
person would be entitled to sell such shares only through unsolicited "brokers'
transactions" or in transactions directly with a "market maker," as such terms
are defined in Rule 144. Additionally, the number of shares to be sold by such
person (together with certain related persons) within any three-month period for
the purposes of Rule 144 and Rule 145 could not exceed the greater of 1 percent
of the outstanding shares of Common Stock or the average weekly trading volume
of such stock during the four calendar weeks preceding such sale. Rules 144 and
145 will only remain available, however, if UCI remains current with its
informational filings with the SEC under the Securities Exchange Act of 1934, as
amended (the "1934 Act"). Two years after the closing of the Acquisition or the
Private Placement, as applicable, a person who received Common Stock in either
transaction would be able to sell such Common Stock without such manner of sale
or volume limitations, provided that UCI was current with its 1934 Act
informational filings and such person had not been an affiliate of UCI for at
least three months prior to such sale. Persons who
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may be deemed to be affiliates of UCI generally include individuals or entities
that control, are controlled by, or are under common control with, UCI, and may
include certain officers and directors of UCI as well as principal stockholders
of UCI.
In order to help assure compliance with Rule 144 and Rule 145 under the
1933 Act, each of MHC and its stockholders and each purchaser in the Private
Placement will be required to sign an agreement providing that such person or
entity will not transfer any Common Stock received in the respective transaction
except in compliance with the 1933 Act, and a restrictive legend referencing
such transfer restrictions will be placed on the reverse side of certificates
representing such shares.
Under the terms of the Registration Rights Agreement, MHC and the MHC
Stockholders have certain demand and piggyback registration rights pursuant to
which they may require UCI, subject to certain terms and conditions, to register
under the 1933 Act all or part of the Common Stock received by such stockholders
in connection with the Acquisition. See "Description of the Agreements - Other
Agreements - Registration Rights Agreement."
ABSENCE OF DISSENTERS' RIGHTS
UCI is incorporated in the State of Delaware, and accordingly, is
governed by the provisions of the Delaware General Corporation Law (the "DGCL").
UCI stockholders are not entitled to appraisal rights under the DGCL with
respect to the Acquisition. Although approval of the stockholders of UCI is
required for the issuance of Common Stock in the Acquisition under the rules and
bylaws of the NASD, the approval of the Acquisition by the stockholders of UCI
is not required under the DGCL.
INTERESTS OF CERTAIN PERSONS IN THE ACQUISITION
Pursuant to the Acquisition Agreement, UCI has agreed to undertake
appropriate corporate action to have A. Wayne Johnson, Chairman and Chief
Executive Officer of MHC, appointed to the UCI Board. The UCI Board has
nominated Mr. Johnson as one of the three nominees in the election of directors
at the Annual Meeting. To the extent Mr. Johnson is not elected as a director at
the Annual Meeting, promptly following the closing of the Acquisition, the UCI
Board is expected to vote to increase the size of the UCI Board from seven to
eight members and to appoint Mr. Johnson to fill the vacancy created by the
expansion in the number of directors. In the event Mr. Johnson is elected as a
director at the Annual Meeting and the closing of the Acquisition is delayed or
ultimately fails to take place, there is no arrangement or understanding
currently in place or contemplated that would limit or otherwise restrict his
service on the UCI Board for the full three-year term to which he is elected.
DC-GA and DC-TN are expected to be formed prior to the closing of the
Acquisition for the purpose of acquiring the assets and the liabilities of
MHC-GA and MHC-TN, respectively, and thereafter will be operated solely to
fulfill the licensed medical provider responsibilities associated with the MHC
Centers that will be acquired by UCI-GA in the Acquisition. Dr. Michael Stout,
M.D. is expected to be the sole owner of each of DC-GA and DC-TN as of the date
of the closing of the Acquisition. Pursuant to the terms of an administrative
services agreement between UCI-GA and each of DC-GA and DC-TN, Dr. Stout is not
expected to receive any economic benefit as a consequence of his sole ownership
of DC- GA and DC-TN. Dr. Stout is the Executive Vice President of Medical
Affairs of UCI and is a principal stockholder of UCI.
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DESCRIPTION OF THE AGREEMENTS
ACQUISITION AGREEMENT
GENERAL
The Acquisition Agreement (which includes as exhibits the Non-Solicit
Agreements and the Registration Rights Agreement) is the legal document that
governs the Acquisition. The Acquisition Agreement provides for the acquisition
by UCI-GA of substantially all of the assets of MHC (the "MHC Assets") and the
acquisition by the UCI-PCs of certain assets of the MHC-PCs (the "MHC-PC
Assets"), all in exchange for the assumption by UCI-GA of certain liabilities of
MHC (the "MHC Liabilities") and the payment of approximately $8.05 million in
value, comprised of a combination of cash paid by UCI-GA and the UCI-PCs and
Common Stock issued by UCI.
THE DESCRIPTION IN THIS SECTION OF THE ACQUISITION AGREEMENT IS
QUALIFIED BY REFERENCE TO THE FULL AGREEMENT WHICH HAS BEEN FILED AS AN EXHIBIT
TO THE UCI CURRENT REPORT ON FORM 8-K FILED WITH THE SEC ON FEBRUARY 17, 1998.
YOU CAN OBTAIN SUCH REPORT BY FOLLOWING THE INSTRUCTIONS WE PROVIDE IN THIS
PROXY STATEMENT UNDER THE HEADING "ADDITIONAL INFORMATION - WHERE YOU CAN FIND
MORE INFORMATION."
If the requisite approvals of the stockholders of UCI are received, the
Acquisition is expected to be consummated as soon as practicable after the
satisfaction or waiver of each of the conditions set forth in the Acquisition
Agreement applicable to the Acquisition. The closing of the Acquisition is
currently scheduled for March 31, 1998, but the parties may mutually agree to
extend the closing date.
ASSETS PURCHASED AND LIABILITIES ASSUMED
The MHC Assets include the MHC accounts receivable, machinery,
furniture, furnishings, equipment, computer hardware and software, inventory,
supplies, leasehold interests, other contract rights, permits, licenses and
goodwill. Excluded from the MHC Assets are cash and cash accounts (other than
any holdback amounts associated with MHC's line of credit, as described below),
accounts receivable from employees, automobile leases, certain real property,
and any furniture, equipment and software used at the MHC headquarters facility.
Each of MHC and the MHC-PCs (collectively, the "Selling Entities") will also
transfer or otherwise assign to the Company all of their rights to all corporate
and trade names used by each of the Selling Entities or their divisions. All MHC
Assets, with the exception of MHC's accounts receivable which are pledged in
support of the MHC line of credit obligation, will be conveyed free and clear of
all liens and encumbrances.
The MHC-PC Assets primarily include medical records and the rights
under the various employment agreements with medical providers employed at the
MHC Centers.
The MHC Liabilities include the obligations of MHC under existing
operating and capital equipment leases, the obligations of MHC under certain of
its existing real property leases (or, at UCI's option, the obligations under
new leases with similar terms), and the MHC line of credit obligation with Bank
One, N.A. UCI-GA will not assume any other of the Selling Entities' obligations
or liabilities, including current and long-term liabilities, contingent
liabilities, medical malpractice claims, environmental claims, workers'
compensation claims, and sales, income and payroll taxes.
CONSIDERATION TO BE PAID IN THE ACQUISITION
Subject to the adjustments described below, the aggregate purchase
price for the MHC Assets will be $8.05 million, plus the assumption of the MHC
Liabilities, including certain line of credit and capital lease obligations of
MHC aggregating $819,933. The purchase price will be payable in accordance with
either of the following two alternatives, one of which must be selected by MHC
and disclosed in writing to UCI no later than the close of business on March 23,
1998:
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Alternative A: At closing, UCI-GA will tender to MHC a cash payment of
$900,000 and a number of shares of Common Stock calculated under a formula in
the Acquisition Agreement as having an aggregate value of $7.15 million, with
both the cash portion and the number of shares subject to adjustment as
described below.
Alternative B: At closing, UCI-GA will tender to MHC a number of shares
of Common Stock calculated under a formula in the Acquisition Agreement as
having an aggregate value of $6.8 million. In addition, UCI-GA will pay, within
10 days after closing, an aggregate of $1.25 million in cash directly to certain
creditors of MHC as directed by MHC in writing no later than the date of
closing. Both the number of shares and the amount of cash paid are subject to
adjustment as provided below.
The price per share of the Common Stock to be utilized for determining
the number of shares to be issued to MHC will be the average of the closing
prices of the Common Stock as reported on the Nasdaq Stock Market 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 cash portion of the consideration to be paid by UCI-GA in the
Acquisition will be decreased dollar-for-dollar to the extent the aggregate of
the line of credit and lease obligations of MHC to be assumed by UCI-GA at the
closing date exceeds a designated ceiling amount. The number of shares of Common
Stock to be issued in the Acquisition will be increased (pursuant to the share
price formula in the Acquisition Agreement) to the extent such line of credit
and lease obligations of MHC are less than the designated ceiling and will be
decreased (per the share price formula) to the extent that any downward
adjustment of the cash consideration, as described above, exceeds the applicable
cash consideration.
The purchase price for the MHC-PC Assets will be $200 which will be
paid by the UCI-PCs to the MHC-PCs at the closing of the Acquisition.
The purchase price is to be allocated among the MHC Assets pursuant to
a letter to be provided by UCI-GA to MHC within 30 days following the closing.
In such allocation, the amount to be allocated to the fixed assets of the
Selling Entities is to be determined by an appraisal firm selected by UCI-GA.
ACCOUNTING TREATMENT
Although the parties anticipate that the purchase of the MHC Assets
will qualify as a tax-free reorganization under Section 368(a)(1)(C) of the
Internal Revenue Code of 1986, as amended (the "Code"), the Company will not be
responsible for assuring that the transaction so qualifies, and the Acquisition
is not conditioned upon such qualification.
COVENANTS
Each of MHC and the MHC-PCs agrees in the Acquisition Agreement not to
compete with the Company anywhere within the states of South Carolina, Tennessee
and Georgia for a period of three years after the closing. In addition, the
holders of the Class B voting common stock of MHC (the "Class B Shareholders")
will each execute a Non-Solicit Agreement attached as an exhibit to the
Acquisition Agreement. See "Related Agreements - Non-Solicit Agreements."
CONDITIONS TO CLOSING
The parties' obligations to close under the Acquisition Agreement will
be subject to approval of the shareholders of UCI of the proposals relating to
the Acquisition to be presented at the Annual Meeting, as well as to customary
contingencies (including compliance at closing with obligations under the
Acquisition Agreement, continued accuracy of representations and warranties
through the closing, availability of necessary governmental and third party
consents and authorizations, the absence of litigation prohibiting the
Acquisition, and the absence of adverse conditions), and the successful
completion of the
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Private Placement. The Company's obligation to close is also subject to UCI-GA
entering into, as of closing, leases or lease assumptions for all of the MHC
centers.
EMPLOYEES
Each of the Selling Entities will make available for employment by the
Company all of each of the Selling Entities' employees, but the Company will not
be obligated to employ any particular employee. The Company's obligation to
close under the Acquisition Agreement will be subject to at least ten of the
physician-employees and/or physician assistant/nurse practitioner employees of
the Selling Entities (collectively, the "Medical Providers") executing, as of
the date of closing, employment agreements with the Company. The Company
reserves the right to require MHC to deliver executed employment agreements from
certain Medical Providers to be disclosed by the Company to MHC prior to the
closing. All such employment agreements will also include non-compete provisions
which are consistent with such employee's current non-compete agreements with
MHC and the MHC-PCs, as applicable. MHC and the MHC-PCs will satisfy, and the
Company will be protected against, all accrued employee benefits, severance,
accrued vacation or other paid leave, and all obligations or liabilities to each
of the employees of MHC and the MHC-PCs arising in connection with their
employment by any of MHC and the MHC- PCs.
REPRESENTATIONS, INDEMNIFICATIONS AND HOLDBACK SHARES
The Acquisition Agreement contains certain customary comprehensive
representations and warranties of the Selling Entities, the Class B Shareholders
and the Company. The Acquisition Agreement also contains mutual indemnification
provisions which are subject to the following limitations which apply to all
claims for indemnification other than claims by the Company related to the
Selling Entities' pending and threatened litigation: (a) a basket of $125,000,
below which such indemnifying party will have no obligation for breaches of
representations, warranties and certain covenants, but when exceeded will
require payment of the first dollar of loss, (b) a general twelve-month survival
period for indemnification for breaches of representations, warranties and
certain covenants, and (c) a cap of $3 million for the total aggregate liability
of the indemnifying parties for breaches of representations, warranties and
certain covenants. Each Class B Shareholder is severally but not jointly liable
for any other Class B Shareholder's breach of the Acquisition Agreement. Also,
each Class B Shareholder's liability is limited to an agreed upon percentage of
the indemnified party's total damages which approximates each Class B
Shareholder's pro rata equity interest in MHC.
To provide the Company additional security in the event a claim for
indemnification by the Company arises, MHC will place into escrow for a period
of one year after the date of closing a number of shares of Common Stock having
an aggregate value equal to $300,000, as calculated using the share price
formula in the Acquisition Agreement (the "Holdback Shares"). In the event
ownership of the Holdback Shares is transferred to a stockholder of MHC upon the
liquidation of MHC, or upon any other distribution by MHC, the Holdback Shares
will remain in escrow as an asset of such stockholder of MHC. Subject to certain
limitations described above, in the event a claim by the Company for
indemnification arises, the Company may elect to recover such indemnification
damages from the Selling Entities, the Class B Shareholders and the Holdback
Shares, or any one or more of them.
BOARD OF DIRECTORS
The Company has agreed to bring about the appointment to the UCI Board
of A. Wayne Johnson, Chairman and Chief Executive Officer of MHC, promptly
following the closing. In anticipation of this obligation, the UCI Board has
nominated Mr. Johnson for election as a director at the Annual Meeting. To the
extent permitted by law, as long as MHC or PENMAN Private Equity and Mezzanine
Fund, L.P. ("PENMAN") is the holder or record of five percent or more the issued
and outstanding Common Stock, a representative of PENMAN will be invited to
attend, at PENMAN's expense, all meetings of the UCI Board.
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NO TRADING OF COMMON STOCK
Each of the Selling Entities and the Class B Shareholders has agreed
not to buy or sell Common Stock from February 3, 1998 until the earlier of the
date of closing and the lawful termination of the Acquisition Agreement.
RELATED AGREEMENTS
NON-SOLICIT AGREEMENTS
Each of the Class B Shareholders will enter into a non-solicit
agreement with the Company which prohibits each of the Class B Shareholders for
a period of two years after closing from soliciting or inducing any person
employed by any of Selling Entities or the Company to terminate such person's
contract of employment with such entity. In addition, each of the Class B
Shareholders will be obligated under a covenant in the Acquisition Agreement
which prohibits each of the Class B Shareholders for a period of five years
after closing from soliciting or inducing up to three senior management
employees of the Selling Entities, to be disclosed by the Company to MHC prior
to closing, to terminate such senior management employee's contract of
employment with the Company.
REGISTRATION RIGHTS AGREEMENT
Under the registration rights agreement between UCI, MHC and each of
the MHC stockholders, UCI, upon written demand of the holders of at least 20
percent of the shares (the "Demand"), agrees to register on one occasion, all or
any portion of the shares so requested to be registered. In addition, UCI grants
to MHC and its stockholders certain "piggyback" registration rights, subject to
standard underwriter cutbacks and company deferral for good cause. The
registration rights terminate one year after the date of closing. Provided UCI
receives the Demand within 30 days after the date of the closing of the
Acquisition, UCI will file with the SEC such registration statement within 60
days after the receipt of the Demand. UCI agrees to use its reasonable best
efforts to cause such registration statement to become effective and to maintain
its effectiveness for a period of nine months after its effective date.
SHAREHOLDER AGREEMENTS
Each of Dr. M.F. McFarland III, CHC and CP&C have executed and
delivered to MHC separate agreements to vote their shares of Common Stock at the
Annual Meeting in favor of the transactions described in the Acquisition
Agreement. As of the record date for the Annual Meeting, Dr. McFarland, CHC and
CP&C held, in the aggregate, shares representing 52.3 percent of the outstanding
Common Stock. Accordingly, if Dr. McFarland, CHC and CP&C vote as indicated,
each of the proposals relating to the Acquisition are assured to be approved,
regardless of the votes that may be cast by any other holders of Common Stock
entitled to vote.
28
<PAGE>
FINANCIAL AND BUSINESS INFORMATION
MARKET PRICE AND DIVIDEND INFORMATION
The Common Stock is traded on the Nasdaq SmallCap Market under the
symbol UCIA. The prices set forth below indicate the high and low bid prices
reported on the Nasdaq SmallCap Market for the indicated periods.
<TABLE>
<CAPTION>
BID PRICE
HIGH LOW
------------- -------------------
<S> <C> <C>
FISCAL YEAR ENDING SEPTEMBER 30, 1998
1st quarter (10/01/97 - 12/31/97) $ 3-1/4 $ 1-3/4
FISCAL YEAR ENDED SEPTEMBER 30, 1997
1st quarter (10/01/96 - 12/31/96) 3-3/8 2-3/8
2nd quarter (01/01/97 - 03/31/97) 3-3/8 2-1/2
3rd quarter (04/01/97 - 06/30/97) 2-11/16 1-11/16
4th quarter (07/01/97 - 09/30/97) 2-3/4 1-5/16
FISCAL YEAR ENDED SEPTEMBER 30, 1996
1st quarter (10/01/95 - 12/31/95) 4-1/4 3-1/8
2nd quarter (01/01/96 - 03/31/96) 5-1/8 3-1/4
3rd quarter (04/01/96 - 06/30/96) 4 3-1/4
4th quarter (07/01/96 - 09/30/96) 3-3/4 2-7/8
FISCAL YEAR ENDED SEPTEMBER 30, 1995
1st quarter (10/01/94 - 12/31/94) 3-1/8 1-1/2
2nd quarter (01/01/95 - 03/31/95) 3-1/4 1-1/2
3rd quarter (04/01/95 - 06/30/95) 3-3/8 2-1/4
4th quarter (07/01/95 - 09/30/95) 3-1/4 1-3/4
</TABLE>
The foregoing quotations reflect inter-dealer prices without retail
markup, markdown or commission and may not necessarily reflect actual
transactions.
On February 12, 1998, the last trading day prior to the public
announcement of the Acquisition, the Common Stock closed at $2.3125 per share.
On March 1998, the latest practicable trading day before the printing of this
Proxy Statement, the Common Stock closed at $ per share.
As of February 10, 1998, there were 631 stockholders of record of
Common Stock, excluding individual participants in security position listings.
UCI has not paid cash dividends on the Common Stock since its inception
and has no plans to declare cash dividends in the foreseeable future.
29
<PAGE>
DESCRIPTION OF MHC
MHC provides nonmedical management and administrative services for the
11 MHC Centers located in Georgia and Tennessee (nine operating as MainStreet
Healthcare in the Atlanta, Georgia area and two operating as Prompt Care in
Knoxville, Tennessee).
As a consequence of the matters described in this Proxy Statement under
"Risk Factors Government Regulation," the organizational structure of MHC
closely parallels the organizational structure of the Company. All medical
services at the MHC Centers are provided by or under the supervision of the
MHC-PCs which have contracted with MHC to provide the medical direction of the
MHC Centers. The medical directors operate the MHC Centers under the financial
and operational control of MHC. However, medical supervision of the MHC Centers
is provided solely by the MHC-PCs. The MHC-PCs are organized so that all
physician services are offered by the physicians who are employed by the MHC-
PCs. MHC does not employ practicing physicians as practitioners, exert control
over their decisions regarding medical care or represent to the public that it
offers medical services. MHC has entered into administrative services agreements
with the MHC-PCs for the performance of all administrative management and
support functions. See "Risk Factors - Government Regulation."
The MHC Centers are staffed by licensed physicians, other healthcare
providers and administrative support staff. The medical support staff includes
licensed nurses, certified medical assistants, laboratory technicians and x-ray
technicians.
The MHC Centers offer out-patient medical care, with and without
appointment, for treatment of acute and episodic medical problems. The MHC
Centers provide a broad range of medical services which would generally be
classified as within the scope of family practice and occupational medicine. The
medical services are provided by licensed physicians, nurses and auxiliary
support personnel. The services provided at the MHC Centers include, but are not
limited to, the following:
o Routine care of general medical problems, including colds, flu, ear
infections, hypertension, asthma, pneumonia and other conditions
typically treated by primary care providers;
o Treatment of injuries, such as simple fractures, dislocations, sprains,
bruises and cuts;
o Minor surgery, including suturing of lacerations and removal of cysts
and foreign bodies;
o Diagnostic tests, such as x-rays, electrocardiograms, complete blood
counts, urinalysis and various cultures; and
o Occupational and industrial medical services, including drug testing,
workers' compensation and physical examinations.
At any of the MHC Centers, a patient with a life-threatening condition
would be evaluated by the physician, stabilized and immediately referred to a
nearby hospital.
The fees charged to a patient are determined by the nature of medical
services rendered. Management of MHC believes that the charges at the MHC
Centers are significantly lower than the charges of hospital emergency
departments and are generally competitive with the charges of local physicians
and other providers in their respective areas.
The MHC Centers accept payment from a wide range of sources. These
include patient payment at time of service (by cash, check or credit card),
patient billing and assignment of insurance benefits (including Blue Cross Blue
Shield, workers' compensation and other private insurance). Private pay billings
represent the most significant source of revenues.
30
<PAGE>
As of February 19, 1998, MHC had 86 full-time equivalent employees and
18 part-time employees. Included in these numbers are 21 medical providers
employed by the MHC-PCs.
Attached as Appendix C to this Proxy Statement are the audited
financial statements of MHC for the fiscal year ended March 31, 1997, the
unaudited interim financial statements of MHC for the three-month and nine-month
periods ended December 31, 1997, and MHC's management's discussion and analysis
of financial condition and results of operations relating to such annual and
interm period financial statements.
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
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. The purchase method of accounting was
used to give effect to all transactions.
The Condensed Statements reflect certain assumptions regarding the
proposed Acquisition and 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 Proxy Statement,
and the unaudited financial statements of 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.
31
<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 $ (1,535,944) (a)
(84,340) (b)
2,270,000 (c) $ 734,056
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 1,766,527 598,015 10,730,016
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 $ 3,970,764 $ 32,587,158
============== =============== =============== ==============
Liabilities and Capital
Current portion - long-term debt $ 916,411 $ 441,204 $ (434,857) (b) $ 922,758
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 (2,380,841) 5,630,694
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 (3,014,090) 14,076,630
-------------- --------------- --------------- --------------
Preferred stock --- 4,779,000 (4,779,000) (b) ---
Common stock 302,608 760,620 (760,620) (b)
143,158 (a)
54,054 (c) 499,820
Paid-in capital 16,249,546 84,478 (84,478) (b)
6,656,842 (a)
2,215,946 (c) 25,122,334
Accumulated deficit (7,111,626) (3,538,952) 3,538,952 (b) (7,111,626)
Total capital 9,440,528 2,085,146 6,984,854 18,510,528
-------------- --------------- --------------- --------------
Total liabilities and capital $22,961,152 $5,655,242 $ 3,970,764 $ 32,587,158
============== =============== =============== ==============
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
Unaudited Pro Forma Combined Condensed Statement of Operations and Accumulated Deficit
for the three months ended December 31, 1997
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) --- $ (0.12)
Weighted average common shares and
common share equivalents
outstanding 6,041,980 --- (i) --- 10,526,759
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1997
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) --- $ (0.31)
Weighted average common shares and
common share equivalents outstanding 5,005,081 --- (i) --- 9,489,860
</TABLE>
34
<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
Cash paid....................................1,535,944 Goodwill..................................5,160,541
--------- ---------
$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 $2.5 million Private
Placement will be fully subscribed, resulting in net proceeds to UCI of
$2,270,000 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 1,081,081 shares of Common
Stock at a price of $2.3125 (the closing price of the Common Stock on
the day prior to the public announcement of the Acquisition), and the
issuance of one attached Common Stock purchase warrant for every two
shares of Common Stock sold, for a total of 540,540 warrants issued. 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:
$ 54,054 Common Stock (1,081,081 shares, par value $0.05 per share)
2,215,946 Additional paid-in capital
-----------
$2,270,000 Net increase in cash
===========
(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.
(e) Net decrease in salaries paid to former corporate officers is $78,750
for three months and $315,000 annually.
35
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(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.
36
<PAGE>
THE ANNUAL MEETING
BUSINESS TO BE CONDUCTED AT THE ANNUAL MEETING
PROPOSALS TO BE VOTED UPON
This Proxy Statement is furnished to holders of Common Stock in
connection with the solicitation of proxies by the UCI Board for use at the
Annual Meeting of Stockholders of UCI to be held for the purposes described in
this Proxy Statement. Each copy of this Proxy Statement mailed to a holder of
Common Stock is accompanied by a form of proxy for use at the Annual Meeting.
There are two sets of proposals - one set relates to the Acquisition and the
other set relates to general business in connection with the Annual Meeting.
ACQUISITION PROPOSALS
UCI stockholders will be asked at the Annual Meeting to approve the
following proposals which relate to the Acquisition:
1. Issuance of shares of Common Stock in connection with the
Acquisition (the "Share Issuance Proposal").
2. Amendment of Article Fourth of the UCI Certificate to increase the
authorized shares of Common Stock from 10 million shares to 30 million shares
(the "Authorized Capital Stock Proposal").
ANNUAL MEETING PROPOSALS
In connection with the Annual Meeting, UCI stockholders will be asked:
1. To elect three members of the UCI Board, each to hold office for a
three-year term ending on the date of the annual meeting of stockholders in the
year 2001 and until such director's respective successor shall have been duly
elected and qualified.
2. To approve the adoption of the UCI Medical Affiliates, Inc. 1997
Stock Incentive Plan for officers, directors, employees and consultants of UCI
and its subsidiaries (the "1997 Incentive Plan Proposal").
3. To ratify the appointment of Price Waterhouse LLP as the firm of
independent auditors to audit the consolidated financial statements of the
Company for the fiscal year ending September 30, 1998 (the "Ratification of
Auditors Proposal").
DATE, TIME AND PLACE OF MEETING
The Annual Meeting will be held on Monday, March 30, 1998 at 10:00 a.m.
local time, at the Embassy Suites Hotel, 200 Stoneridge Drive, Columbia, South
Carolina 29210.
RECORD DATE
Only holders of record of Common Stock at the close of business on
February 10, 1998 (the "Record Date") are entitled to notice of and will be
entitled to vote at the Annual Meeting.
37
<PAGE>
SHARES OUTSTANDING AND ENTITLED TO VOTE
The Common Stock is entitled to one vote per share on each matter that
is presented for stockholder approval at the Annual Meeting. At the close of
business on the Record Date, there were 6,052,164 shares of Common Stock
outstanding and entitled to vote, held of record by 631 stockholders. All of
such shares are eligible to be voted on each matter currently scheduled to come
before the Annual Meeting.
VOTING AND REVOCATION OF PROXIES
The form of proxy accompanying this Proxy Statement is solicited on
behalf of the UCI Board for use at the Annual Meeting. You are requested to
complete, date and sign the accompanying form of proxy and promptly return it in
the accompanying envelope or otherwise mail it to UCI. All proxies that are
properly executed and returned, and that are not revoked, will be voted at the
Annual Meeting in accordance with the instructions indicated on the proxies. If
no instructions are indicated, such proxies will be voted FOR each of the
proposals described in this Proxy Statement, including election of the director
nominees set forth in this Proxy Statement.
The UCI Board does not presently intend to bring any business before
the Annual Meeting other than the specific UCI proposals referred to in this
Proxy Statement and specified in the notice of the Annual Meeting. So far as is
known to the UCI Board, no other matters are to be brought before the Annual
Meeting. If any other business properly comes before the Annual Meeting,
however, it is intended that proxies, in the form enclosed, will be voted on
such matters in accordance with the judgment of the persons voting such proxies.
Any UCI stockholder who has signed the proxy referred to in this Proxy
Statement may revoke it at any time before it is exercised at the Annual Meeting
by (i) delivering to the Corporate Secretary of UCI a written notice, bearing a
date later than the proxy, stating that the proxy is revoked, (ii) signing and
so delivering a proxy relating to the same shares and bearing a later date prior
to the vote at the Annual Meeting or (iii) attending the Annual Meeting and
voting in person (although attendance at the Annual Meeting will not, by itself,
revoke a proxy). Whether or not you plan to attend the Annual Meeting, you are
urged to sign and return the enclosed proxy.
QUORUM
The quorum required for the transaction of business at the Annual
Meeting is a majority of shares of Common Stock, or 3,026,083 shares, issued and
outstanding on the Record Date, which shares must be present in person or
represented by proxy at the Annual Meeting. Directions to withhold authority to
vote for directors, abstentions and broker non-votes will be considered shares
present in person or by proxy and entitled to vote and therefore will be counted
for purposes of determining whether there is a quorum at the Annual Meeting. If
a quorum is not present or represented at the Annual Meeting, the chairman of
the meeting or the stockholders holding a majority of the shares of Common Stock
entitled to vote, present in person or represented by proxy, have the power to
adjourn the meeting from time to time, without notice other than an announcement
at the meeting, until a quorum is present or represented. Directors, officers
and employees of UCI may solicit proxies for the reconvened Annual Meeting in
person or by mail, telephone or telegraph. At any such reconvened Annual Meeting
at which a quorum is present or represented, any business may be transacted that
might have been transacted at the meeting as originally scheduled.
38
<PAGE>
VOTE REQUIRED
GENERAL
Under the NASD rules, approval by the affirmative vote of the holders
of a majority of the total votes cast on the Share Issuance Proposal, in person
or by proxy, is required to approve the Share Issuance Proposal. Accordingly,
abstentions and broker non-votes will have no effect on the outcome of the vote.
Under the DGCL, approval by the affirmative vote of the holders of a
majority of the outstanding shares of Common Stock entitled to vote is required
to approve the Authorized Capital Stock Proposal. Accordingly, abstentions and
broker non-votes will have the same effect as a vote against the proposal.
Under the DGCL, the three director nominees receiving the greatest
number of votes cast (although not necessarily a majority of the votes cast) in
the election of directors at the Annual Meeting will be elected to the Board of
Directors. Accordingly, directions to withhold authority, abstentions and broker
non-votes will have no effect on the outcome of the vote. The UCI Certificate
does not allow for cumulative voting in the election of directors.
Approval by the affirmative vote of the holders of a majority of the
shares of Common Stock present in person or represented by proxy at the Annual
Meeting and entitled to vote is required to approve each of the 1997 Incentive
Plan Proposal and the Ratification of Auditors Proposal. Accordingly,
abstentions and broker non-votes will have the same effect as a vote against
such proposals. Approval of the 1997 Incentive Plan Proposal is required
pursuant to the rules and bylaws of the NASD and by the Code.
A broker non-vote occurs when a broker or other
nominee holding shares for a beneficial owner
votes on one proposal, but does not vote on another proposal because the broker
or other nominee does not have the discretionary voting power and has not
received voting instructions from the beneficial owner.
SHAREHOLDER AGREEMENTS
Each of M. F. McFarland, III, M.D., CHC and CP&C has separately agreed
with MHC in agreements dated February 9, 1998, to vote shares of Common Stock as
to which each of them has voting control in favor of the proposals relating to
the Acquisition to be presented at the Annual Meeting. Each of them has also
indicated to the Company their intent to vote in favor of all other proposals
scheduled to be presented at the Annual Meeting. As of the Record Date, these
shares represented 52.3 percent of the outstanding Common Stock.
BASED ON THESE NUMBERS, APPROVAL OF ALL PROPOSALS AND THE ELECTION OF
THE THREE DIRECTORS TO BE ELECTED BY THE HOLDERS OF COMMON STOCK IS ASSURED,
REGARDLESS OF THE VOTE CAST BY ANY OTHER UCI STOCKHOLDER.
SOLICITATION OF PROXIES AND EXPENSES
UCI will bear the cost of preparing, assembling and mailing this Proxy
Statement and the accompanying form of proxy to stockholders. In addition to
solicitation by mail, the directors, officers and employees of UCI may solicit
proxies from stockholders by telephone, telegram, letter, facsimile or in
person. No compensation will be paid for such solicitations. UCI may request
brokers, custodians, nominees and other record holders to forward copies of the
proxy and other soliciting materials to persons for whom they hold shares of
Common Stock and to request authority for the exercise of proxies. In such
cases, UCI, upon the request of the record holders, will reimburse such holders
for their reasonable expenses.
39
<PAGE>
DESCRIPTION OF PROPOSALS
The UCI Board has considered each of the proposals described in this
Proxy Statement and believes that each proposal is in the best interests of UCI
stockholders.
THE UCI BOARD RECOMMENDS, BY THE UNANIMOUS CONSENT OF ALL DIRECTORS,
THAT YOU VOTE FOR EACH PROPOSAL DESCRIBED IN THIS SECTION.
YOUR PROXY WILL BE SO VOTED UNLESS YOU SPECIFY OTHERWISE.
SHARE ISSUANCE PROPOSAL
Because the shares of Common Stock to be issued in the Acquisition
exceed 20 percent of the number of shares of Common Stock outstanding, the NASD
rules require that UCI stockholders approve the share issuance. Approval of this
proposal is also required to consummate the Acquisition.
AUTHORIZED CAPITAL STOCK PROPOSAL
The Authorized Capital Stock Proposal provides that Article Fourth of
the UCI Certificate will be amended to increase the authorized shares of Common
Stock from 10 million shares to 30 million shares. The remaining shares of
authorized but unissued Common Stock may thereafter be used for general
corporate purposes, including in connection with future acquisitions. Approval
of this proposal is required to consummate the Acquisition. The full text of the
Authorized Capital Stock Proposal is included in Appendix B attached to this
Proxy Statement.
ELECTION OF DIRECTORS
Three directors are to be elected at the Annual Meeting. The UCI
Certificate provides for a classified Board of Directors so that, as nearly as
possible, one-third of the UCI Board is elected each year to serve a three-year
term. Pursuant to the authority granted to it under the UCI Bylaws, the UCI
Board has set the size of the UCI Board at seven members with staggered terms
expiring at the forthcoming Annual Meeting and at the annual meetings of
stockholders in the years 1999 and 2000. Charles P. Cannon, A. Wayne Johnson and
Ashby M. Jordan, M.D. have been nominated by the UCI Board for election as
directors at the forthcoming Annual Meeting for terms expiring at the annual
meeting of stockholders in the year 2001. Mr. Cannon's and Dr. Jordan's terms as
directors expire at the forthcoming Annual Meeting. See "Directors and Executive
Officers."
The persons named in the accompanying proxy have been designated by the
UCI Board and, unless authority is specifically withheld, they intend to vote
for the election of the nominees listed above. A stockholder executing the
enclosed proxy may vote for the nominees or may withhold such vote from the
nominees. In each case where the stockholder has appropriately specified how the
proxy is to be voted, it will be voted in accordance with such stockholder's
specifications. Although it is not contemplated that the nominees will become
unable to serve prior to the Annual Meeting, the persons named on the enclosed
proxy will have the authority to vote for the election of another person in
accordance with their best judgment.
Pursuant to the Acquisition Agreement, in the event Mr. Johnson is not
elected to the UCI Board at the Annual Meeting, promptly following the closing
of the Acquisition, the UCI Board, acting pursuant to the authority granted to
it under the UCI Bylaws, will increase the size of the UCI Board to eight
directors, and Mr. Johnson is to be appointed by the UCI Board as the director
to fill the vacancy created by such expansion of the size of the UCI Board.
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<PAGE>
1997 INCENTIVE PLAN PROPOSAL
GENERAL. The UCI Board approved the adoption of the UCI Medical
Affiliates, Inc. 1997 Stock Incentive Plan (the "Stock Plan") effective as of
December 17, 1997, subject to the approval of the Stock Plan by the stockholders
at the Annual Meeting. The following discussion of the Stock Plan is qualified
in its entirety by reference to the Stock Plan. UCI will provide promptly, upon
request and without charge, a copy of the full text of the Stock Plan to each
stockholder to whom a copy of this Proxy Statement is delivered. Requests should
be directed to: Mr. Jerry F. Wells, Jr., Chief Financial Officer, UCI Medical
Affiliates, Inc., 1901 Main Street, Suite 1200, Columbia, South Carolina 29201
(803) 252-3661.
PURPOSE. The Stock Plan is intended to provide UCI with maximum
flexibility to meet the evolving needs of UCI and its subsidiaries over the next
ten years in providing stock-based incentives and rewards to officers, directors
and employees of UCI, and to consultants and advisors to UCI, who are and have
been in a position to contribute materially to improving UCI's profits. The
enhanced employment incentives available through the Stock Plan are expected to
promote the interests of UCI and its stockholders by strengthening UCI's ability
to attract and retain key officers and employees. Through the operation of the
Stock Plan, such present and future officers and employees may be encouraged to
acquire, or to increase their acquisition of, Common Stock, thus maintaining
their personal and proprietary interests in UCI's continued success and
progress.
ADMINISTRATION. The UCI Board will oversee and carry out the provisions
of the Stock Plan, and may establish one or more Committees (the "Committee") to
assume such duties and any other duties as are contemplated for any of such
Committees under the terms of the Stock Plan. When and if established by the UCI
Board, the Committee will be responsible to the UCI Board for the operation of
the Stock Plan and will make recommendations to the UCI Board with respect to
participation in the Stock Plan by officers, directors and employees of, and
consultants and advisors to, UCI and its subsidiaries, and with respect to the
extent of that participation. (All further references to the Committee contained
in this description of the Stock Plan should be deemed to be references to the
UCI Board to the extent that a Committee has not been established by the Board.)
The interpretation and construction by the Committee of any provisions of the
Stock Plan or of any award granted under it will be final. All awards made under
the Stock Plan will be evidenced by written agreements between UCI and the
participant.
OPERATION. The Stock Plan provides for the grant of incentive stock
options ("ISOs"), nonqualified stock options ("NSOs"), stock appreciation rights
("SARs") and restricted stock awards ("Restricted Stock"). The Stock Plan will
be effective for a term of ten years after the effective date of its adoption by
the UCI Board. A maximum of 1,500,000 shares of Common Stock may be issued
pursuant to awards granted under the Stock Plan, and the UCI Board has reserved
1,500,000 shares for this purpose. The number of shares reserved for issuance
under the Stock Plan will be adjusted in the event of an adjustment in the
capital stock structure of UCI affecting the Common Stock (in connection with a
merger, consolidation, recapitalization, reclassification, combination, stock
dividend, stock split or similar event), and the Committee is authorized to
adjust the terms of awards under the Stock Plan in the event of a change in the
capital stock in order to prevent dilution or enlargement of awards under the
Stock Plan. UCI intends to register the shares of Common Stock reserved under
the Stock Plan under the 1933 Act.
All obligations of UCI under the Stock Plan and under any award granted
under the Stock Plan will be binding upon any successor to UCI, whether the
existence of such successor is the result of a direct or indirect purchase of
all or substantially all of the business or assets of UCI, or a merger,
consolidation or otherwise. Unless otherwise specifically prohibited by the
terms of any award or under any applicable laws, rules or regulations, upon the
occurrence of a change in control of UCI, each then outstanding option and SAR
that is not otherwise exercisable will become immediately and fully exercisable,
and any restrictions imposed on Restricted Stock will lapse. Under the Stock
Plan, events constituting a change in control include the acquisition by any
third party or group of 35 percent or more of the outstanding Common Stock; the
change over a two-year period of the makeup of a majority of the members of the
UCI
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<PAGE>
Board; a tender offer to acquire control of the outstanding Common Stock; and
shareholder approval of the liquidation of UCI, the sale of substantially all of
its assets, or the merger, consolidation or reorganization of UCI where the
voting securities of UCI prior to such event do not continue to constitute at
least 65 percent of the voting securities of the surviving entity.
ELIGIBILITY. Each officer, director and employee of UCI or any of its
subsidiaries is eligible to participate in the Stock Plan, and awards under the
Stock Plan may also be granted from time to time to persons serving as
consultants or advisors to UCI or any of its subsidiaries. The Committee will
select the individuals who will participate in the Stock Plan, and members of
the Committee will not be restricted under the terms of the Stock Plan from
participating in the Stock Plan while serving as members of the Committee. On
the date of this Proxy Statement, seven directors, approximately 450 employees
and no consultants and advisors were eligible to participate in the Stock Plan.
The Committee may grant awards under the Stock Plan to any officer, director or
other employee of, or any consultant or advisor to, UCI or any of its
subsidiaries. Awards that are granted at the same or at different times under
the Stock Plan are not required to contain similar provisions.
No awards may be granted under the Stock Plan after December 17, 2007.
The Board may terminate the Stock Plan sooner without further action by the
stockholders. The UCI Board also may amend the Stock Plan without stockholder
approval, except that no amendment that increases the number of shares of Common
Stock that may be issued under the Stock Plan or changes the class of
individuals who may be selected to participate in the Stock Plan will become
effective until it is approved by the stockholders.
STOCK OPTIONS. The Stock Plan permits the granting of non-transferable
ISOs that qualify as incentive stock options under Section 422A(b) of the Code
and non-transferable NSOs that do not so qualify. The option exercise price of
each option will be determined by the Committee in its sole discretion, but may
not be less than the fair market value of the Common Stock on the date the
option is granted in the case of ISOs and may not be less than 50 percent of
such fair market value in the case of NSOs. On March ____, 1998, the reported
last sale price of the Common Stock on the Nasdaq SmallCap Market was $______
per share.
The term of each option will be fixed by the Committee, but may not
exceed ten years from the date of grant. The Committee will determine at what
time or times each option may be exercised. Options may be made exercisable in
installments, and the exercisability of options may be accelerated by the
Committee. The exercise price of options granted under the Stock Plan must be
paid in cash or by delivery of shares of Common Stock or a combination of cash
and shares.
Except as otherwise provided below, upon termination of a participant's
employment, an option will terminate upon the earliest to occur of the full
exercise of the option, the expiration of the option by its terms, and the date
three months following the date of employment termination. Should termination of
employment (a) result from the death or permanent and total disability of a
participant, such three-month termination period shall extend to one year, or
(b) be for cause, the option will terminate on the date of employment
termination. The employment of a consultant or advisor will be deemed terminated
upon UCI's notice to the participant that UCI will no longer transact business
with the consultant or advisor.
To qualify as ISOs, options must currently meet additional federal tax
requirements, including limits on the value of shares subject to ISOs first
exercisable annually to any participant, and a shorter exercise period and
higher minimum exercise price in the case of certain large stockholders. To the
extent these special requirements are changed or eliminated, the Stock Plan will
be amended accordingly.
STOCK APPRECIATION RIGHTS. The Committee may also grant
non-transferrable rights, alone or in conjunction with options, entitling the
holder upon exercise to receive an amount in any combination of cash or shares
of Common Stock (in the sole discretion of the Committee) equal to the increase
since the
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<PAGE>
date of grant in the fair market value of the shares covered by such SAR over
the SAR price for such shares. The SAR price will be established at the date of
grant of the SAR and will be determined by the Committee in its sole discretion,
except that the SAR price may not be less than the fair market value of the
Common Stock on the date the SAR is granted in the case of an SAR issued in
tandem with an ISO, and may not be less than 50 percent of such fair market
value in the case of all other SARs. The restrictions applicable to the exercise
of SARs under the Stock Plan in the context of termination of employment with
UCI are the same as those restrictions applicable to the exercise of stock
options under the Stock Plan as discussed above.
RESTRICTED STOCK AWARDS. The Committee may also award shares of Common
Stock subject to such conditions and restrictions, if any, as the Committee may
determine. The purchase price, if any, of shares of Restricted Stock shall be
determined by the Committee. Recipients of Restricted Stock may be required to
enter into a Restricted Stock award agreement with UCI in such form as the
Committee may determine, setting forth the restrictions to which the shares are
subject and the date or dates on which the restrictions will lapse. The
Committee may at any time waive such restrictions or accelerate such dates.
Shares of Restricted Stock will be non-transferable. If a participant who holds
shares of Restricted Stock terminates employment for any reason (including
death) prior to the lapse or waiver of any restrictions, then the shares shall
be forfeited to UCI for no payment. Prior to the lapse of any restrictions on
shares of Restricted Stock, the participant will have all rights of a
stockholder with respect to the shares, including voting and dividend rights,
subject only to the conditions and restrictions generally applicable to
Restricted Stock or specifically set forth in any Restricted Stock award
agreement.
CURRENT AWARDS. The number and value of awards that may be granted
under the Stock Plan in the future to officers, directors and employees of, and
consultants and advisors to, UCI or any of its subsidiaries cannot currently be
determined and will be within the discretion of the Committee. As of the date of
this Proxy Statement, one award of an ISO for the purchase of 60,000 shares of
Common Stock at an exercise price of $1.75 per share was made effective December
17, 1997 to an officer (non-executive) of UCI. One-third of that ISO vests on
each of the first three anniversaries of its date of grant. As of the date of
this Proxy Statement, no other grants of any awards have been approved under the
Stock Plan to any other persons.
FEDERAL INCOME TAX CONSEQUENCES. The following discussion is intended
only as a brief summary of the federal income tax rules currently in effect that
are generally relevant to stock incentive awards. The laws governing the tax
aspects of awards are highly technical and such laws are subject to change.
INCENTIVE STOCK OPTIONS: For regular income tax purposes, no taxable
income is realized by the optionee upon the grant or exercise of an ISO. As long
as no disposition of shares issued upon exercise of the ISO is made by the
optionee within two years from the date of grant or within one year after the
transfer of such shares to the optionee, then (a) upon sale of such shares, any
amount realized in excess of the option price will be taxed to the optionee as a
long-term capital gain, and any loss sustained will be a long-term capital loss,
and (b) no deductions will be allowed to UCI for federal income tax purposes.
However, the exercise of an ISO will give rise to an item of tax preference that
may result in alternative minimum tax liability for the optionee.
If shares acquired upon the exercise of an ISO are disposed of prior to
the expiration of the holding periods described above (a "disqualifying
disposition"), generally (a) the optionee will realize ordinary income in the
year of disposition in an amount equal to the excess (if any) of the fair market
value of the shares at exercise (or, if less, the amount realized on a sale of
such shares) over the option price thereof, and (b) UCI will be entitled to
deduct such amount. Any further gain realized will be taxed as short-term or
long-term capital gain and will not result in any deduction by UCI. Special
rules apply when all or a portion of the exercise price of the ISO is paid by
tendering shares of Common Stock, and special rules may also apply where the
optionee is subject to Section 16(b) of the 1934 Act. A disqualifying
disposition
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<PAGE>
will eliminate the item of tax preference associated with the exercise of the
ISO if it occurs in the same taxable year as the exercise of the ISO.
NONQUALIFIED STOCK OPTIONS: No income is realized by the optionee at
the time an NSO is granted. Generally, (a) at exercise, ordinary income is
realized by the optionee in an amount equal to the difference between the option
price and the fair market value of the shares on the date of exercise, and UCI
receives a tax deduction for the same amount, and (b) at disposition,
appreciation or depreciation after the date of the exercise is treated as either
short-term or long-term capital gain or loss, depending on how long the shares
have been held. Special rules could apply in some situations if the optionee is
subject to Section 16(b) of the 1934 Act.
STOCK APPRECIATION RIGHTS: No income will be realized by a participant
in connection with the grant of an SAR. When the SAR is exercised, or when a
participant receives payment in cancellation of an SAR, the participant will
generally be required to include as taxable ordinary income in the year of such
exercise or payment an amount equal to the amount of cash received and the fair
market value of any stock received. UCI will generally be entitled at the same
time to a deduction for federal income tax purposes equal to the amount
includable as ordinary income by such participant.
RESTRICTED STOCK AWARDS: The recipient of Restricted Stock generally
will realize ordinary income equal to the fair market value of the stock at the
time the stock is no longer subject to forfeiture, minus any amount paid for
such stock, and UCI will receive a corresponding deduction. However, unless
prohibited by any award agreement, a recipient may elect under Section 83(b) of
the Code to realize ordinary income on the date of issuance equal to the fair
market value of the shares of Restricted Stock at that time (measured as if the
shares were unrestricted and could be sold immediately), minus any amount paid
for such stock. If the shares are forfeited, the recipient will not be entitled
to any deduction, refund or loss for tax purposes with respect to the forfeited
shares. Upon sale of the shares after the forfeiture period has expired, the
holding period to determine whether the recipient has long-term or short-term
capital gain or loss begins when the restriction period expires (or upon earlier
issuance of the shares, if the recipient elected immediate recognition of income
under Section 83(b) of the Code). If Restricted Stock is received in connection
with another award under the Stock Plan, the income and the deduction, if any,
associated with such award may be deferred in accordance with the rules
described above for Restricted Stock.
The foregoing discussion is provided for the information of
stockholders and is not a complete description of the federal tax consequences
in respect of transactions under the Stock Plan, nor does it describe state or
local tax consequences.
RATIFICATION OF AUDITORS PROPOSAL
The UCI Board, adopting the recommendation of the Audit Committee of
the UCI Board (the "Audit Committee"), has appointed the certified public
accounting firm of Price Waterhouse LLP as UCI's independent auditors for the
fiscal year ending September 30, 1998, subject to ratification by the
stockholders at the Annual Meeting. Representatives of Price Waterhouse LLP are
expected to be present at the Annual Meeting and will be available to respond to
questions and may make a statement if such representatives so desire.
DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS
The following sets forth certain information concerning the persons
nominated for election as directors and the current directors whose terms will
continue beyond the Annual Meeting.
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DIRECTOR NOMINEES FOR TERMS EXPIRING IN 2001
CHARLES P. CANNON, 47, has served as a director of UCI since September
1995, as Vice President, Corporate Controller and Assistant Treasurer for BCBS
since April 1988 and as Assistant Treasurer for its subsidiary, CHC, since April
1988. Prior to joining BCBS in April 1988, he was a Senior Manager and
consultant for Price Waterhouse LLP for eleven years. Mr. Cannon is a member of
the American Institute of Certified Public Accountants, the South Carolina
Association of Certified Public Accountants, the Institute of Management
Accountants and the Tennessee Society of Certified Public Accountants.
A. WAYNE JOHNSON, 46, has served as Chairman and Chief Executive
Officer of MHC from its inception in February 1996. Mr. Johnson has 23 years of
entrepreneurial and business operations experience in the field of financial
services and corporate development. Prior to co-founding MHC in February 1996,
Mr. Johnson had served since 1991 as President of one of the major operating
subsidiaries of First Data Corporation and Chief Marketing Officer and strategic
planner for First Data Card Services Group, a subsidiary of First Data
Corporation. Mr. Johnson was the founder of both Integratec, a collection
company, and QualiServ, a credit card outsourcing service company.
ASHBY M. JORDAN, M.D., 58, has served as a director of UCI since August
1996 and as Vice President of Medical Affairs of BCBS since December 1986. Prior
to joining BCBS, Dr. Jordan was the Vice President of Medical Affairs for CIGNA
HealthPlan of South Florida, Inc. Dr. Jordan is Board Certified by the American
Board of Pediatrics.
DIRECTORS WHOSE TERMS EXPIRE IN 2000
M.F. MCFARLAND, III, M.D., 49, has served as Chairman of the Board,
President and Chief Executive Officer of UCI since January 1987 and as a
director of UCI since September 1984. From September 1984 until January 1987, he
served as Vice President of UCI. He has served as President and as the sole
director of UCI-SC and DC-SC for over five years and of UCI-GA since its
organization in February 1998. He served as Associate Professional Director of
the Emergency Department of Richland Memorial Hospital in Columbia, South
Carolina from 1978 to 1981 and was President of the South Carolina Chapter of
the American College of Emergency Physicians in 1979. Dr. McFarland is currently
a member of the Columbia Medical Society, the South Carolina Medical Association
and the American Medical Association.
CHARLES M. POTOK, 48, has served as a director of UCI since September
1995 and as Executive Vice President and Chief Operating Officer of CP&C since
March 1984. Mr. Potok is an Associate of the Casualty Actuarial Society and a
member of the American Academy of Actuaries. Prior to joining CP&C, Mr. Potok
served as Chief Property and Casualty Actuary and Director of the Property and
Casualty Division of the South Carolina Department of Insurance.
DIRECTORS WHOSE TERMS EXPIRE IN 1999
HAROLD H. ADAMS, JR., 50, has served as a director of UCI since June
1994 and as President and owner of Adams and Associates, International, Adams
and Associates, and Southern Insurance Managers since June 1992. He served as
President of Adams Eaddy and Associates, an independent insurance agency, from
1980 to 1992. Mr. Adams has been awarded the Chartered Property Casualty
Underwriter designation and is currently a member of the President's Board of
Visitors of Charleston Southern University in Charleston, South Carolina. He has
received numerous professional awards as the result of over 25 years of
involvement in the insurance industry and is a member of many professional and
civic organizations.
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THOMAS G. FAULDS, 56, has served as a director of UCI since August 1996
and as Executive Vice President of Private Business for BCBS since October 1991.
Mr. Faulds has been with BCBS since March 1972 where he has served in key senior
management positions in government programs, information systems and operations.
EXECUTIVE OFFICERS
The following sets forth certain information concerning the persons who
currently serve as executive officers of UCI who do not also serve on the UCI
Board.
JERRY F. WELLS, JR., 35, has served as Chief Financial Officer and
Executive Vice President of Finance of UCI since he joined UCI in February 1995
and as Corporate Secretary of UCI since December 1996. He has served as
Executive Vice President of Finance, Chief Financial Officer and Corporate
Secretary of UCI-SC since December 1996, and of UCI-GA since its organization in
February 1998, and as Corporate Secretary of DC-SC since December 1996. Prior to
joining UCI, he served as a Senior Manager and consultant for Price Waterhouse
LLP from 1985 until February 1995. Mr. Wells is a certified public accountant
and is a member of the American Institute of Certified Public Accountants, the
South Carolina Association of Certified Public Accountants and the North
Carolina CPA Association.
D. MICHAEL STOUT, M.D., 52, has served as Executive Vice President of
Medical Affairs of UCI since 1985. He is Board Certified in Emergency Medicine
and is a member of the American College of Emergency Physicians, the Columbia
Medical Society and the American College of Physician Executives.
JON G. KEITH, 48, has served as Executive Vice President and Chief
Operating Officer of UCI and as Chief Operating Officer of UCI-SC since he
joined the Company in January 1997. From 1985 until he joined the Company, Mr.
Keith served as Vice President for Corporate Services and Vice President for
Administration for Baptist Healthcare System of South Carolina and Baptist
Medical Center. Mr. Keith is a Diplomate with the American College of Healthcare
Executives and a member of the Medical Group Management Association.
JITENDRA S. MEHTA, 46, has served as Executive Vice President of
Development and Procurement of UCI since he joined the Company in November 1993.
Mr. Mehta has an extensive background in hospital and medical personnel
administration. He served as Business Director of Multispecialty Clinic in
Maryland from 1985 to 1989 and served as Vice President and Partner of Citrus
Diagnostic Center from 1990 to 1993. Mr. Mehta is currently a member of American
Registry for Radiological Technology and the Nuclear Medicine Technologist
Certification Board.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the 1934 Act requires the directors and officers of
UCI to file reports of holdings and acquisitions in Common Stock with the SEC.
Based on UCI records and other information, UCI believes that all SEC filing
requirements applicable to its directors and officers were complied with in
respect to the Company's fiscal year ended September 30, 1997.
BOARD OF DIRECTORS AND BOARD COMMITTEES
THE UCI BOARD
The UCI Board had a total of four regular meetings and no special
meetings during the Company's fiscal year ended September 30, 1997. No director
attended fewer than 75 percent of the total of such Board meetings and the
meetings of the committees upon which the director served. Among the standing
committees established by the UCI Board are a Compensation Committee, an Audit
Committee, and a Revenue Enhancement Committee. The UCI Board does not have a
nominating committee for
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recommending to stockholders candidates for positions on the UCI Board.
Currently, seven directors serve on the UCI Board.
AUDIT COMMITTEE
The Audit Committee consists of Messrs. Adams and Cannon. This
committee recommends to the UCI Board the engagement of the independent auditors
for the Company, determines the scope of the auditing of the books and accounts
of the Company, reviews the reports submitted by the auditors, examines
procedures employed in connection with the Company's internal control structure,
reviews and approves the terms of acquisitions between the Company and any
related party entities, undertakes certain other activities related to the
fiscal affairs of the Company and makes recommendations to the UCI Board as may
be appropriate. This committee met once during the Company's fiscal year ended
September 30, 1997.
COMPENSATION COMMITTEE
The Compensation Committee consists of Messrs Adams, Cannon, Potok and
Russell J. Froneberger. (Mr. Froneberger is not standing for reelection at the
Annual Meeting.) This committee monitors the Company's executive compensation
plan, practice and policies, including all salaries, bonus awards and fringe
benefits, and makes recommendations to the UCI Board with respect to changes in
existing executive compensation plans and the formation and adoption of new
executive compensation plans. This committee met once during the Company's
fiscal year ended September 30, 1997.
THE REVENUE ENHANCEMENT COMMITTEE
The Revenue Enhancement Committee consists of Messrs. Adams, Faulds,
Froneberger and Potok. This committee monitors the Company's ancillary and
complementary services, and makes recommendations to the UCI Board with respect
to changes in such existing services. This committee met once during the
Company's fiscal year ended September 30, 1997.
EXECUTIVE COMPENSATION
The following table sets forth the total compensation earned during the
fiscal year ended September 30, 1997 and during each of the two prior fiscal
years by the President and Chief Executive Officer of UCI and the executive
officers of UCI whose annual compensation from UCI exceeded $100,000 for all
services provided to the Company. No other executive officer of the Company
earned compensation in excess of $100,000 for services provided to the Company
in any of the three fiscal years reflected in the table.
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SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
----------------------------------------------- ------------------
Securities
Fiscal Underlying All Other
Name and Principal Position Year Salary(1) Bonus (1) Options Compensation(2)
- ---------------------------- ------ ----------- ----------- --------- ----------------
<S> <C> <C> <C> <C> <C>
M.F. McFarland, III, M.D. 1997 $ 316,540 (3) $ - 0- (4) 141,675 $ 7,968
CHAIRMAN, PRESIDENT AND 1996 315,000 (3) 63,500 (4) 30,000 7,368
CHIEF EXECUTIVE OFFICER 1995 194,616 (3) 145,000 (4) 35,000 6,818
D. Michael Stout, M.D. 1997 $ 216,825 (5) $ - 0- (6) 79,825 $ - 0-
EXECUTIVE VICE PRESIDENT OF 1996 198,316 (5) - 0- (6) 10,000 - 0-
MEDICAL AFFAIRS 1995 157,600 (5) 32,000 (6) 20,000 -0-
</TABLE>
(1) Amounts included under the heading "Salary" and "Bonus" include
compensation from both UCI-SC and DC-SC.
(2) Amounts included under the heading "All Other Compensation" are
comprised of premiums for long term disability and life insurance
provided by the Company for the benefit of Dr. McFarland.
(3) For services performed by Dr. McFarland for UCI-SC, a wholly-owned
subsidiary of UCI, Dr. McFarland received an annual salary of $157,500
and $157,500 during the fiscal years ended September 30, 1997 and 1996,
respectively. Dr. McFarland served without compensation from UCI-SC for
his services during the fiscal year ended September 30, 1995. For
services performed by Dr. McFarland for DC-SC, an affiliated
professional association wholly owned by Dr. McFarland that contracts
with UCI-SC to provide all medical services at UCI's medical facilities,
Dr. McFarland received an annual salary of $159,040, $157,500, and
$194,616 for the fiscal years ended September 30, 1997, 1996, and 1995,
respectively.
(4) Pursuant to the employment agreement dated October 1, 1995 between
UCI-SC and Dr. McFarland, UCI-SC accrued incentive bonuses during the
fiscal years ended September 30, 1997 and 1996 payable to Dr. McFarland
of zero and $63,500, respectively, and made no payments to Dr. McFarland
against accrued bonuses. DC-SC accrued a bonus payable to Dr. McFarland
during the fiscal year ended September 30, 1995 of $145,000. Dr.
McFarland received draws from DC-SC out of previously accrued bonuses of
$62,000, $120,000 and $167,430 during the fiscal years ended September
30, 1997, 1996, and 1995, respectively.
(5) For services performed by Dr. Stout for UCI-SC, Dr. Stout received an
annual salary of $50,000 and $45,833 during the fiscal years ended
September 30, 1997 and 1996, respectively. Dr. Stout served without
compensation from UCI-SC for his services during the fiscal year ended
September 30, 1995. For services performed by Dr. Stout for DC-SC, Dr.
Stout received an annual salary of $166,825, $152,483, and $157,600 for
the fiscal years ended September 30, 1997, 1996, and 1995, respectively.
(6) DC-SC accrued and paid bonuses to Dr. Stout of zero, zero and $32,000
during the fiscal years ended September 30, 1997, 1996 and 1995,
respectively.
OPTION GRANTS
The following table sets forth certain information with respect to
options to purchase Common Stock granted during the fiscal year ended September
30, 1997 to certain of the executive officers of UCI. (All options reflected
below vest one-third on each of the first three anniversaries of the grant
date.)
48
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
PERCENT OF TOTAL
NUMBER OF SECURITIES OPTIONS GRANTED EXERCISE OR
UNDERLYING OPTIONS TO EMPLOYEES BASE PRICE EXPIRATION
Name GRANTED IN FY 1997 PER SHARE DATE
- ------------------------------ ----------------------- ------------------ ---------------- ----------------
<S> <C> <C> <C> <C>
M.F. McFarland, III, M.D. 20,000 4.49% $ 2.8875 Dec. 18, 2001
CHAIRMAN, PRESIDENT AND 121,675 27.31 2.1313 June 18, 2002
CHIEF EXECUTIVE OFFICER
A. Michael Stout, M.D. 5,000 1.12 2.6250 Dec. 18, 2006
EXECUTIVE VICE PRESIDENT OF 74,825 16.80 1.9375 June 18, 2007
MEDICAL AFFAIRS
</TABLE>
FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information with respect to
unexercised options to purchase Common Stock held at September 30, 1997. None of
the named executive officers exercised any options during the fiscal year ended
September 30, 1997.
1997 FISCAL YEAR-END
OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY
FISCAL YEAR END OPTIONS AT FISCAL YEAR END
--------------------------------------- ---------------------------------
NAME EXERCISABLE Unexercisable Exercisable Unexercisable
------------------ ----------------- ------------- ----------------
<S> <C> <C> <C> <C>
M.F. McFarland, III, M.D. 33,333 173,342 $ -0- $ 44,862
CHAIRMAN, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
A. Michael Stout, M.D. 16,666 93,159 -0- 42,090
EXECUTIVE VICE PRESIDENT OF
MEDICAL AFFAIRS
</TABLE>
DIRECTOR COMPENSATION
Non-employee directors are paid a fee of $500 for attendance at each
meeting of the UCI Board. Non-employee directors of UCI are reimbursed by UCI
for all out-of-pocket expenses reasonably incurred by them in the discharge of
their duties as directors, including out-of-pocket expenses incurred in
attending meetings of the UCI Board.
During the fiscal year ended September 30, 1996, UCI adopted a
Non-Employee Director Stock Option Plan (the "1996 Non-Employee Plan"). The 1996
Non-Employee Plan provides for the granting
49
<PAGE>
of options to two non-employee directors for the purchase of 10,000 shares of
Common Stock at the fair market value as of the date of grant. Under this plan,
5,000 options were issued to Harold H. Adams, Jr. and 5,000 options were issued
to Russell J. Froneberger. These options are exercisable during the period
commencing on March 20, 1999 and ending on March 20, 2006. At September 30,
1997, there were stock options outstanding under the 1996 Non-Employee Plan for
10,000 shares, none of which were exercisable.
During the fiscal year ended September 30, 1997, UCI adopted a
Non-Employee Director Stock Option Plan (the "1997 Non-Employee Plan"). The 1997
Non-Employee Plan provides for the granting of options to four non-employee
directors for the purchase of 20,000 shares of Common Stock at the fair market
value as of the date of grant. Under this plan, 5,000 options were issued each
to Charles P. Cannon, Thomas G. Faulds, Ashby M. Jordan, M.D., and Charles M.
Potok. These options are exercisable during the period commencing on March 28,
2000 and ending on March 28, 2007. At September 30, 1997, there were stock
options outstanding under the 1997 Non-Employee Plan for 20,000 shares, none of
which were exercisable.
EMPLOYEE CONTRACTS
Effective October 1, 1995, Dr. McFarland entered into a five-year
contract with UCI-SC that provides for annual compensation of $157,500, the use
of one automobile and an incentive bonus payable at the end of the fiscal year,
subject to the determination of the UCI Board and based upon net income and
gross revenue of UCI for the same year. Also, effective October 1, 1995, Dr.
McFarland entered into a five-year contract with DC-SC that provides for annual
compensation of $157,500.
Effective November 1, 1995, Dr. Stout entered into a five-year
contract with UCI-SC that provides for annual compensation of $50,000. Also,
effective November 1, 1995, Dr. Stout entered into a five-year contract with
DC-SC that provides for annual compensation of $160,000.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to UCI
regarding the beneficial ownership of Common Stock as of December 31, 1997.
Information is presented for (i) stockholders owning more than five percent of
the outstanding Common Stock, (ii) each director, director nominee and executive
officer of UCI, individually, and (iii) all directors and executive officers of
UCI, as a group.
50
<PAGE>
<TABLE>
<CAPTION>
Number of Shares
NAME Beneficially Owned (1) Percentage
- -------------------------------------------------------- ------------------------ -----------------
<S> <C> <C>
Blue Cross Blue Shield of South Carolina (2)....................... 2,624,623 43.37 %
M.F. McFarland, III, M.D. (3).........................................589,128 9.65
Harold H. Adams, Jr.....................................................2,500 *
Charles P. Cannon.........................................................-0- -0-
Thomas G. Faulds..........................................................-0- -0-
Russell J. Froneberger..................................................2,000 *
A. Wayne Johnson..........................................................-0- -0-
Ashby M. Jordan, M.D......................................................-0- -0-
Jon G. Keith.......................................................... 20,500 (4) *
Jitendra Mehta.........................................................18,334 (5) *
Charles M. Potok..........................................................-0- -0-
D. Michael Stout, M.D.................................................280,627 (6) 4.62
Jerry F. Wells, Jr.....................................................33,333 (7) *
All current directors and executive officers
as a group (11 persons)............................................946,422 15.28 %
</TABLE>
- ------------------------
* Amount represents less than 1.0 percent.
(1) Beneficial ownership reflected in the table is determined in accordance
with the rules and regulations of the SEC and generally includes voting
or investment power with respect to securities. Shares of Common Stock
issuable upon the exercise of options currently exercisable or
convertible, or exercisable or convertible within 60 days, are deemed
outstanding for computing the percentage ownership of the person holding
such options, but are not deemed outstanding for computing the
percentage ownership of any other person. Except as otherwise specified,
each of the stockholders named in the table has indicated to UCI that
such stockholder has sole voting and investment power with respect to
all shares of Common Stock beneficially owned by that stockholder.
(2) The business address of the named beneficial owner is I-20 at Alpine
Road, Columbia, SC 29219. The shares reflected in the table are held of
record by CHC (2,006,442 shares) and CP&C (618,181 shares), each of
which is a wholly-owned subsidiary of BCBS.
(3) The business address of the named beneficial owner is 1901 Main Street,
Suite 1200, Columbia, SC 29201. Shares reflected in the table include
50,000 shares issuable pursuant to currently exercisable stock options.
(4) Includes 20,000 shares issuable pursuant to currently exercisable stock
options.
(5) All shares are issuable pursuant to currently exercisable stock options.
(6) Includes 21,667 shares issuable pursuant to currently exercisable stock
options.
(7) All shares are issuable pursuant to currently exercisable stock options.
51
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
AGREEMENTS WITH DC-SC
FACILITIES AGREEMENT
Pursuant to a Facilities Agreement between UCI-SC and DC-SC (the
"Facilities Agreement"), UCI- SC supplies to DC-SC the facilities, equipment and
assets of the UCI Centers as well as such non-medical personnel as are
reasonably required by DC-SC in the operation of the UCI Centers. In exchange,
DC-SC provides the necessary staffing for the performance of medical services at
the UCI Centers, including a physician to serve as Executive Medical Director
having overall responsibility for the operations of the UCI Centers. From the
fees paid each month to DC-SC for services rendered at the UCI Centers, DC-SC
retains an amount equal to the cost of all narcotic drugs purchased by DC-SC
during the month and an amount sufficient to satisfy the payroll and related
personnel costs of DC-SC for physicians and other medical providers at the UCI
Centers, with the balance of the fees paid to UCI-SC. During the Company's
fiscal years ended September 30, 1997, 1996, and 1995, DC-SC received an
aggregate of approximately $27,925,000, $23,254,000, and $17,987,000,
respectively, in fees prior to deduction by DC-SC of its payroll and other
related deductible costs covered under the Facilities Agreement. For accounting
purposes, the operations of DC-SC are combined with the operations of UCI and
are reflected in the consolidated financial statements of UCI. Pursuant to the
employment agreement between DC-SC and Dr. McFarland, Dr. McFarland serves as
Executive Medical Director of the UCI Centers, and is paid an annual salary for
his services in such position. Footnotes (3) and (4) of the Summary Compensation
Table in this Proxy Statement describe compensation paid to Dr. McFarland by
DC-SC during the fiscal years ended September 30, 1997, 1996 and 1995. Pursuant
to the employment agreement between DC-SC and Dr. Stout, Dr. Stout provides
medical services to DC-SC, and is paid an annual salary for such services.
Footnotes (5) and (6) of the Summary Compensation Table in this Proxy Statement
describe compensation paid to Dr. Stout by DC-SC during the fiscal years ended
September 30, 1997, 1996 and 1995. In September 1996, the Facilities Agreement
was renewed for an additional fifteen-year term. In January 1995, the Facilities
Agreement was modified to provide UCI-SC with certain rights to terminate the
Facilities Agreement (a) upon the death of Dr. McFarland, (b) upon Dr. McFarland
ceasing to own, either directly or indirectly, a controlling interest in DC-SC,
or (c) upon Dr. McFarland becoming a "disqualified person" as defined by the
South Carolina Business Corporation Act of 1988, as amended. Dr. McFarland is
the President, sole director and sole owner of DC-SC.
REFUND AGREEMENT
Pursuant to a Facilities Fee Refund Agreement (the "Refund Agreement")
entered into among UCI, UCI-SC and DC-SC, DC-SC was entitled to receive a refund
of a portion of the fees payable to UCI-SC under the Facilities Agreement with
respect to fourteen of the UCI Centers. The Refund Agreement was terminated
effective October 1, 1995. During UCI's fiscal years ended September 30, 1997
and 1996, UCI-SC made payments to DC-SC of $62,000 and $120,000, respectively,
against accumulated refunds payable. At September 30, 1997 and 1996, UCI-SC had
refunds payable to DC-SC of approximately $94,000 and $156,000, respectively.
MEDICAL CENTER LEASES
UCI-SC leases six medical center facilities from CHC and one medical
center facility from CP&C under operating leases with fifteen-year terms
expiring in 2008, 2009 and 2010. The terms of these leases are believed to be no
more or less favorable to UCI-SC than those that would have been obtainable
through arm's-length negotiations with unrelated third parties for similar
arrangements. Each of these leases has a five-year renewal option, and a rent
guarantee by DC-SC. One of the leases has a purchase option allowing UCI-SC to
purchase the center at fair market value after February 1, 1995. Total lease
payments
52
<PAGE>
made by UCI-SC under these leases during the fiscal years ended September 30,
1997 and 1996 were $319,730 and $306,178, respectively.
Several of the UCI Centers are leased or were leased from entities
owned or controlled by certain principal stockholders and/or members of UCI's
management. The terms of these leases are believed to be no more or less
favorable to UCI-SC than those that would have been obtainable through
arm's-length negotiations with unrelated third parties for similar arrangements.
The Doctor's Care Northeast facility is leased from a partnership in
which Dr. McFarland is a general partner. The lease was renewed in
October 1994 for a five-year term. The lease has two five-year renewal
options and provides UCI-SC with an option to purchase the facility at
its fair market value after October 1995. Total lease payments made by
UCI-SC under this lease during the fiscal years ended September 30,
1997 and 1996 were $45,600 and $45,600, respectively, plus utilities
and real estate taxes.
The Doctor's Care Lexington facility was leased from a general
partnership in which Dr. McFarland and Dr. Stout were general partners.
The Doctor's Care Lexington facility was sold in February 1996 to
unrelated third parties who lease it to UCI-SC. Total lease payments
made by UCI-SC under this lease during the fiscal years ended September
30, 1997 and 1996 were zero and $14,125, respectively, plus utilities
and real estate taxes.
The Doctor's Care West Columbia and the Doctor's Care Beltline
facilities were leased from a general partnership in which Dr.
McFarland and Dr. Stout were general partners. Both of these centers'
facilities were sold in May 1996 to unrelated third parties who lease
them to UCI-SC. Total lease payments made by UCI-SC under these two
leases during the fiscal years ended September 30, 1997 and 1996 were
zero and $46,516, respectively, plus utilities and real estate taxes.
In connection with its agreement to lease these two facilities, UCI-SC
guaranteed the lessor's mortgage debt relating to the two facilities.
At September 30, 1997 and 1996, the outstanding balance of such debt
was zero.
The Doctor's Care Lugoff facility was leased directly from Dr.
McFarland. This facility was sold in May 1996 to an unrelated third
party who leases it to UCI-SC. Total lease payments made by UCI-SC
under this lease during the fiscal years ended September 30, 1997 and
1996 were zero and $16,613, respectively, plus utilities and real
estate taxes.
OTHER TRANSACTIONS WITH RELATED PARTIES
At December 31,1997, CHC owned 2,006,442 shares of Common
Stock and CP&C owned 618,181 shares of Common Stock, which combine to
approximately 43.37 percent of the outstanding Common Stock. Each of CHC and
CP&C is a wholly-owned subsidiary of BCBS. The following is a historical summary
of purchases of Common Stock by BCBS subsidiaries directly from UCI.
<TABLE>
<CAPTION>
Price Total
DATE BCBS Number per Purchase
PURCHASED Subsidiary of Shares Share Price
- ----------------- ------------- --------------- ---------- ---------------
<S> <C> <C> <C> <C>
12/10/93 CHC 333,333 $1.50 $ 500,000
06/08/94 CHC 333,333 3.00 1,000,000
01/16/95 CHC 470,588 2.13 1,000,000
05/24/95 CHC 117,647 2.13 250,000
11/03/95 CHC 218,180 2.75 599,995
12/15/95 CHC 218,180 2.75 599,995
03/01/96 CHC 109,091 2.75 300,000
06/04/96 CP&C 218,181 2.75 599,998
53
<PAGE>
06/23/97 CP&C 400,000 1.50 600,000
</TABLE>
The Common Stock acquired by CHC and CP&C directly from UCI was
purchased pursuant to exemptions from the registration requirements of federal
and state securities laws. Consequently, the ability of the holders to resell
such shares in the public market is subject to certain limitations and
conditions. The shares acquired by CHC and CP&C were purchased at share prices
below market value at the respective dates of purchase in part as a consequence
of the lower issuance costs incurred by UCI in the sale of these unregistered
securities and in part as a consequence of the restricted nature of the shares.
CHC and CP&C have the right to require registration of the stock under certain
circumstances as described in the respective stock purchase agreements. BCBS and
its subsidiaries have the option to purchase as many shares as may be necessary
for BCBS and its subsidiaries to maintain ownership of 47 percent of the
outstanding Common Stock in the event that UCI issues additional stock to other
parties (excluding shares issued to employees or directors of UCI).
During the fiscal year ended September 30, 1994, UCI-SC entered into a
capital lease purchase agreement with BCBS for a new billing and accounts
receivable system, which includes computer equipment, for an aggregate purchase
price of $504,000. UCI-SC has the option to purchase the equipment at the end of
the lease term for $1. The lease obligation recorded at September 30, 1997 is
$340,916, which includes lease addenda. The terms of the lease purchase
agreement are believed to be no more or less favorable to UCI-SC than the terms
that would have been obtainable through arm's-length negotiations with unrelated
third parties for a similar billing and accounts receivable system, which
includes computer equipment.
During the fiscal year ended September 30, 1994, UCI-SC entered into an
agreement with CP&C pursuant to which UCI-SC, through DC-SC, acts as the primary
care provider for injured workers of firms carrying worker's compensation
insurance through CP&C. Additionally, during the fiscal year ended September 30,
1995, UCI-SC executed a $400,000 note payable to CP&C payable in monthly
installments of $4,546 (including 11 percent interest) from April 1, 1995 to
March 1, 2010, collateralized by certain accounts receivable. The terms of the
agreement with CP&C are believed to be no more or less favorable to UCI-SC than
those that would have been obtainable through arm's-length negotiations with
unrelated third parties for similar arrangements.
UCI-SC, through DC-SC, provides services to members of a health
maintenance organization operated by CHC who have selected DC-SC as their
primary care provider. The terms of the agreement with CHC are believed to be no
more or less favorable to UCI-SC than those that would have been obtainable
through arm's-length negotiations with unrelated third parties for similar
arrangements.
During the fiscal year ended September 30, 1996, BCBS provided a
non-interest bearing advance to UCI in the amount of $600,000. This advance was
paid in full in December 1996. The terms of this advance are believed to have
been no more or less favorable to UCI than those that would have been obtainable
through arm's-length negotiations with related third parties for similar
arrangements.
The employees of UCI and its subsidiaries are offered health, life, and
dental insurance coverage at group rates from BCBS and its subsidiaries. The
group rates offered to the employees of UCI and its subsidiaries are believed to
be no more or less favorable to UCI and its subsidiaries than those that would
have been obtainable through arm's-length negotiations with unrelated third
parties for similar services.
UCI and its subsidiaries contract with Adams and Associates for
worker's compensation, and professional liability insurance coverage, which in
turn contracts with CP&C to be the insurance carrier for the workers
compensation insurance coverage of UCI and its subsidiaries. Aggregate premiums
paid during the fiscal year ended September 30, 1997 in connection with such
policies were approximately $155,000. During the fiscal year ended September 30,
1996, Adams and Associates provided short-term financing to UCI for
approximately $17,000 in workers compensation audit premiums, which was paid in
54
<PAGE>
full during the fiscal year ended September 30, 1997. Harold H. Adams, Jr. is
the President and owner of Adams and Associates and is also a director of UCI.
Effective November 1, 1997, UCI and its subsidiaries no longer contract through
Adams and Associates for any of their insurance coverage. Management of UCI
believes that the terms of its contracts with Adams and Associates were no more
or less favorable to UCI and its subsidiaries than those that would have been
obtainable through arm's-length negotiations with unrelated third parties for
similar services.
UCI contracts with Global Consulting, Inc. for certain financial and
marketing consulting services. Russell J. Froneberger is the President and owner
of Global Consulting, Inc. and is also a director of UCI whose term expires at
the forthcoming Annual Meeting. Mr. Froneberger is not standing for reelection
as a director at the Annual Meeting. Fees paid during the fiscal year ended
September 30, 1997 in connection with these services were approximately $96,000.
The terms of the contracts with Global Consulting, Inc. are believed to be no
more or less favorable to UCI than those that would have been obtainable through
arm's-length negotiations with unrelated third parties for similar services.
55
<PAGE>
ADDITIONAL INFORMATION
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
We have made forward-looking statements in this document that are
subject to known and unknown risks and uncertainties. Forward-looking statements
include the information concerning possible or assumed future results of
operations of the combined company set forth under "Risk Factors" and "The
Acquisition - Description of the Acquisition - Reasons for the Acquisition" and
"- Fairness Opinion" and those preceded by, followed by or that include the
words "believes," "expects," "anticipates" or similar expressions. Such
statements reflect the current views of UCI and/or MHC with respect to future
events. For those statements as they relate to UCI only, we claim the protection
of the safe harbor for forward- looking statements contained in the Private
Securities Litigation Reform Act of 1995, to the extent provided by applicable
law. This safe harbor does not apply to forward-looking statements of MHC
because MHC has never registered its securities with the SEC. You should
understand that the important factors set forth below, in addition to those
discussed elsewhere in this document and in the documents which we incorporate
by reference, could affect the future results of the Company and could cause
those results to differ materially from those expressed or implied in our
forward-looking statements. Although UCI's management believes that their
expectations of future performance are based on reasonable assumptions within
the bounds of their knowledge of their business and operations, there can be no
assurance that actual results will not differ materially from their
expectations. Factors which could cause actual results to differ from
expectations include, among other things, the difficulty in controlling the
Company's costs of providing healthcare and administering its network of medical
centers; the possible negative effects from changes in reimbursement and
capitation payment levels and payment practices by insurance companies,
healthcare plans, government payors and other payment sources; the difficulty of
attracting primary care physicians; the increasing competition for patients
among healthcare providers; possible government regulations in multiple
jurisdictions negatively impacting the existing organizational structure of the
Company; the possible negative effects of prospective healthcare reform; the
challenges and uncertainties in the implementation of the Company's expansion
and development strategy; the dependence on key personnel, a significant delay
in the expected date of the closing of the Acquisition; the ability to
successfully integrate the management structures of MHC and consolidate the
operations of MHC with those of the Company; and other factors described in this
document and in other document filed by UCI with the SEC.
STOCKHOLDER PROPOSALS
Proposals of stockholders of UCI which are intended to be presented by
such stockholders at the next Annual Meeting of UCI stockholders must be
received by UCI no later than November 6, 1998 in order to be considered for
inclusion in the proxy statement and form of proxy relating to that meeting.
OTHER MATTERS
The UCI Board knows of no other matters which are likely to be brought
before the Annual Meeting. If any matters are brought before the Annual Meeting,
the proxy agents named in the enclosed proxy will vote on such matters in
accordance with their best judgment.
ANNUAL REPORT
A copy of the Company's Annual Report on Form 10-KSB/A for the fiscal
year ended September 30, 1997, which has been filed with the SEC, is included in
the Company's 1997 Annual Report to Stockholders which accompanies this Proxy
Statement.
56
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
UCI files annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any reports, statements or
other information that we file at the SEC's public reference rooms in
Washington, D.C., New York, New York and Chicago, Illinois. Please call the SEC
at 1-800-SEC-0330 for further information on the public reference rooms. Our SEC
filings are also available to the public from commercial document retrieval
services and at the Internet web site maintained by the SEC at
"http://www.sec.gov." Reports, proxy statements and other information should
also be available for inspection at the offices of the NASD.
The SEC allows us to "incorporate by reference" information into this
Proxy Statement, which means that we can disclose important information to you
by referring you to another document filed separately with the SEC. The
information incorporated by reference is deemed to be part of this Proxy
Statement, except for any information superseded by information contained
directly in this Proxy Statement. This Proxy Statement incorporates by reference
the documents set forth below that we have previously filed with the SEC. These
documents contain important information about UCI and its finances.
<TABLE>
<CAPTION>
UCI SEC Filings (File No. 0-13265) Period
---------------------------------- ------
<S> <C>
Annual Report on Form 10-KSB/A.............................................Fiscal year ended September 30, 1997
Quarterly Report on Form 10-QSB............................................Quarter ended December 31, 1997
Current Report on Form 8-K.................................................Filed February 17, 1998
A description of Common Stock
contained in UCI's Registration
Statement on Form 8-A......................................................Dated March 6, 1985
</TABLE>
We are also incorporating by reference additional documents we file
with the SEC from the date of this Proxy Statement to the date of the Annual
Meeting. Any statement in this document or in a document incorporated or deemed
to be incorporated by reference in this document shall be deemed to be modified
or superseded for purposes of this document to the extent that a statement
contained in this document or in any other subsequently filed document which
also is or is deemed to be incorporated by reference in this document modifies
or supersedes such statement. Any such statement so modified or superseded shall
not be deemed to constitute a part of this document, except as so modified or
superseded.
UCI has supplied all information contained or incorporated by reference
in this Proxy Statement relating to UCI. MHC has supplied all such information
relating to its operations. UCI does not take any responsibility for the
accuracy of the information provided by MHC.
A copy of the UCI Form 10-KSB/A for the fiscal year ended September 30,
1997 is included in the UCI Annual Report to Stockholders which accompanies this
Proxy Statement. If you are a stockholder, we may have already sent you some of
the other documents incorporated by reference, but you can obtain any document
incorporated by reference through us, the SEC, or the SEC's Internet web site as
described above. Documents incorporated by reference are available from us
without charge, excluding all exhibits unless we have specifically incorporated
by reference an exhibit in this Proxy Statement. Stockholders may obtain
documents incorporated by reference in this Proxy Statement by requesting them
in writing or by telephone to us at the following address:
UCI Medical Affiliates, Inc.
Investor Relations Department
1901 Main Street, Suite 1200
Columbia, South Carolina 29201
(803) 252-3661
57
<PAGE>
If you would like to request documents from us, please do so by March
20, 1998 to receive them before the Annual Meeting.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROXY STATEMENT TO VOTE ON THE PROPOSALS RELATING TO THE
ACQUISITION. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT
IS DIFFERENT FROM WHAT IS CONTAINED IN THIS PROXY STATEMENT. THIS PROXY
STATEMENT IS DATED MARCH 5, 1998. YOU SHOULD NOT ASSUME THAT THE INFORMATION
CONTAINED IN THE PROXY STATEMENT IS ACCURATE AS OF ANY DATE OTHER THAN THAT
DATE, AND NEITHER THE MAILING OF THIS PROXY STATEMENT TO STOCKHOLDERS NOR THE
ISSUANCE OF COMMON STOCK IN CONNECTION WITH THE ACQUISITION SHALL CREATE ANY
IMPLICATION TO THE CONTRARY.
58
<PAGE>
APPENDIX A
February 9, 1998
The Board of Directors
UCI Medical Affiliates, Inc.
1901 Main Street, Suite 1200
Columbia, SC 29201
Members of the Board of Directors:
You have requested my opinion, as of this date, as to the fairness,
from a financial point of view, to UCI Medical Affiliates, Inc., a Delaware
corporation ("UCI"), and its stockholders of the terms of the proposed
transactions referred to below.
Pursuant to the proposed Acquisition Agreement and Plan of
Reorganization (the "Acquisition Agreement") dated as of the date hereof, to be
entered among UCI, UCI Medical Affiliates of Georgia, Inc. ("UCI-GA"),
MainStreet Healthcare Corporation ("MainStreet") and certain of its affiliated
entities, the parties thereto are to effect a business combination transaction
pursuant to which, on the terms and subject to the conditions set forth in the
Acquisition Agreement (the "Proposed Transactions"): (i) UCI-GA and certain of
its affiliates will acquire from MainStreet and its affiliates certain assets
and liabilities for a purchase price of $8,870,000 consisting of a combination
of cash, common stock of UCI and assumption of certain liabilities. I understand
that all approvals required for the consummation of the Proposed Transactions
have been or, prior to consummation of the Proposed Transactions will be,
obtained.
In arriving at my opinion, I have among other things:
(i) reviewed the terms and conditions of the Proposed
Transactions, including the draft Acquisition
Agreement and the draft agreements ancillary thereto;
(ii) analyzed certain financial aspects of the Proposed
Transactions and consideration to be paid by UCI and
UCI-GA in connection with the Proposed Transactions;
(iii) reviewed and analyzed publicly available historical
business and financial information relating to UCI and
its affiliated entities, as presented in documents
filed with the Securities and Exchange Commission and
otherwise provided to me by UCI, as well as historical
financial information relating to MainStreet and its
affiliated entities as provided to me by UCI and
MainStreet;
(iv) analyzed selected summary non-public financial and
operating results of operations of UCI (consolidated)
and MainStreet;
(v) analyzed the financial conditions and prospects of UCI
and MainStreet;
(vi) reviewed and analyzed public information, including
certain stock market data and financial information
relating to selected companies with operating
statistics and dynamics similar to those of UCI and
MainStreet;
A-1
<PAGE>
The Board of Directors
UCI Medical Affiliates, Inc.
February 9, 1998
Page 2
(vii) reviewed the trading history of UCI's common stock,
including such stock's performance in comparison to
market indices and to selected companies with
operating statistics and dynamics similar to those of
UCI;
(viii) conferred with the management teams of each of UCI and
MainStreet;
(ix) reviewed public financial and transaction information
relating to premiums and multiples paid in certain
merger and acquisition transactions similar to the
Proposed Transactions or relevant portions thereof;
and
(x) conducted such other financial analyses and
investigations as I deemed necessary or appropriate
for the purposes of the opinion expressed herein.
In rendering my opinion, I have assumed and relied upon the accuracy
and completeness of the financial and other information respecting UCI and
MainStreet and any other information provided to me by the parties, and we have
not assumed any responsibility for any independent verification of such
information or any independent valuation or appraisal of any of the assets or
liabilities of UCI and MainStreet. With respect to selected summary financial
and operating results referred to above, I have assumed they were reasonably
prepared on a basis reflecting the best currently available information and the
good faith estimates and judgements of the management of UCI as to the future
financial performance of UCI and the management of MainStreet as to the future
financial performance of MainStreet.
In addition to my review and analysis of the specific information set
forth above, my opinion herein reflects and gives effect to my assessment of
general economic, monetary and market conditions existing as of the date of this
letter as they may affect the business and prospects of UCI and MainStreet.
My engagement and the opinion expressed herein are for the benefit of
the Board of Directors of UCI in its evaluation of the Proposed Transactions and
may not be used for any other purpose without my prior written consent, except
that this opinion may be included in its entirety and referred to in any filing
made by UCI with the Securities and Exchange Commission with respect to the
Proposed Transactions. Furthermore, the opinion rendered herein does not
constitute a recommendation that UCI pursue the Proposed Transactions over any
other alternative transactions which may be available to UCI or that any
stockholder of UCI vote to approve the Proposed Transactions.
Based on and subject to the foregoing, I am of the opinion that, as of
the date of this letter, the terms of the Proposed Transactions are fair, from a
financial point of view, to UCI and its stockholders.
Very truly yours,
/s/ Oliver G. Wood, Jr.
Oliver G. Wood, Jr.
A-2
<PAGE>
APPENDIX B
PROPOSED AMENDMENTS TO THE UCI CERTIFICATE
AUTHORIZED CAPITAL STOCK PROPOSAL
The Authorized Stock Proposal provides that the UCI
Certificate will be amended by restating the first paragraph of Article Fourth
to read in its entirety as follows:
"FOURTH: The total number of shares of stock which the
corporation shall have authority to issue is as follows: Thirty Million
(30,000,000) shares of Common Stock, having a par value of five cents ($.05) per
share, amounting in the aggregate to One Million Five Hundred Thousand Dollars
($1,500,000) and Ten Million (10,000,000) shares of Preferred Stock having a par
value of one cent ($.01) per share, amounting in the aggregate to One Hundred
Thousand Dollars ($100,000)."
B-1
<PAGE>
APPENDIX C
INDEX TO FINANCIAL STATEMENTS OF
MAINSTREET HEALTHCARE CORPORATION
<TABLE>
<CAPTION>
Page
<S> <C>
Unaudited Consolidated Financial Statements, for the three months and nine
months ended December 31, 1997 and 1996:
Consolidated Balance Sheets ..........................................................................C-2
Consolidated Statements of Operations.................................................................C-3
Consolidated Statements of Cash Flows.................................................................C-4
Notes to Consolidated Financial Statements............................................................C-5
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 .........................................................................C-6
Consolidated Balance Sheet ...........................................................................C-7
Consolidated Statement of Operations..................................................................C-8
Consolidated Statement of Stockholders' Deficit ......................................................C-9
Consolidated Statement of Cash Flows.................................................................C-10
Notes to Consolidated Financial Statements...........................................................C-11
Management's Discussion and Analysis of Financial Condition and
Results of Operations.....................................................................................C-20
</TABLE>
C-1
<PAGE>
MainStreet Healthcare Corporation
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31, 1997 March 31, 1997
----------------- --------------
(unaudited) (audited)
<S> <C> <C>
Assets
Current Assets: $ 84,340 $ 1,950
Cash
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
authorized, no shares issued and outstanding 412,000 --
5% cumulative redeemable preferred stock, $1,000
redemption value; 6,000 authorized, 4,367 and 4,117
shares issued and outstanding 4,367,000 4,117,000
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.
C-2
<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
services 673,764 410,487 2,410,887 777,738
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.
C-3
<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>
<S> <C> <C>
1997 1996
________ _______
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 perferred 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.
C-4
<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 of 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.
C-5
<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
C-6
<PAGE>
MAINSTREET HEALTHCARE CORPORATION
Consolidated Balance Sheet
March 31, 1997
<TABLE>
<CAPTION>
<S> <C>
Assets
------
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.
C-7
<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.
C-8
<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.
C-9
<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>
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.
C-10
<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.
C-11
<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.
C-12
<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.
C-13
<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.
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<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
-----------
Accumulated depreciation and amortization (71,602)
-----------
$1,422,594
===========
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<PAGE>
MAINSTREET HEALTHCARE CORPORATION
Notes to Consolidated Financial Statements
(7) Long-Term Debt and Leases
Long-term debt and capital leases consists of:
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
===========
The following is a schedule of principal maturities of long-term debt,
including capital leases, as of March 31, 1997.
1998 $ 360,454
1999 360,717
2000 161,691
2001 37,929
2002 34,814
Thereafter 170,293
----------
Total $1,125,898
==========
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.
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
========
Capitalized equipment leases included in equipment was $18,600 at March 31,
1997. The imputed interest rate was 16.45% at March 31, 1997.
C-16
<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.
1998 $ 512,353
1999 453,355
2000 426,199
2001 411,586
2002 258,130
Thereafter 76,757
----------
$2,138,380
==========
(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.
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<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:
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 $ -
The significant components of the deferred income tax expense (benefit) for
the period ended March 31, 1997 are as follows:
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 $ -
(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.
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<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.
C-19
<PAGE>
MAINSTREET HEALTHCARE CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis provides information which the
Mainstreet Healthcare Corporation ("MHC") believes is relevant to an assessment
and understanding of MHC's consolidated results of operations and financial
condition. This discussion should be read in conjunction with the consolidated
financial statements of MHC and the notes thereto.
The consolidated financial statements of MHC include the accounts of MHC,
MainStreet Healthcare Medical Group, P.C. of Georgia and MainStreet Healthcare
Medical Group PC of Tennessee (collectively, the "MHC-PCs"). The financial
statements of the MHC-PCs are consolidated with MHC because MHC has unilateral
control over the assets and operations of the MHC-PCs and notwithstanding the
lack of technical majority ownership, consolidation of the MHC-PCs with MHC is
necessary to present fairly the financial position and results of operations of
MHC. The management agreement between MHC and the MHC-PCs conveys to MHC
perpetual, unilateral control over the assets and operations of the MHC-PCs.
Control is perpetual rather than temporary because of: (i) the length of the
term of the agreement, (ii) the continuing investment of capital by MHC, (iii)
the employment of all of the nonphysical personnel by MHC, and (iv) the nature
of the services provided to the MHC-PCs by MHC.
Procedurally, the management agreement calls for the MHC-PCs to provide
medical services and charge a fee to the patient or to the patient's insurance
carrier or employer for such services. Physician salaries are paid out of these
revenues and all remaining revenues are passed to MHC as a management fee. MHC
provides all support personnel (nurses, technicians, receptionists), all
administrative functions (billing, collecting, vendor payment), and all
facilities, supplies and equipment. The consolidated accounts of MHC include all
revenue and all expenses including physician salaries of all three entities.
The MHC-PCs enter into employment agreements with physicians for terms
ranging from 1-10 years. All employment agreements have clauses that allow for
early termination of the agreement if certain events occur such as the loss of a
medical license. The physicians employed by the MHC-PCs. are paid on a salary
basis. A few of the physicians have incentive compensation agreements. As of
December 31, 1997 and December 31, 1996, the MHC-PCs employed 16 and 20 medical
providers, respectively.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED DECEMBER 31, 1997 AS
COMPARED TO THE THREE MONTHS ENDED DECEMBER 31, 1996
Revenues of $1,641,319 for the quarter ending December 31, 1997 reflects an
increase of 60% from those of the quarter ending December 31, 1996. MHC
commenced its operations in March of 1996 with the acquisition of its first
medical practice and grew through a series of acquisitions through July of 1997
when a maximum of 14 clinics had been acquired. During August and September of
1997, MHC closed three unprofitable practices in South Georgia (Valdosta, Adel,
Thomaston) and continued their liquidation through fiscal year-end.
MHC's revenues per practice per month increased from $34,656 in fiscal 1996
to $49,727 in fiscal 1997, a growth of 43%. This was due to intensive management
of the hours of operation, the addition of providers, the addition of ancillary
services such as x-ray, lab and physical therapy, and increased marketing to
insurance carriers.
Revenues were short of goals for the quarter due in part to the increased
competition from hospitals and other providers in the metropolitan Atlanta
market. In this area, regional hospitals have acquired or opened new primary
care physician practices that compete directly with the company for
C-20
<PAGE>
patients. In each case, the hospital owners of our competition are believed to
have significantly greater resources than the company. Management believes that
such competition will continue into the future and plans to compete on a basis
of quality service and accessibility.
An operating loss of $356,654 was incurred during the third quarter of
fiscal 1997 as compared to an operating loss of $165,984 realized for the third
quarter of fiscal 1996. Management believes that lack of improvement in the
margin is mainly the result of increased start-up and development costs being
absorbed for the locations added since December 1996.
Depreciation and amortization expense decreased to $28,051 in the third
quarter of fiscal 1997 down from $29,610 in the third quarter of fiscal 1996.
This decrease reflects lower depreciation expense as a result of the reduction
in the number of MHC's medical centers. Interest expense increased from $37,147
in the third quarter of fiscal 1996 to $102,320 in the third quarter of fiscal
1997, primarily as a result of the interest costs associated with the
indebtedness incurred in MHC's purchase of these centers and as a result of the
issuance of 13,250 shares of 5% cumulative redeemable preferred shares ($1,000
redemption value).
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED DECEMBER 31, 1997 AS
COMPARED TO THE NINE MONTHS ENDED DECEMBER 31, 1996
Net revenues of $5,078,264 reflect an increase of 141% from the same period
in fiscal 1996 and is attributable to the expansion, marketing and line of
business factors discussed above.
FINANCIAL CONDITION AT DECEMBER 31, 1997
Cash and cash equivalents decreased by $250,110 during the nine months
ended March 31, 1997. Cash was utilized mainly for working capital needs and to
fund the expansion previously discussed.
Accounts receivable increased 34% during the period, reflecting the
addition of medical centers and the overall growth in patient visits to existing
medical centers.
The decrease in goodwill of $259,453 is attributable to the amortization
recorded and adjustment to the March 31, 1997 figures for the three clinics that
were closed in south Georgia during the period.
Total liabilities increased from $2,454,798 at March 31, 1997 to $3,570,096
at December 31, 1997 primarily as a result of indebtedness incurred in capital
leases for equipment purchases and an increase in unpaid accounts payable and
accrued expenses. MHC's current liabilities exceeded it's current assets at
December 31, 1997 by $1,122,717.
Management believes that MHC should be able to continue to operate and meet
its continuing current operating costs out of cash generated from operations.
LIQUIDITY AND CAPITAL RESOURCES
MHC requires capital principally to fund growth (acquire new medical
centers), for working capital needs and for the retirement of indebtedness.
MHC's capital requirements and working capital needs have been funded through a
combination of external financing (including receivable funding and proceeds
from the sale of 5% cumulative redeemable preferred stock) and credit extended
by suppliers.
C-21
<PAGE>
SUBSEQUENT EVENTS
In February of 1998, MHC entered into a definitive agreement to sell
substantially all of the assets of MHC to UCI Medical Affiliates, Inc. for
$8,050,000 plus the assumption of certain indebtedness and capital leases of
MHC.
C-22
<PAGE>
********************************************************************************
APPENDIX
UCI MEDICAL AFFILIATES, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE 1998 ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD ON MONDAY, MARCH 30, 1998 AT THE EMBASSY SUITES HOTEL,
200 STONERIDGE DRIVE, COLUMBIA, SOUTH CAROLINA AT 10:00 A.M. LOCAL TIME.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting
of Stockholders and Proxy Statement, each dated March 5, 1998 and appoints each
of Jerry F. Wells, Jr. and Jon R. Keith as proxy and attorney-in-fact of the
undersigned, each with full power of substitution, to vote all of the shares of
common stock of UCI Medical Affiliates, Inc., a Delaware corporation, held or
owned by the undersigned or standing in the name of the undersigned at the 1998
Annual Meeting of Stockholders of the Company and at any adjournments thereof,
and the undersigned hereby instructs said proxies and attorneys to vote as
follows:
1. To approve the issuance of shares of Common Stock of the Company in
connection with the Acquisition.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
2. To approve the amendment to the Company's Amended and Restated Certificate of
Incorporation to increase the number of authorized shares of the Company's
common stock.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Election of Directors: Terms Expiring in 2001
FOR the nominee listed below WITHHOLD AUTHORITY
to vote as to the nominee
Charles P. Cannon [ ] [ ]
A. Wayne Johnson [ ] [ ]
Ashby M. Jordan, M.D. [ ] [ ]
4. To approve the adoption of the Company's 1997 Stock Incentive Plan.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
5. To ratify the appointment of Price Waterhouse LLP as the firm of independent
auditors for the Company for the fiscal year ending September 30, 1998.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
6. In the discretion of each proxy and attorney-in-fact, upon any other business
which may properly come before the meeting or any adjournment thereof.
DATE:_____________ , 1998 ___________________________________
(Signature)*
(Please sign exactly as shown on
the envelope addressed to you.)
NUMBER OF SHARES: _______________ ___________________________________
(Signature, if held jointly)
*Note: When shares are held by joint tenants, both should sign. When
signing as attorney, executor, administrator, trustee, guardian or
corporate officer or partner, please give full title as such. If a
corporation, please sign in corporate name by president or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
THIS PROXY WILL BE VOTED AS INSTRUCTED. IN THE ABSENCE OF SUCH INSTRUCTIONS,
THIS PROXY WILL BE VOTED "FOR" EACH OF THE PROPOSALS LISTED, AND THE PROXIES
HEREIN NAMED WILL VOTE ON OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE
MEETING OR ANY ADJOURNMENT THEREOF IN ACCORDANCE WITH THEIR JUDGMENT.
<PAGE>
UCI MEDICAL AFFILIATES, INC.
1997 STOCK INCENTIVE PLAN
1. PURPOSES
1.1. The purposes of the UCI Medical Affiliates, Inc.1997 Stock Incentive
Plan are to (i) provide an incentive and reward to directors and employees of
the Company and any Parent or Subsidiary, and consultants and advisors to the
Company and any Parent or Subsidiary, who are and have been in a position to
contribute materially to improving the Company's profits, (ii) aid in the growth
of the Company, and (iii) encourage ownership of Shares by directors and
employees of the Company and any Parent or Subsidiary.
2. DEFINITIONS
2.1. For purposes of this Plan the following terms shall have the
definition which is attributed to them below, unless another definition is
clearly indicated by a particular usage and context.
(a) "Agreement" means the written document issued by the Committee
to a Participant whereby an Award is made to that Participant.
(b) "Award" means the issuance pursuant to this Plan of an Option,
an SAR or Restricted Stock.
(c) "Awarded Shares" means Shares subject to outstanding Awards.
(d) "Board" means the Company's Board of Directors.
(e) "Cause" means theft or destruction of property of the Company,
a Parent or Subsidiary, disregard of Company rules or policies, or
conduct evidencing willful or wanton disregard of the interest of the
Company. Such determination shall be made by the Committee based on
information presented by the Company and the Participant and shall be
final and binding on all parties to the Agreement.
(f) "Code" means the Internal Revenue Code of 1986, as amended.
(g) "Committee" means the Stock Incentive Plan Committee(s)
appointed by the Board pursuant to Section 3.1. To the extent the Board
has not established a Committee hereunder, all references herein to the
Committee shall be deemed to be references to the Board.
(h) "Company" means UCI Medical Affiliates, Inc., a corporation
incorporated under the laws of the state of Delaware, and any successor
thereto.
<PAGE>
(i) "Consultant" means any person or entity that provides services
to the Company as a consultant or advisor.
(j) "Director" means any individual appointed or elected to the
Board.
(k) "Effective Date of Grant" means the effective date on which
the Committee
makes an Award.
(l) "Employee" means any individual who performs services as a
common law employee for the Company, a Parent or Subsidiary, and is
included on the regular payroll of the Company, a Parent or Subsidiary.
(m) "Fair Market Value" means the value established by the
Committee based upon such factors as the Committee in its sole discretion
shall decide including, but not limited to, a valuation prepared by an
independent third party appraiser selected or approved by the Committee.
If at any time the Shares are traded on an established trading system, it
means the last sale price reported on any stock exchange or over-the
counter trading system on which Shares are trading on a specified date
or, if not so trading, the average of the closing bid and asked prices
for a Share on a specified date. If no sale has been made on the
specified date, then prices on the last preceding day on which any such
sale shall have been made shall be used in determining fair market value
under either method prescribed in the previous sentence.
(n) "Incentive Stock Option" means any option granted under this
Plan which meets the requirements of Code ss.422A and any regulations or
rulings promulgated thereunder and is designated by the Committee as an
Incentive Stock Option.
(o) "Nonqualified Stock Option" means any Option granted under
this Plan which is not an Incentive Stock Option.
(p) "Option" means the right to purchase from the Company a stated
number of Shares at a specified price.
(q) "Option Price" means the purchase price per Share subject to
an Option and shall be fixed by the Committee.
(r) "Parent" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company if, at the time of
the granting of the Award, each of the corporations (other than the
Company) owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in such
chain within the meaning of Code ss.425(e) and any regulations or rulings
promulgated thereunder.
(s) "Participant" means a Director, an Employee or a Consultant
who has received an Award under this Plan.
2
<PAGE>
(t) "Permanent and Total Disability" shall have the same meaning
as given to that term by Code ss.22(e)(3) and any regulations or rulings
promulgated thereunder.
(u) "Plan" means this UCI Medical Affiliates, Inc. 1997 Stock
Incentive Plan, as evidenced herein and as amended from time to time.
(v) "Restricted Stock" means Shares issued to the Participant
pursuant to Section 9 hereof which are subject to the restrictions of
this Plan and the Agreement.
(w) "Restriction Period" means a period commencing on the
Effective Date of Grant and ending on such date or upon the achievement
of such performance or other criteria as the Committee shall determine.
The Restriction Period may, in the sole discretion of the Committee, be
structured to provide for a release of restrictions in installments.
(x) "SAR" means stock appreciation rights issued to a Participant
pursuant to Section 8 hereof.
(y) "SAR Price" means the base value established by the Committee
for an SAR on the Effective Date of Grant used in determining the amount
of benefit, if any, paid to a Participant.
(z) "Share" means one share of the common stock of the Company.
(aa) "Subsidiary" means any corporation in an unbroken chain of
corporations beginning with the Company if, at the time of the granting
of the Award, each of the corporations (other than the last corporation)
in the unbroken chain owns stock possessing 50% or more of the total
combined voting power of all classes of stock in one of the other
corporations in such chain, within the meaning of Codess.425(f) and any
regulations or rulings promulgated thereunder.
(bb) "1933 Act" means the Securities Act of 1933, as amended.
(cc) "1934 Act" means the Securities Exchange Act of 1934, as
amended.
3. ADMINISTRATION
3.1. This Plan shall be administered by the Board, or at the Board's
election, by an existing or newly established Committee whose members are
appointed by the Board, or by more than one such Committee if desired and deemed
necessary by the Board in order to provide separate Committee authority for the
granting of Awards to separate categories of eligible Participants. Any such
Committee shall consist of not less than two members. The Board may from time to
time remove members from or add members to the Committee. Vacancies on the
Committee, howsoever caused, shall be filled by the Board.
3
<PAGE>
3.2. The action of a majority of the Committee at which a quorum is
present, or an action approved in writing by a majority of the Committee, shall
be the valid action of the Committee.
3.3. The Committee shall from time to time at its discretion designate
the Directors, Employees and Consultants who shall be Participants, determine
all the terms and conditions as set forth in Section 6.1 or otherwise, including
the type of Award to be made to each, the exercise period, expiration date and
other applicable time periods for each Award, the number of Shares subject to
each Award, with respect to each Option whether it is an Incentive Stock Option
or Nonqualified Stock Option and, if applicable, the Option Price or SAR Price
and the general terms of the Award.
3.4. The interpretation and construction by the Committee of any
provisions of this Plan or of any Option granted under it and all actions of the
Committee shall be final and binding on all parties hereto. No member of the
Board or the Committee shall be liable for any action or determination made in
good faith with respect to this Plan or any Award granted under it.
4. ELIGIBILITY
4.1. Each Participant shall be a Director, an Employee or a Consultant
of the Company, a Parent or a Subsidiary as selected by the Committee in its
sole discretion from time to time.
4.2. A Participant may hold more than one Award, but only on the terms
and subject to the restrictions set forth in this Plan.
5. SHARES SUBJECT TO AWARD
5.1. The securities subject to the Awards shall be 1,500,000 Shares.
Such number shall be adjusted as appropriate in order to give effect to changes
made in the number of outstanding Shares as a result of a merger, consolidation,
recapitalization, reclassification, combination, stock dividend, stock split, or
other relevant change.
5.2. In the event that any outstanding Award under this Plan expires or
is terminated for any reason, the Awarded Shares subject to that Award may again
be the subject of an Award under this Plan.
6. TERMS AND CONDITIONS
6.1. Awards granted pursuant to this Plan shall be authorized by the
Committee under terms and conditions approved by the Committee and shall be
evidenced by Agreements in such form as the Committee shall from time to time
approve, which Agreements shall contain or shall be subject to the following
terms and conditions, whether or not such terms and conditions are specifically
included therein:
4
<PAGE>
(a) Number of Shares. Each Award shall state the number of Shares
to which it pertains.
(b) Date. Each Award shall state the Effective Date of Grant.
(c) Price. With respect to each Award or portion thereof, which
requires payment of an Option Price, it shall state the Option Price.
With respect to an SAR, it shall state the SAR Price.
(d) Method and Time of Payment. With respect to an Award, or
portion thereof, which requires payment of an Option Price, the Option
Price shall be payable on the exercise of the Award and shall be paid in
(i) cash, (ii) Shares, including Shares acquired pursuant to this Plan,
or (iii) part in cash and part in Shares. Shares transferred in payment
of the Option Price shall be valued as of date of transfer based on their
Fair Market Value.
(e) Transfer of Option or Stock. No Award, Option, SAR, or
Restricted Stock (prior to the expiration of the Restriction Period)
shall be transferable by the Participant, except by will or the laws of
descent and distribution upon the Participant's death and subject to any
other limitations of this Plan. In addition to any other restriction
hereunder or otherwise provided in the Agreement with the Participant, no
Shares acquired pursuant to an Award of any type may be sold, transferred
or otherwise disposed of prior to the end of the six month period which
begins on the Effective Date of Grant of such Award.
(f) Recapitalization. The Committee shall make appropriate
adjustments in the number of Awarded Shares or in the Option Price or SAR
Price in order to give effect to changes made in the number of
outstanding Shares as a result of a merger, consolidation,
recapitalization, reclassification, combination, stock dividend, stock
split, or other relevant change.
(g) Investment Purpose.
(i) The Company shall not be obligated to sell or issue any
Shares pursuant to any Award unless such Shares are at that time
effectively registered or exempt from registration under the 1933
Act. The determination of whether a Share is exempt from
registration shall be made by the Company's legal counsel and its
determination shall be conclusive and binding on all parties to
the Agreement.
(ii) Notwithstanding anything in this Plan to the contrary,
each Award under this Plan shall be granted on the condition that
the purchases of Shares thereunder shall be for investment
purposes and not with a view for resale or distribution except
that in the event the Shares subject to such Award are registered
under the 1933 Act, or in the event of a resale of such Shares
without such registration that would otherwise be permissible,
such condition shall be inoperative if in the opinion of counsel
for the Company such condition is not required under the 1933 Act
or any other applicable law, regulation, or rule of any
governmental agency.
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<PAGE>
(h) Other Provisions. Awards authorized under this Plan may
contain any other provisions or restrictions as the Committee in its sole
and absolute discretion shall deem advisable including, but not limited
to:
(i) Offering Options in tandem with or reduced by other
Options, SARs or other employee benefits and reducing one Award by
the exercise of another Option, SAR or benefit; or
(ii) Providing for the issuance to the Participant upon
exercise of an Option and payment of the exercise price thereof
with previously owned Shares, of an additional Award for the
number of shares so delivered, having such other terms and
conditions not inconsistent with this Plan as the Committee shall
determine.
(i) Duration of Award. Each Award shall be for a term of up to ten
years from the Effective Date of Grant as determined in the sole
discretion of the Committee. In the case of a grant of an Incentive Stock
Option to a person who owns more than 10% of the voting power of the
Company's voting stock on the Effective Date of Grant, such Incentive
Stock Option shall not be exercisable after the expiration of five (5)
years from its Effective Date of Grant.
6.2. The Company may place such legends on stock certificates
representing the Shares as the Company, in its sole discretion, deems necessary
or appropriate to reflect restrictions under this Plan, the Agreement, the Code,
the securities laws or otherwise.
6.3. Notwithstanding any provision herein to the contrary, employment
shall be at the pleasure of the Board, of its designees, of the Company, a
Parent or Subsidiary, as the case may be, at such compensation as the
appropriate board or designee shall determine. Nothing contained in this Plan or
in any Award granted pursuant to it shall confer upon any Participant any right
to continue in the employ of the Company, Parent or Subsidiary, as the case may
be, or to interfere in any way with the right of the Company, Parent or
Subsidiary to terminate employment at any time. So long as the Participant shall
continue to be a Director, an Employee or a Consultant, the Award shall not be
affected by any change of the Participant's duties or position except to the
extent the Agreement with the Participant provides otherwise.
6.4. Any person entitled to exercise an Option or an SAR may do so in
whole or in part by delivering to the Company at its principal office, attention
Corporate Secretary, a written notice of exercise. The written notice shall
specify the number of Shares for which an Option or SAR is being exercised.
(a) With respect to an Option, the notice shall be accompanied by
full payment of the Option Price for the Shares being purchased.
(b) During the Participant's lifetime, an Option or SAR may be
exercised only by the Participant, or on the Participant's behalf by the
Participant's legal guardian.
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7. INCENTIVE STOCK OPTIONS AND NONQUALIFIED STOCK OPTIONS
7.1. The Committee in its sole discretion may designate whether an Award
to an Employee is to be considered an Incentive Stock Option or a Nonqualified
Stock Option. AN AWARD TO A NON-EMPLOYEE DIRECTOR OR CONSULTANT MAY BE ONLY A
NONQUALIFIED STOCK OPTION. The Committee may grant both an Incentive Stock
Option and a Nonqualified Stock Option to the same Employee. However, where both
an Incentive Stock Option and a Nonqualified Stock Option are awarded at one
time, such Awards shall be deemed to have been awarded in separate grants, shall
be clearly identified, and in no event will the exercise of one such Award
affect the right to exercise the other such Award except to the extent the
Agreement with the Participant provides otherwise.
7.2. Any Award to an Employee designated by the Committee as an Incentive
Stock Option will be subject to the general provisions applicable to all Awards
granted under this Plan. In addition, the aggregate Fair Market Value of Shares
(determined at the Effective Date of Grant) with respect to which Incentive
Stock Options granted under all Incentive Stock Option Plans of the Company, a
Parent or Subsidiary, are exercisable by the Employee for the first time during
any calendar year shall not exceed $100,000.
7.3. The Option Price shall be established by the Committee in its sole
discretion. With respect to an Incentive Stock Option, the Option Price shall
not be less than 100% of the Fair Market Value of a Share on the Effective Date
of Grant, and in the case of a grant of an Incentive Stock Option to a person
who owns more than 10% of the voting power of the Company's voting stock on the
Effective Date of Grant, shall not be less than 110% of the Fair Market Value of
a Share on the Effective Date of Grant. With respect to a Nonqualified Stock
Option, the Option Price shall not be less than 50% of the Fair Market Value of
a Share on the Effective Date of Grant.
7.4. Any Award to an Employee will be considered to be a Nonqualified
Stock Option to the extent that any or all of the grant or the exercise of such
option is in conflict with Section 7.2, Section 7.3 or with any requirement for
Incentive Stock Options pursuant to Code ss.422A and the regulations issued
thereunder.
7.5. An Option may be terminated as follows:
(a) During the period of continuous employment with the Company,
Parent or Subsidiary, an Option will be terminated only if it has been
fully exercised or it has expired by its terms.
(b) In the event of termination of a Participant's employment with
the Company, the Option will terminate upon the earliest to occur of (i)
the full exercise of the Option (ii) the expiration of the Option by its
terms, and (iii) the date three months following the date of employment
termination; provided, however, should termination of employment (A)
result from the death or Permanent and Total Disability of the
Participant, such three-month period shall be one year or (B) be for
Cause, the Option will terminate on the date of employment
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<PAGE>
termination. For purposes of this Plan, a leave of absence approved by
the Company shall not be deemed to be termination of employment except
with respect to an Incentive Stock Option as required to comply with Code
ss.422A and the regulations issued thereunder.
(c) Subject to the terms of the Agreement with the Participant, if
a Participant shall die or becomes subject to a Permanent and Total
Disability prior to the termination of employment with the Company,
Parent or Subsidiary and prior to the termination of an Option, such
Option may be exercised to the extent that the Participant shall have
been entitled to exercise it at the time of death or disability, as the
case may be, by the Participant, the estate of the Participant or the
person or persons to whom the Option may have been transferred by will or
by the laws of descent and distribution.
7.6. Except as otherwise expressly provided in the Agreement with the
Participant, in no event will the continuation of the term of an Option beyond
the date of termination of employment allow the Participant, or the
beneficiaries or heirs of the Participant, to accrue additional rights under
this Plan, or to purchase more Shares through the exercise of an Option than
could have been purchased on the day that employment was terminated.
7.7. A Participant shall have no rights as a stockholder with respect to
any Shares subject to an Option until the date of the issuance of a stock
certificate to such Participant for such Shares.
No adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distributions or other rights for which
the record date is prior to the date such stock certificate is issued, except as
provided in Section 6.1.(f).
7.8. The continuous employment of a Consultant will be deemed terminated
for purposes of this Plan upon receipt of written notice from the Company to the
effect that the Company will no longer transact business with the Consultant.
8. STOCK APPRECIATION RIGHTS
8.1. The Committee, in its sole discretion, may grant to a Participant an
SAR.
8.2. The SAR Price shall be established by the Committee in its sole
discretion. The SAR Price shall not be less than 100% of Fair Market Value of a
Share on the Effective Date of Grant for a SAR issued in tandem with an
Incentive Stock Option and for other SARs, shall not be less than 50% of Fair
Market Value of a Share on the Effective Date of Grant.
8.3. Upon exercise of an SAR, the Participant shall be entitled, subject
to the terms and conditions of this Plan and the Agreement, to receive the
excess for each Share being exercised under the SAR (i) the Fair Market Value of
a Share on the date of exercise over (ii) the SAR Price for such Share.
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<PAGE>
8.4. At the sole discretion of the Committee, the payment of such excess
shall be made in (i) cash, (ii) Shares, or (iii) a combination of cash and
Shares. Shares used for this payment shall be valued at their Fair Market Value
on the date of exercise of the applicable SAR.
8.5. An Award of an SAR shall be considered an Award for purposes of the
number of Shares subject to an Award pursuant to Section 5.1, unless the
Agreement making the Award of the SAR provides that the exercise of an SAR
results in the termination of an unexercised Option for the same number of
Shares.
8.6. An SAR may be terminated as follows:
(a) During the period of continuous employment with the Company,
Parent or Subsidiary, an SAR will be terminated only if it has been fully
exercised or it has expired by its terms.
(b) Upon termination of employment, the SAR will terminate upon
the earliest of (i) the full exercise of the SAR (ii) the expiration of
the SAR by its terms, and (iii) not more than three months following the
date of employment termination; provided, however, should termination of
employment (I) result from the death or Permanent and Total Disability of
the Participant, such three month period shall be one year or (II) be for
Cause, the SAR will terminate on the date of employment termination. For
purposes of this Plan, a leave of absence approved by the Company shall
not be deemed to be termination of employment unless otherwise provided
in the Agreement or by the Company on the date of the leave of absence.
(c) Subject to the terms of the Agreement with the Participant if
a Participant shall die or becomes subject to a Permanent and Total
Disability prior to the termination of employment with the Company,
Parent or Subsidiary and prior to the termination of an SAR, such SAR may
be exercised to the extent that the Participant shall have been entitled
to exercise it at the time of death or disability, as the case may be, by
the Participant, the estate of the Participant or the person or persons
to whom the SAR may have been transferred by will or by the laws of
descent and distribution.
(d) Except as otherwise expressly provided in the Agreement with
the Participant, in no event will the continuation of the term of an SAR
beyond the date of termination of employment allow the Employee, or his
beneficiaries or heirs, to accrue additional rights under this Plan, have
additional SARs available for exercise or to receive a higher benefit
than the benefit payable as if the SAR was exercised on the date of
employment termination.
8.7. If an SAR which was considered an Award for purposes of Section 8.5
is terminated or unexercised for any reason, the number of Shares of such SAR
that were unexercised shall be again available for Award under this Plan.
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<PAGE>
8.8. The Participant shall have no rights as a stockholder with respect
to an SAR. In addition, no adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or distributions
or rights except as provided in Section 6.1.(f).
9. RESTRICTED STOCK
9.1. The Committee may award to a Participant Restricted Stock under such
terms or conditions as the Committee, in its sole discretion, shall determine
and as otherwise provided herein.
9.2. Restricted Stock shall be Shares which are subject to a Restriction
Period.
9.3. Should the Participant terminate employment for any reason, all
Restricted Stock which is still subject to the Restriction Period shall be
forfeited and returned to the Company for no payment.
9.4. Upon such forfeiture, shares representing such forfeited restricted
Stock shall obtain become available for Award under the Plan.
9.5. The Committee may require under such terms and conditions as it
deems appropriate or desirable that the certificates for Restricted Stock
awarded under this Plan may be held by the Company or its designee until the
Restriction Period expires. In addition, the Committee may place upon such
certificate such legend as the Committee deems necessary or appropriate and may
require as a condition of any receipt of Restricted Stock that the Participant
shall deliver a stock power endorsed in blank relating to the Restricted Stock.
10. AMENDMENT OR DISCONTINUANCE OF PLAN
10.1. The Board may at any time amend, suspend, or discontinue this Plan;
provided, however, that without further approval of the shareholders of the
Company no amendments by the Board shall:
(a) Change the class of Employees eligible to participate; or
(b) Except as provided in Section 5, increase the number of Shares
which may be subject to Options granted under this Plan.
10.2. No amendment to this Plan shall alter or impair any Award granted
under this Plan without the consent of the holder of such Award.
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<PAGE>
11. INDEMNIFICATION OF COMMITTEE
In addition to such other rights of indemnification as they may have as
Directors or as members of the Committee, the members of the Committee shall be
indemnified by the Company against the reasonable expenses, including attorneys'
fees, actually incurred in connection with the defense of any pending,
threatened or possible action, suit or proceeding, or in connection with any
pending, threatened or possible appeal therein, to which they or any of them may
be a party by reason of any actual or alleged action taken or failure to act
under or in connection with this Plan or any option granted thereunder, and
against all amounts paid by them in settlement thereof (provided such settlement
is approved by the Company) or paid by them in satisfaction of a judgment in any
such action, suit or proceeding, except in relation to matters as to which it
shall be adjudged in such action, suit or proceeding that such Committee member
is liable for gross negligence or willful misconduct in the performance of his
duties: provided that within sixty days after institution of any such action,
suit or proceeding a Committee member shall in writing offer the Company the
opportunity, at its own expense, to handle and defend the same.
12. NO OBLIGATION TO EXERCISE OPTION OR SAR
The granting of an Option or SAR shall impose no obligation upon the
Participant to exercise such Option.
13. EFFECTIVE DATE; DURATION OF PLAN
13.1. This Plan shall become effective as of December 17, 1997.
13.2. No Award may be made after the tenth anniversary of the effective
date of this Plan.
14. EFFECT OF PLAN
The making of an Award under this Plan shall not give the Participant any
right to similar grants in future years or any right to be retained in the
employ of the Company, the Parent or a Subsidiary, but a Participant shall
remain subject to discharge to the same extent as if this Plan were not in
effect.
15. CHANGE IN CONTROL
15.1. Treatment of Outstanding Awards. Upon the occurrence of a Change In
Control, as defined below, unless otherwise specifically prohibited under
applicable laws, or by the rules and regulations of any governmental agencies or
national securities exchanges, or by the express provisions of any Agreement,
(a) each Option and each SAR then outstanding hereunder that is not otherwise
exercisable shall become immediately and fully exercisable, and shall remain
exercisable throughout their entire term, notwithstanding any provision in the
Agreement relating
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<PAGE>
to such Option or SAR for the exercise of such Option or SAR in installments or
otherwise pursuant to a vesting schedule, and (b) any Restriction Period and
restrictions imposed on Restricted Stock shall lapse.
15.2. Change in Control Defined. For purposes of this Section, a Change
In Control shall mean that any of the following events shall have occurred:
(i) A person, partnership, joint venture, corporation or other
entity, or two or more of any of the foregoing acting as a group
(or a "person" within the meaning of Section 13(d)(3) of the 1934
Act), other than the Company, a majority-owned subsidiary of the
Company, an employee benefit plan (or related trust) of the
Company or such subsidiary, become(s) after the effective date of
this Plan the "beneficial owner" (as defined in Rule 13(d)(3)
under the 1934 Act) of 35% or more of the then outstanding voting
stock of the Company;
(ii) During any period of two consecutive years, individuals who
at the beginning of such period constitute the Board (together
with any new director whose election by the Board or whose
nomination for election by the Company's shareholders, was
approved by the vote of at least two-thirds of the directors then
still in office who either were directors at the beginning of such
period or whose election or nomination for election was previously
so approved) cease for any reason to constitute a majority of the
directors then in office;
(iii) The Board determines that a tender offer for the Company's
shares indicates a serious intention by the offeror to acquire
control of the Company; or
(iv) The shareholders of the Company approve (a) a plan of
complete liquidation of the Company; or (b) an agreement for the
sale or disposition of all or substantially all of the Company's
assets; or (c) a merger, consolidation, or reorganization of the
Company with or involving any other corporation, other than a
merger, consolidation, or reorganization that would result in the
voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding
or by being converted into voting securities of the surviving
entity) at least sixty-five percent (65%) of the combined voting
power of the voting securities of the Company (or such surviving
entity) outstanding immediately after such merger, consolidation
or reorganization.
15.3. Termination, Amendment and Modifications of Change in Control
Provisions. Notwithstanding any other provision of this Plan or any Agreement,
the provisions of this Section may not be terminated, amended or modified on or
after the effective date of a Change in Control to affect adversely the
operation of any Award theretofore granted under the Plan without the prior
written consent of the Participant with respect to said Participant's
outstanding Awards.
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16. SUCCESSORS; CONSOLIDATION, MERGER AND OTHER EVENTS
16.1. All obligations of the Company under this Plan or any Agreement
with respect to any Award granted hereunder shall be binding on any successor to
the Company, whether the existence of such successor is the result of a direct
or indirect purchase of all or substantially all of the business and/or assets
of the Company, or a merger, consolidation or otherwise. Specifically, in case
of any capital reorganization of the Company, or of any reclassification of any
Shares (other than a change as a result of subdivision or combination), or in
case of the consolidation of the Company with or the merger of the Company with
any other corporation (other than a consolidation or merger in which (i) the
Company is the continuing corporation and (ii) the holders of the Shares
immediately prior to such merger or consolidation continue as holders of Shares
after such merger or consolidation) or of the sale of the properties and assets
of the Company as, or substantially as, an entirety to any other corporation,
each Option and each SAR then outstanding shall after such reorganization,
reclassification, consolidation, merger or sale be exercisable, upon the terms
and conditions specified herein and in the Agreement relating to such Option or
SAR, for or with respect to the number of Shares or other securities or property
to which a holder of the number of Shares relating to such Option or SAR (at the
time of such reorganization, reclassification, consolidation, merger or sale)
upon exercise of such Option or SAR would have been entitled in connection with
such reorganization, reclassification, consolidation, merger or sale; and in any
such case, if necessary, the provisions set forth in this Section with respect
to the rights and interests thereafter of the holder of the Option or SAR shall
be appropriately adjusted so as to be applicable, as nearly as may reasonably
be, to any shares of stock or other securities or property thereafter
deliverable on the exercise of the Option or SAR.
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<PAGE>
INCENTIVE STOCK OPTION AGREEMENT
This Agreement, dated as of , (the "Effective Date of Grant") implements
the grant to the party identified as optionee on the signature page hereof (the
"Optionee") of an Incentive Stock Option pursuant to and subject to the terms
and conditions of the UCI Medical Affiliates, Inc. 1997 Stock Incentive Plan
(the "Plan") and the terms and conditions set forth below. Terms defined in the
Plan shall have the same meaning herein as in the Plan.
The Committee desires to afford the Optionee the opportunity to acquire
Shares of the Company's common stock so the Optionee has a proprietary interest
in the Company, and the Optionee desires the opportunity to acquire Shares.
Accordingly, the Company and the Optionee agree as follows:
1. Grant of Option and Purchase Price. The Company, pursuant to action of the
Committee, grants to the Optionee an Option to purchase Shares (the "Option
Shares") at a price of $ per share ("Option Price"), which has been determined
to be not less than the Fair Market Value of a Share on the Effective Date of
Grant of this Option.
2. Expiration of the Option. This Option shall expire ("Expiration Date") on the
earliest to occur of (i) ten (10) years from the date hereof; (ii) three (3)
months after the Optionee ceases to be an Employee of the Company, a Parent or a
Subsidiary (twelve (12) months if termination of employment is due to the
Optionee's death or the Optionee having incurred a Permanent and Total
Disability); (iii) the date this Option is fully exercised; (iv) the date
mutually agreed to by the Committee and the Optionee;or (v) the date of
termination of employment, if termination of employment is for Cause.
3. Exercise of Option
3.1. Subject to any other conditions herein, this Option shall vest and
become exercisable:
[SELECT ANY ONE OF THE FOLLOWING ALTERNATIVES]
[ ] on the Effective Date of Grant;
[ ] on the _________ anniversary of the Effective Date of
Grant;
[ ] in ( ) installments, the Optionee having the right
hereunder to purchase from the Company the following number
of Shares upon exercise of the Option, on and after the
following dates, in cumulative fashion:
(a) on and after the anniversary of the Effective
Date of Grant, up to % (ignoring fractional
shares) of the total number of Option Shares;
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<PAGE>
(b) on and after the anniversary of the Effective Date of
Grant, up to an additional % (ignoring fractional shares)
of the total number of Option Shares; and
(c) on and after the anniversary of the Effective Date of
Grant, the remaining Option Shares.
[ ] in accordance with the vesting schedule set forth in
Schedule A attached hereto and incorporated herein by
reference.
The Optionee's vested percentage of the total grant hereunder shall be fixed as
of the date the Optionee is no longer an Employee of the Company, a Subsidiary
or a Parent and shall not increase during the additional period, if any, during
which this Option may be exercised under Section 2, 2 hereof. Vested portions of
this Option may be exercised at any time, in whole or in part, before the
Expiration Date.
3.2. This Option may be exercised by mailing or delivering to the
Company, Attention: Corporate Secretary, 1901 Main Street, Suite 1200, Columbia,
South Carolina 29201, (i) a written signed notice of such exercise which
specifies the Effective Date of Grant of this Option, and the number of Shares
being purchased, and (ii) payment for such Shares by check (which clears in due
course) payable to the Company and/or by surrender of Shares previously owned by
the Optionee valued at the Fair Market Value thereof on the date received by the
Company. The Option shall be deemed exercised and the Shares purchased thereby
shall be deemed issued as of the date such payment is received by the Company.
4. Non-transferability of Option. This Option shall not be transferable by the
Optionee other than by will or the laws of descent and distribution and shall be
exercisable during the Optionee's lifetime only by the Optionee.
5. Adjustment in Shares Subject to the Option. The Committee will make
appropriate adjustments in the number of Shares subject to this Option or the
Option Price in order to give effect to changes made in the number of
outstanding Shares as a result of a merger, consolidation, recapitalization,
reclassification, combination, stock dividend, stock split, or other relevant
change.
6. Rights as Shareholder or Employee.
6.1. This Option shall not entitle the Optionee to any rights as a
shareholder of the Company with respect to any Shares subject to this Option
until it has been exercised and any such Shares issued.
6.2. This Option does not confer upon the Optionee any right with respect
to continuation of employment by the Company or a Subsidiary, nor does it in any
way interfere with or affect Optionee's right, the Company's right or a
Subsidiary's right to terminate such employment at any time.
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<PAGE>
7. Withholding. The Committee will make whatever arrangements the Company deems
necessary or appropriate to comply with all applicable withholding requirements.
The Committee and the Company shall have no obligation to deliver a certificate
evidencing the Shares purchased upon exercise of the Option unless and until
withholding arrangements satisfactory to the Company are made. The Optionee's
failure to comply with the required withholding arrangements shall result in a
forfeiture of any benefits hereunder.
8. Entire Agreement. This Agreement, together with the provisions of the Plan
which are incorporated herein by reference, constitutes the entire Agreement
between the Optionee and the Company with respect to the Option granted
hereunder.
9. Applicable Law. The Plan and this Agreement shall be governed by the
laws of the State of South Carolina.
UCI MEDICAL AFFILIATES, INC.
By:______________________________________
Its:_________________________________
-----------------------------------------
Optionee
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<PAGE>
NONQUALIFIED STOCK OPTION AGREEMENT
This Agreement, dated as of , (the "Effective Date of Grant") implements
the grant to the party identified as optionee on the signature page hereof (the
"Optionee") of a Nonqualified Stock Option subject to the terms and conditions
of the UCI Medical Affiliates, Inc.1997 Stock Incentive Plan (the "Plan") and
the terms and conditions set forth below. Terms defined in the Plan shall have
the same meaning herein as in the Plan.
The Committee desires to afford the Optionee the opportunity to acquire
Shares of the Company's common stock so the Optionee has a proprietary interest
in the Company, and the Optionee desires the opportunity to acquire Shares.
Accordingly, the Company and the Optionee agree as follows:
1. Grant of Option and Purchase Price. The Company, pursuant to action of the
Committee, grants to the Optionee an Option to purchase Shares (the "Option
Shares") at a price of $ per share ("Option Price"), [OPTIONAL: WHICH HAS BEEN
DETERMINED TO BE NOT LESS THAN THE FAIR MARKET VALUE OF A SHARE ON THE EFFECTIVE
DATE OF GRANT OF THIS OPTION].
2. Expiration of the Option. This Option shall expire ("Expiration Date") on the
earlier of (i) the date ten (10) years from the date hereof; (ii) the date three
(3) months after the Optionee ceases to be a Director, an Employee or a
Consultant of the Company, a Parent or a Subsidiary (twelve (12) months if
termination of employment is due to the Optionee's death or the Optionee having
incurred a Permanent and Total Disability); (iii) the date this Option is fully
exercised; (iv) the date mutually agreed to by the Committee and the Optionee;
or (v) the date of termination of employment, if termination of employment is
for Cause.
3. Exercise of Option
3.1. Subject to any other conditions herein, this Option shall vest and
become exercisable:
[SELECT ANY ONE OF THE FOLLOWING ALTERNATIVES]
[ ] on the Effective Date of Grant;
[ ] on the _________ anniversary of the Effective Date of
Grant;
[ ] in ( ) installments, the Optionee having the right
hereunder to purchase from the Company the following number
of Shares upon exercise of the Option, on and after the
following dates, in cumulative fashion:
(a) on and after the anniversary of the Effective
Date of Grant, up to % (ignoring fractional
shares) of the total number of Option Shares;
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<PAGE>
(b) on and after the anniversary of the Effective Date of
Grant, up to an additional % (ignoring fractional shares)
of the total number of Option Shares; and
(c) on and after the anniversary of the Effective Date of
Grant, the remaining Option Shares.
[ ] in accordance with the vesting schedule set forth in
Schedule A attached hereto and incorporated herein by
reference.
The Optionee's vested percentage of the total grant hereunder shall be fixed as
of the date the Optionee is no longer a Director, an Employee or a Consultant of
the Company, a Subsidiary or a Parent and shall not increase during the
additional period, if any, during which this Option may be exercised under
Section 2, 2 hereof. Vested portions of this Option may be exercised at any
time, in whole or in part, before the Expiration Date.
3.2. This Option may be exercised by mailing or delivering to the
Company, Attention: Corporate Secretary, 1901 Main Street, Suite 1200, Columbia,
South Carolina 29201, (i) a written signed notice of such exercise which
specifies the Effective Date of Grant of this Option, and the number of Shares
being purchased, and (ii) payment for such Shares by check (which clears in due
course) payable to the Company and/or by surrender of Shares previously owned by
the Optionee valued at the Fair Market Value thereof on the date received by the
Company. The Option shall be deemed exercised and the Shares purchased thereby
shall be deemed issued as of the date such payment is received by the Company.
4. Non-transferability of Option. This Option shall not be transferable by the
Optionee other than by will or the laws of descent and distribution and shall b
exercisable during the Optionee's lifetime only by the Optionee.
5. Adjustment in Shares Subject to the Option. The Committee will make
appropriate adjustments in the number of Shares subject to this Option or the
Option Price in order to give effect to changes made in the number of
outstanding Shares as a result of a merger, consolidation, recapitalization,
reclassification, combination, stock dividend, stock split, or other relevant
change.
6. Rights as Shareholder or Employee.
6.1. This Option shall not entitle the Optionee to any rights as a
shareholder of the Company with respect to any Shares subject to this Option
until it has been exercised and any such Shares issued.
6.2. This Option does not confer upon the Optionee any right with respect
to continuation of employment by the Company or a Subsidiary, nor does it in any
way interfere with or affect Optionee's right, the Company's right or a
Subsidiary's right to terminate such employment at any time.
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<PAGE>
7. Withholding. The Committee will make whatever arrangements the Company deems
necessary or appropriate to comply with all applicable withholding requirements.
The Committee and the Company shall have no obligation to deliver a certificate
evidencing the Shares purchased upon exercise of the Option unless and until
withholding arrangements satisfactory to the Company are made. The Optionee's
failure to comply with the required withholding arrangements shall result in a
forfeiture of any benefits hereunder.
8. Entire Agreement. This Agreement, together with the provisions of the Plan
which are incorporated herein by reference, constitutes the entire Agreement
between the Optionee and the Company with respect to the Option granted
hereunder.
9. Applicable Law. The Plan and this Agreement shall be governed by the laws of
the State of South Carolina.
UCI MEDICAL AFFILIATES, INC.
By:___________________________________
Its:______________________________
--------------------------------------
Optionee
3
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ACQUISITION AGREEMENT AND PLAN OF REORGANIZATION
This Acquisition Agreement and Plan of Reorganization ("Agreement") is
made as of the 9th day of February, 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.
MainStreet provides non-medical management and administrative functions
for nine medical facilities located in the State of Georgia (the "Georgia
Facilities") and two medical facilities located in the State of Tennessee (the
"Tennessee Facilities"). The medical services of the Georgia Facilities are
provided by MHMG-GA, and the medical services of the Tennessee Facilities are
provided by MHMG-TN. Prompt Care is a wholly-owned subsidiary of MainStreet, and
as of the date hereof has no assets or liabilities. The Class B Shareholders are
the sole holders of the Class B Common Stock, par value $.01 per share, of
MainStreet.
UCI of GA desires to acquire substantially all the assets of MainStreet
in transactions MainStreet intends will qualify as a reorganization under
Section 368(a)(1)(C) of the Internal Revenue Code of 1986, as amended, all upon
the terms and conditions set forth herein. In connection therewith, Doctor's
Care of GA desires to purchase substantially all the assets of MHMG-GA, and
Doctor's Care of TN desires to purchase substantially all the assets of MHMG-
TN, each pursuant to 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:
1. DEFINITIONS. The following terms used in this Agreement shall have the
following meanings ascribed to them:
Acquisition Agreement and
Plan of Reorganization
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1.1 "Agreement" shall mean this Acquisition Agreement And Plan of
Reorganization, in its entirety, together with all schedules and exhibits
attached hereto, which are incorporated herein by reference.
1.2 "Assets" shall mean collectively all the MainStreet Assets, MHMG-GA
Assets, and MHMG-TN Assets which are to be transferred to the Transferees
hereunder, excepting only the Excluded Assets.
1.3 "Assumed MainStreet Liabilities" shall have the meaning set forth
in Section 7.1.3 below.
1.4 "Business" shall mean collectively the MainStreet Business, MHMG-GA
Business, and MHMG-TN Business.
1.5 "Certified List of MainStreet Security Holders" shall have the
meaning set forth in Section 8.3.23 below.
1.6 "Class B Shareholders" shall mean collectively Dare, Johnson,
PENMAN, and Riddett, and "Class B Shareholder" shall mean one of them.
1.7 "Closing" shall have the meaning set forth in Section 8.1 below.
1.8 "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.9 "Dare" shall mean Michael J. Dare.
1.10 "Doctor's Care of GA" shall mean Doctor's Care of Georgia, P.C., a
Georgia professional corporation to be formed prior to Closing.
1.11 "Doctor's Care of TN" shall mean Doctor's Care of Tennessee, P.C.,
a Tennessee professional corporation to be formed prior to Closing.
1.12 "ERISA" shall mean the Employment Retirement Income Security Act
of 1974, as amended.
1.13 "Employee Benefit Plan" shall mean any fringe or benefit plans,
including without limitation, any retirement, pension, profit sharing,
thrift-savings, non-qualified deferred compensation, incentive compensation,
stock bonus, stock option (qualified or non-qualified), cash bonus, employee
stock ownership (including, without limitation, payroll related employee stock
ownership), insurance, medical, welfare or vacation plans of any kind and any
"employee benefit plan" (as defined in Section 3(3) of Title I of ERISA or any
voluntary employees' beneficiary association (as defined in Section 501(c)(9) of
the Code) or combination of the foregoing.
Acquisition Agreement and
Plan of Reorganization
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1.14 "Encumbrances" means any and all restrictions on transfer, liens,
encumbrances, charges, pledges, security interests, taxes, claims, options,
warrants, purchase rights, contracts, commitments, equities, claims and demands.
1.15 "Excluded Assets" shall mean collectively the MainStreet Excluded
Assets, MHMG-GA Excluded Assets, MHMG-TN Excluded Assets, and such Excluded
Assets described in Section 6 below.
1.16 "Facilities" shall mean collectively the Headquarters, Georgia
Facilities, and Tennessee Facilities.
1.17 "Financial Statements" shall have the meaning set forth in Section
9.10.
1.18 "GAAP" shall have the meaning set forth in Section 9.10.
1.19 "Georgia Facilities" shall have the meaning set forth in the
introduction hereinabove, and as more fully described in Exhibit 1.19 attached
hereto.
1.20 "Headquarters" shall mean the premises located at 2370 Main
Street, Tucker, Georgia, at which the Business is headquartered.
1.21 "Indemnity Damages" shall mean all losses, damages, liabilities,
claims, suits, demands, penalties, assessments, obligations, causes of action,
or costs (including reasonable litigation expenses and legal fees) with respect
to which an indemnification right applies hereunder.
1.22 "Investment Letter" shall have the meaning set forth in Section
8.3.8.
1.23 "Johnson" shall mean A. Wayne Johnson.
1.24 "Knowledge" shall mean actual knowledge, and the Knowledge of
MainStreet shall mean the actual knowledge of the officers, directors, and/or
Class B Shareholders of MainStreet, or any one of them.
1.25 "MainStreet" shall mean MainStreet Healthcare Corporation, a
Delaware corporation.
1.26 "MainStreet Assets" shall mean collectively all the assets of
MainStreet, which are to be transferred to UCI of GA hereunder, as more fully
described in Section 2.1, excepting only the MainStreet Excluded Assets.
Acquisition Agreement and
Plan of Reorganization
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1.27 "MainStreet Business" shall mean MainStreet's medical management
business and related business operations headquartered at the Headquarters, and
primarily conducted by the Transferors at the Facilities.
1.28 "MainStreet Equipment Leases" shall have the meaning set forth in
Section 7.1.3 below.
1.29 "MainStreet Excluded Assets" shall mean the assets and rights
described in Section 2.2 to be retained by MainStreet.
1.30 "MainStreet Real Estate Leases" shall have the meaning set forth
in Section 7.1.3 below.
1.31 "MHMG-GA" shall mean MainStreet Healthcare Medical Group, P.C., a
Georgia professional corporation.
1.32 "MHMG-GA Assets" shall mean collectively all the assets of
MHMG-GA, which are to be transferred to Doctor's Care of GA hereunder, as more
fully described in Section 3.1, excepting only the MHMG-GA Excluded Assets.
1.33 "MHMG-GA Business" shall mean MHMG-GA's medical business and
related business operations headquartered at the Headquarters, and primarily
conducted by MHMG-GA at the Georgia Facilities.
1.34 "MHMG-GA Excluded Assets" shall mean the assets and rights
described in Section 3.2 to be retained by MHMG-GA.
1.35 "MHMG-TN" shall mean MainStreet Healthcare Medical Group, PC, a
Tennessee professional corporation.
1.36 "MHMG-TN Assets" shall mean collectively all the assets of
MHMG-TN, which are to be transferred to Doctor's Care of TN hereunder, as more
fully described in Section 4.1, excepting only the MHMG-TN Excluded Assets.
1.37 "MHMG-TN Business" shall mean MHMG-TN's medical business and
related business operations headquartered at the Headquarters, and primarily
conducted by MHMG-TN at the Tennessee Facilities.
1.38 "MHMG-TN Excluded Assets" shall mean the assets and rights
described in Section 4.2 to be retained by MHMG-TN.
Acquisition Agreement and
Plan of Reorganization
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1.39 "Non-Solicits" shall mean the non-solicit covenants to be entered
between UCI of GA and each of the Class B Shareholders pursuant to this
Agreement, substantially in the form attached hereto as Exhibit 8.3.7.
1.40 "Parties" shall mean collectively the UCI of GA, UCI, the
Transferors, and the Class B Shareholders, and "Party" shall mean one of them.
1.41 "PENMAN" shall mean PENMAN Private Equity and Mezzanine Fund,
L.P., a Delaware limited partnership.
1.42 "Person" means any individual, corporation, partnership, limited
partnership, limited liability company, trust, entity or unincorporated
organization, or a government or any agency or political subdivision thereof.
1.43 "Private Placement" shall have the meaning set forth in Section
8.6.3 below.
1.44 "Prompt Care" shall mean Prompt Care Medical Center, Inc., a
Tennessee corporation.
1.45 "Purchase Price" shall mean the total price for the MainStreet
Assets as described in Section 7.1.
1.46 "Riddett" shall mean Robert G. Riddett, Jr.
1.47 "Schedule of Exceptions" shall have the meaning set forth in
Section 9 below.
1.48 "Subsidiary" means any corporation with respect to which a
specified Person (or Subsidiary thereof) owns any capital stock or has the power
to vote or direct the voting of sufficient securities to elect one or more
directors.
1.49 "Tennessee Facilities" shall have the meaning set forth in the
introduction hereinabove, and as more fully described in Exhibit 1.49 attached
hereto.
1.50 "Transferees" shall mean UCI of GA, Doctor's Care of GA, and
Doctor's Care of TN.
1.51 "Transferors" shall mean collectively MainStreet, MHMG-GA,
MHMG-TN, and Prompt Care.
1.52 "UCI" shall mean UCI Medical Affiliates, Inc., a Delaware
corporation.
Acquisition Agreement and
Plan of Reorganization
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1.53 "UCI of GA" shall mean UCI Medical Affiliates of Georgia, Inc., a
South Carolina corporation.
1.54 "Universal" shall mean Universal Diagnostics, Inc., a Georgia
corporation.
2. SALE OF MAINSTREET ASSETS TO UCI OF GA.
2.1 Transfer of MainStreet Assets. At the Closing, for the
consideration herein provided, MainStreet shall convey, transfer, assign and
deliver, or cause to be conveyed, transferred, assigned, and delivered, to UCI
of GA, and UCI of GA shall purchase and accept from MainStreet, all of
MainStreet's right, title, and interest (as the case may be) in and to the
following assets (collectively "MainStreet Assets"):
2.1.1 All accounts receivable, machinery, equipment, computer
and telephone systems (including hardware and software), inventory, furniture,
furnishings, supplies, office equipment, and related tangible personal property
respecting the MainStreet Business conducted in the Facilities, including
(without limitation) the items described in Exhibit 2.1.1 attached hereto,
excluding only the MainStreet Excluded Assets.
2.1.2 All of the contract rights, leasehold interests,
goodwill, permits, licenses, computer hardware and software and related
intangible personal property of the MainStreet Business, excluding only the
MainStreet Excluded Assets. MainStreet shall be responsible for obtaining the
necessary consents, if any, to assignment of such intangible assets.
2.1.3 All of the inventory of the MainStreet Business,
wherever located, excluding only the MainStreet Excluded Assets.
2.1.4 Leases and contracts to be assumed by UCI of GA (which
are acceptable to UCI of GA in its sole discretion) at Closing, including
(without limitation) the MainStreet Equipment Leases and MainStreet Real Estate
Leases described in Section 7.1.3 herein. The parties hereto acknowledge and
agree that, except as expressly assumed hereunder, UCI of GA shall not assume
any contracts, equipment leases, personal property leases, real property leases,
or any other liabilities of any Transferor and/or shareholder of the
Transferors. MainStreet shall be responsible for obtaining the necessary
consents, if any, to the assignment of such leases, if any.
2.1.5 All repair and service contracts and warranties (which
are acceptable to UCI of GA in its sole discretion) used or useful in the
MainStreet Business, excluding only the MainStreet Excluded Assets.
Acquisition Agreement and
Plan of Reorganization
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2.1.6 All processes, patents, trademarks, trade names
(including without limitation "Prompt Care", "MainStreet Healthcare" and
"MainStreet Healthcare Corporation"), service marks and trade secrets, used or
useful in the Business.
2.1.7 All hold-back accounts associated with MainStreet's
credit obligations with Bank One, L.P. (formerly NPL-LP, Inc.).
2.1.8 All medical records and files associated with the
Business, to the extent such medical records or files are owned by MainStreet.
2.1.9 Every other asset (whether tangible, intangible,
personal, real, or mixed property, or interests therein) of MainStreet used or
useful in the ordinary course of the Business, including (without limitation)
promotional materials, licenses and permits, operations or other manuals,
recipes, menus, forms, prepaid expenses, deposits, warranties and contract
rights or commitments, excluding only the MainStreet Excluded Assets.
2.2 MainStreet Excluded Assets. Subject to Section 6 below, anything
contained in this Agreement to the contrary notwithstanding, the parties hereto
acknowledge and agree that MainStreet will not sell, assign, or convey to UCI of
GA, and UCI of GA will not acquire, any right, title, or interest whatsoever in
or to any of the assets or property of MainStreet listed in Exhibit 2.2 attached
hereto (collectively "MainStreet Excluded Assets"). MainStreet will make all
reasonable efforts to complete removal of the MainStreet Excluded Assets located
at the Facilities, if any, as of the date of Closing. Neither UCI of GA,
Doctor's Care of GA, nor Doctor's Care of TN shall be an insurer of the safety
or condition of the MainStreet Excluded Assets after Closing; and MainStreet
shall retain the risk of loss with respect to any MainStreet Excluded Assets
after Closing.
2.3 Assets Owned By Prompt Care or Universal. In the event any of the
Assets are owned in whole or part by Prompt Care and/or Universal which would
otherwise be Assets, Prompt Care and Universal will at Closing convey, transfer,
assign and deliver such Assets to UCI of GA.
2.4 Method of Transfer. The transfer and sale of the MainStreet Assets
will be evidenced by appropriate Bills of Sale, assignments and other
instruments executed and delivered by MainStreet to UCI of GA at Closing, as set
forth in this Agreement. UCI of GA shall take, and MainStreet shall deliver,
possession of the MainStreet Assets at completion of Closing.
3. SALE OF MHMG-GA ASSETS TO DOCTOR'S CARE OF GA.
3.1 Transfer of MHMG-GA's Assets. At Closing, for One Hundred and
No/100 ($100.00) Dollars and other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, and no other monetary
consideration, MHMG-GA shall transfer and
Acquisition Agreement and
Plan of Reorganization
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deliver to Doctor's Care of GA all of MHMG-GA's right, title and interest in and
to all the assets of MHMG-GA, including without limitation all medical records
and files in MHMG-GA's possession that were made in treating patients of MHMG-GA
or its predecessors, all records transferred to MHMG-GA concerning prior
treatment of any patient, and all employment and non-compete agreements to which
MHMG-GA is a party (the "MHMG-GA Assets"), excluding only the MHMG-GA Excluded
Assets, if any.
3.2 MHMG-GA Excluded Assets. Subject to Section 6 below, anything
contained in this Agreement to the contrary notwithstanding, the parties hereto
acknowledge and agree that MHMG-GA will not sell, assign, or convey to Doctor's
Care of GA, and Doctor's Care of GA will not acquire, any right, title, or
interest whatsoever in or to any of the assets or property of MHMG-GA listed in
Exhibit 3.2 attached hereto (collectively "MHMG-GA Excluded Assets"). MHMG-GA
will make all reasonable efforts to complete removal of the MHMG-GA Excluded
Assets located at the Facilities, if any, as of the date of Closing. Neither UCI
of GA, Doctor's Care of GA, nor Doctor's Care of TN shall be an insurer of the
safety or condition of the MHMG-GA Excluded Assets after Closing; and MHMG-GA
shall retain the risk of loss with respect to any MHMG-GA Excluded Assets after
Closing.
3.3 Method of Transfer. The transfer of the MHMG-GA Assets will be
evidenced by an appropriate bill of sale substantially in the form attached
hereto as Exhibit 8.3, executed and delivered by MHMG-GA to Doctor's Care of GA
at the Closing, as set forth in this Agreement. Doctor's Care of GA shall take,
and MHMG-GA shall deliver, possession of the MHMG-GA Assets at completion of
Closing. MHMG-GA at its sole expenses shall comply with any applicable law,
regulation, rule, or ordinance related to the transfer of medical records
hereunder, including but not limited to the publication of any required public
notice.
4. SALE OF MHMG-TN ASSETS TO DOCTOR'S CARE OF TN.
4.1 Transfer of MHMG-TN's Assets. At Closing, for One Hundred and
No/100 ($100.00) Dollars and other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, and no other monetary
consideration, MHMG-TN shall transfer and deliver to Doctor's Care of TN all of
MHMG-TN's right, title and interest in and to all the assets of MHMG-TN,
including without limitation all medical records in MHMG-TN's possession that
were made in treating patients of MHMG-TN or its predecessors, all records
transferred to MHMG-TN concerning prior treatment of any patient, and all
employment and non-compete agreements to which MHMG-TN is a party (the "MHMG-TN
Assets"), excluding only the MHMG-TN Excluded Assets, if any.
4.2 MHMG-TN Excluded Assets. Subject to Section 6 below, anything
contained in this Agreement to the contrary notwithstanding, the parties hereto
acknowledge and agree that MHMG-TN will not sell, assign, or convey to Doctor's
Care of TN, and Doctor's Care of TN will not acquire, any right, title, or
interest whatsoever in or to any of the assets or property of
Acquisition Agreement and
Plan of Reorganization
Page 8
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MHMG-TN listed in Exhibit 4.2 attached hereto (collectively "MHMG-TN Excluded
Assets"). MHMG-TN will make all reasonable efforts to complete removal of the
MHMG-TN Excluded Assets located at the Facilities, if any, as of the date of
Closing. Neither UCI of GA, Doctor's Care of GA, nor Doctor's Care of TN shall
be an insurer of the safety or condition of the MHMG-TN Excluded Assets after
Closing; and MHMG-TN shall retain the risk of loss with respect to any MHMG-TN
Excluded Assets after Closing.
4.3 Method of Transfer. The transfer of the MHMG-TN Assets will be
evidenced by an appropriate bill of sale substantially in the form attached
hereto as Exhibit 8.4, executed and delivered by MHMG-TN to Doctor's Care of TN
at the Closing, as set forth in this Agreement. Doctor's Care of TN shall take,
and MHMG-TN shall deliver, possession of the MHMG-TN Assets at completion of
Closing. MHMG-TN at its sole expenses shall comply with any applicable law,
regulation, rule, or ordinance related to the transfer of medical records
hereunder, including but not limited to the publication of any required public
notice.
5. NOT A SALE OF BUSINESS. This transaction constitutes the sale of assets by
each Transferor and not the sale of a business; provided, however, that anything
contained in this Agreement to the contrary notwithstanding, it is the intent of
the parties that the Transferees purchase and acquire and each Transferor sell
and transfer the complete operating process of the Business and all properties
and interest necessary to operate the MainStreet Business, MHMG-GA Business, and
MHMG-TN Business, respectively, substantially as each is presently being
operated, excepting only the MainStreet Excluded Assets, MHMG-GA Excluded
Assets, and MHMG-TN Excluded Assets.
6. ADDITIONAL EXCLUDED ASSETS. Notwithstanding anything contained herein, the
following assets shall be retained by Transferors as Excluded Assets and shall
not be included in the Assets sold, transferred, assigned, conveyed, and
delivered to Transferees hereunder:
6.1 Employee Benefit Plan Assets. The rights of any Transferor under,
and any funds and property held in trust or any other funding vehicle pursuant
to, any Employee Benefit Plan and any contracts, agreements or other documents
relating to Employee Benefit Plans to the extent that no liabilities relating to
or arising from such Employee Benefit Plans assets appear in the Financial
Statements; and
6.2 Certain Corporate Records. The corporate minute books and records,
stock ledger, corporate seal, and income tax records and returns of each
Transferor, and any worksheets, notes, files or documents primarily related
thereto, wherever located.
7. CONSIDERATION FOR MAINSTREET ACQUISITION.
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
Acquisition Agreement and
Plan of Reorganization
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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 in accordance with either of the following options which shall be
selected by MainStreet and disclosed to UCI to GA in writing no later than the
close of business on March 23, 1998:
7.1.1 Purchase Price Option A. At Closing, UCI of GA will
tender to MainStreet a cash payment of Nine Hundred Thousand and No/100
($900,000) Dollars, and the balance of the purchase price will be paid
in shares of the voting common stock of UCI, $0.05 par value per share
(the "Shares"); or
7.1.2 Purchase Price Option B. At Closing, 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. In addition, UCI
of GA will pay, within ten (10) days after Closing, an aggregate of One
Million Two Hundred Fifty Thousand and No/100 ($1,250,000.00) Dollars
directly to certain creditors of MainStreet as directed to UCI of GA by
MainStreet in writing no later than the date of Closing.
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
Acquisition Agreement and
Plan of Reorganization
Page 10
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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.
7.2 Assumption of Certain MainStreet Liabilities.
7.2.1 The Transferees will not assume each of the Transferor's
obligations and liabilities, including (without limitation) the current and
long-term liabilities, contingent liabilities, medical malpractice claims,
environmental claims, workers' compensation claims, and sales, income and
payroll taxes. Notwithstanding the foregoing, as of the date of Closing, UCI of
GA shall assume the following liabilities of MainStreet (the "Assumed MainStreet
Liabilities"): (a) UCI of GA will assume MainStreet's existing operating and
capital equipment leases (the "MainStreet Equipment Leases"), more fully
described on Exhibit 7.2.1(a) attached hereto, provided the aggregate
outstanding balances of such MainStreet Equipment Leases as of the date of
Closing do not exceed the amount shown on Exhibit 7.2.1(a) attached hereto; (b)
UCI of GA will elect at UCI of GA's option to either assume MainStreet's
existing real property leases for the Georgia Facilities and Tennessee
Facilities (the "MainStreet Real Estate Leases") more fully described on Exhibit
7.2.1(b) attached hereto or enter into new leases with similar terms; and (c)
UCI of GA will assume MainStreet's line of credit obligation with Bank One, N.A.
(formerly NPL-LP, Inc.) provided the outstanding balance (less applicable
lending hold-back amounts) of such obligation as of the date of Closing does not
exceed Six Hundred Eighty-Five Thousand ($685,000) Dollars and the terms remain
unchanged (unless otherwise requested or agreed by UCI of GA in writing).
7.2.2 Unless MainStreet selects Purchase Price Option B as set
forth in Section 7.1.2 above, 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 pursuant to the Assumed MainStreet Liabilities, and none of the
Assumed MainStreet Liabilities shall otherwise be in default or subject to
acceleration.
7.2.3 MainStreet shall be responsible for obtaining the
consent, if any, to the assumption of any such Assumed MainStreet Liabilities by
UCI of GA. UCI of GA agrees to cooperate with MainStreet in MainStreet's efforts
to obtain such consents and the written release of MainStreet for the Assumed
MainStreet Liabilities; provided however, UCI of GA shall not be required to
pre-pay or refinance any of the Assumed MainStreet Liabilities or incur any
additional liability or pay any additional amount in connection with any such
consents or releases.
Acquisition Agreement and
Plan of Reorganization
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7.3 Adjustment For Certain Assumed MainStreet Liabilities.
7.3.1 In the event MainStreet selects Purchase Price Option A
as described in Section 7.1.1 above and 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, the Purchase Price tendered
by UCI of GA at Closing as set forth in Section 7.1.1 above, shall be reduced by
the aggregate amount such liabilities exceed such limits. In the event of any
such adjustment, such Purchase Price set forth in Section 7.1.1 shall be
adjusted and applied in the following order to the extent necessary: (i) first
to reduce the cash amount payable to MainStreet, and (ii) second to reduce the
number of Shares to be delivered by UCI to MainStreet.
7.3.2 In the event MainStreet selects Purchase Price Option B
as described in Section 7.1.2 above and 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 7.1.2 above, and (ii) second to reduce the number of Shares to
be delivered by UCI to MainStreet.
7.3.3 In the event the aggregate outstanding balance of the
MainStreet Equipment Leases as of the date of Closing in 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 at Closing each as set forth in Section
7.1.1 and 7.1.2 above, shall be increased by the aggregate amount such
liabilities is less than such limits.
7.4 Limitation On Amount Of Assumed MainStreet Liabilities.
Notwithstanding the foregoing, in no event shall the sum of the cash portion of
the Purchase Price paid by the Transferees hereunder and the total amount of the
Assumed MainStreet Liabilities assumed by UCI of GA exceed twenty (20%) percent
of the Purchase Price.
7.5 Allocation of Purchase Price. The purchase price for the MainStreet
Assets shall be allocated among the MainStreet Assets as set forth in a letter
to be provided by UCI of GA to MainStreet within thirty (30) days of the
Closing; provided however, the amount allocated to the fixed assets of the
Transferors shall be determined by an appraisal firm selected by UCI of GA in
its sole discretion. The cost and expenses of such appraisal shall be paid by
UCI of GA. The
Acquisition Agreement and
Plan of Reorganization
Page 12
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Parties shall use the foregoing allocation for reporting the purchase and sale
of the Assets for federal, state, and local tax purposes and for completing the
requisite filings with the Internal Revenue Service.
8. CLOSING.
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 March 31, 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.
8.2 Transactions at Closing. At the Closing, and subject to the terms
and conditions of this Agreement:
8.2.1 UCI of GA shall pay to MainStreet the consideration then
owing to it pursuant to, and in accordance with, Section 7.1 above.
8.2.2 Doctor's Care of GA shall pay to MHMG-GA the
consideration then owing to it pursuant to, and in accordance with, Section 3.1
above.
8.2.3 Doctor's Care of TN shall pay to MHMG-TN the
consideration then owing to it pursuant to, and in accordance with, Section 4.1
above.
8.2.4 Each of the Transferors and the Class B Shareholders, as
applicable, shall execute and deliver to UCI, UCI of GA, Doctor's Care of GA, or
Doctor's Care of TN, as applicable, the bills of sale, assignments, titles,
certificates, and other documents, agreements and instruments, in form and
substance required by this Agreement, as described in Section 8.3 below.
8.2.5 UCI of GA, Doctor's Care of GA, and Doctor's Care of TN
shall execute and deliver to each of the Transferors and the Class B
Shareholders, as applicable, the documents, agreements and instruments in form
and substance required by this Agreement, as described in Section 8.4..
8.2.6 All employees of each of the Transferors directly and
primarily associated with the Business will cease to be employees of the
Transferors, and the Transferees, or any one of them, may, subject to the
exercise of the Transferees' sole discretion, offer immediately or thereafter to
hire any or all of such persons. The Transferees, or any one of them, shall no
less than fourteen (14) days prior to the date of Closing, notify Mainstreet of
the Transferor's
Acquisition Agreement and
Plan of Reorganization
Page 13
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employees who the Transferees, or any one of them, shall offer employment as of
Closing. The Transferees shall be required to hire only those employees of the
Transferors which the Transferees, or any one of them, elects in its sole
discretion to hire, and the Transferees shall not assume any liability
whatsoever to any employee of any of the Transferors not hired by any of the
Transferees. Each of the Transferors jointly and severally will be responsible
for paying and reporting all costs and liabilities, including but not limited to
compensation, federal and state withholding taxes, federal and state
unemployment taxes, all employee benefit costs, and worker's compensation claims
incurred or accrued prior to the date of Closing.
8.2.7 The parties hereto will take such other actions
contemplated at Closing by this Agreement.
8.3 Transferors' and Class B Shareholders' Documents. At Closing, each
of the Transferors and each of the Class B Shareholders, as applicable, shall
deliver, or cause to be delivered, at Transferors' expense, the following duly
executed, lawful and effective documents and instruments:
8.3.1 A bill of sale for tangible personal property and
fixtures composing portions of the MainStreet Assets substantially in the form
attached hereto as Exhibit 8.3.1 to UCI of GA.
8.3.2 An assignment of intangible personal property composing
portions of the MainStreet Assets substantially in the form attached hereto as
Exhibit 8.3.2 to UCI of GA.
8.3.3 A bill of sale for tangible personal property and
fixtures composing portions of the MHMG-GA Assets substantially in the form
attached hereto as Exhibit 8.3.3 to Doctor's Care of GA.
8.3.4 An assignment of intangible personal property composing
portions of the MHMG-GA Assets substantially in the form attached hereto as
Exhibit 8.3.4 to Doctor's Care of GA.
8.3.5 A bill of sale for tangible personal property and
fixtures composing portions of the MHMG-TN Assets substantially in the form
attached hereto as Exhibit 8.3.5 to Doctor's Care of TN.
8.3.6 An assignment of intangible personal property composing
portions of the MHMG-TN Assets substantially in the form attached hereto as
Exhibit 8.3.6 to Doctor's Care of TN.
8.3.7 Each of the Class B Shareholders shall each execute and
deliver to UCI of GA a non-solicit covenant substantially in the form of Exhibit
8.3.7 attached hereto (the "Non- Solicits").
Acquisition Agreement and
Plan of Reorganization
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<PAGE>
8.3.8 MainStreet 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 (the "Investment Letter").
8.3.9 MainStreet will deliver to UCI of GA copies of such duly
filed UCC termination statements, mortgages or lien satisfactions and other
documents, as are reasonably required by UCI of GA to evidence UCI of GA's
clear, marketable and insurable title to the MainStreet Assets; provided
however, the Parties acknowledge that Bank One, L.P. shall retain a lien on
MainStreet's accounts receivable as collateral for MainStreet's line of credit
obligation being assumed by UCI of GA as set forth in Section 7.1.3 above.
8.3.10 MHMG-GA will deliver to Doctor's Care of GA copies of
such duly filed UCC termination statements, mortgages or lien satisfactions and
other documents, as are reasonably required by Doctor's Care of GA to evidence
Doctor's Care of GA's clear, marketable and insurable title to the MHMG-GA
Assets.
8.3.11 MHMG-TN will deliver to Doctor's Care of TN copies of
such duly filed UCC termination statements, mortgages or lien satisfactions and
other documents, as are reasonably required by Doctor's Care of TN to evidence
Doctor's Care of TN's clear, marketable and insurable title to the MHMG-TN
Assets.
8.3.12 Each Transferor will deliver to UCI of GA such duly
executed termination statements, or upon UCI of GA's request lease assignments,
of the MainStreet Real Estate Leases and other documents, as are reasonably
required by UCI of GA to evidence UCI of GA's clear, marketable and insurable
leasehold interest in each of the Georgia Facilities and Tennessee Facilities.
8.3.13 Each Transferor shall deliver to UCI of GA such duly
executed consents, if the assignment of the MainStreet Equipment Leases, to UCI
of GA.
8.3.14 Copy of the patient list of each Transferor as of the
date of Closing.
8.3.15 MHMG-GA's Articles of Amendment, in a form satisfactory
to UCI of GA, changing the name of MHMG-GA to a name other than "MainStreet
Healthcare Medical Group, P.C.", thus making such name available to UCI of GA.
8.3.16 MHMG-TN's Articles of Amendment, in a form satisfactory
to UCI of GA, changing the name of MHMG-TN to a name other than "MainStreet
Healthcare Medical Group, PC", thus making such name available to UCI of GA.
8.3.17 Each Transferor shall deliver to UCI of GA at Closing
evidence of insurance as set forth in Section 9.19.3 herein.
Acquisition Agreement and
Plan of Reorganization
Page 15
<PAGE>
8.3.18 MainStreet shall execute and deliver to UCI of GA an
Affidavit and Certificate of Assumed Liabilities substantially in the form
attached hereto as Exhibit 8.3.18.
8.3.19 Officers' Certificate of each of the Transferors
substantially in the form attached hereto as Exhibit 8.3.19.
8.3.20 Legal Opinion of Transferors' and Class B Shareholders'
counsel dated the date of Closing, substantially in the form attached hereto as
Exhibit 8.3.20.
8.3.21 MainStreet shall cause the owner as of Closing of
MainStreet's facility located at 2362 Main Street, Tucker, Georgia to execute
and deliver to UCI of GA a lease of MainStreet's facility located at 2362 Main
Street, Tucker, Georgia, substantially in the form attached hereto as Exhibit
8.3.21. As of the date hereof, MainStreet is the owner of such facility. On or
before the Closing, MainStreet shall not convey such facility to any person or
entity other than a Class B Shareholder without the prior written consent of UCI
which shall not be unreasonably withheld.
8.3.22 Certificate of Existence or Good Standing of each of
the Transferors issued by the Secretary of State of its state of formation and
dated within twenty days prior to Closing.
8.3.23 MainStreet shall execute and deliver to UCI of GA a
true and complete list of the holders of MainStreet's securities as of the date
of Closing, substantially in the form attached hereto as Exhibit 8.3.23 (the
"Certified List of MainStreet Security Holders").
8.3.24 A report of each Transferor's accounts receivable (with
aging data) and unbilled cost of fee by patient or customer as of the date of
Closing, and a schedule of advance payments (advances) by patient or customer as
of the date of Closing.
8.4 Documents of UCI, UCI of GA, Doctor's Care of GA, or Doctor's Care
of TN. At Closing, UCI and/or UCI of GA, at their expense, shall deliver or
cause to be delivered to the Transferors or the Class B Shareholders (as the
case may be) the following duly executed, lawful, and effective documents and
instruments:
8.4.1 UCI will deliver a copy of the instructions to the
transfer agent of UCI's common stock instructing the transfer agent to issue
certificate(s) evidencing the Shares to MainStreet.
8.4.2 UCI will deliver to MainStreet the registration rights
agreement substantially in the form attached hereto as Exhibit 8.4.2.
8.4.3 Officers' Certificate of each of the Transferees
substantially in the form attached hereto as Exhibit 8.4.3.
Acquisition Agreement and
Plan of Reorganization
Page 16
<PAGE>
8.4.4 Legal Opinion of Transferees' counsel dated the date of
Closing, substantially in the form attached hereto as Exhibit 8.4.4.
8.4.5 UCI of GA shall execute and deliver to MainStreet a
lease of MainStreet's facility located at 2362 Main Street, Tucker, Georgia,
substantially in the form attached hereto as Exhibit 8.3.21, and shall pay such
initial rental thereunder.
8.4.6 Certificate of Existence or Good Standing of UCI and
each of the Transferees issued by the Secretary of State of its state of
formation and dated within twenty days prior to Closing.
8.5 Conditions of Title.
8.5.1 Assets. At Closing, the Assets shall be conveyed by
appropriate instruments of conveyance free and clear of all claims, security
interests, liens and Encumbrances except (a) personal property and ad valorem
taxes for the year of Closing (which shall be prorated as provided in this
Agreement), and (b) Bank One, L.P. shall retain a lien on MainStreet's accounts
receivable as collateral for MainStreet's line of credit obligation being
assumed by UCI of GA as set forth in Section 7.1.3 above.
8.5.2 Leasehold. At Closing, UCI of GA shall hold a leasehold
interest in each of the Georgia Facilities and Tennessee Facilities free and
clear of all claims, security interests, liens and Encumbrances except real
property taxes for the year of Closing which are not yet due and payable.
8.6 Covenants Prior to Closing.
8.6.1 Access to Information. Subject to any restrictions of
applicable law or third party confidentiality agreements, upon reasonable
notice, each Party shall, and shall cause its Subsidiaries to, afford to the
officers, directors, employees, accountants, counsel, investment bankers,
financial advisors, financing sources and other representatives of the other
Parties hereto (collectively, "Representatives") reasonable access, during
normal business hours throughout the period prior to the date of Closing, to all
of its properties, books, contracts, commitments and records and, during such
period, each party shall and shall cause its Subsidiaries to, furnish promptly
to the other (i) access to each report, schedule and other document filed or
received by it or any of its Subsidiaries pursuant to the requirements of
federal or state securities laws or filed with or sent to the SEC or any other
federal or state regulatory agency or commission and (ii) access to all
information concerning themselves, their Subsidiaries, directors, officers and
shareholders and such other matters as may be reasonably requested by the other
party in connection with any filings, applications or approvals required or
contemplated by this Agreement.
Acquisition Agreement and
Plan of Reorganization
Page 17
<PAGE>
8.6.2 Reasonable Best Efforts. Subject to the terms and
conditions herein provided and to applicable legal requirements, each of the
Parties agrees to use its reasonable best efforts to take, or cause to be taken,
all action and so do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make effective
the transactions contemplated by this Agreement, including, without limitation,
the obtaining of all necessary waivers, consents and approvals and the effecting
of all necessary registrations and filings.
8.6.3 Private Placement. UCI will use its commercially
reasonable best efforts to consummate a private placement through Laidlaw & Co
of up to $2.5 million (the "Private Placement"). UCI, based on conditions that
are prevailing of the date hereof and that have been brought to its attention,
knows of no circumstance or condition that it expects will prevent the
successful completion of the Private Placement.
8.6.4 UCI Stockholders Meeting. UCI, acting through its Board
of Directors, shall, subject to and in accordance with applicable law and its
Certificate of Incorporation, as amended, and its By-Laws, (i) promptly and duly
call, give notice of, convene and hold as soon as practicable following the date
hereof a meeting of the holders of UCI common stock for the purpose of voting to
approve to the extent required by applicable law the transaction contemplated
herein, and recommend approval and adoption thereof, (ii) prepare and file with
the SEC and upon clearance thereof submit to stockholders a proxy statement in
appropriate form for the solicitation of proxies with respect to the foregoing,
and (iii) take all reasonable action to solicit and obtain such approval.
8.6.5 Operation in Regular Course. Until Closing, UCI shall
carry on its business substantially in the same manner as it was carried on
prior to the date hereof; provided however nothing contained herein shall
preclude or in any way restrict UCI's acquiring one or more medical practices or
consummating the Private Placement.
8.7 Transactions Subsequent to Closing.
8.7.1 Employment Matters. Nothing contained herein shall be
construed to create any liability for UCI or any of the Transferees to present
or past employees of any Transferor or any other person or entity or regulatory
agency for periods prior to the date of Closing.
8.7.2 Books and Records. To the extent that any of
Transferors' books, records and documents are to be transferred to Transferees
hereunder, and Transferors may have need to have access to such transferred
books, records, and documents held by Transferees after the Closing, the
Transferees agree that they shall maintain for at least three (3) years after
the Closing (or for such longer period as may be required by applicable law) the
respective books, records and documents transferred hereunder. During said
period, representatives of Transferors shall be permitted to inspect and make
copies of said books, records and documents transferred to
Acquisition Agreement and
Plan of Reorganization
Page 18
<PAGE>
Transferees, if any, during normal business hours and upon reasonable notice for
purposes related to winding up the affairs relating to the Business or for any
other appropriate purpose.
8.7.3 Trade Name. Each Transferor and Class B Shareholder
shall discontinue use of the trade names "MainStreet Healthcare" and "Prompt
Care".
8.7.4 Accounts Receivable. Each Transferor shall cooperate
with UCI of GA's attempts to collect the accounts receivable constituting
portions of the Assets and will promptly pay over to UCI of GA any proceeds of
such accounts receivable.
8.7.5 Transitional Permits. Each Transferor agrees, to the
extent permitted by law, that Transferees may operate for a period of up to 30
days after Closing under any permits or licenses of Transferors respecting the
Business which may not be assignable until similar permits or licenses are
issued to Transferees, provided Transferees promptly make and pursue application
for such permits and licenses and indemnifies Transferors for any loss or damage
from Transferees' operations under such permits or licenses. In the event that
any such permit or license is held in the name of an officer or agent of any
Transferor, Transferors shall use best efforts to cause such person to cooperate
in carrying out the intent of this Section.
8.7.6 Restrictions Against Competition.
8.7.6.1 For a period of three (3) years after
Closing, none of the Transferors:
8.7.6.1.1 shall own, operate, or establish,
in competition with UCI and/or any of the Transferees, an urgent care,
family care, or industrial and/or occupational medical business located
anywhere within the States of South Carolina, Tennessee, and Georgia.
8.7.6.1.2 shall, directly or through an
affiliate, solicit or divert (or assist another person or entity to
solicit or divert) any patient of the Business from purchasing or using
any of the services of the Transferees, or any one of them.
8.7.6.1.3 shall, directly or through an
affiliate, solicit or in any manner attempt to solicit or induce any
person employed by, or an agent of, one or more of the Transferees to
terminate such person's association or contract of employment or
agency, as the case may be, with such entity.
Acquisition Agreement and
Plan of Reorganization
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<PAGE>
8.7.6.2 If any Transferor shall violate any of the
provisions of this Section 8.6.6, the Transferees shall be entitled to recover
any non-speculative lost profits incurred by any one or more of the Transferees
as a result of, growing out of, or in connection with, any such violation by a
Transferor. This remedy shall be in addition to, and not in limitation of, any
injunctive relief or other rights, remedies, or damages, to which any one or
more of the Transferees is or may be entitled as a result of this Agreement. In
the event of a breach or threatened breach by a Transferor of any of the
provisions of this Section 8.6.6, the Transferees, in addition to, and not in
limitation of, any other rights, remedies, or damages available to any one or
more of the Transferees at law or in equity, shall be entitled to a temporary
restraining order, preliminary injunction, and permanent injunction in order to
prevent or restrain any such breach by a Transferor or by a Transferor's
partners, agents, representatives, servants, employers, employees, companies,
consulting clients, and/or any and all persons directly or indirectly acting for
or with a Transferor. Each Transferor agrees that in the event of any breach by
a Transferor of the covenants set forth in this Section 8.6.6, the Transferees
shall suffer irreparable harm for which the remedy of monetary damages may be
inadequate.
8.7.6.3 Each of the Transferors acknowledges and
agrees that the restrictions contained in this Section 8.6.6 is reasonably
related to the value of the Assets sold to Transferees hereunder and that the
scope of this restriction is reasonable in time and territory. In the event
that, notwithstanding the foregoing, any of the provisions of this Section 8.6.6
or any parts thereof shall be held to be invalid or unenforceable, the remaining
provisions or parts thereof shall nevertheless continue to be valid and
enforceable as though the invalid or unenforceable portions or parts had not
been included therein. In the event that any provisions of Section 8.6.6
relating to the time period and/or the areas of restriction and/or the scope of
restricted activities and/or related aspects shall be declared by a court of
competent jurisdiction to exceed the maximum restrictiveness such court deems
reasonable and enforceable, the time period and/or areas of restriction and/or
the scope of restricted activities and/or related aspects deemed reasonable and
enforceable by the court shall become and thereafter be the maximum restriction
in such regard, and the restriction shall remain enforceable to the fullest
extent deemed reasonable by such court. In the event any Class B Shareholder
violates the terms of their respective Non- Solicit, a form of which is attached
hereto as Exhibit 8.3.7, such violation shall be deemed to be a violation by
each of the Transferors of the terms of this Section 8.6.6.
8.7.7 Confidentiality. Subsequent to Closing, each of
the Transferors shall hold in confidence all documents and information
concerning the Business and the Assets (except that Transferors may, after
reasonable notice to UCI of GA disclose such documents and information, or
copies or summaries thereof, to Transferors professional advisors, shareholders,
creditors, and any governmental authority reviewing the transactions
contemplated hereby, or as required in Transferors' reasonable judgment pursuant
to federal or state laws or regulations or court order). Such confidential
information shall not include information that can be demonstrated by
Acquisition Agreement and
Plan of Reorganization
Page 20
<PAGE>
independent documentary evidence to be publicly available other than as a result
of acts in breach of this Section or any Non-Solicit.
8.7.8 Publicity. Upon UCI of GA's request (if any), at a date
reasonably agreed upon by UCI of GA and MainStreet, but no later than thirty
(30) business days after Closing, MainStreet, at UCI of GA's expense, shall mail
to all those patients of Transferors designated by UCI of GA, a letter
substantially on the form provided by UCI of GA, subject to MainStreet's
approval (which shall not be unreasonably withheld) advising of the sale
hereunder and containing a request of Transferors that to the extent requested
by UCI of GA, such patient shall continue its relationships with Transferees.
Other than as directed or expressly permitted by Transferees or expressly
required by law, the Transferors and the Class B Shareholders shall not take any
action or make any disclosures which might reasonably be anticipated to have an
adverse affect on the Transferee's respective business operations relating to
the Assets. This provision shall not, however, be construed to prohibit any
Party from making any disclosures to any governmental authority which it is
required to make by law or from filing this Agreement with, or disclosing the
terms of this Agreement to, any governmentally-regulated institutional lender to
such Party, or prohibit Transferees or Transferors from disclosing to their
respective investors, lenders, and financial advisors such terms of this
transaction as are customarily disclosed to them in connection with the
disposition of such assets. The Parties hereto acknowledge and agree that UCI
may elect, either prior to or after Closing, in it sole discretion, to issue a
press release after consulting with MainStreet, and file documents with the SEC
and Nasdaq concerning the proposed acquisition and this Agreement.
8.7.9 Taxes. Each of the Transferors shall file such tax
returns and reports and pay such taxes to be paid by them as are required for
periods ending with the date of Closing.
8.7.10 Creditors. Each of the Transferors shall as and when
due use their reasonable best efforts within eleven (11) months after the date
of Closing to pay all of Transferors' valid liabilities not expressly assumed by
UCI of GA pursuant to Section 7.1.3 hereunder, and perform all of Transferors'
valid obligations which any of the Transferors have incurred in connection with
the Assets or the operation of the Business.
8.7.11 Miscellaneous Required Acts. The parties hereto shall
take such other actions and comply with other obligations as are required after
Closing under this Agreement or under documents ancillary hereto.
8.7.12 Audit. At UCI of GA's expense, Transferors, no later
than May 30, 1998, shall provide UCI with the audited financial statements of
the Transferors for the period commencing April 1, 1997, and ending March 31,
1998.
8.7.13 Board of Directors. On or about the date of Closing,
Johnson shall be appointed to the Board of Directors of UCI. Also, to the extent
permitted by law, as long as
Acquisition Agreement and
Plan of Reorganization
Page 21
<PAGE>
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 Closing. 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.
8.8 Other Actions. The parties hereto agree that they will at any time
and from time to time do, execute, acknowledge and deliver, or will cause to be
done, executed, acknowledged and delivered, all such further acts, deeds,
assignments, transfers, conveyances, documents, instruments and assurances as
may be reasonably required by the other party in order to carry out fully and to
effectuate the transactions herein contemplated under, and in accordance with,
the provisions of this Agreement.
9. REPRESENTATIONS AND WARRANTIES OF TRANSFERORS AND CLASS B SHAREHOLDERS.
Except as otherwise set forth in the Schedule of Exceptions attached hereto as
Exhibit 9 (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 this
Section 9 are true, correct and complete as of the date of this Agreement:
9.1 Organization of MainStreet; Authority. MainStreet is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, with the corporate power and authority to enter into this
Agreement and the other documents related thereto and to carry out and perform
its obligations under the terms of this Agreement and such other documents
related thereto. MainStreet has the full and unrestricted corporate power and
authority to own, operate and lease its assets and properties and to carry on
its business as currently conducted. MainStreet is qualified to do business and
in good standing in the State of Georgia, and as of the date of Closing the
State of Tennessee, which jurisdictions constitute the only jurisdictions in
which the nature of MainStreet's business requires it to be so qualified or in
which the failure to be so qualified, if required, would have a material adverse
effect on the MainStreet Business taken as a whole. The execution and delivery
of this Agreement and documents related thereto and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
requisite corporate or other action on the part of MainStreet and each of the
Class B Shareholders. This Agreement has been, and at the Closing the documents
related thereto shall be, duly executed and delivered by MainStreet and each of
the Class B Shareholders and constitutes the valid, binding and enforceable
obligation of MainStreet and each of the Class B Shareholders, enforceable in
accordance with its terms and conditions, subject to applicable bankruptcy,
reorganization, insolvency, moratorium and other laws affecting creditors'
rights generally from time to time in effect and to general equitable
principles.
Acquisition Agreement and
Plan of Reorganization
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<PAGE>
9.2 Organization of MHMG-GA; Authority. MHMG-GA is a professional
corporation duly organized, validly existing and in good standing under the laws
of the State of Georgia, with the corporate power and authority to enter into
this Agreement and the other documents related thereto and to carry out and
perform its obligations under the terms of this Agreement and such other
documents related thereto. MHMG-GA has the full and unrestricted corporate power
and authority to own, operate and lease its assets and properties and to carry
on its business as currently conducted. MHMG-GA is qualified to do business and
in good standing in every jurisdiction in which the nature of MHMG-GA's business
requires it to be so qualified or in which the failure to be so qualified, if
required, would have a material adverse effect on the MHMG-GA Business taken as
a whole. The execution and delivery of this Agreement and documents related
thereto and the consummation of the transactions contemplated hereby and thereby
have been duly authorized by all requisite corporate or other action on the part
of MHMG-GA. This Agreement has been, and at the Closing the documents related
thereto shall be, duly executed and delivered by MHMG-GA and constitutes the
valid, binding and enforceable obligation of MHMG-GA, enforceable in accordance
with its terms and conditions, subject to applicable bankruptcy, reorganization,
insolvency, moratorium and other laws affecting creditors' rights generally from
time to time in effect and to general equitable principles.
9.3 Organization of MHMG-TN; Authority. MHMG-TN is a professional
corporation duly organized, validly existing and in good standing under the laws
of the State of Tennessee, with the corporate power and authority to enter into
this Agreement and the other documents related thereto and to carry out and
perform its obligations under the terms of this Agreement and such other
documents related thereto. MHMG-TN has the full and unrestricted corporate power
and authority to own, operate and lease its assets and properties and to carry
on its business as currently conducted. MHMG-TN is qualified to do business and
in good standing in every jurisdiction in which the nature of MHMG-TN's business
requires it to be so qualified or in which the failure to be so qualified, if
required, would have a material adverse effect on the MHMG-TN Business taken as
a whole. The execution and delivery of this Agreement and documents related
thereto and the consummation of the transactions contemplated hereby and thereby
have been duly authorized by all requisite corporate or other action on the part
of MHMG-TN. This Agreement has been, and at the Closing the documents related
thereto shall be, duly executed and delivered by MHMG-TN and constitutes the
valid, binding and enforceable obligation of MHMG-TN, enforceable in accordance
with its terms and conditions, subject to applicable bankruptcy, reorganization,
insolvency, moratorium and other laws affecting creditors' rights generally from
time to time in effect and to general equitable principles.
9.4 Organization of Prompt Care; Authority. Prompt Care is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Tennessee, with the corporate power and authority to enter into
this Agreement and the other documents related thereto and to carry out and
perform its obligations under the terms of this Agreement and such other
documents related thereto. Prompt Care is a wholly-owned Subsidiary of
MainStreet. As of the Closing, Prompt Care owns no assets and owes no
liabilities and has no interest in the
Acquisition Agreement and
Plan of Reorganization
Page 23
<PAGE>
Assets to be sold to Transferees hereunder or the proceeds thereof. The
execution and delivery of this Agreement and documents related thereto and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by all requisite corporate or other action on the part of Prompt
Care. This Agreement has been, and at the Closing the documents related thereto
shall be, duly executed and delivered by Prompt Care and constitutes the valid,
binding and enforceable obligation of Prompt Care, enforceable in accordance
with its terms and conditions, subject to applicable bankruptcy, reorganization,
insolvency, moratorium and other laws affecting creditors' rights generally from
time to time in effect and to general equitable principles.
9.5 Ability to Carry Out the Agreement. None of the Transferors or
Class B Shareholders is subject to or bound by any provision of:
(i) any law, statute, rule, regulation, ordinance or judicial
or administrative decision;
(ii) any articles or certificate of incorporation or bylaws;
(iii) any contract, agreement, mortgage, deed of trust, lease,
note, stockholders' agreement, bond, indenture, other instrument or
agreement, license, permit, trust, custodianship or other restriction
of any kind or character whatsoever: or
(iv) any judgment, order, writ, injunction or decree of any
court, governmental body, administrative agency or arbitrator;
that would prevent or be violated by, or would result in any penalty, forfeiture
or material contract termination as a result of, or under which there would be a
default as a result of, nor is the consent of any Person under any contract or
agreement which has not been obtained required for, the execution, delivery and
performance by each of the Transferors and Class B Shareholders of this
Agreement and the transactions contemplated hereby.
9.6 Capitalization of MainStreet; Ownership. The authorized capital
stock of MainStreet consists solely of: (i) 20,000 shares of preferred stock,
par value $.01 per share (the "MainStreet Preferred Shares") of which 6,000
shares of the MainStreet Preferred Shares are 5.0% cumulative redeemable
preferred stock of which 4,367 shares are issued and outstanding, and the
remaining 14,000 shares of MainStreet Preferred Shares are "blank check
preferred" of which 2,500 shares have been designated 10% cumulative redeemable
preferred stock of which 412 shares are issued and outstanding; (ii) 5,000,000
shares of Class A non-voting convertible common stock, par value $0.01 per
share, of which 276,000 shares are issued and outstanding, and (iii) 20,000,000
shares of Class B common stock, par value $.01 per share, of which 6,460,452
shares are issued and outstanding. The shares of capital stock and other
securities described in Exhibit 9.6 hereto are the only shares of capital stock
and other securities of
Acquisition Agreement and
Plan of Reorganization
Page 24
<PAGE>
MainStreet which are issued and outstanding. All shares of the securities of
MainStreet are held of record by the respective security holders as set forth in
Exhibit 9.6 hereto.
9.7 Capitalization of MHMG-GA; Ownership. The authorized capital stock
of MHMG-GA consists solely of one hundred thousand (100,000) shares of common
stock, no par value, of which 5,000 shares are issued and outstanding and owned
by Pamela K. Erdman, M.D., and 5,000 shares are issued and outstanding and owned
by Harold Holloway, M.D.
9.8 Capitalization of MHMG-TN; Ownership. The authorized capital stock
of MHMG- TN consists solely of two thousand (2,000) shares of common stock, of
which 100 shares are issued and outstanding and owned by Laykoon Huang, M.D.
9.9 Universal, Subsidiaries and Affiliates. Universal is a Georgia
corporation whose Article 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 issuance of stock. Universal owns no
assets and owes no liabilities and has no interest in the Assets to be sold to
Transferees hereunder or in the proceeds thereof. MainStreet does not have, and
has never had, any Subsidiary other than Prompt Care and Universal and does not
control, directly or indirectly, or have any direct or indirect equity
participation or any interest in any corporation, partnership, limited liability
company, trust, venture, business, enterprise, firm or other business
association other than Prompt Care and Universal. Neither MHMG-GA nor MHMG-TN
has, and has never had, any Subsidiary and does not control, directly or
indirectly, or have any direct or indirect equity participation or any interest
in any corporation, partnership, limited liability company, trust, venture,
business, enterprise, firm or other business association.
9.10 Financial Statements. Attached hereto as Exhibit 9.10 are the
following financial statements of the Transferors (collectively the "Financial
Statements"): (i) the audited consolidated balance sheet as of March 31, 1997,
audited consolidated statements of operations, audited consolidated statement of
stockholder's equity, and audited consolidated statement of cash flows for the
fiscal year ended March 31, 1997; and (ii) the unaudited consolidated balance
sheet, unaudited consolidated statements of operations, unaudited consolidated
statement of stockholder's equity, and unaudited consolidated statement of cash
flows as of and for the nine (9) months ended December 31, 1997. The Financial
Statements (including the notes thereto) have been prepared in conformity with
United States generally accepted accounting principles ("GAAP") applied on a
consistent basis throughout the periods covered thereby, are true, correct and
complete, fairly present in all material respects the financial position of the
Transferors at the dates thereof and the results of operations of the
Transferors for the periods covered thereby (subject in the case of unaudited
statements to normal year-end adjustments), and are consistent with the books
and records of the Transferors (which books and records are materially correct
and complete).
9.11 Conduct of Business Since March 31, 1997; Absence of Material
Adverse Change. Since March 31, 1997, there has been no material adverse change
in the Business, operations,
Acquisition Agreement and
Plan of Reorganization
Page 25
<PAGE>
results of operations, assets, properties or financial condition of any of the
Transferors. Since such date, except as contemplated in this Agreement: (i) each
of the Transferors has conducted its respective businesses in the manner
theretofore conducted and only in the ordinary course consistent with past
practices; and (ii) without limiting the generality of the foregoing, none of
the Transferors has:
9.11.1 incurred any loss of, or injury to, the assets or
properties of any of the Transferors as the result of any fire, explosion,
flood, windstorm, earthquake, labor trouble, riot, accident, act of God, public
enemy or armed forces, or other casualty (whether or not covered by insurance
payable to any of the Transferors);
9.11.2 mortgaged, pledged or subjected to lien, charge,
security interest or any other Encumbrance, other than in the ordinary course of
business, any of its assets or properties with respect to any obligations;
9.11.3 sold, exchanged, transferred or otherwise disposed of
any of its assets or properties, tangible and intangible, or cancelled any debts
or claims, other than in the ordinary course of business;
9.11.4 written down the value of any assets or properties or
written off as uncollectible any notes or accounts receivable, except
write-downs and write-offs in the ordinary course of business consistent with
past practices;
9.11.5 made any material change in any method of accounting or
accounting practice except where required by a change in GAAP or reflected in
the Financial Statements;
9.11.6 waived or released any rights of material value; or
9.11.7 agreed or committed, whether in writing or not, to do
any of the foregoing.
9.12 Title to Assets; Absence of Liens.
9.12.1 MainStreet has good, valid and marketable title to, or
valid and subsisting leasehold interests in, all the MainStreet Assets, free and
clear of any and all Encumbrances, except for Encumbrances reflected in the
Financial Statements including that certain lien on MainStreet's accounts
receivable held by Bank One, L.P., and which do not unreasonably or materially
interfere with the conduct of MainStreet's business operations as currently
conducted.
9.12.2 MHMG-GA has good, valid and marketable title to all the
MHMG-GA Assets, free and clear of any and all Encumbrances. The MHMG-GA Assets
consist solely of the medical records of the patients of MHMG-GA.
Acquisition Agreement and
Plan of Reorganization
Page 26
<PAGE>
9.12.3 MHMG-TN has good, valid and marketable title to all the
MHMG-TN Assets, free and clear of any and all Encumbrances. The MHMG-TN Assets
consist solely of the medical records of the patients of MHMG-TN.
9.13 Status of Assets. The Assets sold hereunder constitute all of the
assets of the Business (taking into account the Excluded Assets) and include all
property, rights, and intangibles necessary for Transferees to operate after
Closing a business similar to the Business as is presently conducted. All
material inventory systems, computer systems, telephone systems, machinery,
equipment, and other tangible property which are portions of the Assets are
generally sound, in good repair, may be safely operated within all applicable
standards or regulations in their present conditions, and are in good and
merchantable condition. All material contracts, commitments, and similar rights
which are portions of the Assets are valid, binding, enforceable, and without
known default in violation of law. The information related to accounts
receivable provided to UCI of GA is materially accurate, and such accounts
receivable reflect valid, binding, and enforceable rights of the Business which
shall be lawfully transferred to UCI of GA hereunder.
9.14 Litigation. There are no judicial or administrative actions or
proceedings pending, or to the best of each Transferors's and/or each Class B
Shareholders' Knowledge, threatened that question the validity of this Agreement
or any transaction contemplated hereby or that relate to the Assets or to the
conduct of Business, including but not limited to condemnation or bankruptcy
proceedings, which if adversely determined would have a material adverse effect
upon any of the Transferors' and/or any Class B Shareholders' ability to enter
into this Agreement or perform its obligations hereunder or upon the use,
enjoyment, or value of the Assets for the Transferees.
9.15 Compliance with Laws. Each of the Transferors is in compliance
with all laws, ordinances, and regulations that govern their respective
ownership and present use of the Assets, the violation of which would have a
material adverse effect on the Assets or the Business. All of the Assets sold
hereunder, and each of the Facilities leased hereunder, substantially comply
with applicable environmental, zoning, health, OSHA, consumer products, and fire
safety regulations where such non-compliance does not have a material effect on
the Business or Assets.
9.16 Brokers. None of the Transferors nor any Class B Shareholder has
dealt with any broker in connection with this transaction other than Laidlaw &
Company, and no brokerage commission nor claim thereof shall accrue or become
payable to any person or entity respecting this transaction other than Laidlaw &
Company. Each of the Transferors and Class B Shareholders acknowledge and agree
that any and all commissions payable to Laidlaw & Company in connection with
consummation of the transactions contemplated herein shall be paid by
MainStreet. Notwithstanding the foregoing, the Parties acknowledge that certain
commissions shall be payable to Laidlaw & Company by UCI in connection with
certain capital raising transactions unrelated to the transactions contemplated
herein, including but not limited to that certain Private Placement.
Acquisition Agreement and
Plan of Reorganization
Page 27
<PAGE>
9.17 Payables, Taxes, and Creditors. Each of the Transferors and Class
B Shareholders shall not hinder, delay, defraud, or avoid any obligation to any
past, present or future creditor in the transactions contemplated by this
Agreement. The consideration to be received by the Transferors from the
Transferees pursuant to this Agreement is more than a reasonably equivalent
value in exchange for the transfer of the Assets. Each of the Transferors is
currently solvent and will not be rendered insolvent as a result of the
transactions contemplated hereby. None of the Transferors has initiated, nor
does it intend to initiate with respect to itself as debtor, has had initiated
or expects to have initiated against it as debtor, any proceeding under federal
or any state's bankruptcy, insolvency or similar laws.
9.18 Employee Benefits.
9.18.1 Exhibit 9.18.1 lists each Employee Benefit Plan that
any of the Transferors maintain or to which any of the Transferors contribute.
Each such Employee Benefit Plan (and each related trust, insurance contract or
fund) complies in form and in operation in all material respects with the
applicable requirements of ERISA, the Code, and other applicable laws.
9.18.2 All required reports and descriptions (including Form
5500 Annual Reports, Summary Annual Reports, PBGC-1's and Summary Plan
Descriptions) have been filed or distributed appropriately with respect to each
such Employee Benefit Plan. The requirements of Part 6 of Subtitle B of Title I
of ERISA and of Code Section 4980B have been met with respect to each such
Employee Benefit Plan which is an Employee Welfare Benefit Plan.
9.18.3 All contributions (including all employer contributions
and employee salary reduction contributions) which are due have been paid to
each such Employee Benefit Plan which is an Employee Pension Benefit Plan, and
all contributions for any period ending on or before the date of Closing which
are not yet due, have been paid to each such Employee Pension Benefit Plan or
accrued in accordance with the past custom and practice of the Transferors. All
premiums or other payments for all periods ending on or before the date of
Closing have been paid with respect to each such Employee Benefit Plan which is
an Employee Welfare Benefit Plan.
9.18.4 Each such Employee Benefit Plan which is an Employee
Pension Benefit Plan meets the requirements of a "qualified plan" under Code
Section 401(a) and has received, within the last two (2) years, a favorable
determination letter from the Internal Revenue Service.
9.18.5 The Transferors have delivered to UCI of GA correct and
complete copies of the plan documents and summary plan descriptions, the most
recent determination letter received from the Internal Revenue Service, the most
recent Form 5500 Annual Report and all related trust agreements, insurance
contracts and other funding agreements which implement each such Employee
Benefit Plan.
Acquisition Agreement and
Plan of Reorganization
Page 28
<PAGE>
9.18.6 None of the Transferors has incurred any accumulated
funding deficiency within the meaning of ERISA or any liability to the Pension
Benefit Guaranty Corporation established under ERISA, nor has any tax been
assessed against any of the Transferors for the alleged violation of the Code
with respect to the Business, or their respective operations.
9.19 Insurance.
9.19.1 Exhibit 9.19.1 sets forth the following information
with respect to each insurance policy (including policies providing property,
casualty, liability or workers' compensation coverage or bond or surety
arrangements) or self-insurance arrangement to which any of the Transferors is a
party, a named insured, or otherwise the beneficiary of coverage as of the date
hereof.
(i) the name, address and telephone number of the
agent;
(ii) the name of the insurer, the name of the
policyholder and the name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether
the coverage was on a claims made, occurrence or other basis) and
amount (including a description of how deductibles and ceilings are
calculated and operate) of coverage; and
(v) a description of any retroactive premium
adjustments or other loss-sharing arrangements.
9.19.2 With respect to each such insurance policy: (i) to the
Knowledge of each Transferor and each Class B Shareholder, the policy is legal,
valid, binding, enforceable and in full force and effect; (ii) to the Knowledge
of each Transferor and each Class B Shareholder, the policy if it is an
"occurrence policy" shall continue to be legal, valid, binding, enforceable and
in full force and effect on identical terms following the consummation of the
transactions contemplated by this Agreement; (iii) to the Knowledge of each
Transferor and each Class B Shareholder, each of the Transferors are not nor is
any other party to the policy in breach or default (including with respect to
the payment of premiums or the giving of notices), and no event has occurred
which, with notice or the lapse of time, would constitute such a breach or
default, or permit termination, modification or acceleration, under the policy;
(iv) no party to the policy has repudiated any provision thereof; and (v) no
claims have been made during the past five years. Each of the Transferors has
been covered since their respective dates of formation by insurance in scope and
amount consistent with current coverage, taking into account the growth of their
respective businesses.
Acquisition Agreement and
Plan of Reorganization
Page 29
<PAGE>
9.19.3 For a period of one (1) year after the date of Closing,
the Transferors, at their expense, shall maintain a comprehensive general
liability "claims made" policy for discontinued operations of the Transferors in
the amount of $1,000,000 per occurrence, and UCI and each of the Transferees
shall be listed as additional insureds under such policy. Evidence of such
insurance shall be delivered to Transferees at Closing.
9.20 Directors, Officers and Employees. Exhibit 9.20 contains a correct
and complete listing as of the date hereof of all of the directors, officers and
employees of each of the Transferors, respectively, showing their names,
positions and current wage or salary and rights to bonuses.
9.21 Labor Relations; Employees.
9.21.1 None of the Transferors has a collective bargaining
agreement with any of its employees; there is no labor union organizing activity
pending or, to the Knowledge of each of the Transferors, threatened with respect
to any Transferor; and none of the Transferors has experienced any strikes,
grievances, claims of unfair labor practices or other collective bargaining
disputes. None of the Transferors has committed any unfair labor practices.
9.21.2 There is no pending claim nor, to the Knowledge of each
Transferor, threatened (including, but not limited to, governmental agencies of
any kind) against any of the Transferors arising out of any federal, state,
county, local or foreign statute, ordinance or regulation relating to
discrimination against employees or any other employee practices, including
without limitation retirement or labor relations, or occupational, safety and/or
health standards, sexual harassment or intentional infliction of emotional
distress.
9.22 Real Property.
9.22.1 Other than MainStreet's facility located at 2362 Main
Street, Tucker, Georgia which is owned by MainStreet, none of the Transferors
owns any real property.
9.22.2 Exhibit 7.2.1(b) lists and describes briefly all real
property leased or subleased to or by each of the Transferors, including but not
limited to each of the MainStreet Real Estate Leases. MainStreet has delivered
to UCI of GA correct and complete copies of the leases and subleases (as amended
to date) listed in Exhibit 7.2.1(b). With respect to each such lease and
sublease:
(i) to each Transferor's Knowledge, the lease or sublease is
legal, valid, binding, enforceable and in full force and effect:
(ii) None of the Transferors is, and, to MainStreet's
Knowledge, no other party to the lease or sublease is, in breach or
default, and, to the Knowledge of MainStreet, no
Acquisition Agreement and
Plan of Reorganization
Page 30
<PAGE>
event has occurred which, with notice or lapse of time, would
constitute a breach or default or permit termination, modification or
acceleration thereunder;
(iii) no party to the lease or sublease has repudiated any
provision thereof;
(iv) there are no disputes, oral agreements or forbearance
programs in effect as to the lease or sublease;
(v) with respect to each sublease, the representations and
warranties set forth in clauses (i) through (iv) above are true and
correct with respect to the underlying lease;
(vi) none of the Transferors has assigned, transferred,
conveyed, mortgaged, deeded in trust or encumbered any interest in the
leasehold or subleasehold;
(vii) all facilities leased or subleased thereunder have
received all approvals of governmental authorities (including licenses
and permits) required in connection with the operation thereof and have
been operated and maintained in accordance with applicable laws, rules
and regulations;
(viii) all facilities leased or subleased thereunder are
supplied with utilities and other services necessary for the operation
of said facilities;
(ix) to the Knowledge of MainStreet, the owner of the facility
leased or subleased has good and marketable title to the parcel of real
property, free and clear of any Encumbrance, easement, covenant or
other restriction, except for installments of special easements not yet
delinquent and recorded easements, covenants and other restrictions
which do not unreasonably interfere with the Transferors' current use
of the property; and
(x) as of the date of Closing, MainStreet shall have paid all
payments then due and owing pursuant to such leases and such leases
shall not otherwise be in default or subject to acceleration.
9.23 Equipment Leases. Exhibit 7.2.1(a) lists and describes briefly all
equipment leased to or by each of the Transferors, including but not limited to
each of the MainStreet Equipment Leases. MainStreet has delivered to UCI of GA
correct and complete copies of the leases (as amended to date) listed in Exhibit
7.2.1(a). With respect to each such lease:
(i) to each Transferor's Knowledge, the lease is legal, valid,
binding, enforceable and in full force and effect:
(ii) None of the Transferors is, and, to MainStreet's
Knowledge, no other party to the lease is, in breach or default, and,
to the Knowledge of MainStreet, no event has
Acquisition Agreement and
Plan of Reorganization
Page 31
<PAGE>
occurred which, with notice or lapse of time, would constitute a breach
or default or permit termination, modification or acceleration
thereunder;
(iii) no party to the lease has repudiated any provision
thereof;
(iv) there are no disputes, oral agreements or forbearance
programs in effect as to the lease;
(v) none of the Transferors has assigned, transferred,
conveyed, mortgaged, deeded in trust or encumbered any interest in the
leasehold;
(vi) all equipment leased thereunder has received all
approvals of governmental authorities (including licenses and permits)
required in connection with the operation thereof and has been operated
and maintained in accordance with applicable laws, rules and
regulations;
(vii) to the Knowledge of MainStreet, the owner of the
equipment leased has good and marketable title to equipment, free and
clear of any Encumbrance; and
(viii) as of the date of Closing, MainStreet shall have paid
all payments then due and owing pursuant to such leases and, to the
Knowledge of each Transferor and each Class B Shareholder, such leases
shall not otherwise be in default or subject to acceleration.
9.24 Line of Credit. As of the Closing, none of the terms of
MainStreet's line of credit obligation with Bank One, N.A. (formerly NPL-LP.
Inc.) shall have changed from the terms set forth in those certain loan
documents supplied by MainStreet to UCI of GA (unless otherwise requested or
agreed by UCI of GA in writing). As of the date of Closing, MainStreet shall
have paid all payments then due and owing pursuant to such line of credit and
such obligation shall not otherwise be in default or subject to acceleration.
The Parties hereto acknowledge that Bank One, L.P shall retain a lien on
MainStreet's accounts receivable being conveyed to UCI of GA hereunder.
9.25 Environmental Matters.
9.25.1 In all material respects, each of the Transferors is in
compliance with all local, state and federal statutes, ordinances, and
regulations dealing with the protection of the environment or public health and
safety, including, but not limited to, the Comprehensive Environmental Response,
Compensation, and Liability Act (codified as amended, 42 U.S.C. ss.ss. 9601 et
seq.) ("CERCLA") and the Resource Conservation and Recovery Act (codified as
amended, 42 U.S.C. ss.ss. 6901 et seq.) ("RCARA").
Acquisition Agreement and
Plan of Reorganization
Page 32
<PAGE>
9.25.2 Each of the Transferors has obtained all required
local, state and federal permits, licenses, certificates and approvals, if any,
relating to: (i) air emissions; (ii) discharges to surface water or groundwater;
(iii) noise emissions; (iv) solid or liquid waste disposal; (v) the use,
generation, storage, transportation or disposal of toxic or hazardous substances
or wastes (intended hereby and hereafter to include any and all such materials
listed in any local, state or federal statute, ordinance or regulation); (vi)
the use, storage, transportation or disposal of petroleum or petroleum products;
or (vii) other environmental, health and safety matters.
9.25.3 Each of the Transferors has not caused, suffered,
permitted or sustained any emission, spill, release or discharge of any toxic or
hazardous substances or wastes, or any petroleum products, into or upon: (i) the
air; (ii) soils or any improvements located thereon, whether on a Transferors'
property or elsewhere; (iii) surface water or groundwater; or (iv) a sewer,
septic system or waste treatment, storage or disposal system except in
accordance with applicable law or a valid government permit, license,
certificate or approval.
9.25.4 None of the Transferors, nor any of the Class B
Shareholders has received written notice of any actual or potential claims,
orders, directives, citations or causes of action based on actual or alleged
violations of any local, state, or federal statutes, ordinances or regulations
dealing with the protection of the environment or public health and safety,
including, but not limited to, CERCLA or RCARA, or written notice of any actual
or potential common law claims or causes of action based upon any Transferor's
actual or alleged involvement with or use of any substance regulated by local,
state or federal statutes, ordinances or regulations dealing with the protection
of the environment or public health and safety.
9.25.5 None of the Transferors, nor any of the Class B
Shareholders has received oral or written notice of any actual or potential
claims, orders, directives, citations or causes of action under any local, state
or federal statutes, ordinances or regulations dealing with the protection of
the environment or public health and safety, including, but not limited to,
CERCLA and RCARA, based upon or arising out of its actual or alleged disposal of
hazardous wastes or substances, whether on or off real property being operated
by any of the Transferors.
9.26 Consents. No consent, approval or authorization of or designation,
declaration or filing with any state, federal or foreign governmental authority
is required in connection with the valid execution and delivery of this
Agreement and the consummation by the Transferors and Class B Shareholders of
the transactions contemplated hereby. At Closing, no consent of any third party
which has not been obtained is required in connection with the transfer and
assignment of the Assets hereunder.
9.27 Zoning. To the best of each Transferor's and each Class B
Shareholder's Knowledge, each of the Georgia Facilities and Tennessee Facilities
is currently zoned for commercial operations and are in compliance with
applicable zoning laws and ordinances; and
Acquisition Agreement and
Plan of Reorganization
Page 33
<PAGE>
each of the Transferors and Class B Shareholders does not know that the status
of such zoning is in question or subject to change by the appropriate
governmental authorities.
9.28 Normal Course. MainStreet has paid or caused to be paid promptly
when due all city, county and state ad valorem taxes and similar taxes and
assessments and all utility charges and assessments imposed upon or assessed
against the MainStreet Assets prior to the Closing. MHMG-GA has paid or caused
to be paid promptly when due all city, county and state ad valorem taxes and
similar taxes and assessments and all utility charges and assessments imposed
upon or assessed against the MHMG-GA Assets prior to the Closing. MHMG-TN has
paid or caused to be paid promptly when due all city, county and state ad
valorem taxes and similar taxes and assessments and all utility charges and
assessments imposed upon or assessed against the MHMG-TN Assets prior to the
Closing. Each of the Transferors shall exercise their respective best efforts to
preserve the goodwill of the employees, patients, suppliers and others having
business relationships with the Business through the date of Closing.
9.29 Workers' Compensation. There are no worker compensation or similar
claims or actions pending or threatened, and each of the Transferors and/or each
of the Class B Shareholders do not know of facts which would make such claims
timely, by past or present employees of any of the Transferors.
9.30 No Adverse Conditions. Except as previously disclosed in writing
to UCI of GA, to the best of each Transferor and/or Class B Shareholder's
Knowledge there are no adverse conditions or circumstances that may interfere
with the use and enjoyment of, or opportunity to resell or encumber, any of the
Assets, or might otherwise impede the Transferees' ability to operate a business
similar to the Business utilizing the Assets. Notwithstanding the foregoing, if
the condition or circumstance existed as of the date of execution of this
Agreement but was not disclosed as set forth above, no Transferor or Class B
Shareholder shall be in violation of this Section 9.30 in the event such adverse
condition or circumstance is cured as of Closing to UCI of GA's reasonable
satisfaction. In the event the adverse condition or circumstance arises
subsequent to the execution of this Agreement, and a Transferor or Class B
Shareholder has Knowledge of such condition or circumstance, such condition or
circumstance shall be disclosed in writing to UCI of GA.
9.31 Copies of Documents. True, correct and complete copies of all
documents listed in the exhibits and schedules hereto with respect to the
representations and warranties contained in this Section 9 have been heretofore
delivered to UCI of GA.
9.32 Disclosure. Each disclosure in the Schedule of Exceptions
disclosed as an exception to a representation or warranty of the Transferors and
Class B Shareholders shall be deemed adequate to disclose an exception to a
representation or warranty made herein to which it relates only if such
disclosure refers to an agreement delivered to UCI of GA or identifies the
exception with reasonable particularity and includes a brief description of the
facts or obligation.
Acquisition Agreement and
Plan of Reorganization
Page 34
<PAGE>
To the Knowledge of each of the Transferors and Class B Shareholders, no
information about any of the Transferors contained in this Agreement or any
document executed in connection therewith, the Financial Statements, or any
written statement furnished by or on behalf of the Transferors or Class B
Shareholders pursuant to the terms of this Agreement contains any untrue
statement of material fact or omits to state any material fact necessary in
order to make the statements and information contained herein or therein not
misleading in light of the circumstances under which made.
9.33 Representations and Warranties at Closing. Except as expressly
otherwise permitted in this Agreement, the representations and warranties of
each Transferor and/or each Class B Shareholder set forth in this Agreement
shall be true as of the date of Closing as though such representations and
warranties were made on such date, unless they reference a specific earlier date
whereupon, as of the Closing, they shall be true as at the earlier date
referenced. Notwithstanding the foregoing, Transferor and the Class B
Shareholders shall promptly notify Transferees of any occurrence or state of
facts which would result in any of the representations and warranties contained
in this Section 9 not being true and correct if made anew at the time of such
notice. From time to time prior to Closing, Transferor and the Class B
Shareholders shall promptly supplement and amend any Exhibit referenced in this
Section 9 with respect to any matter hereafter arising which, if existing or
occurring at the date of this Agreement, would have been required to be set
forth or described on an Exhibit referenced in this Section 9. No such
supplement or amendment shall have the effect of curing any inaccuracy or
misrepresentation in any representation or warranty in this Agreement as of the
date hereof unless each Transferee elects in writing to waive such inaccuracy or
misrepresentation.
9.34 Value of Assets and Future Profitability. Except as expressly set
forth herein, Transferors and the Class B Shareholders make no representation or
warranty of any kind whatsoever, including as to the value of the Assets or the
future profitability or future earnings performance of the business of UCI of GA
after the date of Closing.
10. REPRESENTATIONS AND WARRANTIES OF UCI AND THE TRANSFEREES. 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
this Section 10 are true, correct and complete as of the date of this Agreement:
10.1 Organization and Good Standing. UCI is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware and has full corporate power to carry on its businesses and to own and
operate its properties and assets as presently owned and operated. UCI of GA is
a corporation duly organized, validly existing, and in good standing under the
laws of the State of South Carolina and has full corporate power to carry on its
businesses and to own and operate its properties and assets as presently owned
and operated.
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Plan of Reorganization
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10.2 Authority. Other than the approval of shareholders of UCI, UCI and
UCI of GA have taken all corporate action necessary to approve and authorized
the execution of this Agreement and to consummate the transactions contemplated
hereby. Each of their respective representatives signing this Agreement has full
power and authority to execute this Agreement in the indicated capacity and to
consummate the transactions contemplated hereby. This Agreement has been, and at
the Closing the documents related thereto shall be, duly executed and delivered
by UCI and UCI of GA, and constitute valid and binding obligations of UCI and
UCI of GA enforceable in accordance with its terms and conditions except as
enforcement may be limited by applicable bankruptcy, insolvency or similar laws
effecting creditors rights generally and by principles of equity.
10.3 Ability to Carry Out the Agreement. Other than the required
approval of the shareholders of UCI, neither UCI nor UCI of GA is subject to or
bound by any provision of:
(i) any law, statute, rule, regulation, ordinance or judicial
or administrative decision;
(ii) any articles or certificate of incorporation or bylaws;
(iii) any contract, agreement, mortgage, deed of trust, lease,
note, shareholders' agreement, bond, indenture, other instrument or
agreement, license, permit, trust, custodianship other restriction of
any kind or character whatsoever; or
(iv) any judgment, order, writ, injunction or decree of any
court, governmental body, administrative agency or arbitrator;
that would prevent or be violated by or would result in any penalty, forfeiture
or contract termination as a result of, or under which there would be a default
as a result of, nor is the consent of any Person under any material agreement
which has not been obtained required for, the execution, delivery and
performance by either UCI or UCI of GA of this Agreement and the transactions
contemplated hereby, other than violations, penalties, forfeitures, contract
terminations, defaults or failure to obtain consents which, singly or in the
aggregate, shall not have a material adverse effect on the enforceability or
validity of this Agreement or the ability of UCI and UCI of GA to perform their
respective obligations hereunder.
10.4 Capitalization. UCI is authorized to issue: (i) Ten Million
(10,000,000) shares of UCI Common Stock of which 5,744,965 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. Upon the approval of the shareholders of UCI which is anticipated
prior to Closing, UCI shall amend its certificate of incorporation to authorize
Thirty Million (30,000,000) shares of UCI common stock. As of Closing, all of
the Shares to be issued in the transaction described herein shall be duly
authorized and reserved for issuance pursuant to
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Plan of Reorganization
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this Agreement, and, upon the consummation of the transactions contemplated
hereby, shall be validly issued, fully paid, nonassessable and not subject to
preemptive rights.
10.5 Securities Law Filings. UCI has previously furnished to MainStreet
and the Class B Shareholders copies of: (i) its Annual Report on Form 10-KSB/A
for the year ended September 30, 1997, as filed with the SEC; and (ii) its
Quarterly Report on Form 10-QSB for the quarters ended December 31, 1997. UCI
has filed all documents required to be filed with the SEC since January 1, 1996
(the "UCI SEC Documents"). As of their respective dates, the UCI SEC Documents
compiled in all material respects with the requirements of the Securities Act of
1933, as amended, or the Securities and Exchange Act of 1934, as amended, as the
case may be, and none of the UCI SEC Documents contained any untrue statement of
a material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The consolidated
financial statements of UCI included in the UCI SEC Documents complied as to
form in all material respects with the applicable accounting requirements and
the published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles (except, in
the case of the unaudited statements, as permitted by Form 10-QSB of the SEC)
applied on a consistent basis during the periods involved (except as may be
indicated therein or in the notes thereto) and fairly, accurately and completely
present the consolidated financial position of UCI and its consolidated
Subsidiaries, at the respective dates thereof and the consolidated results of
its operations and its consolidated cash flows for the respective periods then
ended (subject, in the case of the unaudited statements, to normal year-end
audit adjustments and to any other adjustments described therein).
10.6 Litigation. There are no judicial or administrative actions or
proceedings pending, or to the best Knowledge of UCI and UCI of GA, threatened
that question the validity of this Agreement or any transaction contemplated
hereby, which if adversely determined would have a material adverse effect upon
their ability to enter into this Agreement or perform their respective
obligations hereunder.
10.7 Taxes. UCI has paid or caused to be paid promptly when due all
city, county and state ad valorem taxes and similar taxes and assessments
imposed upon or assessed against the assets of UCI or its Subsidiaries prior to
the Closing.
10.8 Compliance with Laws. UCI and UCI of GA is in compliance with all
laws, ordinances, and regulations that govern their respective assets, the
violation of which would have a material adverse effect on the business of UCI
taken as a whole.
10.9 Payables and Creditors. UCI of GA shall pay all accounts payable
and taxes, assessments, and charges respecting the Assets incurred after the
date of Closing within a reasonable amount of time following Closing in
accordance with their terms and will protect the
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reputation of the Transferors by paying all the valid debts and obligations of
each of the Transferors which have been expressly assumed by UCI of GA
hereunder.
10.10 Disclosure. To the Knowledge of UCI and UCI of GA, no information
about any of the Transferees contained in this Agreement or any document
executed in connection therewith, or any written statement furnished by or on
behalf of the Transferees pursuant to the terms of this Agreement contains any
untrue statement of material fact or omits to state any material fact necessary
in order to make the statements and information contained herein or therein not
misleading in light of the circumstances under which made.
10.11 Representations and Warranties at Closing. Except as expressly
otherwise permitted in this Agreement, the representations and warranties of UCI
and UCI of GA set forth in this Agreement shall be true as of the date of
Closing as though such representations and warranties were made on such date,
unless they reference a specific earlier date whereupon, as of the Closing, they
shall be true as at the earlier date referenced.
11. CONDITIONS PRECEDENT.
11.1 Conditions of UCI and the Transferees. The obligations of UCI and
the Transferees hereunder shall be subject, to the extent not waived, to the
satisfaction of each of the following conditions at the Closing:
11.1.1 Representation and Warranties. The representations and
warranties of all of the Transferors and all of the Class B Shareholders
contained in this Agreement shall be true and correct in all material respects
as of the date when made and, except for changes specifically contemplated by
this Agreement, on and as of the date of Closing as though such representations
and warranties had been made as of the date of Closing.
11.1.2 Performance of this Agreement. All of the Transferors
shall have performed and complied in all material respects with all covenants,
conditions, and agreements required by this Agreement to be performed or
complied with by it prior to or at the Closing.
11.1.3 Consents, Regulatory Filings, and Approvals. All third
party consents, approvals, licenses, and permits, if any, the granting of which
are necessary for the consummation of the transactions contemplated hereby,
shall have been obtained, and all waiting periods specified by law, if any, the
passing of which are necessary for such consummation, shall have passed.
11.1.4 Litigation, Injunctions. There shall be no injunction,
order or decree of any court or governmental agency or authority prohibiting or
enjoining UCI or any of the Transferees from consummating the transactions
contemplated hereby or materially affecting the Assets.
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Plan of Reorganization
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11.1.5 Deliveries. The deliveries of documents which each of
the Transferors and each of the Class B Shareholders is obligated to make under
Section 8.3 shall have been made.
11.1.6 Real Estate Leases. As of Closing, UCI of GA shall have
entered into valid and binding leases or validly assumed the existing leases for
all of the Georgia Facilities and Tennessee Facilities.
11.1.7 Computer Equipment Installation. Prior to Closing, each
of the Transferors shall provide UCI of GA and its agents during the term of
this Agreement reasonable access to each of the Georgia Facilities and Tennessee
Facilities to install any and all computer equipment, at UCI of GA's expense.
11.1.8 Medical Providers. As of Closing, Transferees shall
have entered into employment agreements with no less than ten (10) of the
physician-employees and/or physician assistant/nurse practitioner employees of
the Transferors (collectively the "Medical Providers") executing; provided
however, the Transferees reserve the right to require Transferors to deliver
executed employment agreements from certain Medical Providers to be disclosed by
UCI of GA to Transferors prior to Closing. All such employment agreements shall
also include non-compete provisions which are consistent with such employee's
current non-compete agreements with the Transferors.
11.1.9 Private Placement. As of Closing, UCI shall have
successfully completed the Private Placement.
11.1.10 Approval of Shareholders of UCI. The Parties hereto
acknowledge that the transactions described herein require the approval of the
shareholders of UCI. In the event, the shareholders of UCI fail for any reason
to timely approve the transactions described herein, this Agreement shall be
null, void, and without effect, and no Party shall have any further obligation
to any other Party hereunder.
11.1.11 No Material Adverse Change. Since December 31, 1997,
there shall have been no material adverse change in the assets, Business,
operations, results of operations or financial condition of MainStreet, except
events or changes contemplated by this Agreement, changes consented to in
writing by UCI of GA and changes in the ordinary course of business which are
not, either individually or in the aggregate, materially adverse.
11.2 Transferors' Conditions. Each of the Transferors' and each of the
Class B Shareholders' obligations to sell the Assets shall be subject, to the
extent not waived, to the satisfaction of each of the following conditions at
the Closing:
11.2.1 Representation and Warranties. The representations and
warranties of UCI and the Transferees contained in this Agreement shall be true
and correct in all material respects
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Plan of Reorganization
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as of the date when made and, except for changes specifically contemplated by
this Agreement, on and as of the date of Closing as though such representations
and warranties had been made as of the date of Closing.
11.2.2 Performance of this Agreement. UCI and the Transferees
shall have performed and complied in all material respects with all covenants,
conditions, and agreements required by this Agreement to be performed or
complied with by them respectively prior to or at the Closing.
11.2.3 Consents, Regulatory Filings, and Approvals. All third
party consents, approvals, licenses, and permits, if any, the granting of which
are necessary for the consummation by each of the Transferors of the
transactions contemplated hereby, shall have been obtained and all waiting
periods specified by law, the passing of which are necessary for such
consummation, if any, shall have passed.
11.2.4 Litigation, Injunctions. There shall be no injunction,
order or decree of any court or governmental agency or authority prohibiting or
enjoining any of the Transferors from consummating the transactions contemplated
hereby.
11.2.5 Deliveries. The deliveries of documents which UCI and
the Transferees are obligated to make under Section 8.4 shall have been made.
11.2.6 No Material Adverse Change. Since December 31, 1997,
there shall have been no material adverse change in the assets, business,
operations, results of operations or financial condition of UCI, except events
or changes contemplated by this Agreement, changes consented to in writing by
MainStreet and changes in the ordinary course of business which are not, either
individually or in the aggregate, materially adverse.
12. COST AND EXPENSES.
12.1 Transactional Cost. The Parties shall be responsible for their
respective attorney's fees, accountants' fees, experts' fees, and other expenses
incurred by them in connection with the negotiations and Closing of this
transaction; provided however, in the event litigation is commenced to enforce
any rights under this Agreement or to pursue any other remedy available to any
Party, all legal expense or other direct costs of litigation of the prevailing
Party shall be paid by the non-prevailing Party.
12.2 Proration of Taxes and Charges. All personal property taxes and
like charges (which are not terminated and paid as of Closing by the
Transferors), if any, relating to the personal (tangible and intangible)
property comprising the Assets shall be prorated as of the date of closing, in
accordance with regular accounting procedure. Settlement at Closing will be made
on proration of estimates of such taxes and charges. If, as the result of such
proration at Closing,
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Plan of Reorganization
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a net balance is owed by Transferors to Transferees, or visa versa, the amount
thereof shall be paid to such party at or within thirty (30) days after receipt
of the next succeeding payment notice. Transferors shall be responsible for, and
shall pay, all sales taxes, if any, applicable to the sale of the Assets as
called for herein.
13. INDEMNITY RIGHTS.
13.1 General Indemnity
13.1.1 By Transferors and Class B Shareholders. Each of the
Transferors and the Class B Shareholders shall jointly and severally (but with
respect to the Class B Shareholders severally and not jointly in accordance with
their respective Percentage of Responsibility as set forth in Section 13.5
below) indemnify and hold UCI and each of the Transferees and their respective
officers, directors and agents harmless, from any and all Indemnity Damages
asserted against or incurred by UCI or any of the Transferees as a result of any
breach by any of the Transferors and/or any of the Class B Shareholders of any
covenant, warranty representation, or agreement, made by any of the Transferors
and/or any of the Class B Shareholders herein or in agreements related hereto
including but not limited to litigation expenses and legal fees that might be
incurred because of such breach.
13.1.2 By Transferees and UCI. Each of the Transferees and UCI
shall indemnify and hold each of the Class B Shareholders and Transferors and
their respective officers, directors and agents harmless, from any and all
Indemnity Damages asserted against or incurred by any of the Transferors as a
result of any breach by UCI and/or any of the Transferees of any covenant,
warranty representation, or agreement, made by UCI and/or any of the Transferees
herein or in agreements related hereto including but not limited to litigation
expenses and legal fees that might be incurred because of such breach.
13.2 Special Indemnities. Each of the Transferors and the Class B
Shareholders shall jointly and severally (but with respect to the Class B
Shareholders severally and not jointly in accordance with their respective
Percentage of Responsibility as set forth in Section 13.5 below) indemnify and
hold UCI and each of the Transferees and their respective officers, directors,
and agents harmless from any and all Indemnity Damages asserted against or
incurred by UCI or any of the Transferees as a result of:
13.2.1 Award or Settlement. Any lawsuit or similar claim
against any of the Transferors and/or any of the Class B Shareholders arising
from events or conditions prior to the date of Closing.
13.2.2 Title to Assets. Any challenge to: (a) any of the
Transferors' title to the Assets, or (b) the transfer of such title and interest
to the Transferees pursuant to the Agreement.
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Plan of Reorganization
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13.2.3 Accounts Payable. Any accounts payable, taxes,
assessments, or charges of any of the Transferors and/or any of the Class B
Shareholders, provided such accounts payable is not expressly assumed by UCI of
GA herein.
13.2.4 Bulk Sales. Any and all Indemnity Damages asserted
against or incurred by UCI or any of the Transferees under any applicable
Uniform Commercial Code - Bulk Transfers Act respecting this Agreement.
13.2.5 Worker's Compensation Award. Any and all Indemnity
Damages asserted against or incurred by UCI or any of the Transferees as a
result of any Worker's Compensation award or settlement with respect to any
claim of an employee of any of the Transferors arising from an accident or
work-related injury occurring prior to the Closing.
13.2.6 Medical Malpractice Claims. Any and all Indemnity
Damages asserted against or incurred by UCI or any of the Transferees as a
result of any medical malpractice claim arising from prior to the Closing.
13.3 Provisions of General Application. With respect to any right of
indemnification arising under this Agreement, the following provisions shall
apply:
13.3.1 Procedures. The indemnified Party and the indemnifying
Party agree to cooperate in the defense of any third party claim or action
subject to this Section 13, to permit the cooperation and participation of the
other Parties in any such claim or action, and to promptly notify the other
Parties of the occurrence of any indemnified event or any material developments
or amounts due respecting any indemnification event.
13.3.2 No Implications. Neither the rights of any Party to
indemnification from another Party nor the obligations of any Party to indemnify
another Party, under this Agreement shall in any way imply or create, and each
Party specifically disclaims, any responsibility whatsoever by such Party for
any other Party's liabilities to any other person or entity or governmental
body.
13.3.3 Settlement. No settlement of an action covered by this
Section 13 shall be made without the prior written consent of UCI and
MainStreet, which consent shall not be unreasonably withheld or delayed;
provided however, that anything in this Agreement to the contrary
notwithstanding, (a) if there is a reasonable probability that a claim may
materially and adversely affect an indemnifying party other than as a result of
money damages or other money payments, the indemnifying party shall have the
right, at its own cost and expense, to compromise or settle such claim in any
reasonable manner, but (b) the indemnifying party shall not, without prior
written consent of the indemnified party, settle or compromise any claim or
consent to the entry of any judgment which does not include as an unconditional
term thereof the giving by the claimant or the plaintiff to the indemnified
party a release from all liability in respect of such
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Plan of Reorganization
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claim. In any event, all Parties hereto shall retain the right to participate in
the prosecution of any such actions, and the Party prosecuting such action shall
act reasonably and in accordance with good business judgment giving due
recognition to the interests of the other Parties to this Agreement.
13.3.4 Insurance. Prior to enforcing any claim for
indemnification against the indemnifying parties under this Agreement, the
indemnified parties shall administratively file in good faith with any insurers
all forms and submissions required by applicable policies for the proceeds or
other benefits of insurance coverage, if any, applicable to the claim or event
from which such indemnification right arose. In the event that insurance
proceeds are paid to the indemnified parties respecting an event to which an
indemnification right applies hereunder, such indemnification right shall apply
only to the extent that the amount of damages indemnified against exceeds such
insurance proceeds actually paid to the indemnified parties; provided however,
that: (a) such insurance proceeds shall not affect or be applied towards the
maximum liability established in Section 13.4 (b) below, and (b) shall not be a
condition precedent to asserting such indemnification claim under this
Agreement. If the indemnifying parties incur indemnity costs or pay indemnity
damages under this Agreement, and the indemnified parties subsequently receive
insurance proceeds for the same claim or event, then the indemnified parties
shall refund such indemnity costs or damage payments to the indemnifying parties
from such insurance proceeds to the extent that the indemnified party has
received benefits from both sources (i.e., payments of indemnity damages from
the indemnifying party and such insurance proceeds) in excess of the amount of
indemnity damages incurred by or asserted against the indemnified parties.
13.3.5 Cooperation. The Parties agree to cooperate fully with
each other in connection with the mitigation, defense, negotiation or settlement
of any such legal proceeding, claim or demand, and in any event, all Parties
shall retain the right to participate in the defense of any such legal
proceeding, claim or demand. Subject to rights of or duties to any insurer or
other third person having liability therefor, the indemnifying parties shall
have the right within fifteen (15) days after receipt of the notice described in
Section 13.3.1 to assume the control of the defense, compromise or settlement of
any such action, suit, proceeding, claim, liability, demand or assessment,
including at its own expense, employment of counsel; provided however, that if
the indemnifying parties shall have exercised their right to assume such
control, the indemnified party: (a) may, in its sole discretion and expense,
employ counsel to represent it (in addition to counsel employed by the
indemnifying parties) in any such matter, and in such event counsel selected by
the indemnifying parties shall be required to cooperate with such counsel of the
indemnified party in such defense, compromise or settlement for the purpose of
informing and sharing information with such indemnified party; and (b) shall, at
its own expense, make available to the indemnifying parties those employees of
the indemnified parties and their affiliates whose assistance, testimony or
presence is reasonably deemed by the indemnifying parties necessary or
beneficial to assist them in evaluating and defending any such action, suit,
proceeding, claim, liability, demand or assessment; provided further, however,
that any such access shall be
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Plan of Reorganization
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conducted in such a manner as not to interfere unreasonably with the operations
of the businesses of the indemnified parties.
13.4 Limitations. Anything contained in this Agreement to the contrary
notwithstanding: (a) each indemnifying party hereunder shall not be liable for
any claim for indemnification asserted by an indemnified party or by any party
pursuant to any provision of this Agreement after the first (1st) anniversary
date of the Closing; (b) the Transferors and Class B Shareholders aggregate
liability to the Transferees, and the Transferees aggregate liability to the
Transferors and Class B Shareholders, for such indemnification claims under this
Agreement shall each not exceed Three Million and No/100 Dollars
($3,000,000.00); and (c) an indemnifying party shall not become liable for any
such indemnification claims under this Agreement unless and until the aggregate
of all such claims exceeds One Hundred Twenty-Five Thousand and No/100 Dollars
($125,000.00) in which event the indemnified party shall be entitled to
indemnification from the first dollar of loss, but then only up to the amount
limitation in Section 13.4(b) above in the aggregate. Notwithstanding the
foregoing, the limitations of Section 13.4 above shall apply to all claims for
indemnification under this Agreement except claims by any Transferee or UCI
related to any Indemnity Damages asserted or incurred by UCI or any of the
Transferees related to, or in connection with, any litigation or claim set forth
on Exhibit 9.14 attached hereto.
13.5 Ratable Percentages. Notwithstanding anything contained herein to
the contrary, whenever any claim for Indemnity Damages arises pursuant to
Sections 13.1.1 or 13.2 above, payment by the Class B Shareholders thereunder in
each and every case shall be made to the indemnified parties in the following
percentages:
Responsible Party Percentage of Responsibility
----------------- ----------------------------
Johnson 22.0%
PENMAN 78.0%
Riddett 0.0%
Dare 0.0%
In no event shall any Class B Shareholder be liable for Indemnity Damages with
respect to any individual claim hereunder in an amount in excess of the product
of multiplying: (i) such Class B Shareholder's Percentage of Responsibility set
forth opposite such Class B Shareholder's name above, by (ii) the aggregate
amount of such Indemnity Damages not paid by a Transferor. Nothing contained in
this Section 13.5 shall in any way be deemed to limit in any way the liability
of any Transferor hereunder.
13.6 Holdback.
13.6.1 Holdback Shares. At Closing, 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
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Plan of Reorganization
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($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 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. At Closing, 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.
13.6.2 Holdback Termination. The Holdback Shares shall be
distributed to J/MS as follows.
13.6.2.1 On the first anniversary of the date of
Closing, the Holdback Shares remaining in escrow shall be delivered to J/MS;
except that if any claims made pursuant to Sections 13.1.1 or 13.2 have not been
resolved as of such date, then the Holdback Shares equal to the amount of such
unresolved claims shall remain in escrow.
13.6.2.2 Any Holdback Shares not so distributed to
J/MS pursuant to the foregoing shall be retained in escrow until such claims are
resolved pursuant to Section 13.6.3 and 13.6.4 below.
13.6.3 Assertion of Claims Against Holdback. Subject to the
limitations set forth in Sections 13.4 and 13.5 above, if UCI or any Transferee
shall have any claim of indemnification against J/MS pursuant to Section 13
hereof, it shall promptly give written notice thereof to J/MS, including in such
notice a brief description of the facts upon which such claim or adjustment is
based and the amount thereof (the "Claim Notice"). Unless J/MS shall give
written notice, within twenty (20) days after receipt of the Claim Notice, to
UCI and the Escrow Agent objecting to the forfeiture of any Holdback Shares for
application to such claims, the lesser of (a) that number of the Holdback Shares
that is equal in value to the sum of the amount of claim or claims to be
satisfied, or (b) all the Holdback Shares, shall be forfeited to UCI. Such claim
or claims shall be deemed satisfied to the extent of such forfeiture.
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Plan of Reorganization
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13.6.4 Resolution of Conflicts; Arbitration.
13.6.4.1 If J/MS gives such written objection to UCI
and the Escrow Agent, Escrow Agent shall continue to hold the Holdback Shares
until the rights of J/MS, on the one hand, and the indemnified party, on the
other hand, with respect thereto have been agreed upon between Johnson and the
indemnified party or until such rights are settled by arbitration or judicial
action.
13.6.4.2 J/MS and the indemnified party shall attempt
promptly and in good faith for a period of thirty (30) days to agree upon the
rights of the parties with respect to each of such claims. If J/MS and such
indemnified party should so agree, a memorandum setting forth such agreement
shall be prepared and signed by both parties and the Holdback Shares shall be
distributed or forfeited in accordance with the terms thereof.
13.6.4.3 If no such agreement can be reached after
such period of good faith negotiation, either the indemnified party or J/MS may
demand arbitration of the matter unless the amount of the damage or loss is at
issue in pending litigation with a third party, in which event arbitration shall
not be commenced until such amount is ascertained or both parties agree to
arbitration; and in any such event the matter shall be settled by arbitration
conducted by three arbitrators. The indemnified party shall select one
arbitrator and J/MS shall select another arbitrator, and the two arbitrators so
selected shall select a third arbitrator. The decision of the arbitrators as to
the validity and amount of any claim in such Claim Notice shall be binding and
conclusive upon the Parties. Judgment upon any award rendered by the arbitrators
may be entered in any court having jurisdiction. Any such arbitration shall be
held in Columbia, South Carolina. Any such arbitration shall be conducted under
the rules then in effect of the American Arbitration Association, and shall be
based on the provisions and limitations of this Section 13. The non-prevailing
party shall pay all costs and expenses of the prevailing party in connection
with any such arbitration.
13.7 Exclusive Remedies. Anything contained in this Agreement to the
contrary notwithstanding, the indemnification rights set forth in this Section
13, all of which are subject to the terms, limitations, and restrictions of this
Article 13, shall be the exclusive remedy for monetary damages sustained as a
result of a breach of a representation, warranty, covenant, or agreement under
this Agreement. Such limitations set forth in this Section 13 shall not impair
the rights of any of the parties: (a) to seek non-monetary equitable relief,
including (without limitation) specific performance or injunctive relief to
redress any default or breach of this Agreement; or (b) to seek enforcement,
collection, damages, or such non-monetary equitable relief to redress any
default or breach of any Non-Solicits to be delivered at Closing hereunder. In
connection with the seeking of any non-monetary equitable relief, each of the
Parties acknowledges and agrees that the other Parties hereto would be damaged
irreparably in the event any of the provisions of this Agreement are not
performed in accordance with their specific terms or otherwise are breached.
Acquisition Agreement and
Plan of Reorganization
Page 46
<PAGE>
13.8 Cross Default.
13.8.1 Transferees and UCI. Notwithstanding anything contained
herein to the contrary, in the event UCI or any of the Transferees breach this
Agreement or any other agreement or instrument ancillary hereto to which it is a
party, such breach thereof (at the expiration of the applicable grace period set
forth therein) shall constitute a breach by UCI and each of the Transferees of
this Agreement.
13.8.2 Transferors and Class B Shareholders. Notwithstanding
anything contained herein to the contrary but subject to Section 13.5, in the
event any of the Transferors and/or any of the Class B Shareholders breach this
Agreement or any other agreement or instrument ancillary hereto (other than a
Non-Solicit or any Investment Letter) to which it is a party, such breach
thereof (at the expiration of the applicable grace period set forth therein)
shall constitute a breach by each of the Transferors and Class B Shareholders of
this Agreement.
14. EXISTING LIABILITIES. Except as specifically set forth in Section 7.2 above,
neither UCI nor any of the Transferees assumes any, and hereby expressly
disclaims all, obligations or liabilities of each of the Transferors, contingent
or absolute, including (without limitation) liabilities for (i) federal or state
income, payroll, property, or sales taxes for any period, or (ii) any tort,
contract, or statutory liability resulting from or alleged to have resulted from
the Business prior to the Closing, except for the obligations arising and
maturing after the date of Closing to perform under those liabilities expressly
assumed by UCI of GA hereunder. All property taxes assessed against the Assets
sold hereby shall be prorated as of the date of Closing, and each of the
Transferors shall jointly and severally promptly pay when due, or reimburse
Transferees for, all such taxes which remain any of the Transferors'
responsibility.
15. RISK OF LOSS. In the event the Assets or any substantial part thereof shall
be damaged or destroyed prior to the date of Closing due to any casualty or
event, or there shall occur any actions for condemnation or eminent domain
having a material adverse affect on the Assets or any substantial part thereof,
each of the Transferors shall promptly notify UCI of GA that such damage,
destruction, or action has occurred and the estimated extent thereof. In the
event of such damage, destruction, condemnation or eminent domain, UCI of GA
must within five (5) days of receipt of such notice either:
15.1 Termination. Terminate this Agreement by giving Transferors
written notice of such termination and thereupon all parties shall be released
of all further liability to the others; or
15.2 Adjustment. Alternatively, and subject to the fulfillment of the
conditions set forth herein, require the consummation of the transactions
provided for in this Agreement and, in such case (or in case of any damage by
fire or other casualty, or condemnation or eminent domain action not entitling
UCI of GA to terminate this Agreement), all proceeds of insurance covering
Acquisition Agreement and
Plan of Reorganization
Page 47
<PAGE>
the Assets and all of the claims arising as a result of such damage or
destruction to such Assets or all proceeds of such condemnation or eminent
domain action for such Assets shall become the property of UCI of GA. In the
event UCI of GA elects to require the consummation of the transactions
contemplated herein, neither Transferor shall compromise or settle any such
claim or action at any time without the written consent of UCI of GA which shall
not be unreasonably withheld. Each Transferor shall cooperate with the
collection of such amounts. Further, in such event, the representations and
warranties of the Transferors and the Class B Shareholders, as set forth herein
shall be modified equitably to account for such claim or action.
16. MISCELLANEOUS.
16.1 Termination.
16.1.1 This Agreement constitutes the binding and irrevocable
agreement of the Parties to consummate the transactions contemplated hereby, the
consideration for which is comprised of the covenants set forth herein and the
expenditures and obligations incurred and to be incurred by the Parties in
respect of this Agreement, and this Agreement may be terminated or abandoned
only as follows:
16.1.1.1 By UCI of GA and MainStreet. This Agreement
may be terminated without liability upon the mutual written consent of
UCI of GA and MainStreet.
16.1.1.2 By UCI of GA. In the event that Closing has
not been completed by April 15, 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 had 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 15, 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 had 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.
Acquisition Agreement and
Plan of Reorganization
Page 48
<PAGE>
16.1.2 Effect on Agreement. In the event of termination of
this Agreement pursuant Section 16.1.1.1 above, this Agreement shall forthwith
become void, the transactions contemplated hereby shall be abandoned and there
shall be no liability or obligation on the part of the Transferors, Transferees
or Class B Shareholders or their respective officers, directors or partners. In
the event of termination of this Agreement pursuant Sections 16.1.1.2 or
16.1.1.3 above: (a) the Transferors and Class B Shareholders' exclusive remedy
for UCI or any Transferee's breach of this Agreement, or wrongful act or failure
to act by UCI or any Transferee, which was the cause for such termination of the
Agreement shall be pursuant to Section 13 above; and (b) UCI and each
Transferees' exclusive remedy for any breach of this Agreement by any Transferor
or Class B Shareholder, or wrongful act or failure to act by any Transferor or
Class B Shareholder, which was the cause for such termination of the Agreement
shall be pursuant to Section 13 above, and the terms and conditions set forth
therein.
16.1.3 Return of Documents. Upon termination of this Agreement
pursuant to Section 16.1.1 above, each Party, if so requested by any other
Party, will return promptly every document furnished to it by or on behalf of
the other Party in connection with the transaction contemplated hereby, whether
so obtained before or after the execution of this Agreement, and any copies
thereof (except for copies of documents publicly available) which may have been
made, and will use reasonable efforts to cause its representatives and any
representatives of financial institutions and others to whom such documents were
furnished promptly to return such documents and any copies of thereof any of
them may have been made.
16.2 Entire Agreement. This Agreement, including the exhibits and
schedules attached hereto, embodies the entire Agreement and understanding
between the Parties hereto as to the matters herein addressed and supersedes all
prior agreements and understandings relating to the subject matter hereof.
16.3 No Waiver. No failure to exercise, and no delay in exercising any
right, power or remedy hereunder or under any document delivered pursuant hereto
shall impair any right, power or remedy which the parties hereto may have, nor
shall any such delay be construed to be a waiver of any such rights, powers or
remedies, or any acquiescence in any breach or default under this Agreement, nor
shall any waiver of any breach or default of any Party hereunder be deemed a
wavier of any default or breach subsequently occurring.
16.4 Survival. All representations, warranties, covenants, and
agreements herein contained shall survive the Closing hereunder; except that the
representations and warranties contained in Sections 9 and 10 shall terminate as
of the first (1st) anniversary date of the Closing.
16.5 Amendment. No provision of this Agreement or any document or
instrument relating to the Agreement, may be amended, modified, supplemented,
changed, waived, discharged, or terminated, unless the Parties hereto consent
thereto in writing.
Acquisition Agreement and
Plan of Reorganization
Page 49
<PAGE>
16.6 Notices. All notices, requests, approvals, consents, demands and
other communication provides for or permitted hereunder shall be in writing,
signed by an authorized representative of the sender and addressed to the
respective party at the address set forth below:
UCI of GA: UCI Medical Affiliates of
--------- Georgia, Inc.
1901 Main Street, Suite 1200
Columbia, SC 29201
Attn.: Jerry F. Wells
with copy to: Julian Hennig III, Esquire
Nexsen Pruet Jacobs & Pollard, LLP
P.O. Drawer 2426
Columbia, SC 29202
UCI: UCI Medical Affiliates, Inc.
--- 1901 Main Street, Suite 1200
Columbia, SC 29201
Attn.: Jerry F. Wells
with copy to: Julian Hennig III, Esquire
Nexsen Pruet Jacobs & Pollard, LLP
P.O. Drawer 2426
Columbia, SC 29202
MainStreet: MainStreet Healthcare Corporation
---------- 2370 Main Street
Tucker, Georgia 30084
Attn: A. Wayne Johnson
with copy to: Sheldon E. Friedman, Esquire
S. Friedman & Associates, P.C.
1050 Crown Pointe Parkway
Suite 1550
Atlanta, GA 30338
MHMG-GA: MainStreet Healthcare Medical Group, P.C.
------- 2370 Main Street
Tucker, Georgia 30084
Attn: A. Wayne Johnson
Acquisition Agreement and
Plan of Reorganization
Page 50
<PAGE>
with copy to: Sheldon E. Friedman, Esquire
S. Friedman & Associates, P.C.
1050 Crown Pointe Parkway
Suite 1550
Atlanta, GA 30338
MHMG-TN: MainStreet Healthcare Medical Group, PC
------- 2370 Main Street
Tucker, Georgia 30084
Attn: A. Wayne Johnson
with copy to: Sheldon E. Friedman, Esquire
S. Friedman & Associates, P.C.
1050 Crown Pointe Parkway
Suite 1550
Atlanta, GA 30338
Prompt Care: Prompt Care Medical Center, Inc.
----------- 2370 Main Street
Tucker, Georgia 30084
Attn: A. Wayne Johnson
with copy to: Sheldon E. Friedman, Esquire
S. Friedman & Associates, P.C.
1050 Crown Pointe Parkway
Suite 1550
Atlanta, GA 30338
Dare: Michael J. Dare
---- 2370 Main Street
Tucker, Georgia 30084
with copy to: Sheldon E. Friedman, Esquire
S. Friedman & Associates, P.C.
1050 Crown Pointe Parkway
Suite 1550
Atlanta, GA 30338
Johnson: A. Wayne Johnson
------- 2370 Main Street
Tucker, Georgia 30084
Acquisition Agreement and
Plan of Reorganization
Page 51
<PAGE>
with copy to: Sheldon E. Friedman, Esquire
S. Friedman & Associates, P.C.
1050 Crown Pointe Parkway
Suite 1550
Atlanta, GA 30338
PENMAN: PENMAN Private Equity and Mezzanine
------ Fund, L.P.
333 West Wacker Drive
Suite 510
Chicago, IL 60606
Attn: Kelvin J. Pennington
with copy to: Mark D. Schindel
333 West Wacker Drive
Suite 510
Chicago, IL 60606
with additional
copy to: Mark Kindelin, Esquire
Altheimer & Gray
10 South Wacker Drive
Chicago, IL 60606
Riddett: Robert G. Riddett, Jr.
------- 2370 Main Street
Tucker, Georgia 30084
with copy to: Sheldon E. Friedman, Esquire
S. Friedman & Associates, P.C.
1050 Crown Pointe Parkway
Suite 1550
Atlanta, GA 30338
A Party hereto may change its respective address by notice in writing
given to the other Parties to this Agreement. Any notice, request, approval,
consent, demand or other communication shall be effective upon the first to
occur of the following; (i) when delivered to the Party to whom such notice,
request, approval, consent, demand or the communication is being given, or (ii)
three (3) business days after being duly deposited in the United States mail,
certified, return receipt requested.
16.7 Severability of Provisions. In case any one or more of the
provisions contained in this Agreement should be invalid, illegal or
unenforceable in any respect, the validity, legality and
Acquisition Agreement and
Plan of Reorganization
Page 52
<PAGE>
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby.
16.8 Successors and Assigns. This Agreement shall be binding upon the
Parties, and their respective successors, heirs, and assigns, and shall inure to
the benefit of the Parties and their respective successors, heirs, and permitted
assigns.
16.9 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one Agreement, and
any party hereto may execute this Agreement by signing any such counterpart. The
authorized attachment of counterpart signature pages shall constitute execution
by the Parties.
16.10 Choice of Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of South Carolina.
16.11 Venue and Jurisdiction. The Parties hereto hereby (i) agree that
any litigation, action or proceeding arising out of or relating to this
Agreement shall be instituted in a state or federal court in the City and State
of Columbia, South Carolina, (ii) waive any objection which it might have now or
hereafter to any such litigation, action or proceeding based upon improper venue
or inconvenient forum, and (iii) irrevocably submit to the jurisdiction of such
courts in any such litigation, action or proceeding.
16.12 No Trading of UCI Common Stock. Each of the Transferors and the
Class B Shareholders hereby agrees not to buy or sell the common stock of UCI
from the date hereof until the earlier of: (a) the date of Closing, or (b) the
lawful termination of this Agreement.
16.13 Third Parties. The provisions of this Agreement are not intended
to be for the benefit of any third parties other than Doctor's Care of TN and
Doctor's Care of GA, and no third party shall be deemed to have any privity of
contract with any of the Parties hereto by virtue of this Agreement other than
Doctor's Care of TN and Doctor's Care of GA.
16.14 Time of Essence. The Parties acknowledge and agree that time is
of the essence in the performance of this Agreement.
16.15 Cumulative Remedies. 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.
16.16 No Inference Against Author. No provision of this Agreement shall
be interpreted against any Party because such Party or its legal representative
drafted such provision.
Acquisition Agreement and
Plan of Reorganization
Page 53
<PAGE>
16.17 Usage. The section and paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Terms such as "hereof",
"hereunder", "hereto", "herein", and words of similar import shall refer to this
Agreement in its entirety and all references to "Articles", "paragraphs",
"Sections", and similar cross references shall refer to specified portions of
this Agreement, unless the context clearly requires otherwise.
16.18 Further Instruments and Acts. From time to time at a Party's
request, whether at or after Closing and without further consideration, the
other Party(ies) shall execute and deliver such further instruments of
conveyance, transfer and assignment and upon reimbursement for actual reasonable
out-of-pocket expenses take such other action as the requesting Party reasonably
may require to more effectively convey and transfer to the requesting Party the
properties to be conveyed, transferred and assigned hereunder, and, if
necessary, will assist the requesting Party in the collection or reduction to
possession of such property. In addition, each Party agrees to provide
reasonable access to records respecting the Business as are requested by the
other Party(ies) for proper purpose with good cause shown (subject to
appropriate confidentiality agreements to be negotiated as such time) and agree
to reasonably cooperate in resolving any matters resulting from the transactions
contemplated hereby.
16.19 Assignment. This Agreement is not assignable by any Party without
the prior written consent of the other Party(ies) hereto; except that upon
notice to MainStreet, any of the Transferees shall be entitled to assign its
right to receive title to its portion of the Assets hereunder to a corporation
or partnership controlled by, under common control with, or controlling, such
Transferee; provided that upon such assignment the assignee shall become bound
by and subject to this Agreement, such Transferee shall not be released from any
term, condition, or covenant of this Agreement, and the relevant instruments,
certificates, opinions, and documents to be delivered at Closing hereunder shall
be modified to accommodate such assignment.
[SIGNATURE PAGE ATTACHED]
Acquisition Agreement and
Plan of Reorganization
Page 54
<PAGE>
IN WITNESS WHEREOF, the parties have executed this 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 Its: President
Chief Financial Officer
UCI MEDICAL AFFILIATES OF GEORGIA MAINSTREET HEALTHCARE
INC. MEDICAL GROUP, P.C., a Georgia
corporation
By: /s/ Jerry F. Wells, Jr. By: /s/ Pamela K. Erdman, M.D.
----------------------- --------------------------
Its: Executive Vice President and Its: President
Chief Financial Officer
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/ A. Wayne Johnson
--------------------
By: /s/ Kelvin S. Pennington Its: Chairman and Secretary
------------------------
Kelvin J. Pennington
Its: General Partner PROMPT CARE MEDICAL CENTER, INC.
By: /s/ A. Wayne Johnson
--------------------
/s/ Robert G. Riddett, Jr. Its: Chairman and Secretary
- ------------------------------
Robert G. Riddett, Jr.
/s/ Michael J. Dare
- ------------------------------
Michael J. Dare
/s/ A. Wayne Johnson
- ------------------------------
A. Wayne Johnson
Acquisition Agreement and
Plan of Reorganization
Page 55
<PAGE>
INDEX OF EXHIBITS
Exhibit 1.19 Addresses of Georgia Facilities
Exhibit 1.49 Addresses of Tennessee Facilities
Exhibit 2.1 List of MainStreet Assets
Exhibit 2.2 List of MainStreet Excluded Assets
Exhibit 3.2 List of MHMG-GA Excluded Assets
Exhibit 4.2 List of MHMG-TN Excluded Assets
Exhibit 7.2.1(a) List of MainStreet Equipment Leases
Exhibit 7.2.1(b) List of MainStreet Real Estate Leases
Exhibit 8.3.1 MainStreet Bill of Sale
Exhibit 8.3.2 MainStreet Assignment and Assumption
Exhibit 8.3.3 MHMG-GA Bill of Sale
Exhibit 8.3.4 MHMG-GA Assignment and Assumption
Exhibit 8.3.5 MHMG-TN Bill of Sale
Exhibit 8.3.6 MHMG-TN Assignment and Assumption
Exhibit 8.3.7 Form of Non-Solicits
Exhibit 8.3.8 Form of Investment Letter
Exhibit 8.3.18 Form of Affidavit and Certificate of Assumed Liabilities
Exhibit 8.3.19 Form of Transferor's Officers Certificate
Exhibit 8.3.20 Form of Legal Opinion of Transferors' and Class B
Shareholders' Counsel
Exhibit 8.3.21 Form of Lease
Exhibit 8.3.23 Certified List of MainStreet Security Holders
Exhibit 8.4.2 Form of Registration Rights Agreement
Exhibit 8.4.3 Form of Transferees' Officers Certificate
Exhibit 8.4.4 Form of Legal Opinion of Transferees' Counsel
Exhibit 9.6 Security holders of MainStreet
Exhibit 9.10 Financial Statements
Exhibit 9.18.1 Employee Benefit Plans
Exhibit 9.19.1 Insurance
Exhibit 9.20 List of Directors, Officers and Employees of each
Transferor
Acquisition Agreement and
Plan of Reorganization
Page 56
<PAGE>
Exhibit 1.19
Addresses of Georgia Facilities
1. Post Office Box 1135
12 Seventh Street
Auburn, GA 30011
2. 1678-A Mulkey Road
Austell, GA 30106
3. Post Office Box 81246
1491 Old Salem Road
Conyers, GA 30013
4. 4168 Tate Street
Covington, GA 30014
5. 719 Scenic Hwy, SW
Lawrenceville, GA 30046
6. 5014 Snapfinger Woods Drive
Decatur, GA 30035
7. 2270 Oak Road
Snellville, GA 30078
8. 1324 Rockbridge Road
Stone Mountain, GA 30087
9. 2362 Main Street
Tucker, GA 30084
<PAGE>
Exhibit 1.49
Addresses of Tennessee Facilities
1. 10412 Kingston Pike
Knoxville, TN 37922
2. 180-B West Inskip Drive
Knoxville, TN 37912
<PAGE>
Exhibit 2.1
List of MainStreet Assets
[See Attached]
<PAGE>
EXHIBIT 2.1
MAINSTREET ASSETS
Asset Account: Location: Cost:
- -------------- --------- -----
Building Improvements Tucker 195,667
Covington 3,967
Lawrenceville 19,658
Valdosta 3,275
Knoxville 10,774
Austell 5,542
Snellville 7,763
Conyers 10,141
Snapfinger 5,358
--------
262,146
Furniture & Fixtures Tucker 17,701
Stone Mountain 445
Lawrenceville 4,581
Valdosta 763
Knoxville 2,032
Austell 51,450
Snellville 58,734
Auburn 2,000
Macon 315
Snapfinger 22,900
-------
160,920
Clinic Equipment Tucker 119,372
Stone Mountain 41,935
Covington 78,684
Lawrenceville 130,654
Valdosta 17,000
Knoxville 61,663
Austell 51,216
Snellville 106,829
Macon 26,386
Snapfinger 60,247
Ultrasound 58,000
-------
751,986
<PAGE>
EXHIBIT 2.1
MAINSTREET ASSETS
(CONTINUED)
Signage Tucker 2,088
Stone Mountain 570
Covington 3,062
Lawrenceville 1,886
Valdosta 2,617
Knoxville 5,011
Austell 318
Snellville 132
Conyers 1,810
------
17,495
Office Equipment Tucker 589
Covington 228
Valdosta 800
Austell 3,004
------
4,620
Computers Various 76,041
Tucker 2,489
Stone Mountain 1,781
Lawrenceville 169
Valdosta 5,051
Austell 2,141
------
87,672
Computer Software Various 94,150
Leasehold Improvements Tucker 928
Covington 2,700
Lawrenceville 7,620
Austell 2,042
Snellville 37,449
Conyers 2,927
Snapfinger 425
-------
54,091
Total Included Assets 1,433,080
=========
Exhibit 2.2
-----------
<PAGE>
List of MainStreet Excluded Assets
1. Cash and cash accounts located in corporate checking accounts and petty
cash funds located in practices (other than the hold-back accounts
associated with MainStreet's credit obligations with Bank One. L.P.
(formerly NPL-LP, Inc.));
2. Accounts receivable from employees of Transferors;
3. Real property located at 2362 Main Street, Tucker, Georgia;
4. Furniture, fixtures, equipment, and software used at 2370 Main Street,
Tucker, Georgia (the "Headquarters");
5. Any lease for the use of the Headquarters;
6. Ford Motor Company leases (Ford 150 Truck & Ford 250 Van).
<PAGE>
Exhibit 3.2
List of MHMG-GA Excluded Assets
None.
<PAGE>
Exhibit 4.2
List of MHMG-TN Excluded Assets
None.
<PAGE>
Exhibit 7.2(a)
List of MainStreet Equipment Leases
[See Attached]
<PAGE>
EXHIBIT 7.2(A)
LIST OF MAINSTREET
EQUIPMENT LEASES
CAPITAL LEASES:
<TABLE>
<CAPTION>
TOTAL
ORIGINAL LEASE MONTH MONTH
LESSOR: LOCATION: EQUIPMENT: COST: PAYMENTS: STARTED ENDING
- ------- --------- ---------- ----- --------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
BB&T LEASING CORPORATION Tucker XMA X-Ray System 18,600.00 24,180.48 Dec-96 Nov-00
P.O. Box 400
Asheville, NC 28802
AFFILIATED CAPITAL Snellville Matrix Pro-Elecdt 20,145.00 22,042.08 Jun-97 May-00
Finance Administration
P.O. Box 1207
Northbrook, IL 60065
MICHAEL DARE Lawrenceville Matrix Pro-Elecdt 20,145.00 20,145.00 Aug-97 Mar-99
4704 Lavista Rd
Tucker, GA 30084
ROBERT RIDDETT Snapfinger Matrix Pro-Elecdt 23,650.00 23,650.00 Aug-97 Jul-99
51 Hanarry Dr.
Lawrenceville, GA 30045
BELL SOUTH FINANCIAL SERV Snapfinger Norstar Tele System 10,726.18 Feb-95 Jan-99
P.O. Box 105679
Atlanta, GA 30348
STATE BANK OF SOUTH ORANGE Snapfinger Biomedics EKG Syst 16,922.00 26,447.00 Jun-97 Oct.01
Valley & Third Street
South Orange, NJ 07079
COPELCO CAPITAL Mobile BioSound AU3 System 58,000.00 68,381.00 May-97 Apr-02
700 East Gate Drive
Mt. Laurel, NJ 08054
AFFILIATED CAPITAL Snapfinger Neurometer CPT Sys 11,545.00 11,298.96 Jun-97 May-00
Finance Administration
P.O. Box 1207
Northbrook, IL 60065
</TABLE>
<PAGE>
EXHIBIT 7.2(A) CONTINUED
LIST OF MAINSTREET
EQUIPMENT LEASES
OPERATING LEASES:
<TABLE>
<CAPTION>
Month
Lessor: Location: Equipment: Ending Lessee
- ------ -------- --------- ------ ------
<S> <C> <C> <C> <C>
COPELCO CAPITAL Tucker (3) QBC Autoread May-01 MainStreet Healthcare
700 East Gate Drive Lawrenceville
Mt. Laurel, NJ 0054 Covington
PITNEY BOWES Tucker (7) Meter Equipment Jun-01 MainStreet Healthcare
CREDIT Stone Mountain
P.O. Box 85460 Covington
Louisville, KY Lawrenceville
40285 Knoxville (n)
Knoxville (w)
Austell
IKON CAPITAL Headquarters (4) Sharp Copiers Feb-00 MainStreet Healthcare
1738 Bass Road Tucker
Macon, GA 31210 Lawrenceville
Covington
SYMRNA BANK & Austell Computer System Sept-98 MainStreet Healthcare
TRUST
P.O. Box 813000
Smyrna, GA 30080
COPELCO CAPITAL Snapfinger Copier Sept-98 MainStreet Healthcare
700 East Gate Drive
Mt. Laurel, NJ
08054
EASTSIDE BANK Snellville Various F,F,E Nov-01 MainStreet Healthcare
P.O. Box 549
Snellville, GA 30278
FORT MOTOR CREDIT Mobile 1996 Ford Van Jun-98 MainStreet Healthcare
P.O. Box 105332
Atlanta, GA 30353
</TABLE>
<PAGE>
Exhibit 7.2(b)
List of MainStreet Real Estate Leases
[See Attached]
<PAGE>
EXHIBIT 7.2(B)
LIST OF MAINSTREET
REAL ESTATE LEASES
<TABLE>
<CAPTION>
(4/98-3/99) (4/99-3/00)
Predicated Predicated (4/00-3/01)
Month Month Type of FY 1999 FY 2000 Predicated FY
Practice Location # Lessor Started Ending Lease Expense Exense 2001 Expenses
- ----------------- - ------ ------- ------ ----- ------- ------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Tucker 002 MainStreet Healthcare Apr-96 Mar-05 Standard 48,068.88 48,068.88 48,068.88
2352 Main Street 2370 Main Street
Tucker, GA 30084 Tucker, GA 30084
Stone Mountain 003 Dr. Harold Holloway May-96 Apr-01 Standard 34,733.16 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 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 n/a
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 91,006.00
10412 Kingston Pike 1463 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 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 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 Sublease 58,710.00 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 Sublease 54,000.00 54,000.00 54,000.00
1491 Old Salem Rd Partnership
Conyers, GA 30208 535 Cooper Road
Loganville, GA 30052
Auburn 012 Columbia Barrow Jan-98 Dec-98 Standard 8,937.00 n/a 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 Standard 1,100.00 n/a n/a
6014 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 n/a
2390 Main Street 5394 Leather Stking
Tucker, GA 30084 Lane
Stone Mtn. GA 30087
</TABLE>
EXHIBIT 7.2(B)
LIST OF MAINSTREET
REAL ESTATE LEASES
(CONTINUED)
(4/01-3/02) (4/02-Forward)
Predicated FY Future
Practice Location # Lessor 2002 Expenses Obligation)
- ----------------- - ------ ------------- -----------
Tucker 002 MainStreet Healthcare 48,068.88 192,275.52
2352 Main Street 2370 Main Street
Tucker, GA 30084 Tucker, GA 30084
Stone Mountain 003 Dr. Harold Holloway 2,894.43 n/a
1324 Rockbridge Rd 130 Mockingbird Dr.
Stone Mt., GA Amercus, GA 31709
30087
Covington 004 Dr. Edward R. Bailey 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
719 Scenic Hwy 719 Scenic Hwy
Suite B & C Suite A
Lawrenceville, GA Lawrenceville, Ga
30045 30045
Knoxville (West) 007 Lay Properties 60,672.00 n/a
10412 Kingston Pike 1463 N Campbell
Knoxville, TN Start Rd.
37912 Knoxville, TN 37932
Knoxville (North) 007 Lay Properties 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 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 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 40,500.00
1491 Old Salem Rd Partnership
Conyers, GA 30208 535 Cooper Road
Loganville, GA 30052
Auburn 012 Columbia Barrow 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
6014 Snapfinger 3551 Knotsberry Lane
Woods Duluth, GA 30135
Decatur, GA 30035
Univ. Diagnostics 015 Dr. Robert F. Eaves n/a n/a
2390 Main Street 5394 Leather Stking
Tucker, GA 30084 Lane
Stone Mtn. GA 30087
<PAGE>
Exhibit 8.3.1
MainStreet Bill of Sale
[See Attached]
<PAGE>
BILL OF SALE
(MainStreet Healthcare Corporation, a Delaware corporation)
KNOW ALL MEN BY THESE PRESENTS, that MAINSTREET HEALTHCARE
CORPORATION, a Delaware corporation, with its principal office at 2370 Main
Street, Tucker, Georgia (the "Seller"), for the consideration paid by UCI
MEDICAL AFFILIATES OF GEORGIA, INC., a South Carolina corporation with offices
at 1901 Main Street, Suite 1200, Columbia, South Carolina 29201 (the "Buyer")
set forth in that certain Acquisition Agreement and Plan of Reorganization dated
as of February 9, 1998, by and between among others Seller; Buyer; UCI Medical
Affiliates, Inc., 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. (the "Agreement"), the receipt and sufficiency whereof is hereby
acknowledged, has bargained and sold and by these presents does sell, assign and
transfer unto Buyer all of Seller's right, title and interest in and to, all the
MainStreet Assets described in the Agreement, all as provided in the Agreement.
TO HAVE AND TO HOLD the same unto Buyer, its successors and assigns,
forever. AND Seller does for itself and its successors and assigns, covenant and
agree to and with Buyer, its successors and assigns, to warrant and defend the
sale and conveyance of the aforesaid assets hereby sold unto Buyer.
This Bill of Sale is made, executed and delivered pursuant to the
Agreement, and is subject to all of the terms, provisions, and conditions
thereof, including (without limitation) the indemnification therein. To the
extent of any conflict between the terms hereof and thereof, the terms of the
Agreement shall be controlling.
All capitalized terms not otherwise defined herein shall have the
meanings ascribed to them in the Agreement unless the context clearly requires
otherwise.
IN WITNESS WHEREOF, Seller has duly executed this Bill of Sale to be
effective as of 11:59 p.m. on the 31st day of March, 1998.
IN THE PRESENCE OF: MAINSTREET HEALTHCARE CORPORATION, a
Delaware corporation
(CORPORATE SEAL)
__________________________ By:_________________________________________
(Witness) Its:_______________________________________
__________________________
(Witness)
<PAGE>
____________________________ )
STATE OF ) PROBATE
____________________________ )
COUNTY OF
PERSONALLY APPEARED before me the undersigned witness who, after first
being duly sworn, deposes and says that s/he saw the within named MAINSTREET
HEALTHCARE CORORATION, a Delaware corporation, by__________________________, its
______________________, sign, seal and, as its act and deed, deliver the within
written Bill of Sale for the uses and purposes therein mentioned and that s/he
with the other witness whose signature appears above, witnessed the execution
thereof.
____________________________
Witness
SWORN to before me this_________
day of____________________________________, 1998.
______________________________________________(L.S.)
Notary Public for___________________________________
My Commission Expires:_________________
<PAGE>
Exhibit 8.3.2
MainStreet Assignment and Assumption
[See Attached]
<PAGE>
ASSIGNMENT AND ASSUMPTION AGREEMENT
(MainStreet Healthcare Corporation, a Delaware corporation)
KNOW ALL MEN, that MAINSTREET HEALTHCARE CORPORATION, a Delaware
corporation with its principal office at 2370 Main Street, Tucker, Georgia (the
"Assignor"), for and in consideration of good and valuable consideration to it
in hand paid at or before the ensealing and delivery of these presents, by UCI
MEDICAL AFFILIATES OF GEORGIA, INC., a South Carolina corporation ("Assignee"),
the receipt and sufficiency whereof is hereby acknowledged, hereby assigns to
Assignee all of Assignor's right, title and interest in and to all the
intangible assets and rights composing portions of the MainStreet Assets as
described in the Acquisition Agreement and Plan of Reorganization dated
effective as of February 9, 1998, by and between Assignor; Assignee; UCI Medical
Affiliates, Inc., a Delaware corporation; MainStreet Healthcare Medical Group,
PC, a Tennessee professional corporation; MainStreet Healthcare Medical Group,
P.C., a Georgia 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. (the "Agreement"), all as provided in the Agreement.
Assignee hereby covenants with Assignor to assume and faithfully
perform and discharge all of the terms, covenants, liabilities and obligations
set forth on Schedule 1 attached hereto (subject to the Agreement) maturing and
to be performed or discharged by Assignor, if any, under the above assigned
contracts beginning on the date hereof and henceforth.
This Assignment is made, executed, and delivered pursuant to the
Agreement, and is subject to all the terms, provisions and conditions thereof,
including (without limitation) the mutual indemnifications therein. To the
extent of any conflict between the terms hereof and thereof, the terms of the
Agreement shall be controlling. All capitalized terms not otherwise defined
herein shall have the meanings ascribed to them in the Agreement unless the
context clearly requires otherwise.
[SIGNATURE PAGE ATTACHED]
ASSIGNMENT AND ASSUMPTION AGREEMENT
PAGE 1
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Assignment and
Assumption Agreement to be effective as of the 31st day of March, 1998.
ASSIGNOR:
---------
IN THE PRESENCE OF: MAINSTREET HEALTHCARE CORPORATION, a
Delaware corporation
(CORPORATE SEAL)
_______________________ By:_________________________________________
(Witness) Its:_______________________________________
_______________________
(Witness)
ASSIGNEE:
---------
UCI MEDICAL AFFILIATES OF GEORGIA, INC.,
a South Carolina corporation
_______________________
(Witness)
By:_________________________________________
Its:_______________________________________
_______________________
(Witness)
ASSIGNMENT AND ASSUMPTION AGREEMENT
PAGE 2
<PAGE>
SCHEDULE 1
LIABILITIES TO BE ASSUMED
1. MainStreet Equipment Leases (as defined in the Agreement);
2. MainStreet Real Estate Leases (as defined in the Agreement); and
3. that certain line of credit obligation with Bank One, N.A. (formerly
NPL-LP, Inc.),
All as set forth in that certain Asset Purchase Agreement and Plan of
Reorganization dated as of February 9, 1998.
ASSIGNMENT AND ASSUMPTION AGREEMENT
PAGE 3
<PAGE>
Exhibit 8.3.3
MHMG-GA Bill of Sale
[See Attached]
<PAGE>
BILL OF SALE
(MainStreet Healthcare Medical Group, P.C., a Georgia professional corporation)
KNOW ALL MEN BY THESE PRESENTS, that MAINSTREET HEALTHCARE MEDICAL
GROUP, P.C., a Georgia professional corporation, with its principal office at
2370 Main Street, Tucker, Georgia (the "Seller"), for the consideration paid by
UCI MEDICAL AFFILIATES OF GEORGIA, INC., a South Carolina corporation with
offices at 1901 Main Street, Suite 1200, Columbia, South Carolina 29201 (the
"Buyer") set forth in that certain Acquisition Agreement and Plan of
Reorganization dated as of February 9, 1998, by and between among others Seller;
Buyer; UCI Medical Affiliates, Inc., a Delaware corporation; MainStreet
Healthcare Corporation, a Delaware 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. (the "Agreement"), the receipt and sufficiency whereof is hereby
acknowledged, has bargained and sold and by these presents does sell, assign and
transfer unto Buyer all of Seller's right, title and interest in and to, all the
MHMG-GA Assets described in the Agreement, all as provided in the Agreement.
TO HAVE AND TO HOLD the same unto Buyer, its successors and assigns,
forever. AND Seller does for itself and its successors and assigns, covenant and
agree to and with Buyer, its successors and assigns, to warrant and defend the
sale and conveyance of the aforesaid assets hereby sold unto Buyer.
This Bill of Sale is made, executed and delivered pursuant to the
Agreement, and is subject to all of the terms, provisions, and conditions
thereof, including (without limitation) the indemnification therein. To the
extent of any conflict between the terms hereof and thereof, the terms of the
Agreement shall be controlling.
All capitalized terms not otherwise defined herein shall have the
meanings ascribed to them in the Agreement unless the context clearly requires
otherwise.
IN WITNESS WHEREOF, Seller has duly executed this Bill of Sale to be
effective as of 11:59 p.m. on the 31st day of March, 1998.
IN THE PRESENCE OF: MAINSTREET HEALTHCARE MEDICAL GROUP,
P.C., a Georgia professional corporation
(CORPORATE SEAL)
__________________________ By:______________________________________
(Witness) Its:____________________________________
__________________________
(Witness)
<PAGE>
STATE OF ____________________________________________ )
) PROBATE
COUNTY OF ___________________________________________ )
PERSONALLY APPEARED before me the undersigned witness who, after first
being duly sworn, deposes and says that s/he saw the within named MAINSTREET
HEALTHCARE MEDICAL GROUP, P.C., a Georgia professional corporation, by
_____________________________, its ___________________________, sign, seal and,
as its act and deed, deliver the within written Bill of Sale for the uses and
purposes therein mentioned and that s/he with the other witness whose signature
appears above, witnessed the execution thereof.
___________________________
Witness
SWORN to before me this__________
day of ___________________________________, 1998.
__________________________________________ (L.S.)
Notary Public for___________________________
My Commission Expires:______________
<PAGE>
Exhibit 8.3.4
MHMG-GA Assignment and Assumption
[See Attached]
<PAGE>
ASSIGNMENT AND ASSUMPTION AGREEMENT
(MainStreet Healthcare Medical Group, P.C., a Georgia professional corporation)
KNOW ALL MEN, that MAINSTREET HEALTHCARE MEDICAL GROUP, P.C., a
Georgia professional corporation with its principal office at 2370 Main Street,
Tucker, Georgia (the "Assignor"), for and in consideration of good and valuable
consideration to it in hand paid at or before the ensealing and delivery of
these presents, by UCI MEDICAL AFFILIATES OF GEORGIA, INC., a South Carolina
corporation ("Assignee"), the receipt and sufficiency whereof is hereby
acknowledged, hereby assigns to Assignee all of Assignor's right, title and
interest in and to all the intangible assets and rights composing portions of
the MHMG-GA Assets as described in the Acquisition Agreement and Plan of
Reorganization dated effective as of February 9, 1998, by and between Assignor;
Assignee; UCI Medical Affiliates, Inc., a Delaware corporation; MainStreet
Healthcare Corporation, a Delaware 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. (the "Agreement"), all as provided in the Agreement.
Assignee hereby covenants with Assignor to assume and faithfully
perform and discharge all of the terms, covenants, liabilities and obligations
set forth on Schedule 1 attached hereto (subject to the Agreement) maturing and
to be performed or discharged by Assignor, if any, under the above assigned
contracts beginning on the date hereof and henceforth.
This Assignment is made, executed, and delivered pursuant to the
Agreement, and is subject to all the terms, provisions and conditions thereof,
including (without limitation) the mutual indemnifications therein. To the
extent of any conflict between the terms hereof and thereof, the terms of the
Agreement shall be controlling. All capitalized terms not otherwise defined
herein shall have the meanings ascribed to them in the Agreement unless the
context clearly requires otherwise.
[SIGNATURE PAGE ATTACHED]
ASSIGNMENT AND ASSUMPTION AGREEMENT
PAGE 1
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Assignment and
Assumption Agreement to be effective as of the 31st day of March, 1998.
ASSIGNOR:
---------
IN THE PRESENCE OF: MAINSTREET HEALTHCARE MEDICAL GROUP,
P.C., a Georgia professional corporation
(CORPORATE SEAL)
_______________________ By:_________________________________________
(Witness) Its:______________________________________
_______________________
(Witness)
ASSIGNEE:
---------
UCI MEDICAL AFFILIATES OF GEORGIA, INC.,
a South Carolina corporation
_______________________
(Witness)
By:_________________________________________
Its:______________________________________
_______________________
(Witness)
ASSIGNMENT AND ASSUMPTION AGREEMENT
PAGE 2
<PAGE>
SCHEDULE 1
LIABILITIES TO BE ASSUMED
None
ASSIGNMENT AND ASSUMPTION AGREEMENT
PAGE 3
<PAGE>
Exhibit 8.3.5
MHMG-TN Bill of Sale
[See Attached]
<PAGE>
BILL OF SALE
(MainStreet Healthcare Medical Group, PC, a Tennessee professional corporation)
KNOW ALL MEN BY THESE PRESENTS, that MAINSTREET HEALTHCARE MEDICAL
GROUP, PC, a Tennessee professional corporation, with its principal office at
2370 Main Street, Tucker Georgia (the "Seller"), for the consideration paid by
UCI MEDICAL AFFILIATES OF GEORGIA, INC., a South Carolina corporation with
offices at 1901 Main Street, Suite 1200, Columbia, South Carolina 29201 (the
"Buyer") set forth in that certain Acquisition Agreement and Plan of
Reorganization dated as of February 9, 1998, by and between among others Seller;
Buyer; UCI Medical Affiliates, Inc., a Delaware corporation; MainStreet
Healthcare Corporation, a Delaware corporation; MainStreet Healthcare Medical
Group, P.C., a Georgia 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. (the "Agreement"), the receipt and sufficiency whereof is hereby
acknowledged, has bargained and sold and by these presents does sell, assign and
transfer unto Buyer all of Seller's right, title and interest in and to, all the
MHMG-TN Assets described in the Agreement, all as provided in the Agreement.
TO HAVE AND TO HOLD the same unto Buyer, its successors and assigns,
forever. AND Seller does for itself and its successors and assigns, covenant and
agree to and with Buyer, its successors and assigns, to warrant and defend the
sale and conveyance of the aforesaid assets hereby sold unto Buyer.
This Bill of Sale is made, executed and delivered pursuant to the
Agreement, and is subject to all of the terms, provisions, and conditions
thereof, including (without limitation) the indemnification therein. To the
extent of any conflict between the terms hereof and thereof, the terms of the
Agreement shall be controlling.
All capitalized terms not otherwise defined herein shall have the
meanings ascribed to them in the Agreement unless the context clearly requires
otherwise.
IN WITNESS WHEREOF, Seller has duly executed this Bill of Sale to be
effective as of 11:59 p.m. on the 31st day of March, 1998.
IN THE PRESENCE OF: MAINSTREET HEALTHCARE MEDICAL GROUP, PC,
a Tennessee professional corporation
(CORPORATE SEAL)
_______________________ By:_____________________________________
(Witness) Its:__________________________________
_______________________
(Witness)
<PAGE>
STATE OF ___________________________ )
) PROBATE
COUNTY OF __________________________ )
PERSONALLY APPEARED before me the undersigned witness who, after first
being duly sworn, deposes and says that s/he saw the within named MAINSTREET
HEALTHCARE MEDICAL GROUP, PC, a Tennessee professional corporation, by
_________________________, its _______________________, sign, seal and, as its
act and deed, deliver the within written Bill of Sale for the uses and purposes
therein mentioned and that s/he with the other witness whose signature appears
above, witnessed the execution thereof.
___________________________
Witness
SWORN to before me this ______
day of ___________________________________, 1998.
___________________________________________(L.S.)
Notary Public for__________________________________
My Commission Expires:_______________________
<PAGE>
Exhibit 8.3.6
MHMG-TN Assignment and Assumption
[See Attached]
<PAGE>
ASSIGNMENT AND ASSUMPTION AGREEMENT
(MainStreet Healthcare Medical Group, PC, a Tennessee professional corporation)
KNOW ALL MEN, that MAINSTREET HEALTHCARE MEDICAL GROUP, PC, a
Tennessee professional corporation with its principal office at 2370 Main
Street, Tucker, Georgia (the "Assignor"), for and in consideration of good and
valuable consideration to it in hand paid at or before the ensealing and
delivery of these presents, by UCI MEDICAL AFFILIATES OF GEORGIA, INC., a South
Carolina corporation ("Assignee"), the receipt and sufficiency whereof is hereby
acknowledged, hereby assigns to Assignee all of Assignor's right, title and
interest in and to all the intangible assets and rights composing portions of
the MHMG-TN Assets as described in the Acquisition Agreement and Plan of
Reorganization dated effective as of February 9, 1998, by and between Assignor;
Assignee; UCI Medical Affiliates, Inc., a Delaware corporation; MainStreet
Healthcare Corporation, a Delaware corporation; MainStreet Healthcare Medical
Group, P.C., a Georgia 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. (the "Agreement"), all as provided in the Agreement.
Assignee hereby covenants with Assignor to assume and faithfully
perform and discharge all of the terms, covenants, liabilities and obligations
set forth on Schedule 1 attached hereto (subject to the Agreement) maturing and
to be performed or discharged by Assignor, if any, under the above assigned
contracts beginning on the date hereof and henceforth.
This Assignment is made, executed, and delivered pursuant to the
Agreement, and is subject to all the terms, provisions and conditions thereof,
including (without limitation) the mutual indemnifications therein. To the
extent of any conflict between the terms hereof and thereof, the terms of the
Agreement shall be controlling. All capitalized terms not otherwise defined
herein shall have the meanings ascribed to them in the Agreement unless the
context clearly requires otherwise.
[SIGNATURE PAGE ATTACHED]
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Assignment and
Assumption Agreement to be effective as of the 31st day of March, 1998.
ASSIGNOR:
---------
IN THE PRESENCE OF: MAINSTREET HEALTHCARE MEDICAL GROUP,
P.C., a Tennessee professional corporation
(CORPORATE SEAL)
_______________________ By:_________________________________________
(Witness) Its:______________________________________
_______________________
(Witness)
ASSIGNEE:
---------
UCI MEDICAL AFFILIATES OF GEORGIA, INC.,
a South Carolina corporation
_______________________
(Witness)
By:_________________________________________
Its:______________________________________
_______________________
(Witness)
<PAGE>
SCHEDULE 1
LIABILITIES TO BE ASSUMED
None
<PAGE>
Exhibit 8.3.7
Form of Non-Solicits
[See Attached]
<PAGE>
NON-SOLICIT COVENANT
THIS NON-SOLICIT COVENANT ("Agreement"), is made and entered into to be
effective as of this 31st day of March, 1998, by and between UCI Medical
Affiliates of Georgia, Inc., a South Carolina corporation ("UCI of GA"), and
_____________________________ ("Shareholder").
Preliminary Statement
---------------------
Shareholder is currently a shareholder of MainStreet Healthcare
Corporation, a Delaware corporation ("Mainstreet"). Mainstreet has owned and
operated various medical-related facilities and equipment in the States of
Georgia and Tennessee (the "Business").
Pursuant to that certain Acquisition Agreement and Plan of
Reorganization dated February ____, 1998 (the "Acquisition Agreement"), by and
among UCI of GA; UCI Medical Affiliates, Inc., a Delaware corporation ("UCI");
Mainstreet; MainStreet Healthcare Medical Group, P.C., a Georgia corporation
("MSH of GA"); Mainstreet Healthcare Medical Group, PC, a Tennessee corporation
("MSH of TN"); Michael J. Dare; A. Wayne Johnson; PENMAN Private Equity and
Mezzanine Fund, L.P., a Delaware limited partnership; and Robert G. Riddett,
Jr., Mainstreet transferred substantially all of Mainstreet's assets (the
"Assets") to UCI of GA as set forth in the Acquisition Agreement. Upon the
closing of the transactions contemplated in the Acquisition Agreement, UCI of GA
intends to operate the Assets acquired by it for UCI of GA's business similar to
the Business of Mainstreet. In connection therewith, UCI of GA has contracted
with Doctor's Care of Georgia, P.C., a Georgia professional corporation ("DC of
GA") to provide health care services at such facilities within the State of
Georgia, and with Doctor's Care of Tennessee, P.C., a Tennessee professional
corporation ("DC of TN") to provide health care services at such facilities
within the State of Tennessee. For purposes herein MainStreet, MSH of GA, and
MSH of TN are collectively referred to herein as the "MainStreet Entities".
Mainstreet has conducted the Business for several years, and
Shareholder has made use of, acquired, and added to confidential and proprietary
information and trade secrets of Mainstreet, all of which are portions of the
Assets (which Assets are being transferred to UCI of GA pursuant to the
Acquisition Agreement).
Shareholder also has developed unique information and knowledge about
the competitive market, locations, potential patients, processes and prospects
of the Business of Mainstreet.
The value of the acquisition by UCI of GA pursuant to the Acquisition
Agreement would be diminished in the event that Shareholder were to violate the
terms of this Agreement. UCI, UCI of GA, DC of GA, and DC of TN (collectively
the "UCI Entities") have required, as a condition precedent to its purchase of
such Assets pursuant to the Acquisition Agreement, that Shareholder covenant not
to divulge any confidential information and not to solicit the employees of the
UCI Entities, or any one of them, as set forth herein.
Shareholder has agreed to provide such covenants as set forth herein as
a material inducement to the UCI Entities to enter into and close the
Acquisition Agreement and in consideration of the payments to be made
thereunder. Shareholder's covenants contained herein are ancillary to the
Acquisition Agreement. Shareholder acknowledges that he/she will benefit from
the Acquisition Agreement.
Pursuant to the Acquisition Agreement, UCI of GA and Shareholder desire
to set forth the terms and conditions of their agreements and understandings
respecting such covenants.
Non-Solicit Covenant
Page 1
<PAGE>
Statement of Agreement
----------------------
NOW, THEREFORE, in consideration of the foregoing premises, the
promises set forth herein, the Acquisition Agreement, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Shareholder and UCI of GA, intending to be legally bound, hereby
agree and covenant as follows:
1. Non-Disclosure of Information. Shareholder shall not, at any time
after the date hereof, directly or indirectly, divulge or disclose to any person
or entity including without limitation any Affiliate (as defined below) of
Shareholder for any purpose whatsoever any confidential information that has
been developed or obtained by, or disclosed to, Shareholder at any time before
or after the date hereof (exclusive of such information as is in the public
domain or as is required to be disclosed pursuant to an applicable law, rule,
regulation, or final non-appealable order of a court of competent jurisdiction).
Shareholder acknowledges that such confidential information is of a special and
unique nature and value relating to matters of the Mainstreet's Business,
including, without limitation, the lists of patients and potential patients of
one or more of the Mainstreet Entities, leases or contacts (which were
specifically targeted by one or more of the Mainstreet Entities prior to
Closing), pricing information and lists, sales and marketing materials and
methods, proprietary information, trade secrets, trademarks, systems,
procedures, manuals, confidential reports, records, operational expertise, the
nature and type of services rendered by the Mainstreet Entities, or any one of
them, the equipment and methods used and preferred by patients and customers of
the Mainstreet Entities, or any one of them, and the fees paid by them (all of
which are deemed for all purposes to be confidential, proprietary, and trade
secrets of one or more of the Mainstreet Entities transferred to the UCI
Entities pursuant to the Acquisition Agreement).
2. Covenants against Solicitation.
[PROVISION FOR PENMAN ONLY
a. Employees. For a period of two (2) years after the
effective date hereof, Shareholder shall not solicit or in any manner attempt to
solicit or induce any person employed by, or an agent of, one or more of the UCI
Entities to terminate such person's association or contract of employment or
agency, as the case may be, with such entity.
b. Senior Employees. For a period of five (5) years after the
effective date hereof, Shareholder shall not solicit or in any manner attempt to
solicit or induce the following three (3) senior management employees of one or
more of the UCI Entities to terminate such person's association or contract of
employment or agency, as the case may be, with such entity:_____________________
____________________________________________.]
[PROVISION FOR ALL CLASS B SHAREHOLDERS OTHER THAN PENMAN
a. Employees. For a period of two (2) years after the
effective date hereof, Shareholder shall not, directly or through an Affiliate
(as defined below) solicit or in any manner attempt to solicit or induce any
person employed by, or an agent of, one or more of the UCI Entities to terminate
such person's association or contract of employment or agency, as the case may
be, with such entity.
b. Senior Employees. For a period of five (5) years after the
effective date hereof, Shareholder shall not, directly or through an Affiliate
(as defined below) solicit or in any manner attempt to solicit or induce the
following three (3) senior management employees of one or more of the UCI
Entities to terminate such person's association or contract of employment or
agency, as the case may be, with such entity:___________________________________
______________________________________________________________________________.]
Non-Solicit Covenant
Page 2
<PAGE>
c. Definition of Affiliate. For purposes of this Agreement, an
"Affiliate" of Shareholder is a Person (as defined below) that directly, or
indirectly through one or more intermediaries, controls, or is controlled by, or
is under common control with Shareholder. For purposes of this Agreement, a
"Person" includes, in addition to such person, all of the following persons: (i)
any relative or spouse of such person, or any relative of such spouse, any one
of whom has the same home as such person; (ii) any trust or estate in which such
person or any of the persons specified in Section 2(c)(i) of this Agreement
collectively own ten percent (10%) or more of the total beneficial interest, or
of which any of such persons serve as trustee, executor or in any other
capacity; and (iii) any corporation, partnership, limited liability company or
other organization in which such person or any of the persons specified in
Section 2(c)(i) of this Agreement are the beneficial owners collectively of ten
percent (10%) of any class of equity securities, of the equity interest, or of
the partnership interest.
3. Consideration. In consideration of the restrictions and covenants
contained herein, Shareholder hereby acknowledges the receipt and adequacy of
such other consideration set forth in the Acquisition Agreement.
4. Remedies.
a. Accounting for Lost Profits. If Shareholder shall violate
any of the provisions of Sections 1 or 2, the UCI Entities shall be entitled to
recover any non-speculative lost profits incurred by any one or more of the UCI
Entities as a result of, growing out of, or in connection with, any such
violation by Shareholder. This remedy shall be in addition to, and not in
limitation of, any injunctive relief or other rights, remedies, or damages, to
which any one or more of the UCI Entities is or may be entitled as a result of
this Agreement.
b. Injunctive Relief. In the event of a breach or threatened
breach by Shareholder of any of the provisions of Sections 1 or 2, the UCI
Entities, in addition to, and not in limitation of, any other rights, remedies,
or damages available to any one or more of the UCI Entities at law or in equity,
shall be entitled to a temporary restraining order, preliminary injunction, and
permanent injunction in order to prevent or restrain any such breach by
Shareholder or by Shareholder's partners, agents, representatives, servants,
employers, employees, companies, consulting clients, and/or any and all persons
directly or indirectly acting for or with Shareholder. Shareholder agrees that
in the event of any breach by Shareholder of the covenants set forth in this
Agreement, the UCI Entities shall suffer irreparable harm for which the remedy
of monetary damages may be inadequate.
c. Alternatives. The UCI Entities shall have the option, in
their sole discretion, to enforce the various restrictions of Sections 1 and 2
cumulatively, in the alternative, or consecutively.
5. Reasonableness of Restrictions.
a. Acknowledgment. Shareholder has carefully read and
considered the provisions of Sections 1, 2, 3 and 4, and, having done so,
voluntarily agrees that the restrictions set forth in those Sections, including,
but not limited to, the time period of restriction, the geographical areas of
restriction, and the scope of restricted activities set forth in Section 2, are
fair and reasonable and are reasonably required for the protection of the
legitimate interests of each of the UCI Entities, and their respective parent or
subsidiary corporations, partnerships, officers, directors, partners, employees
and affiliates.
b. Enforcement. In the event that, notwithstanding the
foregoing, any of the provisions of Sections 1, 2, or 4 or any parts thereof
shall be held to be invalid or unenforceable, the remaining provisions or parts
thereof shall nevertheless continue to be valid and enforceable as though the
invalid or unenforceable portions or parts had not been included therein. In the
event that any provisions of Sections 1 or 2 relating to the time period and/or
the areas of restriction and/or the scope of restricted activities and/or
related aspects shall be declared
Non-Solicit Covenant
Page 3
<PAGE>
by a court of competent jurisdiction to exceed the maximum restrictiveness such
court deems reasonable and enforceable, the time period and/or areas of
restriction and/or the scope of restricted activities and/or related aspects
deemed reasonable and enforceable by the court shall become and thereafter be
the maximum restriction in such regard, and the restriction shall remain
enforceable to the fullest extent deemed reasonable by such court.
6. Miscellaneous.
a. Burden and Benefit. This Agreement shall be binding upon
UCI of GA's successors and assigns and Shareholder's heirs, personal and legal
representatives, successors and assigns, and shall inure to the benefit of each
of the UCI Entities' respective successors and permitted assigns and
Shareholder's heirs, personal legal representatives, successors, and permitted
assigns.
b. Modifications. This Agreement can only be modified by a
written agreement duly signed by Shareholder and an authorized representative of
UCI of GA. Moreover, in order to avoid uncertainty, ambiguity and
misunderstandings in their relationships, the parties hereto covenant and agree
not to enter into any oral agreement or understanding inconsistent or in
conflict with this Agreement; and the parties hereto further covenant and agree
that any oral communication allegedly or purportedly constituting such an
agreement or understanding shall be absolutely null, void and without effect.
c. Waiver. Any waiver by either party of any breach or any
term or condition hereof shall be effective only if in writing and such writing
shall not be deemed to be a waiver of any subsequent or other breach, term or
condition of this Agreement.
d. Assignments. Neither this Agreement nor any rights
hereunder may be assigned or otherwise transferred by Shareholder. This
Agreement may be assigned or otherwise transferred by UCI of GA to any entity
controlled by or under common control with UCI of GA, or in connection with the
merger or acquisition of, or sale of substantially all of, the assets of UCI of
GA.
e. Cumulative Remedies. 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.
f. Venue and Jurisdiction. The parties hereto hereby (i) agree
that any litigation, action or proceeding arising out of or relating to this
Agreement may be instituted in a state or federal court located in Richland
County, South Carolina, (ii) waive any objection which they might have now or
hereafter to any such litigation, action, or proceeding based upon improper
venue or inconvenient forum, and (iii) irrevocably submit to the jurisdiction of
such courts in any such litigation, action or proceeding. For all purposes of
this Agreement, the parties hereto further agree that service of process may be
effected pursuant to United States mail.
g. Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior contemporaneous written or oral agreements and
representations between the parties with respect thereto.
h. Governing Law. The construction and interpretation of this
Agreement shall at all times and in all respects be governed by the laws of the
State of South Carolina.
i. Severability. The invalidity or unenforceability or any
provision of this Agreement shall not render invalid or unenforceable any other
provision hereof.
Non-Solicit Covenant
Page 4
<PAGE>
j. Survival. All terms of this Agreement shall survive the
Closing under the Acquisition Agreement.
k. Usage. Capitalized terms used herein which are not
otherwise defined herein shall have the meanings ascribed to them in the
Acquisition Agreement. The section and paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Terms such as "hereof",
"hereunder", "hereto", "herein", and words of similar import shall refer to this
Agreement in its entirety and all references to "Paragraphs", "Sections", and
similar cross references shall refer to specified portions of this Agreement,
unless the context clearly requires otherwise.
l. Enforcement. In the event litigation or other legal
proceedings are commenced to enforce any rights under this Agreement, all
reasonable legal expenses (including reasonable attorney's fees) and other
direct costs of litigation of the prevailing party shall be paid by the
non-prevailing party. All remedies specified herein are cumulative and
non-exclusive, and parties shall be entitled to seek or enforce any other rights
or remedies available to them at law or in equity.
m. Notices. Any notice, request, approval, consent, demand or
other communication shall be effective upon the first to occur of the following:
(i) upon receipt by the party to whom such notice, request, approval, consent,
demand or other communication is being given; or (ii) three (3) business days
after being duly deposited in the United States certified mail, return receipt
requested, and addressed as follows:
UCI of GA: UCI Medical Affiliates of Georgia, Inc.
--------- 1901 Main Street, Suite 1200
Mail Code 1105
Columbia, South Carolina 29201
Attn.: Jerry F. Wells, Jr.
Shareholder: ________________________________________
----------- ________________________________________
________________________________________
________________________________________
The parties hereto may change their respective addresses by notice in writing
given to the other party to this Agreement.
Non-Solicit Covenant
Page 5
<PAGE>
IN WITNESS WHEREOF, this Non-Solicit Covenant is executed under seal by
UCI of GA and Shareholder to be effective as of the date first above written.
WITNESSES: SHAREHOLDER:
- ---------- ------------
_______________________
________________________________(SEAL)
Print Name:
Social Security Number:
_______________________
UCI OF GA:
----------
UCI MEDICAL AFFILIATES OF GEORGIA
_______________________
By:______________________________(SEAL)
Its:________________________________
_______________________
Non-Solicit Covenant
Page 6
<PAGE>
Exhibit 8.3.8
Form of Investment Letter
[See Attached]
<PAGE>
INVESTMENT LETTER
March 31, 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:
On this date, the Company is issuing to the undersigned shareholder
("Transferee") of MainStreet Healthcare Corporation, a Delaware corporation
("Main Street"), the number of shares of the common stock, $0.05 par value, of
UCI Medical Affiliates, Inc., a Delaware corporation (the "Company"), as are set
forth opposite Transferee's signature on the signature page hereof (the
"Shares"). In consideration of your agreement to issue the Shares to Transferee,
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 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.
Investment Letter
Page 1
<PAGE>
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 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 dated as of March 31,
1998, 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
Investment Letter
Page 2
<PAGE>
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 was
invited by any of the foregoing means of communications.
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:
Investment Letter
Page 3
<PAGE>
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 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:
Number of Shares of _______________________________
UCI Medical Affiliates, (Print name of Transferee here)
Inc. to be transferred:
______________Shares
______________________________________________________
Date: (Signature of Transferee or authorized representative)
______________________________________________________
(Street Address)
______________________________________________________
(City, State, Zip Code)
Investment Letter
Page 4
<PAGE>
Exhibit 8.3.18
Form of Affidavit and Certificate of Assumed Liabilities
[See Attached]
<PAGE>
AFFIDAVIT AND CERTIFICATE OF ASSUMED LIABILITIES
OF
MAINSTREET HEALTHCARE CORPORATION
PERSONALLY appeared before me ROBERT G. RIDDETT, JR. who first
being duly sworn, deposes and says that:
1. Robert G. Riddett, Jr. is the President of MainStreet Healthcare
Corporation ("MainStreet"), and as such has access to, and knowledge of, the
business records of MainStreet.
2. The outstanding balances of the MainStreet Equipment Leases as of
March 31, 1998 total $ , in the aggregate.
3. The outstanding balances of the MainStreet Real Estate Leases as of
March 31, 1998 total $ , in the aggregate.
4. 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 March 31, 1998 totals $_________________________________________.
5. This Affidavit and Certificate of Assumed Liabilities is being
delivered to UCI Medical Affiliates of Georgia, Inc. ("UCI of GA") pursuant to
Section 8.3.18 of that certain Acquisition Agreement and Plan of Reorganization
by and between among others UCI of GA and MainStreet, dated February 9, 1998
(the "Acquisition Agreement"), and may be relied upon by UCI of GA.
6. Capitalized terms used and not otherwise defined herein shall have
the respective meanings ascribed to them in the Acquisition Agreement.
Executed as of the 31st day of March, 1998.
__________________________________
Robert G. Riddett, Jr., President
Sworn to me this
31st day of March, 1998
_______________________
Notary Public For______________________
My Commission Expires:_______________
<PAGE>
Exhibit 8.3.19
--------------
<PAGE>
Form of Transferor's Officers Certificate
[See Attached]
<PAGE>
TRANSFEROR'S OFFICERS' CERTIFICATE
[Corporate Name]
TO:_______________________________
We hereby certify in connection with the Acquisition Agreement and Plan
of Reorganization (the "Agreement") dated _____________________, 1998,
respecting the purchase of substantially all of the assets of 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; and Prompt Care Medical Center,
Inc., a Georgia corporation, by UCI Medical Affiliates, Inc., a Delaware
corporation; UCI Medical Affiliates of Georgia, Inc., a South Carolina
corporation; Doctor's Care of Georgia, P.C., a Georgia professional corporation;
and Doctor's Care of Tennessee, P.C., a Tennessee professional corporation, that
we are officers of _______________________________________________________ (the
"Company") and, that as such, have access to the corporate records and
familiarity with the matters therein contained and herein certified, that we are
authorized to execute and deliver this certificate in the name and on behalf of
the Company, and that:
1. Incumbency of Officers. The following named persons are on the date
hereof, and at all times since prior to the date of the Agreement, have been
duly elected, qualified, and acting officers of the Company holding the office
or offices set forth opposite his or her name, and that the signature set forth
opposite each such officer's name is his or her true and legal signature:
Name Office Signature
- ---- ------ ---------
- --------------------- ----------------- ---------------------
- --------------------- ----------------- ---------------------
- --------------------- ----------------- ---------------------
- --------------------- ----------------- ---------------------
- --------------------- ----------------- ---------------------
2. Incumbency of Directors. The following named persons are on the date
hereof, and were as of the date referenced in paragraph 5 below, the duly
elected, qualified, and acting directors of the Company, and constitute all the
directors of the Company at the date hereof and constituted all the directors at
the date referenced in paragraph 5 below:_______________________________________
________________________________________________________________________________
_________.
<PAGE>
3. Articles of Incorporation. Attached as Exhibit A hereto is a true,
correct, and complete copy of the Articles of Incorporation of the Company as
filed with the Secretary of State of the Company's state of organization, which
Articles of Incorporation have not been amended, modified, or rescinded except
as may be reflected in Exhibit A, and remain in full force and effect as of the
date hereof.
4. Bylaws. Attached as Exhibit B hereto is a true, correct, and
complete copy of the Bylaws of the Company, which Bylaws have not been amended,
modified, or rescinded except as may be reflected in Exhibit B and remain in
full force and effect as of the date hereof.
5. Approving Resolutions. Attached as Exhibit C hereto is a true,
correct, and complete copy of the resolutions of the Board of Directors of the
Company (with any preamble thereto) authorizing the Company's entering into and
performing its obligations under the Agreement, which resolutions were duly
adopted on __________________________, 199 , and which resolutions are in full
force and effect on and as of the date hereof, not having been amended, altered,
repealed, or rescinded. Attached as Exhibit D hereto is a true, correct, and
complete copy of the resolutions of the shareholders of the Company (with any
preamble thereto) authorizing the Company's entering into and performing its
obligations under the Agreement, which resolutions were duly adopted on
__________________________, 199 , and which resolutions are in full force and
effect on and as of the date hereof, not having been amended, altered, repealed,
or rescinded.
6. Bringdown of Representations and Warranties. Each representation and
warranty made by or respecting the Company in the Agreement is true and accurate
in all material respects as of the date of this certificate with the same effect
as if made on and as of the date of this certificate by the Company, except as
otherwise contemplated by the Agreement.
7. Compliance with Agreement. The Company has performed and complied in
all material respects with each and every covenant, agreement, and condition
required to be performed or complied with by the Company under the Agreement on
or prior to the date hereof.
IN WITNESS WHEREOF, we have executed this certificate on behalf of the
Company in the capacities set forth below our signatures as of the ____ day of ,
1998.
Sign:_____________________________
Print Name:_______________________
Title: President
Sign:_____________________________
Print Name:_______________________
Title: Secretary
2
<PAGE>
Exhibit 8.3.20
Form of Legal Opinion of Transferors' and Class B Shareholders' Counsel
[See Attached]
<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. 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 and all documents, instruments, statements,
and certificates required to be delivered by Seller, MHMG-GA, MHMG-TN, 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. In this regard,
the certificates of officers of Seller,
<PAGE>
UCI Medical Affiliates of Georgia, Inc.
[Date of Closing]
Page 2
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 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 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 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 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 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 and Ancillary Documents.
5. Neither the execution and delivery of the Agreement 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), lending institution, or other third
party except for such consents as have been
<PAGE>
UCI Medical Affiliates of Georgia, Inc.
[Date of Closing]
Page 3
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 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 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 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 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.
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
<PAGE>
UCI Medical Affiliates of Georgia, Inc.
[Date of Closing]
Page 4
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) 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 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 or the Ancillary Documents, or on the consummation of
the transactions contemplated by the Agreement 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 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
<PAGE>
UCI Medical Affiliates of Georgia, Inc.
[Date of Closing]
Page 5
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 and the Ancillary Documents.
(f) We express no opinion as to the enforceability of any provisions in
the Agreement 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.
<PAGE>
Exhibit 8.3.21
--------------
Form of Lease
[See Attached]
<PAGE>
STATE OF GEORGIA ) LEASE AGREEMENT
) AND
COUNTY OF DEKALB ) RIGHT OF FIRST REFUSAL
THIS LEASE AGREEMENT AND RIGHT OF FIRST REFUSAL (the "Lease") is made
as of this 31st day of March, 1998, to be effective as of the 1st day of April,
1998, by and between MAINSTREET HEALTHCARE CORPORATION, a Delaware corporation
(the "Landlord"), and UCI MEDICAL AFFILIATES OF GEORGIA, INC., a South Carolina
corporation (the "Tenant").
This Lease is executed and delivered in connection with that certain
Acquisition Agreement and Plan of Reorganization by and among others Landlord;
Tenant; and UCI Medical Affiliates, Inc. dated as of February 9, 1998 (the
"Acquisition Agreement") related to the transfer of certain assets of MainStreet
by Tenant. In connection with the Acquisition Agreement, Tenant desires to lease
from Landlord the facility owned by Landlord located at 2362 Main Street,
Tucker, Georgia 30084, upon the terms and conditions set forth herein.
In consideration of these premises and the mutual promises below, and
for other good and valuable consideration, the receipt and legal sufficiency of
which is hereby acknowledged by the parties hereto, Landlord and Tenant agree as
follows:
1. Leased Premises. Landlord hereby leases, demises, and lets, to
Tenant, and Tenant hereby leases from Landlord, that certain premises and all
improvements thereon located at 2362 Main Street, Tucker, Georgia 30084, all as
more fully described on Schedule 1 attached hereto (collectively the
"Premises"), upon the terms, covenants, and conditions hereinafter contained.
2. Term. The term of this Lease shall be ten (10) years commencing on
April 1, 1998, and terminating on March 31, 2008, unless earlier terminated as
provided herein.
3. Rent.
A. Subject to Section 22 below, commencing on April 1, 1998
and continuing though March 31, 2003, the Tenant shall pay to the Landlord an
annual rental of Fifty-Seven Thousand Six Hundred and No/100 ($57,600.00)
Dollars, in monthly installments of Four Thousand Eight Hundred and No/100
($4,800.00) Dollars, on the first (1st) day of each month, payable in advance
during the term of this Lease in lawful money of the United States, addressed to
Landlord at Landlord's address set forth in Section 43 herein.
B. Subject to Section 22 below, commencing on April 1, 2003
and continuing though the end of the term of this Lease, the Tenant shall pay to
the Landlord an annual rental of Sixty-One Thousand Two Hundred and No/100
($61,200.00) Dollars, in
Lease And Option Agreement
And Right of First Refusal
Page 1
<PAGE>
monthly installments of Five Thousand One Hundred and No/100 ($5,100.00)
Dollars, on the first (1st) day of each month, payable in advance during the
term of this Lease in lawful money of the United States, addressed to Landlord
at Landlord's address set forth in Section 43 herein.
4. Utilities. Tenant shall pay throughout the term of this Lease, all
charges for air conditioning, heat, water, sewer, janitor, garbage collection,
security, gas, electricity, light, telephone, or any other communication or
utility service used in or rendered or supplied to the Premises through the term
of this Lease. Such items shall be prorated for periods outstanding at the
commencement or the termination of this Lease. Tenant shall make such payments
directly to the intended recipient thereof. Upon receipt of the actual bill for
such period, the party receiving such bill shall promptly forward same to the
other party and Landlord and Tenant shall then make such adjustment and payment
as shall be required to make such proration accurate.
5. Real Estate Taxes. Landlord shall promptly pay all taxes and
assessments of every kind or nature which are now or may hereafter be imposed or
assessed upon the Premises by federal, state, or local government authority.
Tenant shall be entitled, but shall have no obligation, to pay any taxes or
assessments not promptly paid by Landlord as required above, in which case
Tenant may elect that the amount of such payment be either (i) deducted by
Tenant from the rent hereunder after notice of such payment is given by Tenant
to Landlord, or (ii) reimbursed to Tenant by Landlord within ten (10) days after
notice of such payment is given by Tenant to Landlord.
6. Insurance on Building. Landlord shall at all times during the term
of this Lease maintain and shall pay all premiums for the fire and hazard
insurance on the building constituting a portion of the Premises for not less
than the replacement cost thereof.
7. Other Insurance Coverage. Tenant shall at all times maintain the
following insurance coverage respecting the Premises and its business operations
thereon: public liability insurance for personal injury and property damage;
workers' compensation insurance required by South Carolina law; hazard insurance
on all contents and property of Tenant at the Premises and all property of other
persons temporarily stored at the Premises; and such other insurance coverages
required by this Lease or as are customarily carried on businesses such as that
to be conducted by Tenant at the Premises.
8. Condition of Premises. Landlord shall, at its own expense, keep the
Premises in good repair and shall make any and all necessary repairs and
replacements to the Premises.
9. Hazardous Substance Remediation. Notwithstanding anything contained
herein to the contrary, Tenant shall not be required to remediate, purge or
remove, or bear the cost of such remediation, purge or removal of, any hazardous
substance which contaminated the Premises prior to the commencement of the term
of this Lease or which existed at the
Lease And Option Agreement
And Right of First Refusal
Page 2
<PAGE>
commencement of the term of this Lease and worsened through no fault of Tenant
thereafter. In addition, Tenant shall not be obligated to take actions to
prevent such worsening of contamination which existed at the commencement of
this Lease. Landlord shall indemnify Tenant and hold Tenant and its officers and
agents harmless from any and all liability, claim, injury, damage, penalty, or
cost, (including reasonable attorney's fees) arising out of third party claims
or assertions resulting from any hazardous substances existing on the Premises
as of the effective date of this Lease.
10. Americans With Disabilities Act. Notwithstanding any term or
provision to the contrary contained herein, the Landlord, at Landlord's sole
cost and expense, shall ensure that the Premise and improvements thereon shall
be in material compliance with the Americans With Disabilities Act, as the same
is amended from time to time (the "Act"). Tenant shall not be required to make
any alterations or additions to the Premises (both structural and
non-structural) that may be necessary from time to time to keep or bring the
Premises in compliance with the Act.
11. Alterations. Tenant shall not make, or suffer to be made, any
alterations of the Premises, or any part thereof, without the written consent of
Landlord, which consent shall not be unreasonably withheld.
12. Entry by Landlord. Landlord shall have the right to enter the
Premises at reasonable times, for the purpose of inspection, posting notices or
supervising any necessary repairs and maintenance required hereto to be
performed by Landlord, upon reasonable written notice to Tenant.
13. Signs and Parking. Tenant shall have the exclusive right to use the
parking area which is part of the Premises. Tenant, at its discretion, may erect
such signs as it deems necessary or appropriate, so long as the same comply with
applicable laws and zoning restrictions.
14. Assignment and Subletting. Tenant shall have the right to make
subleases of all or any portion of the Premises and any permitted sublessee may
use the same for any lawful purpose permitted by this Lease, so long as Tenant
shall agree in writing to remain liable hereunder as though no subleases had
been made, unless Landlord acknowledges in writing that Tenant shall not remain
liable hereunder. Subject to Tenant's right to approval any assignee which will
not be unreasonably withheld, Landlord may assign this Lease and all rights
hereunder provided Tenant's use and enjoyment of the Premises during the term of
this Lease is not disturbed. Tenant shall be entitled to assign this Lease to
any corporation controlled by or under common control with Tenant, or in
connection with the acquisition of, or the sale of substantially all of, the
assets of Tenant. Landlord shall have the right to approval any purchaser of the
Premises, which approval shall not be unreasonably withheld.
Lease And Option Agreement
And Right of First Refusal
Page 3
<PAGE>
15. Default of Tenant. The occurrence of any of the following events
shall constitute a breach of this Lease:
A. The failure of Tenant to pay rent or to make any other
payment of money as herein required when due for a period of ten (10) days after
delivery by Landlord of a written notice to Tenant of any such failure.
B. The expiration of a period of sixty (60) days following (I)
the adjudication of Tenant as a bankrupt by any court of competent jurisdiction,
(II) the entry of an order approving a petition filed by one other than Tenant,
seeking reorganization of Tenant under the National Bankruptcy Act or any other
applicable law of the United States or of any State, or (III) the appointment of
a trustee or receiver of all or substantially all of the business or property of
Tenant, or (IV) the levy of any attachments, execution or garnishment upon the
interest of Tenant hereunder, or upon the leasehold estate hereby created,
unless during such period such adjudication, order or appointment of a receiver
or trustee, attachment, execution or garnishment shall be vacated or unless
within such period Tenant shall have taken proper action to vacate such
adjudication, order or appointment of a receiver or trustee, attachment,
execution or garnishment, and in such event such occurrence shall not constitute
a breach of this Lease until final adjudication of the matter.
C. The filing by Tenant of a voluntary petition in bankruptcy
or the making of an assignment for the benefit of creditors, the consenting by
Tenant to the appointment of a receiver or trustee of all or any part of its
property, the filing by Tenant of a petition or answer seeking reorganization
under the National Bankruptcy Act or any other applicable law, or the filing by
Tenant of a petition to take advantage of any insolvency act.
D. The failure of Tenant to correct any default hereunder,
other than those specified in subdivisions (A), (B), and (C) of this Section 15
within thirty (30) days after delivery by Landlord to Tenant of a written notice
of such default, or if the default is of such a nature that it cannot be
corrected within thirty (30) days, then the failure of Tenant within such period
to commence and thereafter proceed diligently to cure such default.
If any of the above-mentioned events of default shall occur,
the Landlord at its option may re-enter and take possession of the Premises, and
at its option terminate this Lease and accelerate all payments due or coming due
hereunder.
16. Default of Landlord. If at any time during the term hereof
MainStreet or Landlord shall default in any of their respective obligations
under this Lease and/or the Acquisition Agreement, Tenant may give written
notice to Landlord of its intention to terminate the Lease together with a
statement of the nature of such default, and such termination shall become
effective on the thirtieth (30th) day after the date of such notice unless (a)
such default shall be cured within thirty (30) days after such notice, or (b) if
the default is of such a nature that it cannot be cured within such period, the
necessary steps to
Lease And Option Agreement
And Right of First Refusal
Page 4
<PAGE>
cure such default are duly commenced within such period and are thereafter
diligently pursued. Notwithstanding anything contained herein to the contrary,
in the event Landlord breaches this Lease, the Acquisition Agreement, or any
document or instrument ancillary thereto to which it is a party, such breach
thereof (at the expiration of the applicable grace period set forth therein)
shall constitute a breach by Landlord of this Lease.
17. Holding Over. In case Tenant holds over after the end of any term
herein provided, such tenancy shall be from month to month only, and not a
renewal hereof; subject, however, to every other term, covenant and condition of
this Lease, and the rent shall be at the monthly rate of the last year of the
lease term.
18. Damage or Destruction. The damage or destruction of the
improvements now existing on the Premises in whole or in part by fire or other
cause, or such material injury thereto shall at the option of Tenant, exercised
by notice to Landlord, within thirty (30) days after the date of such damage,
destruction or unavailability, produce and work a termination of this Lease.
Upon damage or destruction of the Premises in whole or in part, by fire or any
other cause, if Tenant shall not exercise its option to terminate this Lease
within such thirty (30) days, Landlord shall at its expense promptly restore the
Premises to the condition they were in immediately prior to such damage.
Notwithstanding anything contained herein to the contrary, the rent shall abate
during the period said Premises are untenantable.
19. Condemnation. If any portion of the Premises shall be taken or
condemned by any competent authority for any public or quasi-public use or
purpose so as to render the remaining portion of the Premises unsuited for
Tenant's reasonable uses, even though the entire Premises be not so taken or
condemned, then Tenant, at any time thereafter, shall have the right to
terminate this Lease. Upon the termination of this Lease as herein provided,
Tenant shall be entitled to a refund of all rents paid in advance from the date
of termination to the date through which the rent shall have been paid. Tenant
hereby waives any and all rights to participate in the proceeds of any award
made in any condemnation proceedings for the taking of the Premises, or any
portion thereof, except the right to participate in Tenant's equitable portion
of any proceeds for the loss of Tenant's business at such location, if any.
20. Quiet Enjoyment. Landlord agrees and warrants that Tenant, keeping
and performing the covenants herein contained on the part of Tenant to be kept
and performed, shall at all times during the term of this Lease peaceably and
quietly have, hold and enjoy the Premises.
21. Removal of Trade Fixtures / Related Leases. Upon the termination of
the Lease, all trade fixtures, furniture, equipment and other personal property
which Tenant placed upon the Premises may be removed by Tenant, provided Tenant
shall otherwise leave the Premises in reasonable condition.
Lease And Option Agreement
And Right of First Refusal
Page 5
<PAGE>
22. Set Off. Anything contained in this Lease to the contrary
notwithstanding, Tenant shall have the right of set off and recoupment against
amounts coming due hereunder in the event that Landlord breaches this Lease. In
the event Tenant elects to exercise the right of set off and recoupment set
forth herein, upon notice to Landlord the rental hereunder shall be deemed
reduced by the amount of any set off or recoupment to which the Tenant is
entitled. Landlord's right to lawfully contest such set off or recoupment in any
action to collect rental hereunder shall not be impaired by Tenant's exercise of
such set off or recoupment rights. The inclusion of this special set off or
recoupment provision shall not affect the availability, if any, of rights of set
off or recoupment arising at law or in equity.
23. Subject to Acquisition Agreement. This Lease 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.
24. Representations and Warranties of Landlord. Landlord hereby
warrants, represents, and covenants as follows:
A. Authority. Landlord has taken all action necessary to
approve and authorize the execution of this Lease, and to consummate the
transactions contemplated hereby. When executed and delivered, this Lease shall
constitute valid and binding obligations of Landlord, enforceable in accordance
with its terms and conditions except as enforcement may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors rights generally and
by principles of equity. Neither the execution nor the delivery of this Lease
nor the consummation of the transactions contemplated hereby, nor compliance
with all of the terms and conditions hereof, will result in the breach by
Landlord of any of the terms, conditions or provisions of any trust, order,
judgment, law, or other contract, agreement or instrument to which he is a
party, or by which he is bound, or constitute a default of such indenture,
mortgage, deed of trust, order, judgment, law, or other contract, agreement or
instrument.
B. Title to Premises. Upon execution and delivery of this
Lease, Landlord will have good, marketable and insurable title to the Premises,
and will not be indebted to any contractor, laborer, mechanic, material man or
any other person or entity for work, labor, materials or services in connection
with the Premises for which any such person or entity could claim a lien against
the Premises.
C. Consents. No consent of any third party which has not been
obtained is required in connection with Landlord's lease of the Premises
hereunder, including but not limited to the consent of any financial
institution.
D. Litigation. There are no judicial or administrative actions
or proceedings pending, or to the best of Landlord's knowledge threatened, that
question the
Lease And Option Agreement
And Right of First Refusal
Page 6
<PAGE>
validity of this Lease or any transaction contemplated hereby or that relate to
the Premises, including but not limited to condemnation or bankruptcy
proceedings, which if adversely determined would have an adverse affect upon
Landlord's ability to enter into this Lease or perform its obligations hereunder
or upon the use, enjoyment, or value of the Premises for Tenant.
E. Zoning. The Premises is currently zoned for commercial
operations and is in compliance with applicable zoning laws and ordinances; and
Landlord does not know that the status of such zoning is in question or subject
to change by the appropriate governmental authorities.
F. Environmental. The Premises is not now used and, to the
best of Landlord's knowledge, has never been used for the underground storage of
petroleum products, or as a garbage or refuse dump site, a landfill, a waste
disposal facility for the storage, processing, treatment or temporary or
permanent disposal of regulated waste materials, including without limitation
solid, industrial, toxic, hazardous, radioactive, nuclear or putrescible waste
or sewage, and, to the best of Landlord's knowledge, is in substantial
compliance with applicable environmental laws.
25. Representations and Warranties of Tenant. Tenant hereby represents,
warrants, and covenants as follows:
A. Organization and Good Standing. Tenant is a corporation
duly organized, validly existing, and in good standing under the laws of the
State of South Carolina and has full corporate power to carry on its businesses
and to own and operate its properties and assets as presently owned and
operated. Tenant has taken all corporate action necessary to approve and
authorize the execution of this Lease, and to consummate the transactions
contemplated hereby. When executed and delivered, this Lease shall constitute
valid and binding obligations of Tenant, enforceable in accordance with its
terms and conditions except as enforcement may be limited by applicable
bankrupt, insolvency or similar laws effecting creditors rights generally and by
principles of equity. Neither the execution nor the delivery of this Lease nor
the consummation of the transactions contemplated hereby, nor compliance with
all of the terms and conditions hereof, will result in the breach by Tenant of
any of the terms, conditions or provisions of any trust, order, judgment, law,
or other contract, agreement or instrument to which it is a party, or by which
it is bound, or constitute a default of such indenture, mortgage, deed of trust,
order, judgment, law, or other contract, agreement or instrument.
B. Consents. No consent of any third party is required in
connection with the lease of the Premises hereunder.
Lease And Option Agreement
And Right of First Refusal
Page 7
<PAGE>
C. Litigation. There are no judicial or administrative actions
or proceedings pending, or to the best of Tenant's knowledge threatened, that
question the validity of this Lease or any transaction contemplated hereby.
26. Rights of First Refusal. Landlord grants Tenant the right, at
Tenant's option, to purchase the Premises at the same price and upon the same
terms and conditions of any bona fide offer for the purchase thereof which
Landlord shall at any time during the term of this Lease be ready and willing to
accept. Landlord shall give Tenant written notice of all of the terms and
conditions of any such bona fide offer and Tenant shall have thirty (30) days
from and after the receipt of such notice in which to exercise its option to
purchase the Premises by giving written notice to Landlord. Such exercise of
said option to purchase the Premises shall create a binding agreement between
Landlord and Tenant for the sale and purchase of the Premises upon the same
terms and conditions contained in the bona fide offer. The right granted to
Tenant in this Section 26 shall be continuing until the lawful termination of
this Lease, and Tenant's failure to exercise such right with respect to any bona
fide offer shall not affect its rights as to any subsequent offers received by
Landlord or Landlord's heirs, successors, assigns, or legal representatives. In
the event Tenant should fail to exercise its right of first refusal option in
any instance, Landlord shall then be free to sell the Premises in accordance
with the offer of the prospective purchaser (or to any other purchasers upon
substantially the same terms) and to convey the Premises to such purchaser,
subject to the terms and conditions of this Lease; provided, however, that such
sale must be consummated within ninety (90) days after receipt by Tenant of
written notice of the terms and conditions of the offer. Tenant's rights under
this Section may be assigned to any person or entity controlling, controlled by,
or under common control with, Tenant. Tenant's failure to exercise its rights
under this Section shall not terminate this Lease nor extinguish Tenant's rights
or obligations under this Lease. Notwithstanding the foregoing, the Tenant shall
not have a right of first refusal in connection with the transfer of title to
the Premises from Landlord to A. Wayne Johnson.
27. Binding Effect. This Lease shall inure to the benefit of the heirs,
successors, representatives, and permitted assigns of the parties hereto, and
shall bind the heirs, successors, representatives, and assigns of the parties
hereto.
28. References to Gender and Number Terms. Whenever the context
requires, the singular number shall include the plural, the plural the singular,
and the use of any gender shall include all genders.
29. Days Defined. Any reference in this Lease to a number of days shall
mean calendar days unless otherwise expressly provided.
30. Attorney's Fees. If any action at law or in equity shall be brought
to recover any rent under this Lease, or for or on account of any breach of or
to enforce or interpret any of the covenants, terms or conditions of this Lease,
or for the recovery of the possession of the
Lease And Option Agreement
And Right of First Refusal
Page 8
<PAGE>
Premises, the prevailing party shall be entitled to recover from the other party
as part of the prevailing party's cost a reasonable attorney's fee, the amount
of which shall be fixed by the court and shall be made a part of any judgment
rendered.
31. Headings. The headings of the paragraphs of this Lease are for
convenience or reference only and are not a part of this Lease.
32. Modifications. This Lease can only be modified by a written
agreement duly signed by authorized representatives of each party hereto.
Moreover, in order to avoid uncertainty, ambiguity and misunderstandings in
their relationships, the parties hereto covenant and agree not to enter into any
oral agreement or understanding inconsistent or in conflict with this Lease; and
the parties hereto further covenant and agree that any oral communication
allegedly or purportedly constituting such an agreement or understanding shall
be absolutely null, void and without effect.
33. Waiver. Any waiver by either party of any breach or any term or
condition hereof shall be effective only if in writing and such writing shall
not be deemed to be a waiver of any subsequent or other breach, term or
condition of this Lease.
34. Relationship of the Parties. Nothing herein shall be deemed to
create any partnership, joint venture, or agency relationship between the
parties. Neither party shall make any representation or statement (whether oral
or written) to any person or entity inconsistent with this paragraph.
35. Third Parties. The provisions of this Lease are not intended to be
for the benefit of any third parties, and no third party shall be deemed to have
any privity of contract with either of the parties hereto by virtue of this
Lease.
36. Time of Essence. The parties acknowledge and agree that time is of
the essence in the performance of this Lease.
37. Severability. If any provision or provisions of this Lease shall be
held to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
38. Governing Law. The construction and interpretation of this Lease
shall at all times and in all respects be governed by the laws of the State of
South Carolina.
39. Venue and Jurisdiction. The parties hereto hereby (i) agrees that
any litigation, action or proceeding arising out of or relating to this Lease
may be instituted in a state or federal court in the County of Richland, State
of South Carolina, (ii) waives any objection which it might have now or
hereafter to any such litigation, action or proceeding based upon improper venue
or inconvenient forum, and (iii) irrevocably submits to the jurisdiction of such
Lease And Option Agreement
And Right of First Refusal
Page 9
<PAGE>
courts in any such litigation, action or proceeding. For all purposes of this
Lease, the parties hereto irrevocably consents to personal jurisdiction of such
courts, and further agrees that service of process upon such party may be
effected pursuant to the United States mail.
40. No Inference Against Author. No provision of this Lease shall be
interpreted against any party because such party or its legal representative
drafted such provision.
41. Entire Lease. This Lease constitutes the entire agreement between
the parties with respect to the subject matter hereof and supersedes all prior
contemporaneous written or oral agreements and representations between the
parties with respect thereto.
42. Recordation. This Lease or a memorandum hereof may be recorded by
either party. The parties agree to execute for recording purposes any such
memorandum.
43. Notices. Any notice, request, approval, consent, demand or other
communication shall be effective upon the first to occur of the following: (i)
upon receipt by the party to whom such notice, request, approval, consent,
demand or other communication is being given; or (ii) three (3) business days
after being duly deposited in the United States mail, certified or registered,
return receipt requested, and addressed as follows:
Landlord: MainStreet Healthcare Corporation
2370 Main Street
Tucker, GA 30084
Tenant: UCI Medical Affiliates of Georgia, Inc.
1901 Main Street, Suite 1200
Columbia, SC 29201
Attn.: Jerry F. Wells, Jr.
The parties hereto may change their respective addresses by notice in writing
given to the other party to this Lease.
Lease And Option Agreement
And Right of First Refusal
Page 10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Lease this
31st day of March, 1998, to be effective as of April 1, 1998.
IN THE PRESENCE OF: LANDLORD:
MAINSTREET HEALTHCARE
CORPORATION
_________________________ By:_________________________________
(Witness as to Landlord) Its:____________________________
_________________________
(Witness as to Landlord)
TENANT:
UCI MEDICAL AFFILIATES OF GEORGIA,
INC.
_________________________ By:_________________________________
(Witness as to Tenant) Jerry F. Wells, Jr.
Its: Chief Financial Officer
_________________________
(Witness as to Tenant)
Lease And Option Agreement
And Right of First Refusal
Page 11
<PAGE>
STATE OF SOUTH CAROLINA )
) PROBATE
COUNTY OF RICHLAND )
PERSONALLY appeared before me the undersigned witness and made oath
that s/he saw the within-named MainStreet Healthcare Corporation by its sign,
seal, and as his act and deed, deliver the within-written instrument for the
uses and purposes therein mentioned, and that s/he with the other witness whose
signature appears above, witnessed the execution thereof.
______________________________
WITNESS
SWORN TO before me this
31st day of March, 1998.
___________________________________________(L.S.)
Notary Public for South Carolina
My Commission Expires:_____________________
STATE OF SOUTH CAROLINA )
) PROBATE
COUNTY OF RICHLAND )
PERSONALLY appeared before me the undersigned witness and made oath
that s/he saw the within-named UCI Medical Affiliates of Georgia, Inc., by Jerry
F. Wells, Jr., its Chief Financial Officer, sign, seal, and as its act and deed,
deliver the within-written instrument for the uses and purposes therein
mentioned, and that s/he with the other witness whose signature appears above,
witnessed the execution thereof.
______________________________
WITNESS
SWORN TO before me this
31st day of March, 1998.
___________________________________________(L.S.)
Notary Public for South Carolina
My Commission Expires:_____________________
Lease And Option Agreement
And Right of First Refusal
Page 12
<PAGE>
SCHEDULE 1
LEGAL DESCRIPTION OF THE PREMISES
ALL THAT TRACT OR PARCEL OF LAND lying and being in Land Lot 213 of the
18th District of DeKalb County, Georgia, being more particularly
described as follows:
BEGINNING at an iron pin on the southwesterly side of Main Street
(Third Street), (based on an 80-foot right-of-way), 50 feet
northwesterly as measured along the southwesterly side of Main Street
from the intersection form by the southwesterly side of Main Street and
the northwesterly side of First Avenue; thence southwesterly 213.4 feet
to an iron pin on the northeasterly side of a 20-foot alley; thence
northwesterly along the northeasterly side of said alley 85 feet to an
iron pin; thence northeasterly 214.7 feet, more or less, to an iron pin
on the southwesterly side of Main Street; thence southeasterly along
the southwesterly side of Main Street 86.5 feet to the iron pin and the
TRUE POINT OF BEGINNING. Being improved properly known as 2362 Main
Street, Tucker, according to the present system of numbering houses in
DeKalb County, Georgia.
Lease And Option Agreement
And Right of First Refusal
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<PAGE>
Exhibit 8.3.23
Certified List of MainStreet Security Holders
[See Attached]
<PAGE>
CERTIFIED LIST OF MAINSTREET SECURITY HOLDERS
PERSONALLY appeared before me ROBERT G. RIDDETT, JR. and A. WAYNE
JOHNSON who first being duly sworn, depose and say that:
1. Robert G. Riddett, Jr. and A. Wayne Johnson are the President and
Secretary, respectively, of MainStreet Healthcare Corporation ("MainStreet"),
and as such have access to, and knowledge of, the business records of
MainStreet.
2. The identity of the holders of the securities of MainStreet, and a
description of such holdings, as of March 31, 1998, is set forth on Schedule A
attached hereto.
3. This Certified List of Mainstreet Security Holders is being
delivered to UCI Medical Affiliates of Georgia, Inc. ("UCI of GA") pursuant to
Section 8.3.23 of that certain Acquisition Agreement and Plan of Reorganization
by and between among others UCI of GA and MainStreet, dated February 9, 1998
(the "Acquisition Agreement"), and may be relied upon by UCI of GA.
4. Capitalized terms used and not otherwise defined herein shall have
the respective meanings ascribed to them in the Acquisition Agreement.
Executed as of the 31st day of March, 1998.
_________________________________
Robert G. Riddett, Jr., President
_________________________________
A. Wayne Johnson, Secretary
Sworn to me this
31st day of March, 1998
_______________________
Notary Public For__________________
My Commission Expires:___________
<PAGE>
SCHEDULE A
List of Security Holders
<PAGE>
Exhibit 8.4.2
Form of Registration Rights Agreement
[See Attached]
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is entered into
as of March 31, 1998 among UCI Medical Affiliates, Inc., a Delaware corporation
(the "Company"); MainStreet Healthcare Corporation, a Delaware corporation
("MainStreet"); Frank Corker, M.D. ("Corker"); Michael J. Dare ("Dare"); David
Ellis, D.O. ("Ellis"); Pamela K. Erdman, M.D. ("Erdman"); Harold Holloway, M.D.
("Holloway"); Laykoon Huang, M.D. ("Huang"); A. Wayne Johnson ("Johnson"); Izhak
Oliver, M.D. ("Oliver"); PENMAN Private Equity and Mezzanine Fund, L.P., a
Delaware limited partnership ("Penman"); Richard Petit, P.A. ("Petit"); Practice
Acquisition Consultants, Inc., a corporation ("PAC"); and Robert G. Riddett, Jr.
("Riddett"). Corker, Dare, Ellis, Erdman, Holloway, Huang, Johnson, Oliver,
Penman, Petit, PAC and Riddett are hereinafter collectively known as the
"Mainstreet Shareholders".
RECITALS
This Agreement is made pursuant to that certain Acquisition Agreement
and Plan of Reorganization dated as of February 9, 1998 among the Company; UCI
Medical Affiliates of Georgia, Inc.; Mainstreet; MainStreet Healthcare Medical
Group, P.C.; MainStreet Healthcare Medical Group, PC; Prompt Care Medical
Center, P.C.; Johnson; Penman; Riddett; and Dare (the "Acquisition Agreement").
In order to induce the Holders, respectively, to enter into the Acquisition
Agreement and to accept shares of the Company's common stock as provided in the
Acquisition Agreement, the Company has agreed to provide the registration rights
set forth in this Agreement. In order to induce the Company to provide the
registration rights set forth in this Agreement and to issue shares of its
common stock to the Holders pursuant to the Acquisition Agreement, the Holders
have agreed to provide the covenants set forth in this Agreement.
In consideration of the foregoing premises, the mutual promises of the
parties contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
TERMS OF AGREEMENT
1. Definitions. The following terms not otherwise defined shall have
the meanings ascribed to them below:
1933 Act shall mean the US Securities Act of 1933, as amended, and all
rules and regulations promulgated thereunder.
Demand Right shall mean the right of a Demand Percentage of the Holders
to make one (1) demand for registration of the Registrable Shares as described
in Section 2 of this Agreement.
Demand Percentage of the Holders shall mean the Holder or Holders at
the relevant time of more than twenty percent (20%) of the number of Registrable
Shares issued to the Holders in the aggregate upon the closing of the
Acquisition Agreement.
REGISTRATION RIGHTS AGREEMENT
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<PAGE>
Holder shall mean any one of Mainstreet, Corker, Dare, Ellis, Erdman,
Holloway, Huang, Johnson, Oliver, PAC, Penman, Petit, and Riddett, and Holders
shall mean collectively two or more of Mainstreet, Corker, Dare, Ellis, Erdman,
Holloway, Huang, Johnson, Oliver, PAC, Penman, Petit, and Riddett and their
respective successors and permitted assigns, if any.
Piggy-Back Registration shall mean the right of the Holders to
participate as selling shareholders for the Registrable Shares in a public
offering registered with the SEC under the 1933 Act by the Company as described
in Section 3 of this Agreement.
Registrable Shares shall mean the shares of the Company's common stock
issued to the Holders pursuant to the Acquisition Agreement.
SEC shall mean the United States Securities and Exchange Commission.
Termination Date shall mean the first to occur of: (i) the first (1st)
anniversary of the date hereof, or (ii) the expiration of the holding period
applicable to resale by the Holders of the Registrable Shares under SEC Rule
144(d), as amended, or (iii) the registration of all the Registrable Shares.
All capitalized terms not otherwise defined herein shall have the
meanings ascribed to them in the Acquisition Agreement.
2. Demand Registration Rights. The Company shall provide to the Holders
demand registration rights for the Registrable Shares upon the following terms
and conditions:
(a) If on or before the Termination Date the Company receives
written demand from a Demand Percentage of the Holders requesting that all or a
portion of the Registrable Shares then held by them be registered pursuant to
this Section 2(a), then subject to the limitations set forth herein and provided
that the Company has not previously provided written notice to the Holders
pursuant to Section 3(a) specifying the Company's election to file a
registration statement, the Company shall within sixty (60) days following the
Company's receipt of such written demand, prepare and file with the SEC a Form
S-3 registration statement (or such other available form of registration
statement selected by the Company) as a "shelf" registration under Rule 415 (to
the extent available for use in such registration) under the 1933 Act governing
and permitting the resale to the public of the Registrable Shares then held by
such Holders and included in such written demand, and shall use its reasonable
best efforts to cause such registration statement to become effective and to
maintain the effectiveness of such registration statement for a period of nine
(9) calendar months after the initial effective date of such registration
statement. The Company shall use its best efforts to register or qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such United States jurisdictions (not exceeding ten (10) in the
aggregate) as shall be reasonably requested by the Holders; provided that the
Company shall not be required in connection therewith or as a condition thereto
to qualify to do business or to file a general consent to service of process in
any such states or jurisdictions and further provided that (anything herein to
the contrary notwithstanding with respect to the bearing of expenses) if any
jurisdiction in which the Registrable Shares shall be qualified shall require
that expenses incurred in connection with the qualification therein of the
Registrable Shares be borne by selling shareholders, then such expenses shall be
payable by the Holders pro rata to the extent required by such jurisdiction. In
connection with any registration effected pursuant to this Section 2(a), the
Company shall apply for listing and use its best efforts to list
REGISTRATION RIGHTS AGREEMENT
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<PAGE>
the Registrable Shares being registered on any national securities exchange on
which the Company's common stock is listed, or if the Company's common stock is
not listed on a national securities exchange, apply for qualification and use
its best efforts to qualify the Registrable Shares being registered for
inclusion on the automated quotation system of the National Association of
Securities Dealers, Inc.
(b) The Holders collectively shall be entitled to exercise the
Demand Right only one (1) time in the aggregate, and the number of Registrable
Shares subject to such Demand Right must not be fewer than the lesser of (i)
50,000 shares or (ii) all the Registrable Shares then held by such Holders. In
the event that a Demand Percentage of the Holders exercise the Demand Right, all
the Holders then holding Registrable Shares shall be given a reasonable
opportunity (upon not less than ten (10) days notice) to elect to participate in
such registered offering. The exercise of a Demand Right by any one or more of
the Holders shall eliminate the availability of such Demand Right as to all
Holders. In the event the Holders enter into an underwriting or similar
agreement with an underwriter selected by the Holders of Registrable Shares in
connection with such Holders' exercise of such Demand Right, then subject to the
limitations set forth in this Section 2(b), the Company hereby agrees to
cooperate with such underwriter, including entering into an agreement with the
managing underwriter of such offering (in usual and customary form applicable to
an issuer in an underwritten secondary offering of such issuer's securities held
solely by selling shareholders) and delivering applicable opinions of counsel
and accountant's comfort letters as may be reasonably requested by such managing
underwriter; provided: (a) such cooperation does not prohibit or in any way
limit the Company's use of a Form S-3 registration statement in connection with
the Holders' exercise of such Demand Right; (b) such cooperation does not
violate any applicable state or federal law or regulation, including without
limitation the rules and regulations of the SEC, (c) such underwriting is a
"firm commitment" underwriting and not a "best efforts" underwriting, and (d)
the Holders pay all costs, expenses, and commissions of such underwriter and any
costs reasonably incurred by the Company as a consequence of the Company being a
party to any agreement with, or making any representation or warranty to, such
underwriter (including the costs of any attorney fees incurred in connection
with the negotiation with any such underwriter or in connection with any
opinion(s) of counsel reasonably requested by such underwriter or any costs and
expenses relating to accountants' comfort letters).
(c) Notwithstanding the foregoing, with respect to any demand
made pursuant to Section 2(a) that is received by the Company more than thirty
(30) days following the date of this Agreement
(i) if the Company shall furnish to the Holders requesting to exercise
the Demand Right a certificate signed by the president of the Company
stating that in the good faith judgment of the Board of Directors, it
would be seriously detrimental to the Company and its stockholders for
such registration statement to be filed at the date filing would be
required, and it is therefore essential to defer the filing of such
registration statement, the Company shall have an additional period of
not more than ninety (90) days within which to file such registration
statement; and
(ii) if the Company has begun in good faith to actively pursue the
possibility of registering certain of its securities, either for its
own account or the account of a security holder or holders, the Company
shall not be obligated to take any action to effect a registration
pursuant to Section 2(a) until one hundred twenty (120) days after the
effective date of the registration statement with respect to the
contemplated registration or the cessation by the Company of
discussions regarding a possible offering; provided, however, that
should the Company's
REGISTRATION RIGHTS AGREEMENT
PAGE 3
<PAGE>
obligation under Section 2(a) be suspended pursuant to the terms of
this Section 2(c) by virtue of the commencement by the Company of
discussions regarding a possible offering, such suspensions shall be
effective for no more than ninety (90) days unless within such ninety
(90) days the Company has filed a registration statement with respect
to such offering.
(d) Should any registration effected hereunder be terminated
or withdrawn prior to its effectiveness as a consequence of the action or
inaction of the Holders requesting such registration or pursuant to an agreement
between the Company and the Holders requesting such registration with respect to
the Registrable Shares, the Company shall be deemed to have satisfied its
obligations hereunder and shall have no further obligation to effect any
registration hereunder; provided however, that to the extent the Holders
included in any registration statement withdrawn or terminated pursuant to this
Section 2(d) were not included in any earlier registration statement so
withdrawn or terminated, the Company shall not be deemed to have satisfied its
obligations hereunder to such Holders in the event such Holders immediately
reimburse the Company for all out-of-pocket costs and expenses incurred by the
Company in connection with such terminated or withdrawn registration.
(e) In the event MainStreet is the first Holder to exercise
the Demand Right, the Company agrees that in connection with such registration,
to the extent requested by MainStreet, the Company will prepare and file one (1)
post-effective amendment to the registration statement filed in such
registration for the sole purpose of including as a selling shareholder any
Holder of Registrable Shares whose shares were not included in such registration
statement as initially declared effective, provided that such request for such
post-effective amendment from MainStreet is made following the effective date of
such registration statement and on or before the date six (6) months following
the date of this Agreement, and provided further that any Holder included in any
such amendment pays all costs incurred by the Company in connection with the
printing and distribution of any offering documentation made necessary in
connection with such amendment.
3. Piggy-Back Registration Rights. The Company shall provide to the
Holders piggy-back registration rights for the Registrable Shares upon the
following terms and conditions:
(a) If on or before the Termination Date the Company elects to
file a registration statement to register for public offering any shares of its
common stock of the same class as the Registrable Shares in an underwritten
public offering, the Company shall provide the Holders who then hold Registrable
Shares with not less than twenty (20) days prior written notice of the proposed
date of filing of such registration statement. Within ten (10) days after
receiving notice of the proposed registration, the Holders who then hold
Registrable Shares can elect to be selling shareholders and include their
Registrable Shares, or any portion thereof, in such offering (a "Piggy-Back
Registration"), subject to the restrictions set forth herein, in the 1933 Act,
and in the rules and regulations promulgated by the SEC. The Company will not be
obligated or required to give such notice or to include any Registrable Shares
in any registration effected solely to implement an employee benefit or similar
qualified or non-qualified stock option plan (e.g., a Form S-8 registration
statement) or a merger or other transaction to which SEC Rule 145 or the
equivalent is applicable (e.g., a Form S-4 registration statement). In any
underwritten Piggy-Back Registration, the Company shall have the exclusive right
to select the investment bankers and managing underwriters for such registered
offering and to negotiate the underwriting or similar agreement. The Company may
at any time and from time to time, without the consent of any Holder, delay,
suspend, abandon or withdraw any Registration Statement described in this
Section 3(a) and any related, proposed or actual offering or other distribution
in which any Holder has requested inclusion of such Holder's Registrable Shares
pursuant to this Section 3(a).
REGISTRATION RIGHTS AGREEMENT
PAGE 4
<PAGE>
(b) In connection with any offering involving an underwriting
of shares being issued by the Company, the Company shall not be required under
this Section 3 to include any of the Registrable Shares in such underwriting
unless the Holders accept the terms of the underwriting as agreed upon between
the Company and the underwriter selected by the Company and all other
shareholders participating in such offering, and then only in such quantity as
will not, in the written opinion of the underwriter, jeopardize the success of
the offering by the Company; provided, however, that the underwriter may not
limit the amount of the Registrable Shares included in such registration and
underwriting to less than an amount equal to twenty percent (20%) of the amount
of all the Company's securities included within such registration and
underwriting.
4. Other Obligations Regarding Registration.
(a) Subject to Section 2(b), Section 2(e) and Section 7, all
expenses (excluding any underwriter or selling agent's discounts and commissions
applicable to Registrable Shares sold by the Holders) incurred in connection
with any registration pursuant to this Agreement shall be borne by the Company;
provided, however, that the Company shall not be required to pay fees and costs
of legal counsel or other advisors for the Holders.
(b) The Company agrees that, in connection with any
registration statement required by this Agreement, it shall prepare and file
whatever pre-effective and post-effective amendments and whatever supplements or
revised prospectuses that the 1933 Act or SEC may require and that it shall
furnish to the Holders and their advisors a reasonable number of preliminary,
final, supplemental, and revised prospectuses required under the 1933 Act. The
Company hereby agrees to cooperate with the counsel for the Holders in
connection with the preparation and filing of any registration statement
required by this Agreement, including any amendments and supplements thereto.
5. Obligations of Holders.
(a) Each Holder of Registrable Shares proposed to be included
in any registration statement contemplated by this Agreement shall furnish to
the Company in writing such information as the Company may reasonably require
from such Holder, and otherwise reasonably cooperate with the Company in
connection with any registration statement with respect to such Registrable
Shares.
(b) The failure of any Holder of Registrable Shares proposed
to be included in any registration statement contemplated by this Agreement to
furnish any information or documents in accordance with any provision contained
in this Agreement shall not affect the obligations of the Company under this
Agreement to any remaining Holders who furnish such information and documents
unless in the reasonable opinion of counsel to the Company or the managing
underwriter, such failure impairs or may impair they viability of the offering
or the legality of the registration statement or the underlying offering.
(c) The Holders of Registrable Shares included in any
registration statement contemplated by this Agreement shall not (until further
notice) effect sales thereof after receipt of telegraphic or written notice from
the Company to suspend sales to permit the Company to correct or update such
registration statement or prospectus; but the obligations of the Company with
respect to maintaining any registration statement current and effective shall be
extended by a period of days equal
REGISTRATION RIGHTS AGREEMENT
PAGE 5
<PAGE>
to the period such suspension is in effect, and the Company shall use its best
efforts to lift such suspension.
(d) At the end of any period during which the Company is
obligated to keep any registration statement current and effective as provided
by Section 2 hereof (and any extensions thereof required by Section 5(c)), the
Holders of Registrable Shares included in such registration statement shall
discontinue sales of shares pursuant to such registration statement upon receipt
of notice from the Company of its intention to remove from registration the
shares covered by such registration statement which remain unsold, and such
Holders shall notify the Company of the number of shares registered which remain
unsold promptly after receipt of such notice from the Company.
(e) Each of the Holders, if the managing underwriters so
request in connection with any underwritten registration of the Company's
securities, shall not, without prior written consent of such underwriters,
effect any public sale or other distribution of any equity securities of the
Company, including any sale pursuant to SEC Rule 144, during the seven (7) days
prior to, and during the ninety (90) day period commencing on the effective date
of such underwritten registration, except in connection with such underwritten
registration. The Holders agree to execute and deliver such customary and
standard lock-up agreement as requested by the managing underwriters to
effectuate the foregoing restrictions, so long as the Company is not in default
under its obligations under this Agreement.
(f) No Holder may participate in any underwritten registration
pursuant to this Agreement unless such Holder (i) agrees to sell such Holder's
Registrable Shares on the basis provided in any underwriting arrangements
approved by the persons entitled under the provisions of this Agreement to
approve such arrangements, and (ii) completes, executes, and delivers all
questionnaires, powers of attorney, indemnities, custody agreements,
certificates, underwriting agreements, and other documents reasonably required
by the terms of such underwriting arrangements. Any Holder to be included in any
underwritten registration shall be entitled at any time to withdraw such
Registrable Shares from such registration prior to its effective date in the
event that such Holder shall disapprove of any of the terms of the related
underwriting agreement, but only if such Holder is permitted to do so by the
managing underwriters or pursuant to any agreement therewith.
(g) Each Holder acknowledges and agrees that to the extent
such Holder is the beneficial owner of five percent (5%) or more of the Common
Stock of the Company, or is a member of a "group" (as that term is defined in
the Securities Exchange Act of 1934) that beneficially owns five percent (5%) or
more of the Common Stock of the Company, the underwriter or underwriters
selected by the Company to facilitate the public distribution of the Company's
securities in a registered public offering may require as a condition to such
underwriter's obligation to the Company that such Holder or group deliver to
such underwriter an executed agreement or other undertaking pursuant to which
such Holder or group agrees, without the prior written consent of such
underwriter, not to offer, sell, transfer or otherwise dispose of any shares of
the Company's Common Stock in the public market for a designated period
following the closing of such registered offering, and that in such event, each
Holder hereby agrees to execute such agreement or undertaking as may be
reasonably requested by the underwriter(s), but only to the extent all other
beneficial owners of five percent (5%) or more of the then outstanding Common
Stock also execute such agreement.
REGISTRATION RIGHTS AGREEMENT
PAGE 6
<PAGE>
6. Indemnification.
(a) The Company shall indemnify the Holders, each of the
Holders' officers and directors, and each person controlling the Holders, and
each underwriter, if any, with respect to such registration effected pursuant to
Section 2 or 3 hereof, against all claims, losses, damages and liabilities (or
action in respect thereto) arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any prospectus,
offering circular or other document (including any related registration
statement, notification or the like) incident to any such registration or based
on any omission (or alleged omission) to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
or any violation by the Company of any rule or regulation promulgated under the
1933 Act applicable to the Company and relating to action or inaction required
of the Company in connection with any such registration, and will reimburse the
Holders, each of the Holders' officers and directors, and each person
controlling the Holders, for any legal and any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action, provided that the Company will not be liable in any
such case to the extent that any such claim, loss, damage or liability arises
out of or is based on any untrue statement or omission based upon information
furnished to the Company by the Holders or their respective agents in writing
for inclusion in the applicable registration statement.
(b) The Holders of Registrable Shares included in any
registration statement contemplated by this Agreement shall jointly and
severally indemnify the Company, each of its directors and officers, and each
underwriter, if any, of the Company's securities covered by such registration
statement, and each person who controls the Company within the meaning of the
1933 Act, against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, to the extent that
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reasonable reliance upon information furnished to the
Company by the Holders in writing for inclusion in the registration statement
(provided that the Holders have been provided with the opportunity to review any
such registration statement prior to its effectiveness, and the Company has
responded to any comments of the Holders with respect to matters pertaining to
such Holders in the registration statement and such Holders have expressed their
satisfaction with such response(s)), or any violation by the Holders of any rule
or regulation promulgated under the 1933 Act applicable to the Holders and
relating to any action or inaction required of the Holders in connection with
any such registration, and will reimburse the Company, such directors, officers,
persons or underwriters for any legal or any other expenses reasonably incurred
in connection with investigating or defending any such claim loss damage,
liability or action; provided, however, that the indemnity agreement contained
in this subsection shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Holder, which consent shall not be unreasonably withheld,
nor, in the case of a sale directly by the Company of its securities (including
a sale of such securities through any underwriter retained by the Company to
engage in a distribution solely on behalf of the Company), shall the Holder be
liable to the Company in any case in which such untrue statement or alleged
untrue statement or omission or alleged omission was contained in a preliminary
prospectus and corrected in a final or amended prospectus, and the Company
failed to deliver a copy of the final or amended prospectus at or prior to the
confirmation of the of the securities to the person asserting any such loss,
claim, damage or liability in any case where such delivery is
REGISTRATION RIGHTS AGREEMENT
PAGE 7
<PAGE>
required to be made by the Company by the 1933 Act. Notwithstanding any other
terms of this Section 6(b) to the contrary, to the extent any other stockholder
to whom the Company has previously granted registration rights is a participant
(the "Participant") in a registration in which any Holder hereunder is a
participant, the indemnification obligation of such Holder to the Company
hereunder shall be construed so that it is no more or less favorable to such
Holder than if such Holder had been obligated under the indemnification
obligation applicable to the Participant under the Participant's registration
rights agreement with the Company.
(c) If the indemnification provided for in Section 6(a) or
6(b) is unavailable to or insufficient to hold harmless an indemnified party
under such Sections in respect of any losses, claims, damages or liabilities (or
actions in respect thereof) referred to therein, then each indemnifying party
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions in respect
thereof) in such proportions as is appropriate to reflect the relative fault of
the Company and each Holder in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable considerations. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
or such Holder and the parties' relative intent, knowledge, access to
information and the opportunity to correct or prevent such statement or
omission. The Company and the Holders agree that it would not be just and
equitable if contributions pursuant to this Section 6(c) were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to above in this Section 6(c). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
in this Section 6(c) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.
(d) The obligations of the Company and the Holders under this
Section 6 shall survive the completion of any offering of Registrable Shares in
a registration statement under this Agreement.
7. Tax Consequences. The Company does not warrant or represent, and
shall not be liable for, the tax consequences to the Holders for the exercise of
the Holders' rights under this Agreement (including, without limitation, the
potential tax consequences of the exercise of any of the Holders' rights
hereunder or the treatment of the transactions under the Acquisition Agreement
as a tax-free reorganization under Section 368 of the U.S. Internal Revenue
Code).
8. Miscellaneous.
(a) Amendments and Waivers. The provisions of this Agreement
may not be amended, modified, or supplemented and any waiver or consent to or
any departure from any of the provisions of this Agreement may not be given and
shall not become effective, unless and until (in each case) the Company shall
have agreed in writing thereto and shall have received the prior written consent
of (i) a Demand Percentage of the Holders to any such amendment, modification,
supplement,
REGISTRATION RIGHTS AGREEMENT
PAGE 8
<PAGE>
wavier, or consent and (ii) with respect to any such amendment, modification,
supplement, waiver, or consent which would be detrimental to a Holder, such
Holder.
(b) Notices. All notices, requests, approvals, consents,
demands and other communication provided for or permitted hereunder shall be in
writing, signed by an authorized representative of the sender and addressed to
the respective party at the address set forth below:
UCI: UCI Medical Affiliates, Inc.
1901 Main Street, Suite 1200
Columbia, SC 29201
Attn.: Jerry F. Wells
with copy to: Julian Hennig III, Esquire
Nexsen Pruet Jacobs & Pollard, LLP
P.O. Drawer 2426
Columbia, SC 29202
MainStreet: MainStreet Healthcare Corporation
2370 Main Street
Tucker, Georgia 30084
Attn: A. Wayne Johnson
with copy to: Sheldon E. Friedman, Esquire
S. Friedman & Associates, P.C.
1050 Crown Pointe Parkway
Suite 1550
Atlanta, GA 30338
Corker: Frank Corker, M.D.
__________________
__________________
with copy to: Sheldon E. Friedman, Esquire
S. Friedman & Associates, P.C.
1050 Crown Pointe Parkway
Suite 1550
Atlanta, GA 30338
Dare: Michael J. Dare
2370 Main Street
Tucker, Georgia 30084
REGISTRATION RIGHTS AGREEMENT
PAGE 9
<PAGE>
with copy to: Sheldon E. Friedman, Esquire
S. Friedman & Associates, P.C.
1050 Crown Pointe Parkway
Suite 1550
Atlanta, GA 30338
Ellis: David Ellis, D.O.
__________________
__________________
with copy to: Sheldon E. Friedman, Esquire
S. Friedman & Associates, P.C.
1050 Crown Pointe Parkway
Suite 1550
Atlanta, GA 30338
Erdman: Pamela K. Erdman, M.D.
__________________
__________________
with copy to: Sheldon E. Friedman, Esquire
S. Friedman & Associates, P.C.
1050 Crown Pointe Parkway
Suite 1550
Atlanta, GA 30338
Holloway: Harold Holloway, M.D.
__________________
__________________
with copy to: Sheldon E. Friedman, Esquire
S. Friedman & Associates, P.C.
1050 Crown Pointe Parkway
Suite 1550
Atlanta, GA 30338
Huang: Laykoon Huang, M.D.
__________________
__________________
with copy to: Sheldon E. Friedman, Esquire
S. Friedman & Associates, P.C.
1050 Crown Pointe Parkway
Suite 1550
Atlanta, GA 30338
REGISTRATION RIGHTS AGREEMENT
PAGE 10
<PAGE>
Johnson: A. Wayne Johnson
2370 Main Street
Tucker, Georgia 30084
with copy to: Sheldon E. Friedman, Esquire
S. Friedman & Associates, P.C.
1050 Crown Pointe Parkway
Suite 1550
Atlanta, GA 30338
Oliver: Izhak Oliver, M.D.
__________________
__________________
with copy to: Sheldon E. Friedman, Esquire
S. Friedman & Associates, P.C.
1050 Crown Pointe Parkway
Suite 1550
Atlanta, GA 30338
PENMAN: PENMAN Private Equity and Mezzanine
Fund, L.P.
333 West Wacker Drive
Suite 510
Chicago, IL 60606
Attn: Kelvin J. Pennington
with copy to: Mark D. Schindel
333 West Wacker Drive
Suite 510
Chicago, IL 60606
with additional
copy to: Mark Kindelin, Esquire
Petit: Richard Petit, P.A.
__________________
__________________
with copy to: Sheldon E. Friedman, Esquire
S. Friedman & Associates, P.C.
1050 Crown Pointe Parkway
Suite 1550
Atlanta, GA 30338
REGISTRATION RIGHTS AGREEMENT
PAGE 11
<PAGE>
Riddett: Robert G. Riddett, Jr.
2370 Main Street
Tucker, Georgia 30084
with copy to: Sheldon E. Friedman, Esquire
S. Friedman & Associates, P.C.
1050 Crown Pointe Parkway
Suite 1550
Atlanta, GA 30338
A party hereto may change its respective address by notice in writing
given to the other parties to this Agreement. Any notice, request, approval,
consent, demand or other communication shall be effective upon the first to
occur of the following; (i) when delivered to the party to whom such notice,
request, approval, consent, demand or the communication is being given, or (ii)
three (3) business days after being duly deposited in the United States mail,
certified, return receipt requested.
(c) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding of the successors and assigns of each of the parties,
including without limitation, subsequent Holders of the Registrable Shares, who
must agree to be bound by all the terms and conditions of this Agreement by
executing a joinder hereto.
(d) Counterparts. This Agreement may be executed in two or
more counterparts, and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same instrument.
(e) Headings. The headings in this Agreement are for
convenience of reference only and shall not constitute a part of this Agreement,
nor shall they affect their meaning, construction, or effect.
(f) Governing Law. The validity, performance, construction,
and effect of this Agreement shall be governed by and construed in accordance
with the internal laws of the State of South Carolina, without giving effect to
principles of conflicts of law. Jurisdiction and venue (subject to proper
service of process) shall be exclusively in the state and federal courts for the
County of Richland in the State of South Carolina.
(g) Severability. In the event that any one or more of the
provisions contained herein, or the applicable thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
(h) Entire Agreement. This Agreement is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein. There are no promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted by the Company affecting the
Registrable Shares. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject
REGISTRATION RIGHTS AGREEMENT
PAGE 12
<PAGE>
matter, and supplements, but does not limit or abrogate, any similar provisions
of the Acquisition Agreement.
(i) Majority of Holders. After the exercise by the Holders of
a Demand Right hereunder, all decisions and actions of the Holders shall require
the approval of Holders owning greater than fifty (50) percent of the number of
Registrable Shares.
IN WITNESS WHEREOF, the parties have executed and delivered this
Registration Rights Agreement to be legally binding and effective as of the date
first above written.
COMPANY:
UCI MEDICAL AFFILIATES, INC. __________________________________
David Ellis, D.O.
By:___________________________________
Name:_________________________________
Title:________________________________ __________________________________
Pamela K. Erdman, M.D.
HOLDERS:
MAINSTREET HEALTHCARE __________________________________
CORPORATION Harold Holloway, M.D.
By:___________________________________
Name:_________________________________ __________________________________
Title:________________________________ Laykoon Huang, M.D.
PENMAN PRIVATE EQUITY AND
MEZZANINE FUND, L.P. __________________________________
By: Penman Asset Management, L.P. A. Wayne Johnson
Its: General Partner
By:_____________________________ __________________________________
Kelvin Pennington Izhak Oliver, M.D.
Its: General Partner
__________________________________
_________________________________ Robert G. Riddett, Jr.
Richard Petit, P.A.
PRACTICE ACQUISITION CONSULTANTS,
_________________________________ INC.
Frank Corker, M.D.
By: ______________________________
_________________________________ Its:____________________________
Michael J. Dare
REGISTRATION RIGHTS AGREEMENT
PAGE 13
<PAGE>
Exhibit 8.4.3
Form of Transferees' Officers Certificate
[See Attached]
<PAGE>
TRANSFEREE'S OFFICERS' CERTIFICATE
[Corporate Name]
TO:_______________________________
We hereby certify in connection with the Acquisition Agreement and Plan
of Reorganization (the "Agreement") dated , 1998, respecting the purchase of
substantially all of the assets of 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; and Prompt Care Medical Center, Inc., a Georgia corporation, by UCI
Medical Affiliates, Inc., a Delaware corporation; UCI Medical Affiliates of
Georgia, Inc., a South Carolina corporation; Doctor's Care of Georgia, P.C., a
Georgia professional corporation; and Doctor's Care of Tennessee, P.C., a
Tennessee professional corporation, that we are officers of
_______________________________________________________ (the "Company") and,
that as such, have access to the corporate records and familiarity with the
matters therein contained and herein certified, that we are authorized to
execute and deliver this certificate in the name and on behalf of the Company,
and that:
1. Incumbency of Officers. The following named persons are on the date
hereof, and at all times since prior to the date of the Agreement, have been
duly elected, qualified, and acting officers of the Company holding the office
or offices set forth opposite his or her name, and that the signature set forth
opposite each such officer's name is his or her true and legal signature:
Name Office Signature
- ---- ------ ---------
- --------------------- ----------------- ---------------------
- --------------------- ----------------- ---------------------
- --------------------- ----------------- ---------------------
- --------------------- ----------------- ---------------------
- --------------------- ----------------- ---------------------
2. Incumbency of Directors. The following named persons are on the date
hereof, and were as of the date referenced in paragraph 5 below, the duly
elected, qualified, and acting directors of the Company, and constitute all the
directors of the Company at the date hereof and constituted all the directors at
the date referenced in paragraph 5 below:_______________________________________
________________________________________________________________________________
__________.
<PAGE>
3. Articles of Incorporation. Attached as Exhibit A hereto is a true,
correct, and complete copy of the Articles of Incorporation of the Company as
filed with the Secretary of State of the Company's state of organization, which
Articles of Incorporation have not been amended, modified, or rescinded except
as may be reflected in Exhibit A, and remain in full force and effect as of the
date hereof.
4. Bylaws. Attached as Exhibit B hereto is a true, correct, and
complete copy of the Bylaws of the Company, which Bylaws have not been amended,
modified, or rescinded except as may be reflected in Exhibit B and remain in
full force and effect as of the date hereof.
5. Approving Resolutions. Attached as Exhibit C hereto is a true,
correct, and complete copy of the resolutions (with any preamble thereto)
authorizing the Company's entering into and performing its obligations under the
Agreement, which resolutions were duly adopted on ____________________________,
199_, by the Board of Directors of the Company, and which resolutions are in
full force and effect on and as of the date hereof, not having been amended,
altered, repealed, or rescinded.
6. Bringdown of Representations and Warranties. Each representation and
warranty made by or respecting the Company in the Agreement is true and accurate
in all material respects as of the date of this certificate with the same effect
as if made on and as of the date of this certificate by the Company, except as
otherwise contemplated by the Agreement.
7. Compliance with Agreement. The Company has performed and complied in
all material respects with each and every covenant, agreement, and condition
required to be performed or complied with by the Company under the Agreement on
or prior to the date hereof.
IN WITNESS WHEREOF, we have executed this certificate on behalf of the
Company in the capacities set forth below our signatures as of the ____ day of ,
1998.
Sign:_____________________________
Print Name:_______________________
Title: President
Sign:_____________________________
Print Name:_______________________
Title: Secretary
2
<PAGE>
Exhibit 8.4.4
Form of Legal Opinion of Transferees' Counsel
[See Attached]
<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. 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 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.
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
<PAGE>
MainStreet HealthCare Corporation
[Date of Closing]
Page 2
representations and warranties of Buyer and UCI contained in the Agreement. 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 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 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 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 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
<PAGE>
MainStreet HealthCare Corporation
[Date of Closing]
Page 3
material terms, conditions or provisions of any material agreement or instrument
known to 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), 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
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 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 or the Ancillary Documents.
8. The issuance, sale and delivery of the Shares in accordance with the
Agreement have been duly authorized by all necessary corporate action on the
part of UCI. The Shares when so issued, sold and delivered in accordance with
the provisions of the Agreement will be duly and validly issued, fully paid and
nonassessable.
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).
<PAGE>
MainStreet HealthCare Corporation
[Date of Closing]
Page 4
(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).
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 or the Ancillary Documents, or on the consummation of
the transactions contemplated by the Agreement 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.
<PAGE>
MainStreet HealthCare Corporation
[Date of Closing]
Page 5
(e) The enforceability of the Agreement 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 and the
Ancillary Documents.
(f) We express no opinion as to the enforceability of any provisions in
the Agreement 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.
<PAGE>
Exhibit 9.1
1. MainStreet is not authorized to do business in Tennessee as of this
date; however, it shall qualify before Closing.
<PAGE>
Exhibit 9.5
1. See Exhibit 9.26.
<PAGE>
Exhibit 9.6
Security holders of MainStreet
[See Attached]
<PAGE>
EXHIBIT 9.6
<TABLE>
<CAPTION>
Class A Non-Voting Common Stock: Number of Shares Date of Issuance
- ------------------------------- ---------------- ----------------
<S> <C> <C> <C>
1. Frank T. Corker 3,000 12/04/96
2. Laykoon Huang 160,000 12/04/96
3. Dennis R. Thomas* 20,000 12/04/96
4. Izhak Oliver 50,000 12/20/96
5. David Ellis 15,000 01/15/97
6. Richard G. Pettit 15,000 01/15/97
7. Practice Acquisition Consultants, Inc. 5,000 05/21/97
8. L. Lanier Allen* 8,000 04/24/97
*Includes Allen & Thomas whose shares are going to be redeemed prior to the Closing.
Class B Common Stock:
1. A. Wayne Johnson 1,351,250 12/12/96
2. Robert G. Riddett, Jr. 646,250 12/12/96
3. Michael J. Dare 352,500 12/12/96
4. PENMAN Private Equity and 3,525,000 12/ /96
Mezzanine Fund, L.P.
5. PENMAN Private Equity and 423,458 7/11/97
Mezzanine Fund, L.P.
6. A. Wayne Johnson 161,994 7/11/97
5% Cumulative Redeemable Preferred:
1. A. Wayne Johnson 927 12/12/96
2. PENMAN Private Equity and 2,440 12/ /96
Mezzanine Fund, L.P.
3. PENMAN Private Equity and 750 4/07/97
Mezzanine Fund, L.P.
4. PENMAN Private Equity and 130 6/05/97
Mezzanine Fund, L.P.
5. PENMAN Private Equity and 20 6/05/97
Mezzanine Fund, L.P.
6. PENMAN Private Equity and 100 5/22/97
Mezzanine Fund, L.P.
<PAGE>
Exhibit 9.6 (Continued)
10% Cumulative Redeemable Preferred:
PP-1 PENMAN Private Equity and 298 7/11/97
Mezzanine Fund, L.P.
PP-2 A. Wayne Johnson 114 7/11/97
</TABLE>
<PAGE>
Exhibit 9.9
1. Universal Diagnostics, Inc. Was formed on January 27, 1997. A stock
certificate for 900 shares to MainStreet Healthcare Corporation was
prepared, but has not been signed
<PAGE>
Exhibit 9.10
Financial Statements
[See Attached]
<PAGE>
KPMG
MAINSTREET HEALTHCARE CORPORATION
Consolidated Financial Statements
March 31, 1997
With Independent Auditors' Report Thereon
<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
2
<PAGE>
MAINSTREET HEALTHCARE CORPORATION
Consolidated Balance Sheet
March 31, 1997
Assets
<TABLE>
<CAPTION>
Current assets:
<S> <C>
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.
3
<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.
4
<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 Additional Total
Common Stock 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
garanteed 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.
5
<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>
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.
6
<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.
7
<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.
8
<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.
9
<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.
10
<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
============
11
<PAGE>
MAINSTREET HEALTHCARE CORPORATION
Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>
<S> <C>
(7) Long-Term Debt and Leases
Long-term debt and capital leases consists of:
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
================
The following is a schedule of principal maturities of long-term debt,
including capital leases, as of March 31, 1997.
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.
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
=======
Capitalized equipment leases included in equipment was $18,600 at
March 31, 1997. The imputed interest rate was 16.45% at March 31,
1997.
12
<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.
1998 $ 512,353
1999 453,355
2000 426,199
2001 411,586
2002 258,130
Thereafter 76,757
-----------
$2,138,380
==========
(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.
13
<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:
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 $ -
=========
The significant components of the deferred income tax expense (benefit)
for the period ended March 31, 1997 are as follows:
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 $ -
===============
(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.
14
<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.
15
<PAGE>
MainStreet Healthcare, Inc.
Balance Sheet
ASSETS 12/31/97 12/31/96
Cash
Petty Cash 10,409 850
Cash-Checking 73,931 1,995,684
-----------------------------
Total Cash 84,340 1,996,534
Accounts Receivable
Accounts Receivable-Medical 3,219,829 2,304,372
Less: Doubtful Accounts (1,788,679) (1,129,406)
A/R Lockbox Account 4,079 -
Accounts Receivable-Other 51,701 19,738
-----------------------------
Total Accounts Receivable 1,486,930 1,194,704
Inventory
Inventory-Medical Supplies 25,250 14,500
Supplies 5,060 -
-----------------------------
Total Inventory-Medical Supplies 30,310 14,500
Prepaid
Prepaid Insurance 438 (871)
Prepaid Interest - (7,828)
Prepaid Other 29,149 4,054
Deposits - Refundable 41,789 33,154
-----------------------------
Total Prepaid 71,376 28,509
Other Current Assets
Other Receivables 17,995 9,898
------------------------------
Total Other Assets 17,995 9,898
TOTAL CURRENT ASSETS 1,690,951 3,244,145
Fixed Assets
Land 104,600 104,600
Buildings 162,900 162,900
Building Improvements 263,594 216,551
Furniture & Fixtures 181,947 181,066
Clinic Equipment 752,413 629,031
Signs 19,804 6,499
Trucks - 1,700
Office Equipment 5,117 1,313
Computers 102,925 48,291
Software 106,915 95,951
Leasehold Improvements 50,143 38,383
-----------------------------
Total Fixed Assets 1,750,358 1,486,285
Accumulated Depreciation (188,218) (53,846)
-----------------------------
NET FIXED ASSETS 1,562,140 1,432,439
<PAGE>
Other Assets
Organizational Expense 5,229 44,363
Deferred Acquisition Costs 196,625 5,334
Deferred A/R financing fees 30,285 -
Deferred Conversion Costs 11,144 (56,914)
Deferred Recruiting Costs 6,100 -
Goodwill 1,515,883 1,580,126
Non Compete 192,916 245,833
Investments - -
Bond Discount - -
--------------------------
TOTAL OTHER ASSETS 1,958,182 1,818,742
TOTAL ASSETS 5,211,273 6,495,326
<PAGE>
MainStreet Healthcare, Inc.
Balance Sheet
LIABILITIES 12/31/97 12/31/96
Current Liabilities
Notes Payable-Acquisitions 345,719 485,719
Contracts Payable - Current 26,333 26,333
Lease Payable - Current 69,152 -
Accrued Interest - Notes/Lease Payable 29,023 8,154
NCFE Financing Payable 613,543 -
NCFE Financing Reserves (111,487) -
Accounts Payable - Trade 1,149,097 400,839
Payroll Taxes Payable 107,195 78,317
Health Insurance 5,749 13,815
401(k) Plan - Employee 1,040 (7,715)
Accrued Wages 373,433 57,606
Accrued Interest - Redeem. Shares 194,695 5,535
Other Accrued Payables 166,207 5,564
----------------------------
Total Current Liabilities 2,969,699 1,074,167
Long Term Liabilities
LT Notes Payable - Acquisitions 312,272 430,171
Contracts Payable - Long Term 277,505 302,403
Lease Payable - Long Term 91,075 -
Shareholder Loans 19,476 87,336
----------------------------
Total Long Term Liabilities 700,328 819,910
Total Liabilities 3,670,027 1,894,077
EQUITY
Common Stock - -
Class A Common Stock 2,480 2,480
Class B Common Stock 58,450 58,450
Redeemable Preferred Stock 4,283,814 4,283,814
Excess Paid in Capital 715,454 715,454
Accumulated Deficit (42,965) -
Retained Earnings (1,569,272) (1,188)
YTD Net Income (1,906,715) (457,761)
----------------------------
Total Equity 1,541,246 4,601,249
Total Liabilities & Equity 5,211,273 6,495,326
<PAGE>
MainStreet Healthcare, Inc.
MAINSTREET: CONSOLIDATED
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
OTHER DIRECT COSTS: 12/31/97 Pctg. 12/31/96 Pctg.
<S> <C> <C> <C> <C> <C>
6010 Advertising 42,657 0.8% 5,852 0.3%
6011 Yellow Pages 31,413 0.6% 399 0.0%
6400 Computer Supplies 18,149 0.4% 14,305 0.7%
7055 Computer Communications 7,366 0.2% -- 0.0%
6410 Computer Maintenance 11,072 0.2% 1,402 0.1%
6520 Collection Costs 461 0.0% 226 0.0%
6550 Dues & Subscriptions 8,977 0.2% 7,950 0.4%
6590 Entertainment 8,986 0.2% 3,001 0.1%
(7000 Travel 45,840 0.9% 14,187 0.7%
7130 Uniforms 5,914 0.1% 20 0.0%
7150 Licenses 5,554 0.1% 4,760 0.2%
7180 Office Supplies 77,180 1.5% 40,851 1.9%
7190 Outside Services 258 0.0% 2,363 0.1%
7280 Postage 36,432 0.7% 8,653 0.4%
---------- -------
Total Other Direct Costs 300,259 5.9% 103,969 4.8%
Total Direct Clinic Costs: 1,625,382 32.0% 584,006 27.1%
Profit (Loss) after Direct Costs (825,769) (16.3%) (92,166) 4.6%
INDIRECT CLINIC COSTS:
6030 Acctng & Audit Fees 550 0.0% 1,018 0.1%
6031 Legal Fees 22,384 0.4% 8,190 0.4%
6050 Bad Check -- 0.0% 1,306 0.1%
6070 Bank Service Charges 30,765 0.6% 7,007 0.3%
6510 Contributions (25) 0.0% 125 0.0%
6530 Courier 8,093 0.2% 3,500 0.2%
6535 Donations 1,296 0.0% 15 0.0%
(7155 Recruiting Costs 8,007 0.2% 6,792 0.3%
7290 Personnel Recuitment Fees 7,900 0.2% 1,756 0.1%
7120 Long Term Interest Expense 18,459 0.5% 27,730 1.3%
7125 Capitalized Lease Interest Exp 4,607 0.0% -- 0.0%
(7300 Miscellaneous Items 5,876 0.1% 9,229 0.4%
---------- -------
Total Indirect Clinic Costs 107,912 2.1% 66,668 3.1%
Profit (Loss) after Indirect Costs (933,681) (18.4%) (158,834) 1.5%
CORPORATE EXPENSES:
5010 Management Salaries 272,174 5.4% 25,460 1.2%
7110 Officer Life Insurance -- 0.0% -- 0.0%
5020 Office Salaries 187,934 3.7% 56,607 2.6%
5030 Marketing Salaries 28,321 0.6% 25,880 1.2%
5050 Computer Wages 37,917 0.8% 16,115 0.8%
5040 Other Wages & Benefits -- 0.0% 744 0.0%
7210 Sales Promotion -- 0.0% 180 0.0%
7260 Franchise Taxes 2,989 0.1% -- 0.0%
9055 Program (Interest) Cost - A/R
Finance 20,040 0.4% -- 0.0%
---------- -------
Total Corporate Expenses 549,735 10.8% 124,986 5.8%
</TABLE>
<PAGE>
MainStreet Healthcare, Inc.
MAINSTREET: CONSOLIDATED
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
12/31/97 Pctg. 12/31/96 Pctg.
<S> <C> <C> <C> <C>
Net Profits (Loss) before Non Cash Iter (1,483,056) (29.2) (283,820) (4.3%)
Non Cash Items:
6560 Depreciation Expense 114,394 2.3% 53,569 2.2%
6581 Amortization - Goodwill 80,870 1.6% 51,511 1.6%
6582 Amortization - Non Compete 55,000 1.1% 29,167 0.9%
6570 Amortization - Other 2,221 0.0% 277 0.0%
9020 Imputted Interest - NP 22,635 0.5% 33,882 0.2%
9060 Accrued Interest - Redeemable Shar 148,529 2.9% 5,535 0.3%
9070 Accredited Interest - Class A Stk - 0.0% - 0.0%
9080 Restructure Goodwill - 0.0% - 0.0%
9030 Loss on Disposal of Assets - 0.0% - 0.0%
---------- ---------
Total Non Cash Items 423,549 8.3% 173,941 5.1%
Net Profit/(Loss) (1,906,705) (37.6%) (457,761) (9.4%)
</TABLE>
<PAGE>
Exhibit 9.11.1
1. None.
Exhibit 9.11.2
1. Bank One, N.A. financing.
Exhibit 9.11.3
1. Subsequent to March 31, 1997, MainStreet purchased the
practice of L. Lanier Allen which included assets, etc.
Subsequent to that date, the parties agreed to rescind the
relationship. It has been agreed that Dr. Allen would return
his 8,000 shares of Class A common stock and MainStreet would
pay Dr. Allen approximately $20,000.00 and surrender all
assets of the Thomaston practice inclusive of Accounts
Receivable of $25,949 (gross) $19,037 (net).
2. With respect to the termination of the Adel/Thomaston
practice, Dr. Dennis Thomas is no longer an employee of
MainStreet and MainStreet has transferred to Dr. Thomas the
following:
1. Adel Receivables equal to $130,404 (gross) $18,982 (net);
2. Adel Fixed Assets equal to $5,000; and
3. Valdosta Receivables equal to $45,724 (gross) $5,293 (net).
The note to Dr. Thomas for $50,000 was cancelled and he is to
turn over his 20,000 shares of Class A stock of MainStreet
once payment of $20,000 and expenses due have been made,
which is anticipated to be paid prior to closing.
3. There was a pending action against Dr. Schock involving
violation of non-compete provisions, but it has been recently
resolved.
4. On or about August 31, 1997, MainStreet terminated the
practice of Dr. Corker (Valdosta). The accounts receivable
were transferred to Dr. Thomas and the fixed assets remained
with MainStreet.
5. The Macon Creek/Columbia Coliseum practice was
terminated on or about May 31, 1997.
6. MainStreet terminated the employment of Dr. Allen
Miller, Dr. Gary Klein, Dr. Lanier Allen, Dr. Dennis Thomas.
Kathleen Thomas resigned December, 1997.
7. Since March 31, 1997, MainStreet Healthcare Corporation
purchased for $54,000 the practice of Harshad Mehta, M.D. of
Covington, Georgia. The assets included furniture, fixtures,
patient records, accounts receivable and goodwill. The
corporation is paying him $3,000 per month for a period of 18
months. The closing date was on or about September 1, 1997.
8. MainStreet has reached an agreement to terminate a
contract to enter into a lease for a medical practice building
under construction in Valdosta, Georgia in exchange for
agreement to make a $70,000 payment to Rodlock Investments,
L.L.C.
Exhibit 9.11.6
1. See Exhibits 9.11.3 and 9.14.
Exhibit 9.12.1
1. Real Estate taxes are past due in the following practices:
a. Snellville - 2270 Oak Road, Snellville, GA 30278; in the name
of David Ellis in the amount of $961.92; due date - December
20, 1997;
b. Gwinnett - in the name of David Ellis in the amount of
$5,661.11; due date - December 15, 1997.
We are in the process of having these taxes paid and they shall be
paid in full as of the date of Closing.
Exhibit 9.13
See 9.12.1.
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.
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 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
indicated he will dismiss MainStreet. If he fails to do so, we
will file a motion to dismiss.
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 is due February 9, 1998 under an extension of time.
MainStreet has been remitting $10,000.00 per month since November
1997. 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.
<PAGE>
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.
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.
Gary Klein, M.D.; This is a dispute concerning the termination
of Dr. Klein's Employment Agreement.
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.
<PAGE>
Exhibit 9.14 (Continued)
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.
Exhibit 9.17
See Exhibit 9.12.1.
Exhibit 9.18.1
Employee Benefit Plans
[See Attached]
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 9.18.1
EMPLOYEE BENEFIT PLANS
Benefit Plan: Carrier: Policy #: Agent Address
------------ ------- -------- ----- -------
<S> <C> <C> <C> <C> <C>
1. Group Health Insurance United Healthcare BPL29200-25120 David Asbury 1360 Peachtree St
Atlanta, GA 30309
2. Group Life Insurance United Healthcare BPL29200-25120 David Asbury 1360 Peachtree St
Atlanta, GA 30309
3. Group Dental Insurance The Guardian G-318872 David Asbury 1360 Peachtree St
Atlanta, GA 30309
4. Vacation Day Company Policy MainStreet Internal
5. Holiday Company Policy MainStreet Internal
6. Sick Day Company Policy MainStreet Internal
7. Worker's Compensation Policy State Farm Insurance 91-ES-4565-1 Robert Giganti 3145 Tucker
Norcross Rd
Tucker, GA 30084
<CAPTION>
Phone
-----
<S> <C>
1. 404 846 3000
2. 404 846 3000
3. 404 846 3000
4.
5.
6.
7. 770 491 3999
</TABLE>
Exhibit 9.19.1
Insurance
[See Attached]
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 9.19.1
INSURANCE
Insurance Coverage: Carrier: Policy Agent Address
------------------ ------- ------ ----- -------
<S> <C> <C> <C> <C> <C>
1. MalPractice Insurance Mag Mautual Ins. Co. 104620 Tom Harkins 8 Piedmon Ctr
Atlanta, GA 30355
2. Business Liability Insurance State Farm Ins. 91-M1-1254-4 Robert Giganti 3145 Tucker Norcross Rd.
Tucker, GA 30084
3. Worker's Compensation Star Farm Ins. 91-ES-4565-1 Robert Giganti 3145 Tucker Norcross Rd.
Tucker, GA 30084
4. Group Health Insurance United Healthcare Ins. CBPL 29200-25120 David Asbury 1360 Peachtree St.
Atlanta, GA 30309
5. Group Life Insurance United Healthcare Ins. CBPL 29200-25120 David Asbury 1360 Peachtree St.
Atlanta, GA 30309
6. Group Dental Insurance The Guardian Co. G-318872 David Asbury 1360 Peachtree St.
Atlanta, GA 30309
<CAPTION>
Phone
-----
<S> <C>
1. 404 842 5600
2. 770 491 3999
3. 770 491 3999
4. 404 846 3000
5. 404 846 3000
6. 404 846 3000
</TABLE>
Exhibit 9.20
List of Directors, Officers and Employees of each Transferor
[See Attached]
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 9.20
MAINSTREET HEALTHCARE
MEDICAL GROUP PC
TENNESSEE
Wages Bonus
------ -----
<S> <C> <C> <C> <C> <C>
Corporate Officers Laykoon Huang President 166,400.00 none
Robert G. Riddett, Jr. Secretary none none
A. Wayne Johnson Chmn, Asst. Secy none none
Directors Laykoon Huang 166,400.00 none
Robert G. Riddett, Jr. none none
A. Wayne Johnson none none
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 9.20
MAINSTREET HEALTHCARE
MEDICAL GROUP PC
TENNESSEE
EMPLOYEE LIST
Location Departmen Name Salary Wages Expires Bonus
-------- --------- ---- ------ ----- ------- -----
<S> <C> <C> <C> <C> <C> <C>
t
-
Knox West Provider Jea Wook 50/hour none
Sim 130,500.00 91,0 none
Craig Baker 00.0
0
130,500.0
0
Knox Provider Laykoon 166,400.00 166,400.0 12/31/00 none
Nort Huang 0
h
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 9.20
MAINSTREET HEALTHCARE
MEDICAL GROUP PC
GEORGIA
Wages
-------
<S> <C> <C> <C> <C>
Corporate Officers Pamela K. President $ 96,000
Erdman Vice President 108,000
Robert G. Riddett, Secretary 150,000
Jr. Chairman 88,400
A. Wayne Asst. Secy. 0
Johnson Treasurer
Harold E.
Holloway
Michael J. Dare
Directors Pamela K. 96,000
Erdman 108,000
Robert G. Riddett, 150,000
Jr. 88,400
A. Wayne 0
Johnson
Harold E.
Holloway
Michael J. Dare
<CAPTION>
Bonuses
- --------
<C>
none
none
none
none
none
none
none
none
none
none
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 9.20
MAINSTREET HEALTHCARE
MEDICAL GROUP PC
GEORGIA
EMPLOYEES
Bonus
Location Departmen Name Salary Wages Expires Computation
--------- ---------- ------- -------- ------ -------- -----------
<S> <C> <C> <C> <C> <C> <C>
t
-
Tucker Provider Laura Davidson 80,000.00 80,000.0 12/31/00 2.5%/gross
Pamela Erdman 1000/day 0 12/31/98 none
PA Ratna Kanumury 35/hour 96,000.0 none
0
29,120.0
0
Stn Mtn Provider Harold 85/hour 88,400.0 5/1/99 none
Holloway 120,000.00 0 8/4/00 25%>108Q
Lan Mahon 120,000.
00
Covington Provider Nicholas Grego 50/hour 104,000. none
00
Lawrville Provider Wilfred Danley 135,000.00 135,000. 12/31/01 35%>32M
PA Beth Howard 45/hour 00 none
93,600.0
0
Austell Provider Izhak Oliver 208,000.00 208,000. 12/31/01 none
Jasmine Jeffers 145,600.00 00 12/31/03 none
PA Leslie Irvine 70,000.00 124,600. none
00
70,000.0
0
Snellville Provider Frederic 75/hour 12,000.0 none
PA Steinberg 130,000.00 0 10/15/03 30%>108Q
John Tumor 130,000.
00
Conyers Provider Shahid Rafique 130,000.00 130,000. 12/31/03 30%>105Q
00
Auburn Provider Susan Tanner 75/hour 78,000.0 5/30/99 30%>base/.3Q
PA Richard Petit 90,000.00 0 12/15/01 20%/70Q
90,000.0
0
Snapfinger Provider Harshad Mehta 3000/month 36,000.0 none
Ruben 112,320.00 0 12/31/01 20%/150Q
Alexander 112,320.
00
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 9.20
MAINSTREET HEALTHCARE
DELAWARE CORPORATION
Wages Bonus
------ -----
<S> <C> <C> <C> <C> <C>
Corporate Officer Robert G. Riddett, President 108,000 none
Jr. Secretary 150,000 none
A. Wayne Johnson EVP, CFO 0 none
Michael J. Dare
Directors Mark D. Schindel 0 none
Kelvin J. 0 none
Pennington 150,000 none
A. Wayne 108,000 none
Johnston
Robert G. Riddett,
Jr.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 9.20
MAINSTREET HEALTHCARE
DELAWARE CORPORATION
EMPLOYEE LIST
Location Department Name Hourly Rate Salaried Wages Bonus
-------- ---------- ---- ------ -------- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Tucker Nursing Barb Ernst 13.50 28,080 none
Cynthia Pinckney 13.50 28,080 none
Jill Nielsen 35.00 72,800 none
Jodi Crawford 35.00 72,800 none
Joy Johnson 15.00 31,200 none
Michelle 12.50 26,000 none
Practice Mgr Freeman 18.27 1,461.54 38,000 none
Clerical Rebecca Mele 7.25 15,080 none
Melanie Ernst 9.75 20,280 none
Pamela Stroman 10.00 20,800 none
Sherry Juneau
Stone Mtn Nursing Robbie Hart 20.63 1,650.00 42,900 none
Kim Kneisel 11.50 23,920 none
Practice Mgr Judy Dobson 14.50 1,160.00 30,160 none
Clerical Kelly O'Brien 9.25 19,240 none
Marie Hammond 10.65 22,152 none
Rita Ramsey 10.50 21,840 none
Covington Nursing Djuana Manning 9.00 18,720 none
Leatha Harris 10.00 20,800 none
Practice Mgr Debora Ballard 12.98 1,038.46 27,000 none
Clerical Delbra Bailey 10.50 21,840 none
Sonja Crawley 11.00 22,880 none
Amily Jones 11.00 22,880 none
Lawville Nursing Linda Froman 10.00 20,800 none
Marthalyn 10.00 20,800 none
Mccurry 11.75 24,440 none
Practice Mgr Joy Silvestri 12.50 1,000.00 26,000 none
Clerical Carol Gebhard 7.00 14,560 none
Traci Copeland 8.50 17,680 none
Terri Eliasen 10.00 20,800 none
Lona Mills
<PAGE>
<CAPTION>
Location Department Name Hourly Rate Salaried Wages Bonus
-------- ---------- ---- ------ -------- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Austell Nursing Lynne Davis 11.00 22,880 none
Joyce Lawson 10.50 21,840 none
Georgianne 13.00 27,040 none
Donalson 22,880 none
Nancy Tipton 11.00 21,840 none
Lea Stephens 10.50
Practice Mgr 416.52 10,830 none
Clerical Janice Albertson 5.21 20,800 none
Peggy Mccombs 10.00 1,200.00 31,200 none
Patricia Graben 15.00 22,360 none
Linda Hall 10.75 23,920 none
Barbara Bickford 11.50
Snellville Nursing Janis Moore 12.00 24,960 none
Rita Patel 9.25 19,240 none
Sybil Gresham 12.50 26,000 none
Practice Mgr Lynne Swanger 16.83 1,346.16 35,000 none
Clerical Heather Helms 7.50 15,600 none
Janet Lee 8.75 18,200 none
Sue Stanely 7.50 15,600 none
Conyers Nursing Corinne 8.50 17,680 none
Mcdonald 11.00 22,880 none
Practice Mgr Laurie Ledford 16.83 35,000 none
Clerical Nancy Franklin 9.00 18,720 none
Amanda Warren
Auburn Nursing Julie Hougland 11.54 24,003 none
Brenda Duncan 12.65 26,312 none
Practice Mgr Lynn Webb 16.83 1,346.15 35,000 none
Kendra Danley 8.50 17,680 none
Snapfinger Nursing Felicia Johnston 9.00 18,720 none
Jacqueline 15.00 31,200 none
Practice Mgr Minter 14.42 1,153.85 30,000 none
Clerical Debra Upshaw 11.00 22,880 none
Debra Upshaw
Knox West Nursing Shoba Ganta 11.70 24,336 none
Marilyn Geren 13.50 28,080 none
Tawfiq Nimri 11.44 23,795 none
Cheryl Ranz 10.40 21,632 none
Linda Russell 8.76 18,221 none
Fue Mel Tsai 10.40 21,632 none
Practice Mgr Linda Calloway 9.88 790.40 20,550 none
Clerical Hannelore 8.26 17,181 none
Phillips 9.88 20,550 none
Colleen Riddle 7.72 16,058 none
Imogene Parris 7.80 16,224 none
Lof Chen
<PAGE>
<CAPTION>
Location Department Name Hourly Rate Salaried Wages Bonus
-------- ---------- ---- ------ -------- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Knox North Nursing Karen Hurst 8.32 17,306 none
Betty Morton 15.86 1,268.80 32,989 none
Melissa Quails 9.48 19,718 none
Marion Parker 11.28 23,462 none
Vickie Phillips 11.44 23,795 none
Sales Michael Farmer 17.31 1,384.62 36,000 none
Practice Mgr Chan Mak 14.42 1,153.60 29,994 none
Clerical Karen Hurst 8.32 17,306 none
Meier Lue 7.90 16,432 none
Ultrasound Nurse Robyn Hayman 14.42 1,153.85 30,000 none
Manager Marc Upshaw 33.65 2,692.31 70,000 none
Driver Derek O'Neal 5.73 458.33 11,917 none
Corporate Corporate Robert Riddett 51.92 4,153.85 108,000 none
Anne O'Neal 15.00 31,200 none
Practice Walt Thom 46.15 3,692.31 96,000 none
Mgmnt Ed Vinson 35.56 2,844.62 73,960 none
Tim Hawkins 26.92 2,153.85 56,000 none
Accounting Connie Viscarra 16.11 1,288.46 33,500 none
Frank Brock 34.62 2,769.23 72,000 none
A/R Carol Griffin 13.00 27,040 none
Collecti Tracey Hunter 11.00 22,880 none
ons Deanne Downs 10.00 20,800 none
</TABLE>
Exhibit 9.21
See Exhibit 9.14 (claim by Tracey Hunter).
Exhibit 9.26
1. Those consents required under the real estate leases,
equipment leases and the financing to Bank One, N.A.
<PAGE>
FORM 10-KSB/A
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
( X ) ANNUAL REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1997
( ) TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the transition period from _________________ to _________________
Commission File Number: 0-13265
UCI MEDICAL AFFILIATES, INC.
- ------------------------------------------------------------------------------
(Name of Small Business Issuer in its charter)
Delaware 59-2225346
- ------------------------------------------------------------------------------
(State or other jurisdiction
of incorporation or organization) (IRS Employer Identification Number)
1901 Main Street, Suite 1200, Mail Code 1105, Columbia, SC 29201
- -----------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (803) 252-3661
----------------
Securities registered pursuant to Section 12(b) of the Act: None
----------------
Securities registered pursuant to Section 12(g) of the Act: Common Stock,
$.05 par value
---------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to the
filing requirements for the past 90 days. Yes X No
-------- --------
Indicate by check mark if the disclosure of delinquent filers pursuant to Item
405 of regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. ( X )
The registrant's revenue for the year ended September 30, 1997, the registrant's
most recent year end, was $27,924,772.
The aggregate market value of voting stock held by nonaffiliates of the
registrant on December 5, 1997, is approximately $5,801,885.*
The number of shares outstanding of the registrant's common stock, $.05 par
value, was 5,744,965 at September 30, 1997.
Transitional Small Business Disclosure Format (check one): Yes No X
----- ------
* Calculated by excluding all shares held by officers, directors and controlling
shareholder of registrant without conceding that all such persons are
"affiliates" of registrant for purposes of the federal securities laws.
Total number of pages, including the cover page, is 97. Exhibit Index
is on pages 52-53.
1
<PAGE>
UCI MEDICAL AFFILIATES, INC.
INDEX TO FORM 10-KSB/A
PAGE
PART I
Item 1 Description of Business......................... 3
Item 2 Description of Property......................... 7
Item 3 Legal Proceedings............................... 8
Item 4 Submission of Matters to a Vote of Security Holders ...... 8
PART II
Item 5 Market For Common Equity and
Related Stockholder Matters................................ 9
Item 6 Management's Discussion and Analysis of Financial
Condition and Results of Operations........................ 10
Item 7 Financial Statements ...................................... 17
Item 8 Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure..................... 17
PART III
Item 9 Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the Exchange Act. 18
Item 10 Executive Compensation..................................... 20
Item 11 Security Ownership of Certain Beneficial Owners
and Management............................................. 22
Item 12 Certain Relationships and Related Transactions ........... 24
Item 13 Exhibits and Reports on Form 8-K ......................... 27
2
<PAGE>
PART I
Item 1. Description of Business
General
UCI Medical Affiliates, Inc. ("UCI") is a Delaware corporation incorporated on
August 25, 1982. Operating through its wholly-owned subsidiary, UCI Medical
Affiliates of South Carolina, Inc. ("UCI-SC"), UCI provides nonmedical
management and administrative services for a network of 40 freestanding medical
centers (the "Centers") located throughout South Carolina (29 operating as
Doctor's Care, one as Doctor's Surgical Group, one as Doctor's Orthopedic Group,
four as Progressive Physical Therapy Services and five family practice offices
operating under different names).
Organizational Structure
Federal law and the laws of South Carolina generally specify who may practice
medicine and limit the scope of relationships between medical practitioners and
other parties. Under such laws, UCI and UCI-SC are prohibited from practicing
medicine or exercising control over the provision of medical services. In order
to comply with such laws, all medical services at the Centers are provided by or
under the supervision of Doctor's Care, P.A. (the "P.A.," and collectively with
UCI and UCI-SC, the "Company"), which has contracted with UCI-SC to provide the
medical direction of the Centers. The medical directors operate the Centers
under the financial and operational control of UCI-SC. However, medical
supervision of the Centers is provided solely by the P.A. The P.A. is organized
so that all physician services are offered by the physicians who are employed by
the P.A. Neither UCI nor UCI-SC employ practicing physicians as practitioners,
exert control over their decisions regarding medical care or represent to the
public that it offers medical services. UCI-SC has entered into an
administrative services agreement with the P.A. for the performance of all
administrative, management and support functions. UCI-SC believes that the
services it provides to the P.A. which result in control over the assets of the
P.A. and mandate financial statement consolidation under Generally Accepted
Accounting Principles do not constitute the practice of medicine under
applicable laws.
Nevertheless, because of the uniqueness of the structure of the relationship
described above, many aspects of the Company's business operations have not been
the subject of state or federal regulatory interpretation and there can be no
assurance that a review of the Company's business by the courts or regulatory
authorities will not result in a determination that could adversely affect the
operations of the Company or that the health care regulatory environment will
not change so as to restrict the Company's existing operations or future
expansion.
The Centers
The Centers are staffed by licensed physicians, other healthcare providers and
administrative support staff. The medical support staff includes licensed
nurses, certified medical assistants, laboratory technicians and x-ray
technicians.
The Centers typically are open for extended hours (weekends and evenings) and
out-patient care only. When hospitalization or specialty care is needed,
referrals to appropriate specialists are made.
The Company's Centers are broadly distributed throughout the state of South
Carolina. There are twenty-two primary care Centers in the Columbia region, five
in the Charleston region, five in the Myrtle Beach region, two in the Aiken
region, and six in the Greenville-Spartanburg region.
The Company is considering introducing its medical model into neighboring states
as management believes that the same conditions that led to the Company's growth
to date in South Carolina exist in other states. Although management believes
that expansion into neighboring states is possible, there can be no assurance
that expansion into other states would be successful.
3
<PAGE>
Medical Services Provided at the Centers
The Company's Centers offer out-patient medical care, without appointment, for
treatment of acute and episodic medical problems. The Centers provide a broad
range of medical services which would generally be classified as within the
scope of family practice and occupational medicine. The medical services are
provided by licensed physicians, nurses and auxiliary support personnel. The
services provided at the Centers include, but are not limited to, the following:
(bullet) Routine care of general medical problems, including colds, flu, ear
infections, hypertension, asthma, pneumonia and other conditions
typically treated by primary care providers;
(bullet) Treatment of injuries, such as simple fractures, dislocations,
sprains, bruises and cuts;
(bullet) Minor surgery, including suturing of lacerations and removal of
cysts and foreign bodies;
(bullet) Diagnostic tests, such as x-rays, electrocardiograms, complete
blood counts, urinalysis and various cultures; and
(bullet) Occupational and industrial medical services, including drug
testing, workers' compensation and physical examinations.
At any of the Centers, a patient with a life-threatening condition would be
evaluated by the physician, stabilized and immediately referred to a nearby
hospital.
Patient Charges and Payments
The fees charged to a patient are determined by the nature of medical services
rendered. Management of the Company believes that the charges at its Centers are
significantly lower than the charges of hospital emergency departments and are
generally competitive with the charges of local physicians and other providers
in the area.
The Company's Centers accept payment from a wide range of sources. These include
patient payments at time of service (by cash, check or credit card), patient
billing and assignment of insurance benefits (including Blue Cross/Blue Shield,
Workers' Compensation and other private insurance). Private pay billings
represent the most significant source of revenues. The Company also provides
services for members of the four largest health maintenance organizations
("HMOs") operating in South Carolina - Companion HealthCare Corporation,
HealthSource South Carolina, Inc., Physician's Health Plan, and Maxicare.
Capitated Reimbursement Arrangements
Medical services traditionally have been provided on a fee-for-service basis
with insurance companies assuming responsibility for paying all or a portion of
such fees. The increase in medical costs under traditional indemnity health care
plans has been caused by a number of factors. These factors include: (i) the
lack of incentives on the part of health care providers to deliver
cost-effective medical care; (ii) the absence of controls over the utilization
of costly specialty care physicians and hospitals; (iii) a growing and aging
population which requires increased health care expenditures; and (iv) the
expense involved with the introduction and use of advanced pharmaceuticals and
medical technology.
As a result of escalating health care costs, employers, insurers and
governmental entities all have sought cost-effective approaches to the delivery
of and payment for quality health care services. HMOs and other managed health
care organizations have emerged as integral components in this effort. HMOs
enroll members by entering into contracts with employer groups or directly with
individuals to provide a broad range of health care services for a capitation
payment, with minimal or no deductibles or co-payments required of the members.
HMOs, in turn, contract with health care providers like the Company to
administer medical care to HMO members. These
4
<PAGE>
contracts provide for payment to the Company on either a discounted
fee-for-service or through capitation payments based on the number of members
covered, regardless of the amount of necessary medical care required within the
covered benefit period.
The Company negotiates contracts with HMOs for the P.A.'s physicians to provide
health care on a capitated reimbursement basis. Under these contracts, which
typically are automatically renewed on an annual basis, the P.A.'s physicians
provide virtually all covered primary care services in exchange for a fixed
monthly capitation payment from the HMOs for each member who chooses a P.A.
physician as his or her primary care physician. The capitation amount is fixed
depending upon the age and sex of the HMO enrollee. Contracts with HMOs
accounted for approximately 11% of the Company's net revenues in fiscal 1997.
To the extent that enrollees require more care than is anticipated, aggregate
capitation payments may be insufficient to cover the costs associated with the
treatment of enrollees. No capitation contracts currently in place at the
Company have been determined to be insufficient to cover related costs of
treatment. Higher capitation rates are typically received for senior patients
because their medical needs are generally greater and consequently the cost of
covered care is higher.
Certain third party payors are studying various alternatives for reducing
medical costs, some of which, if implemented, could affect reimbursement levels
to the Company. Management of the Company cannot predict whether changes in
present reimbursement methods or proposed future modifications in reimbursement
methods will affect payments for services provided by the Centers and, if so,
whether they will have an adverse impact upon the business of the Company.
Competition and Marketing
All of the Company's Centers face competition, in varying degrees, from hospital
emergency rooms, private doctor's offices and other competing freestanding
medical centers. Some of these providers have financial resources which are
greater than those of the Company. In addition, traditional sources of medical
services, such as hospital emergency rooms and private physicians, have had, in
the past, a higher degree of recognition and acceptance by patients than Centers
such as those operated by the Company. The Company's Centers compete on the
basis of accessibility, including evening and weekend hours, a no-appointment
policy, the attractiveness of the Company's state-wide network to large
employers and third party payors, and on a basis of a competitive fee schedule.
In an effort to offset the competition's community recognition, the Company has
substantially increased its marketing efforts. Regional marketing
representatives have been added, focused promotional material has been developed
and a newsletter for employers promoting the Company's activities has been
initiated. Additionally, the Company has created a Family Practice Division to
attract those patients who desire to visit the more traditional type doctor's
office - by appointment.
Government Regulation
Federal law and the laws of many states, including South Carolina, generally
specify who may practice medicine and limit the scope of relationships between
medical practitioners and other parties. Under such laws, business corporations
such as UCI and UCI-SC are prohibited from practicing medicine or exercising
control over the provision of medical services. In order to comply with such
laws, all medical services at the Centers are provided by or under the
supervision of the P.A., which has contracted with UCI-SC to provide the medical
direction of the Centers. The P.A. is organized so that all physician services
are offered by the physicians who are employed by the P.A. Neither UCI nor
UCI-SC employ practicing physicians as practitioners, exert control over their
decisions regarding medical care or represent to the public that it offers
medical services. UCI-SC has entered into an administrative services agreement
with the P.A. for the performance by UCI-SC of all administrative, management
and support functions. UCI-SC believes that the services it provides to the P.A.
which result in control over the assets of the P.A. and mandate financial
statement consolidation under Generally Accepted Accounting Principles do not
constitute the practice of medicine under applicable laws. Accordingly, the
Company believes that it is not in violation of applicable state laws relating
to the practice of medicine.
5
<PAGE>
As a participant in the health care industry, the Company's operations and
relationships are subject to extensive and increasing regulation by a number of
governmental entities at the federal, state and local levels. The Company
believes its operations are in material compliance with applicable laws.
Nevertheless, because of the uniqueness of the structure of the relationship
between UCI-SC and the P.A., many aspects of UCI's business operations have not
been the subject of state or federal regulatory interpretation and there can be
no assurance that a review of UCI's or the P.A.'s business by courts or
regulatory authorities will not result in a determination that could adversely
affect the operations of UCI or that the health care regulatory environment will
not change so as to restrict UCI's existing operations or its expansion.
Approximately five (5%) percent of the revenues of the Company is derived from
payments made by government-sponsored health care programs (principally,
Medicare and Medicaid). As a result, any change in reimbursement regulations,
policies, practices, interpretations or statutes could adversely affect the
operations of the Company. There are also state and federal civil and criminal
statutes imposing substantial penalties, including civil and criminal fines and
imprisonment, on health care providers that fraudulently or wrongfully bill
governmental or other third-party payors for health care services. The Company
believes it is in material compliance with such laws, but there can be no
assurance that the Company's activities will not be challenged or scrutinized by
governmental authorities.
Certain provisions of the Social Security Act, commonly referred to as the
"Anti-kickback Statute", prohibit the offer, payment, solicitation or receipt of
any form of remuneration in return for the referral of Medicare or state health
program patients or patient care opportunities, or in return for the
recommendation, arrangement, purchase, lease or order of items or services that
are covered by Medicare or state health programs. Many states have adopted
similar prohibitions against payments intended to induce referrals of Medicaid
and other third-party payor patients. Although the Company believes that it is
not in violation of the Anti-kickback Statute or similar state statutes, its
operations do not fit within any of the existing or proposed federal safe
harbors.
Significant prohibitions against physician referrals were enacted by the U.S.
Congress in the Omnibus Budget Reconciliation Act of 1993. Subject to certain
exemptions, a physician or a member of his immediate family is prohibited from
referring Medicare or Medicaid patients to an entity providing "designated
health services" in which the physician has an ownership or investment interest
or with which the physician has entered into a compensation arrangement. While
the Company believes it is in compliance with such legislation, future
regulations could require the Company to modify the form of its relationships
with physician groups. Some states have also enacted similar self-referral laws
and the Company believes it is likely that more states will follow. The Company
believes that its practices fit within exemptions contained in such statutes.
Nevertheless, expansion of the operations of the Company to certain
jurisdictions may require structural and organizational modifications of the
Company's relationships with physician groups to comply with new or revised
state statutes.
Because the P.A. remains a separate legal entity, it may be deemed a competitor
subject to a range of antitrust laws which prohibit anti-competitive conduct,
including price fixing, concerted refusals to deal and division of market. The
Company intends to comply with such state and federal laws which may affect its
development of integrated health care delivery networks, but there can be no
assurance that a review of the Company's business by courts or regulatory
authorities will not result in a determination that could adversely affect the
operation of the Company.
As a result of the continued escalation of health care costs and the inability
of many individuals to obtain health insurance, numerous proposals have been or
may be introduced in the U.S. Congress and state legislatures relating to health
care reform. There can be no assurance as to the ultimate content, timing or
effect of any health care reform legislation, nor is it possible at this time to
estimate the impact of potential legislation, which may be material, on the
Company.
Federal and state laws regulate insurance companies, HMOs and other managed care
organizations. Generally, these laws apply to entities that accept financial
risk. Certain of the risk arrangements entered into by the Company could
possibly be characterized by some states as the business of insurance. The
Company, however,
6
<PAGE>
believes that the acceptance of capitation payments by a healthcare provider
does not constitute the conduct of the business of insurance. Many states also
regulate the establishment and operation of networks of healthcare providers.
Generally, these laws do not apply to the hiring and contracting of physicians
by other healthcare providers. There can be no assurance that regulators of the
states in which the Company may operate would not apply these laws to require
licensure of the Company's operations as an insurer or provider network. The
Company believes that it is in compliance with these laws in the state in which
it currently does business, but there can be no assurance that future
interpretations of these laws by the regulatory authorities in South Carolina or
the states in which the Company may expand will not require licensure or a
restructuring of some or all of the Company's operations. In the event that the
Company is required to become licensed under these laws, the licensure process
can be lengthy and time consuming and, unless the regulatory authority permits
the Company to continue to operate while the licensure process is progressing,
the Company could experience a material adverse change in its business while the
licensure process is pending. In addition, many of the licensing requirements
mandate strict financial and other requirements which the Company may not
immediately be able to meet. Further, once licensed, the Company would be
subject to continuing oversight by and reporting to the respective regulatory
agency.
Employees
As of September 30, 1997 and 1996, the Company had 480 and 429 employees,
respectively (384 and 330, respectively, on a full-time equivalent basis). This
includes 84 and 72 medical providers, respectively, employed by the P.A.
Advisory Note Regarding Forward-Looking Statements
Certain of the statements contained in this PART I, Item 1 (Description of
Business) and in PART II, Item 6 (Management's Discussion and Analysis of
Financial Condition and Results of Operations) that are not historical facts are
forward-looking statements subject to the safe harbor created by the Private
Securities Litigation Reform Act of 1995. The Company cautions readers of this
Annual Report on Form 10-KSB that such forward-looking statements involve known
and unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Company to be materially different
from those expressed or implied by such forward-looking statements. Although the
Company's management believes that their expectations of future performance are
based on reasonable assumptions within the bounds of their knowledge of their
business and operations, there can be no assurance that actual results will not
differ materially from their expectations. Factors which could cause actual
results to differ from expectations include, among other things, the difficulty
in controlling the Company's costs of providing healthcare and administering its
network of Centers; the possible negative effects from changes in reimbursement
and capitation payment levels and payment practices by insurance companies,
healthcare plans, government payors and other payment sources; the difficulty of
attracting primary care physicians; the increasing competition for patients
among healthcare providers; possible government regulations negatively impacting
the existing organizational structure of the Company; the possible negative
effects of prospective healthcare reform; the challenges and uncertainties in
the implementation of the Company's expansion and development strategy; the
dependence on key personnel, and other factors described in this report and in
other reports filed by the Company with the Securities and Exchange Commission.
Item 2. Description of Properties
All but one of the Company's primary care Centers' facilities are leased. The
properties are generally located on well-traveled major highways, with easy
access. Each property offers free, off-street parking immediately adjacent to
the center. One Center is leased from an entity affiliated with the Company's
Chairman. Six Centers are leased from Companion HealthCare Corporation and one
Center is leased from Companion Property and Casualty Insurance Company,
principal shareholders of the Company. Ten of the Centers are leased from
physician employees of the P.A. See additional information regarding these
leases at Item 12, "Certain Relationships and Related Transactions."
7
<PAGE>
Item 3. Legal Proceedings
The Company is party to various claims, legal activities and complaints arising
in the normal course of business. In the opinion of management and legal
counsel, aggregate liabilities, if any, arising from legal actions would not
have a material adverse effect on the financial position of the Company.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
8
<PAGE>
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
The common stock of the Company is traded on the Nasdaq SmallCap Market under
the symbol UCIA. The prices set forth below indicate the high and low bid prices
reported on the Nasdaq SmallCap Market for the indicated periods.
Bid Price
Fiscal Year ended September 30, 1997 High Low
1st quarter (10/01/96 - 12/31/96) $3-3/8 $2-3/8
2nd quarter (01/01/97 - 03/31/97) 3-3/8 2-1/2
3rd quarter (04/01/97 - 06/30/97) 2-11/16 1-11/16
4th quarter (07/01/97 - 09/30/97) 2-3/4 1-5/16
Bid Price
Fiscal Year ended September 30, 1996 High Low
1st quarter (10/01/95 - 12/31/95) $4-1/4 $3-1/8
2nd quarter (01/01/96 - 03/31/96) 5-1/8 3-1/4
3rd quarter (04/01/96 - 06/30/96) 4 3-1/4
4th quarter (07/01/96 - 09/30/96) 3-3/4 2-7/8
Bid Price
Fiscal Year ended September 30, 1995 High Low
1st quarter (10/01/94 - 12/31/94) $3-1/8 $1-1/2
2nd quarter (01/01/95 - 03/31/95) 3-1/4 1-1/2
3rd quarter (04/01/95 - 06/30/95) 3-3/8 2-1/4
4th quarter (07/01/95 - 09/30/95) 3-1/4 1-3/4
The foregoing quotations reflect inter-dealer prices without retail markup,
markdown or commission and may not necessarily reflect actual transactions.
As of September 30, 1997, there were 652 stockholders of record of the Company's
common stock, excluding individual participants in security position listings.
The Company has not paid cash dividends on its common stock since inception and
has no plans to declare cash dividends in the foreseeable future.
Recent Sales of Unregistered Securities
During the Company's fiscal year ended September 30, 1997, the securities
identified below were issued by the Company without registration under the
Securities Act of 1933. In each case, all of the shares were issued pursuant to
the exemption from registration contained in Section 4(2) of the Securities Act
of 1933 (the "Act") and Rule 506 of Regulation D under the Act as a transaction,
not involving a general solicitation, in which the purchaser was purchasing for
investment. The Company believes that each purchaser was given or had access to
9
<PAGE>
detailed financial and other information with respect to the Company and
possessed requisite financial sophistication.
On August 1, 1997, the Company issued 253,648 shares of its common stock to Dr.
Stephen F. Serbin, 253,648 shares of its common stock to Dr. Peter J. Stahl and
10,353 shares of its common stock to Dr. Sharon Silverman as consideration in
connection with the merger of the medical practice of Doctors Serbin, Stahl, and
Silverman with UCI-SC.
On September 9, 1997, the Company issued 19,513 shares of its common stock to
Dr. Leif M. Adams as part of the purchase price in connection with the Company's
acquisition of substantially all of the assets of the medical practice of Dr.
Adams.
Item 6. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion and analysis provides information which the Company
believes is relevant to an assessment and understanding of the Company's
consolidated results of operations and financial condition. This discussion
should be read in conjunction with the consolidated financial statements and
notes thereto.
STATEMENT OF OPERATIONS DATA
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(In thousands, except per share data)
----------------------------------------------------------------
For the year ended September 30,
----------------------------------------------------------------
1997 1996 1995 1994 1993
----------- --------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenues $27,925 $23,254 $17,987 $12,540 $9,799
Income (loss) before extraordinary items (84) 466 (1,360) 644 268
Net income (loss) (84) 466 (1,360) 644 407
Net income (loss) per share1 (.02) .11 (.43) .28 .21
Weighted average number of shares
outstanding1 5,000 4,294 3,137 2,324 1,971
<CAPTION>
BALANCE SHEET DATA
- -------------------------------------------------------------------------------------------------------------------------
(In thousands, except per share data)
--------------------------------------------------------------------
At September 30,
---------------------------------------------------------------------
1997 1996 1995 1994 1993
---------- ----------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C>
Working capital $ 2,921 $ 2,020 $ (383) $ 763 $ (845)
Premises & equipment, net 4,003 3,300 2,795 1,098 487
Total assets 20,864 15,733 10,216 6,674 2,940
Long-term debt 7,939 5,373 4,366 2,838 667
Stockholders' equity 9,488 7,822 3,253 2,603 457
</TABLE>
- ----------------------------
1 The net income (loss) per share and the weighted average number of shares
outstanding has been restated for all periods presented to reflect the one for
five reverse stock split effected on July 27, 1994.
10
<PAGE>
Consolidation with the P.A.
The consolidated financial statements of the Company include the accounts of
UCI, UCI-SC and the P.A. The financial statements of the P.A. are consolidated
with UCI because UCI-SC has unilateral control over the assets and operations of
the P.A., and notwithstanding the lack of majority ownership of the P.A. by UCI
and UCI-SC, consolidation of the P.A. with UCI and UCI-SC is necessary to
present fairly the financial position and results of operations of UCI and
UCI-SC. The management agreement between UCI-SC and the P.A. conveys to UCI-SC
perpetual, unilateral control over the assets and operations of the P.A. Control
is perpetual rather than temporary because of (i) the length of the term of the
agreement, (ii) the continuing investment of capital by UCI-SC, (iii) the
employment of all of the non-physician personnel by UCI-SC and (iv) the nature
of the services provided to the P.A. by UCI-SC.
In November 1997 the Emerging Issue Task Force (EITF) finalized EITF 97-2 which
provides guidance on consolidation of physician practices and enhances related
disclosures of physician practice management companies. This EITF 97-2 is
effective for fiscal years ending after December 15 1998. The Company is in the
process of evaluating any potential effect on its financial reporting format.
Procedurally, the management agreement calls for the P.A. to provide medical
services and charge a fee to the patient or to the patient's insurance carrier
or employer for such services. Physician salaries are paid out of these revenues
and all remaining revenues are passed to UCI-SC as a management fee. UCI-SC
provides all support personnel (nurses, technicians, receptionists), all
administrative functions (billing, collecting, vendor payment), and all
facilities, supplies and equipment. The consolidated accounts of the Company
include all revenue and all expenses (including physician salaries) of all three
entities.
The P.A. enters into employment agreements with physicians for terms ranging
from one to ten years. All employment agreements have clauses that allow for
early termination of the agreement if certain events occur such as the loss of a
medical license. Over 80% of the physicians employed by the P.A. are paid on an
hourly basis for time scheduled and worked at the medical centers. The other
physicians are salaried. A few of the physicians have incentive compensation
arrangements, however, no amounts were accrued or paid during the Company's
three prior fiscal years that were significant. As of September 30, 1997 and
1996, the P.A.
employed 84 and 72 medical providers, respectively.
The net assets of the P.A. are not material for any period presented and
intercompany accounts and transactions have been eliminated. For the fiscal year
ended September 30, 1997, the Company has shown a substantial increase in
revenues and in the number of medical centers under management. This growth is a
direct result of actions taken by management to increase marketing efforts, to
expand the state-wide network in South Carolina and to focus on the field of
occupational and industrial medicine.
Results of Operations for the Year Ended September 30, 1997 Compared to the Year
Ended September 30, 1996
For fiscal year 1997, revenues of $27,925,000 reflect an increase of 20% from
the amount reported for fiscal year 1996. The following reflects revenue trends
from fiscal year 1993 through fiscal year 1997:
For the year ended September 30, (in thousands)
-------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- -------- -------- -------
Revenues $27,925 $23,254 $17,987 $12,540 $9,799
Operating Costs 26,466 21,525 18,180 11,881 9,133
Operating Margin 1,458 1,729 (193) 660 666
The increase in revenue for fiscal year 1997 is attributable to a number of
factors. The Company engaged in a significant expansion, increasing the number
of primary care medical Centers in South Carolina from 29 to 33
11
<PAGE>
(as of September 30, 1997). The expansion included the addition of seven Centers
and the closure of three Centers, for a net addition of three Centers to the
cluster in Columbia (bringing the total to 18) and one Center in Greenville
(bringing the total to six in this region). Myrtle Beach has four locations and
the Charleston area has the remaining five sites. The revenue from the net
increase in new locations in fiscal year 1997 and from the full year of
operations of the locations added in fiscal year 1996 represented the most
significant portion of the revenue growth. Of the $4,671,000 in revenue growth,
approximately $876,000 was from the net increase of four locations opened in
fiscal year 1997 and approximately $2,462,000 was the result of having the four
locations opened during fiscal year 1996 operating for all of fiscal year 1997.
The increase of four Centers in fiscal year 1997 was net of two centers in the
Columbia area and one center in the Myrtle Beach area that were closed during
fiscal year 1997. Each of these centers were start-ups (versus acquisitions)
and, therefore, had no related intangible assets recorded, and each had not
proven to be profitable in a reasonable period of time. The aggregate costs of
the three centers closed exceeded their aggregate revenues by $253,000 during
fiscal year 1997.
The remainder of the revenue growth in fiscal year 1997 (approximately
$1,333,000) was the result of "same center" growth in patient visits and
charges. This represents an average growth of approximately seven (7%) percent
in revenue at these established centers.
The Company, in fiscal year 1997, increased its services provided to members of
HMOs. In these arrangements, the Company, through the P.A., acts as the
designated primary caregiver for members of HMOs who have selected one of the
Company's centers or providers as their primary care provider. In fiscal year
1994, the Company began participating in an HMO operated by Companion HealthCare
Corporation ("CHC"), a wholly owned subsidiary of Blue Cross Blue Shield of
South Carolina ("BCBS"). BCBS, through CHC, is a primary stockholder of UCI.
Including its arrangement with CHC, the Company now participates in four HMOs
and is the primary care "gatekeeper" for more than 20,000 capitated lives in
fiscal year 1997 compared to 18,000 in fiscal year 1996 and 11,000 is fiscal
year 1995. While HMOs do not, at this time, have a significant penetration into
the South Carolina market, the Company believes that HMOs and other managed care
plans will experience a substantial increase in market share in the next few
years, and the Company is therefore positioning itself for this possibility.
Capitated revenue grew from approximately $2,400,000 for fiscal year 1996 to
$3,100,000 ($700,000, or 15%, of the $4,671,000 in total revenue growth) in
fiscal year 1997.
The Company negotiates contracts with HMOs for the P.A.'s physicians to provide
health care on a capitated reimbursement basis. Under these contracts, which
typically are automatically renewed on an annual basis, the P.A. physicians
provide virtually all covered primary care services and receive a fixed monthly
capitation payment from the HMOs for each member who chooses a P.A. physician as
his or her primary care physician. The capitation amount is fixed depending upon
the age and sex of the HMO enrollee. Contracts with HMOs accounted for
approximately 11% of the Company's net revenue in fiscal year 1997 compared to
10% in fiscal year 1996 and 8% in fiscal year 1995.
Increased revenues in fiscal year 1997 also reflect the Company's heightened
focus on occupational medicine and industrial health services. Focused marketing
materials, including quarterly newsletters for employers, were developed to
spotlight the Company's services for industry. The Company also entered into an
agreement with Companion Property and Casualty Insurance Company ("CP&C")
wherein the Company acts as the primary care provider for injured workers of
firms insured through CP&C. CP&C is a primary stockholder of UCI. See additional
information at Item 12, "Certain Relationships and Related Transactions".
Patient encounters increased to 393,000 in fiscal year 1997, from 338,000 in
fiscal year 1996.
Even with the positive effects of the factors mentioned above, revenues were
short of goals for the year, due in part to the increased competition from
hospitals and other providers in Columbia, Greenville, Sumter and Myrtle Beach.
In each of these areas, regional hospitals have acquired or opened new primary
care physician practices that compete directly with the Company for patients. In
each case, the hospital owner of the Company's competition is believed to have
significantly greater resources than the Company. Management believes that
12
<PAGE>
such competition will continue into the future and plans to compete on a basis
of quality service and accessibility.
An operating margin of $1,458,000 was realized in fiscal year 1997 as compared
to an operating margin of $1,729,000 in fiscal year 1996. This margin
deterioration was primarily the result of the increased cost-cutting pressures
being applied by managed care insurance payors that cover many of the Company's
patients. The following table breaks out the Company's revenue and patient
visits by revenue source for fiscal year 1997:
Percent (%) of Percent (%) of
Payor Patient Visits Revenue
- ----------------------------- ------------------- -----------------
Patient Pay 24% 24%
Employer Paid 15% 11%
HMO 10% 11%
Workers Compensation 10% 14%
Medicare/Medicaid 12% 7%
Managed Care Insurance 24% 28%
Other 5% 5%
As managed care plans attempt to cut costs, they typically increase the
administrative burden of providers such as the Company by requiring referral
approvals and by requesting hard copies of medical records before they will pay
claims. The number of patients at the Company's Centers that are covered by a
managed care plan versus a traditional indemnity plan continues to grow.
Management expects this trend to continue.
The operating margin deterioration was also contributed to by the high costs of
the three centers closed during fiscal year 1997. Costs exceeded revenues by
$253,000 at these three centers during the fiscal year 1997.
Depreciation and amortization expense increased to $1,250,000 in fiscal year
1997, up from $961,000 in fiscal year 1996. This increase reflects higher
depreciation expense as a result of significant leasehold improvements and
equipment upgrades at a number of the Company's Centers, as well as an increase
in amortization expense related to the intangible assets acquired from the
Company's purchase of existing practices in Greenville and Columbia. Net
interest expense increased from $583,000 in fiscal year 1996 to $813,000 in
fiscal year 1997 primarily as a result of the interest costs associated with the
indebtedness incurred in the leasehold improvements, the operating line of
credit the Company has with its primary bank, and debt associated with the
acquisitions noted above.
Results of Operations and Balance Sheet Analysis for Fiscal Year 1996
Compared to Fiscal Year 1995
Total revenues for fiscal year 1996 increased by 29% to $23,254,000 from
$17,987,000 for fiscal year 1995. The Company expanded from 25 to 29 Centers
during fiscal year 1996.
The Company, in fiscal year 1996, increased its services provided to members of
HMOs. In these arrangements, the Company, through the P.A., acts as the
designated primary caregiver for members of HMOs who have selected one of the
Company's Centers or providers as their primary care provider. The Company
participated in four HMOs during fiscal 1996 and was the primary care
"gatekeeper" for more than 18,000 capitated lives.
Patient encounters increased to 393,000 in fiscal year 1996 from 283,000 in
fiscal year 1995.
An operating margin of $1,729,000 was realized in fiscal 1996 as compared to an
operating loss of $193,000 in fiscal year 1995. This improvement was attributed
to cost cutting measures put into place in the third quarter of fiscal year 1995
which focused on personnel costs.
13
<PAGE>
Depreciation and amortization expense increased to $961,000 in fiscal year 1996,
up from $579,000 in fiscal year 1995. This increase reflects higher depreciation
expense as a result of significant leasehold improvements and equipment upgrades
at a number of the Company's medical centers, as well as an increase in
amortization expense related to the intangible assets acquired from the
Company's purchase of existing practices in Greenville and Columbia. Net
interest expense increased from $505,000 in fiscal year 1995 to $583,000 in
fiscal year 1996 primarily as a result of the interest costs associated with the
indebtedness incurred in leasehold improvements and the operating line of credit
the Company had with its primary bank.
Effective October 1, 1993, the Company adopted Statement of Financial Standards
No. 109, "Accounting for Income Taxes" ("SFAS 109") which requires the use of an
asset and liability approach to accounting for income taxes. As part of the
adoption of SFAS 109, the Company has recognized a deferred tax asset relating
to net operating loss carry forwards which are available to offset future
taxable income.
Cash and cash equivalents increased from $77,000 at September 30, 1995 to
$238,000 at September 30, 1996. Cash was provided mainly via the sale of stock
and the increase in debt.
Accounts receivable increased from $2,343,000 at September 30, 1995 to
$4,187,000 at September 30, 1996. This was attributable to the opening of four
additional primary care Centers and the overall growth in patient visits to
existing Centers.
The increase in property and equipment during fiscal year 1996 is attributable
to the equipment needs of new centers and the upgrading of equipment at
established centers. The excess of cost over the net assets of acquired
businesses (goodwill) totaled $5,829,000 at September 30, 1996 compared to
$3,578,000 at the end of the previous fiscal year and reflects the medical
practices acquired.
The current portion of debt decreased in fiscal year 1996 to $914,000 from
$1,245,000 at the end of fiscal year 1995. This reduction was mainly due to the
refinancing of the line of credit to a long-term maturity. Long-term debt
increased from $3,121,000 to $4,459,000 primarily as a result of indebtedness
incurred in capital leases for Center upfits and in the utilization of an
operating line of credit.
Overall, the Company's current assets exceeded its current liabilities at
September 30, 1996 by $2,020,000.
Results of Operations for the Three Months Ended September 30, 1997 as Compared
to the Three Months Ended September 30, 1996:
The following summarizes the fiscal 1997 fourth quarter results of operations as
compared to the prior year:
For the Three Months Ended
------------------------------------------------
September 30, 1997 September 30, 1996
(in 000's) (in 000's)
---------------------- ----------------------
Revenues $ 7,625 $ 6,250
Operating Costs 7,590 6,012
Operating Margin 35 238
G&A Expenses 25 59
Depreciation & Amortization 358 273
Interest Expense, net 242 156
Benefit for Income Taxes 167 266
Net Income (loss) (423) 16
Revenues of $7,625,000 for the quarter ending September 30, 1997 reflect an
increase of twenty-two (22%) percent from those of the quarter ending September
30, 1996.
14
<PAGE>
Of the net increase of four centers during the year, discussed earlier, three
were added during the fourth quarter and represented $530,000 of the total
$1,375,000 in revenue growth from quarter to quarter.
Patient encounters increased to 106,000 in the fourth quarter of fiscal
1997 from 88,000 in the fourth quarter of fiscal 1996.
Even with the positive effects of the factors mentioned above, revenues were
short of goals for the quarter, due in part to the increased competition from
hospitals and other providers in Columbia, Greenville, Sumter and Myrtle Beach.
In each of these areas, regional hospitals have acquired or opened new primary
care physician practices that compete directly with the Company for patients. In
each case, the hospital owners of our competition are believed to have
significantly greater resources than the Company. Management believes that such
competition will continue into the future and plans to compete on a basis of
quality service and accessibility.
During the fourth quarter of fiscal year 1997, the Company increased its
allowance for doubtful accounts by $279,000.
The increases in depreciation, amortization and interest expense are all related
to the items discussed in the year-to-date results with nothing unusual being
recorded in the fourth quarter.
Financial Condition at September 30, 1997
The Company grew significantly during the year ended September 30, 1997.
Cash and cash equivalents decreased from $238,000 at September 30, 1996 to
$15,000 at September 30, 1997. Cash was used mainly for acquisitions of
equipment and practice intangibles.
Accounts receivable increased from $4,187,000 at September 30, 1996 to
$5,944,000 at September 30, 1997. This was attributable to the net growth of
four additional primary care Centers and the overall growth in patient visits to
existing Centers. This growth was expected and management does not believe that
there has been a decline in the collectibility of accounts receivable.
The increase in property and equipment is attributable to the equipment needs of
new Centers and to the up-grading of equipment at established Centers. The
excess of cost over the net assets of acquired businesses (goodwill) totaled
$7,802,000 at September 30, 1997 compared to $5,829,000 at the end of the
previous fiscal year and reflects the medical practices acquired.
The growth in accounts payable ($1,392,000 at September 30, 1996 to $2,040,000
at September 30, 1997) and in accrued salaries ($751,000 at September 30, 1996
to $959,000 at September 30, 1997) is attributable to the overall growth in the
Company in terms of the number of centers and employees. Long-term debt
increased from $4,459,000 to $6,920,000 primarily as a result of indebtedness
incurred in capital leases for Center upfits, in the utilization of an operating
line of credit, and as part of practice acquisitions. Management believes that
it will be able to fund debt service requirements for the foreseeable future out
of cash generated through operations.
Liquidity and Capital Resources
The Company requires capital principally to fund growth (acquire new Centers),
for working capital needs and for the retirement of indebtedness. The Company's
capital requirements and working capital needs have been funded through a
combination of external financing (including bank debt and proceeds from the
sale of common stock to CHC and CP&C), internally generated funds and credit
extended by suppliers.
15
<PAGE>
The Company has a $3,000,000 bank line of credit with an outstanding
indebtedness of $2,906,000 at September 30, 1997. The line of credit bears
interest of prime plus 1% with a maturity of December 1998. (Prime rate was 8.5%
as of September 30, 1997.) The line of credit is used to fund the working
capital needs of the Company's expansion.
Operating activities used $461,000 of cash during fiscal year 1997, compared
with $1,197,000 used during fiscal year 1996. The increased utilization of cash
for the increase of accounts receivable resulting from the growth in the number
of Centers and in the number of patient visits was offset by an increase in
accounts payable.
Investing activities used $808,000 of cash during fiscal year 1997 compared with
$693,000 in fiscal year 1996 as a result of continued expansion activity.
Continued growth is anticipated during fiscal year 1998. (See "Subsequent
Events" for a description of acquisition activity in the first quarter of fiscal
year 1998.)
The Company received $600,000 in cash during fiscal year 1997 resulting from
private placements of stock with CP&C which was used in part to manage the
Company's rapid growth. Should additional needs arise, the Company may consider
additional capital sources to obtain funding. There is no assurance that any
additional financing, if required, will be available on terms acceptable to the
Company. (See "Subsequent Events" for a description of $1,500,000 in funding
received by the Company in the first quarter of fiscal year 1998.)
Overall, the Company's current assets exceeded its current liabilities at
September 30, 1997 by $2,921,000 and by $2,020,000 at September 30, 1996.
The Company has a plan in place to ensure that the critical computer systems
that support the Company's business will be year 2000 compatible.
Subsequent Events
On October 1, 1997, the Company acquired certain assets of a three facility
physical therapy practice in Columbia, South Carolina for $856,756 by assuming
certain liabilities and issuing 276,976 shares of the common stock of the
Company. The Company entered into employment agreements with the physical
therapists who had been the owners of the practice. The Company also entered
into lease agreements or assumed existing lease agreements from the previous
owners. The practice previously had annual revenues of approximately $964,000.
On October 6, 1997, the Company completed a private placement of a $1.5 million,
6.5% five-year convertible subordinated debenture with FPA Medical Management,
Inc., a national physician practice management company headquartered in San
Diego, California. The debentures are convertible to common stock at any time
within the five year period at a fixed price premium to the current stock price
and are subject to Rule 144 of the Securities and Exchange Commission when
converted.
On November 1, 1997, the Company acquired certain assets of a medical practice
in New Ellenton, South Carolina for $262,004 by paying $17,468 at closing,
financing $159,536 with the seller, and issuing 30,223 shares of the common
stock of the Company. The Company entered into an employment agreement with the
physician who had been the sole shareholder of the acquired medical practice.
The Company also entered into a lease agreement with the physician owner for the
facility occupied by the acquired medical practice. The practice previously had
annual revenues of approximately $409,000.
On December 11, 1997, the Company renewed its long-term debt agreement with
Carolina First Bank for a $3,000,000 line of credit, bearing interest at an
annual rate of prime plus one (1%) percent (prime rate was 8.5% as of September
30, 1997). This line of credit balance at September 30, 1997 is classified as
long-term on the accompanying balance sheet.
16
<PAGE>
Item 7. Financial Statements
Reference is made to the Index to Financial Statements on Page 28.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
17
<PAGE>
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act
Directors
The UCI Restated Certificate of Incorporation provides for a classified Board of
Directors so that, as nearly possible, one-third of the UCI Board of Directors
is elected each year to serve a three-year term. Currently, the Board of
Directors consists of seven directorships with staggered terms expiring at the
Annual Meetings of Stockholders in 1998, 1999 and 2000. Pursuant to the
authority granted to it by UCI's Bylaws, the Board of Directors has set the size
of the Board of Directors at seven members. Set forth below is certain
biographical information with respect to the directors of UCI.
Directors Whose Terms Expire in 2000
M.F. McFarland, III, M.D., 49, has served as Chairman of the Board, President
and Chief Executive Officer of UCI since January 1987 and as a director of UCI
since September 1984. From September 1984 until January 1987, he served as Vice
President of UCI. He has served as President and as the sole director of UCI-SC
and the P.A. for over five years. He served as Associate Professional Director
of the Emergency Department of Richland Memorial Hospital in Columbia, South
Carolina from 1978 to 1981 and was President of the South Carolina Chapter of
the American College of Emergency Physicians in 1979. Dr. McFarland is currently
a member of the Columbia Medical Society, the South Carolina Medical Association
and the American Medical Association.
Charles M. Potok, 48, has served as a director of UCI since September 1995 and
as Executive Vice President and Chief Operating Officer of Companion Property
and Casualty Insurance Company ("CP&C") since March 1984. Mr. Potok is an
Associate of the Casualty Actuarial Society and a member of the American Academy
of Actuaries. Prior to joining CP&C, Mr. Potok served as Chief Property and
Casualty Actuary and Director of the Property and Casualty Division of the South
Carolina Department of Insurance.
Directors Whose Terms Expire in 1999
Harold H. Adams, Jr., 50, has served as a director of UCI since June 1994 and as
President and owner of Adams and Associates, International, Adams and
Associates, and Southern Insurance Managers since June 1992. He served as
President of Adams Eaddy and Associates, an independent insurance agency, from
1980 to 1992. Mr. Adams has been awarded the Chartered Property Casualty
Underwriter designation and is currently a member of the President's Board of
Visitors of Charleston Southern University in Charleston, South Carolina. He has
received numerous professional awards as the result of over 25 years of
involvement in the insurance industry and is a member of many professional and
civic organizations.
Thomas G. Faulds, 56, has served as a director of UCI since August 1996 and as
Executive Vice President of Private Business for Blue Cross Blue Shield of South
Carolina since October 1991. Mr. Faulds has been with Blue Cross Blue Shield of
South Carolina since March 1972 where he has served in key senior management
positions in government programs, information systems and operations.
Directors Whose Terms Expire in 1998
Charles P. Cannon, 47, has served as a director of UCI since September 1995, as
Vice President, Corporate Controller and Assistant Treasurer for Blue Cross Blue
Shield of South Carolina since April 1988 and as Assistant Treasurer for its
subsidiary, Companion HealthCare Corporation, since April 1988. Prior to joining
BCBS in April 1988, he was a Senior Manager and consultant for Price Waterhouse
LLP for eleven years. Mr. Cannon is a member of the American Institute of
Certified Public Accountants, the South Carolina Association
18
<PAGE>
of Certified Public Accountants, the Institute of Management Accountants, and
the Tennessee Society of Certified Public Accountants.
Russell J. Froneberger, 52, has served as a director of UCI since June 1994 and
as President of Global Consulting, a multinational marketing and financial
consulting firm, since 1991. Mr. Froneberger has over thirty years of
international corporate finance and marketing experience, having been associated
with Manufacturers Hanover Trust Company from 1967 to 1972, and South Carolina
National Bank, where he served as Senior Vice President of Marketing and
Corporate Development Relations from 1972 to 1991. He has lectured on finance
and capital formation at major universities and was the founder and first
Chairman of the Midlands International Trade Association in Columbia, South
Carolina.
Ashby Jordan, M.D., 58, has served as a director of UCI since August 1996 and as
Vice President of Medical Affairs of Blue Cross Blue Shield of South Carolina
since December 1986. Prior to joining Blue Cross Blue Shield, Dr. Jordan was the
Vice President of Medical Affairs for CIGNA HealthPlan of South Florida, Inc.
Dr.Jordan is Board Certified by the American Board of Pediatrics.
Executive Officers
The names and certain other biographical information of the executive officers,
who are not also directors of UCI are as follows:
Jerry F. Wells, Jr., 35, has served as Chief Financial Officer and Executive
Vice President of Finance of the Company since he joined the Company in February
1995 and as Corporate Secretary of the Company since December 1996. He has
served as Chief Financial Officer and Corporate Secretary of UCI-SC and
Corporate Secretary of the P.A. since December 1996. Prior to joining UCI, he
served as a Senior Manager and consultant for Price Waterhouse LLP from 1985
until February 1995. Mr. Wells is a certified public accountant and is a member
of the American Institute of Certified Public Accountants, the South Carolina
Association of Certified Public Accountants and the North Carolina CPA
Association.
D. Michael Stout, M.D., 52, has served as Executive Vice President of Medical
Affairs of UCI since 1985. He is Board Certified in Emergency Medicine and is a
member of the American College of Emergency Physicians and the Columbia Medical
Society. Dr. Stout is also a member of the American College of Physician
Executives.
Jon G. Keith, 48, has served as Executive Vice President and Chief Operating
Officer of UCI and as Chief Operating Officer of UCI-SC since January 1997.
Prior to that time, Mr. Keith served as Vice President for Corporate Services
and Vice President for Administration for Baptist Healthcare System of South
Carolina and Baptist Medical Center from 1985 until January 1997. Mr. Keith is a
Diplomate with the American College of Healthcare Executives and a member of the
Medical Group Management Association.
Jitendra S. Mehta, 46, has served as Executive Vice President of Development and
Procurement of UCI since November 1993. Mr. Mehta has an extensive background in
hospital and medical personnel administration. He served as Business Director of
Multispecialty Clinic in Maryland from 1985 to 1989 and served as Vice President
and Partner of Citrus Diagnostic Center from 1990 to 1993. Mr. Mehta is
currently a member of American Registry for Radiological Technology and the
Nuclear Medicine Technologist Certification Board.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities and Exchange Act of 1934 requires the directors
and officers of UCI to file reports of holdings and transactions in the common
stock of UCI with the Securities and Exchange Commission ("SEC"). Based on UCI
records and other information, UCI believes that all SEC filing requirements
applicable to its directors and officers were complied with in respect to the
fiscal year ended September 30, 1997.
19
<PAGE>
Item 10. Executive Compensation
Executive Compensation
The following table sets forth the total compensation earned during the fiscal
year ended September 30, 1997 and during each of the two prior fiscal years by
the Company's President and Chief Executive Officer and the executive officers
of the Company whose annual compensation from the Company exceeded $100,000 for
all services provided to UCI, UCI-SC, and the P.A. No other executive officer of
UCI, UCI-SC or the P.A. earned compensation in excess of $100,000 for services
provided to UCI, UCI-SC or the P.A. in any of the three fiscal years reflected
below.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term
Compensation
Awards
------------------
Securities
Annual Compensation Underlying All Other
------------------------------------------
Name and Principal Position FY Salary(1) Bonus(1) Options Compensation(2)
-------- ----------------- --------------- ------------------ -------------------
<S> <C> <C> <C> <C> <C>
M.F. McFarland, III, M.D. 1997 $ 316,540 (3) $ 0 (4) 141,675 $ 7,968
Chairman, President and 1996 315,000 (3) 63,500 (4) 30,000 7,368
Chief Executive Officer 1995 194,616 (3) 145,000 (4) 35,000 6,818
D. Michael Stout, M.D. 1997 $ 216,825 (5) $ 0 (6) 79,825 $ 0
Executive Vice President of 1996 198,316 (5) 0 (6) 10,000 0
Medical Affairs 1995 157,600 (5) 32,000 (6) 20,000 0
</TABLE>
(1) Amounts included under the heading "Salary" and "Bonus" include
compensation from both UCI-SC and the P.A.
(2) Amounts included under the heading "All Other Compensation" are comprised
of premiums for long term disability and life insurance provided by the
Company for the benefit of Dr. McFarland.
(3) For services performed by Dr. McFarland for UCI-SC, a wholly-owned
subsidiary of UCI, Dr. McFarland received an annual salary of $157,500 and
$157,500 during the fiscal years ended September 30, 1997 and 1996,
respectively. Dr. McFarland served without compensation from UCI-SC for his
services during the fiscal year ended September 30, 1995. For services
performed by Dr. McFarland for the P.A., an affiliated professional
association that contracts with UCI-SC to provide all medical services at
the Company's medical facilities, Dr. McFarland received an annual salary
of $159,040, $157,500, and $194,616 for the fiscal years ended September
30, 1997, 1996, and 1995, respectively.
(4) Pursuant to the employment agreement dated October 1, 1995 between UCI-SC
and Dr. McFarland, UCI-SC accrued incentive bonuses during the fiscal years
ended September 30, 1997 and 1996 payable to Dr. McFarland of zero and
$63,500, respectively and made no payments to Dr. McFarland against accrued
bonuses. The P.A. accrued a bonus payable to Dr. McFarland during the
fiscal year ended September 30, 1995 of $145,000. Dr. McFarland received
draws from the P.A. out of previously accrued bonuses of $62,000, $120,000
and $167,430 during the fiscal years ended September 30, 1997, 1996, and
1995, respectively.
(5) For services performed by Dr. Stout for UCI-SC, Dr. Stout received an
annual salary of $50,000 and $45,833 during the fiscal years ended
September 30, 1997 and 1996, respectively. Dr. Stout served without
compensation from UCI-SC for his services during the fiscal year ended
September 30, 1995. For services performed by Dr. Stout for the P.A., Dr.
Stout received an annual salary of $166,825, $152,483, and $157,600 for the
fiscal years ended September 30, 1997, 1996, and 1995, respectively.
(6) The P.A. accrued and paid bonuses to Dr. Stout of zero, zero and $32,000
during the fiscal years ended September 30, 1997, 1996 and 1995,
respectively.
20
<PAGE>
Option Grants
The following table sets forth certain information with respect to options to
purchase Common Stock granted during the fiscal year ended September 30, 1997 to
certain of the Company's executive officers. (All options reflected below vest
one-third in each of the three years following grant date.)
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants
Number of
Securities Percent of Total
Underlying Options Granted Exercise or
Options to Employees Base Price Expiration
Name Granted in FY 1997 Per Share Date
- -------------------------------- ---------------- -------------------- -------------- -------------------
<S> <C> <C> <C> <C>
M.F. McFarland, III, M.D. 20,000 4.49% $ 2.8875 Dec. 18, 2001
Chairman, President and Chief 121,675 27.31% 2.1313 June 18, 2002
Executive Officer
D.Michael Stout, M.D. 5,000 1.12% 2.6250 Dec. 18, 2006
Executive Vice President of 74,825 16.80% 1.9375 June 18, 2007
Medical Affairs
</TABLE>
Fiscal Year-End Option Values
The following table sets forth certain information with respect to unexercised
options to purchase Common Stock held at September 30, 1997. None of the named
executive officers exercised any options during the fiscal year ended September
30, 1997.
<TABLE>
<CAPTION>
1997 FISCAL YEAR-END OPTION VALUES
Number of Securities Underlying Value of Unexercised
Unexercised Options at 09/30/97 In-the-Money Options at 09/30/97
---------------------------------------- -----------------------------------------
Exercisable Unexercisable Exercisable Unexercisable
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
M.F. McFarland, III, M.D. 33,333 173,342 $ 0 $ 44,862
Chairman, President and
Chief Executive Officer
D. Michael Stout, M.D. 16,666 93,159 0 42,090
Executive Vice President of
Medical Affairs
</TABLE>
Compensation of Directors
Non-employee directors are paid a fee of $500 for attendance at each meeting of
the Board of Directors. Non-employee directors of UCI are reimbursed by UCI for
all out-of-pocket expenses reasonably incurred by them in the discharge of their
duties as directors, including out-of-pocket expenses incurred in attending
meetings of the Board of Directors.
21
<PAGE>
During the fiscal year 1996, UCI adopted a Non-Employee Director Stock Option
Plan (the "1996 Non-Employee Plan"). The 1996 Non-Employee Plan provides for the
granting of options to two non-employee directors for the purchase of 10,000
shares of UCI's common stock at the fair market value as of the date of grant.
Under this plan, 5,000 options were issued to Harold H. Adams, Jr. and 5,000
options were issued to Russell J. Froneberger. These options are exercisable
during the period commencing on March 20, 1999 and ending on March 20, 2006. At
September 30, 1997, there were stock options outstanding under the 1996
Non-Employee Plan for 10,000 shares, none of which were exercisable.
During the fiscal year 1997, UCI adopted a Non-Employee Director Stock Option
Plan (the "1997 Non-Employee Plan"). The 1997 Non-Employee Plan provides for the
granting of options to four non-employee directors for the purchase of 20,000
shares of UCI's common stock at the fair market value as of the date of grant.
Under this plan, 5,000 options were issued each to Charles P. Cannon, Thomas G.
Faulds, Ashby H. Jordan, M.D., and Charles M. Potok. These options are
exercisable during the period commencing on March 28, 2000 and ending on March
28, 2007. At September 30, 1997, there were stock options outstanding under the
1997 Non-Employee Plan for 20,000 shares, none of which were exercisable.
Employee Contracts
Effective October 1, 1995, Dr. McFarland entered into a five year contract with
UCI-SC that provides for annual compensation of $157,500, the use of one
automobile, and an incentive bonus payable at the end of the Company's fiscal
year subject to the Board of Directors' determination and based upon net income
and gross revenue of the Company for the same year. Also, effective October 1,
1995, Dr. McFarland entered into a five year contract with the P.A. that
provides for annual compensation of $157,500.
Effective November 1, 1995, Dr. Stout entered into a five year contract with
UCI-SC that provides for annual compensation of $50,000. Also, effective
November 1, 1995, Dr. Stout entered into a five year contract with the P.A. that
provides for annual compensation of $160,000.
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information known to the Company
regarding the beneficial ownership of the common stock of UCI as of September
30, 1997. Information is presented for (i) shareholders owning more than five
percent of the outstanding common stock, (ii) each director and executive
officer of UCI, individually, and (iii) all directors and executive officers of
UCI, as a group. Except as otherwise specified, each of the shareholders named
in the table has indicated to UCI that such shareholder has sole voting and
investment power with respect to all shares of common stock beneficially owned
by that shareholder. Beneficial ownership reflected in the table below is
determined in accordance with the rules and regulations of the SEC and generally
includes voting or investment power with respect to securities. Shares of common
stock issuable upon the exercise of options currently exercisable or
convertible, or exercisable or convertible within sixty days, are deemed
outstanding for computing the percentage ownership of the person holding such
options, but are not deemed outstanding for computing the percentage ownership
of any other person.
22
<PAGE>
<TABLE>
<CAPTION>
Number of Shares
Name Beneficially Owned Percentage
- ------------------------------------------------------- ---------------------- ------------------
<S> <C> <C>
Blue Cross Blue Shield of South Carolina 2,624,6231 45.69%
I-20 at Alpine Road
Columbia, SC 29219
M.F. McFarland, III, M.D. 572,4612 9.91%
1901 Main Street, Suite 1200, Mail Code 1105
Columbia, SC 29201
D. Michael Stout, M.D. 275,1263 4.78%
1901 Main Street, Suite 1200, Mail Code 1105
Columbia, SC 29201
Harold H. Adams, Jr. 2,000 *
6137 Hampton Ridge Road
Columbia, SC 29209
Charles P. Cannon 0 0
I-20 at Alpine Road
Columbia, SC 29219
Thomas G. Faulds 0 0
I-20 at Alpine Road
Columbia, SC 29219
Russell J. Froneberger 2,000 *
1201 Main Street, Suite 1980
Columbia, SC 29201
Ashby Jordan, M.D. 0 0
I-20 at Alpine Road
Columbia, SC 29219
Jitendra Mehta 16,6674 *
1901 Main Street, Suite 1200, Mail Code 1105
Columbia, SC 29201
Jon G. Keith 500 *
1901 Main Street, Suite 1200, Mail Code 1105
Columbia, SC 29201
Charles M. Potok 0 0
I-20 at Clemson Road
Columbia, SC 29219
Jerry F. Wells, Jr. 25,0005 *
1901 Main Street, Suite 1200, Mail Code 1105
Columbia, SC 29201
All current directors and executive officers
as a group (11 persons) 893,754 15.56%
</TABLE>
- ------------------------------------
* Amount represents less than 1.0%.
1 Shares are held of record by CHC (2,006,442 shares) and CP&C (618,181
shares), each of which is a wholly-owned subsidiary of BCBS.
2 Includes 33,333 shares which may be acquired pursuant to the exercise of
stock options.
3 Includes 16,666 shares which may be acquired pursuant to the exercise of
stock options.
4 Includes 16,667 shares which may be acquired pursuant to the exercise of
stock options.
5 Includes 25,000 shares which may be acquired pursuant to the exercise of
stock options
23
<PAGE>
Item 12. Certain Relationships and Related Transactions
Agreements with Doctor's Care
Facilities Agreement. Pursuant to a Facilities Agreement between UCI-SC and the
P.A. (the "Facilities Agreement"), UCI-SC supplies to the P.A. the facilities,
equipment and assets of the Centers as well as such non-medical personnel as are
reasonably required by the P.A. in the operation of the Centers. In exchange,
the P.A. provides the necessary staffing for the performance of medical services
at the Centers, including a physician to serve as Executive Medical Director
having overall responsibility for the operations of the Centers. From the fees
paid each month to the P.A. for services rendered at the Centers, the P.A.
retains an amount equal to the cost of all narcotic drugs purchased by the P.A.
during the month and an amount sufficient to satisfy the payroll and related
personnel costs of the P.A. for physicians and other medical providers at the
Centers, with the balance of the fees paid to UCI-SC. During the Company's
fiscal years ended September 30, 1997, 1996, and 1995, the P.A. received an
aggregate of approximately $27,925,000, $23,254,000, and $17,987,000,
respectively, in fees prior to deduction by the P.A. of its payroll and other
related deductible costs covered under the Facilities Agreement. For accounting
purposes, the operations of the P.A. are combined with the operations of the
Company and are reflected in the consolidated financial statements of the
Company. Pursuant to the employment agreement between the P.A. and Dr.
McFarland, Dr. McFarland serves as Executive Medical Director of the Centers,
and is paid an annual salary for his services in such position. Refer to
footnotes (3) and (4) of the Summary Compensation Table for compensation paid to
Dr. McFarland by the P.A. during the fiscal years ended September 30, 1997,
1996, and 1995. Pursuant to the employment agreement between the P.A. and Dr.
Stout, Dr. Stout provides medical services to the P.A., and is paid an annual
salary for such services. Refer to footnotes (5) and (6) of the Summary
Compensation Table for compensation paid to Dr. Stout by the P.A. during the
fiscal years ended September 30, 1997, 1996, and 1995. In September 1996, the
Facilities Agreement was renewed for an additional fifteen-year term. In January
1995, the Facilities Agreement was modified to provide UCI-SC with certain
rights to terminate the Facilities Agreement (a) upon the death of Dr.
McFarland, (b) upon Dr. McFarland ceasing to own, either directly or indirectly,
a controlling interest in the P.A., or (c) upon Dr. McFarland becoming a
"disqualified person" as defined by the South Carolina Business Corporation Act
of 1988, as amended.
Refund Agreement. Pursuant to a Facilities Fee Refund Agreement (the "Refund
Agreement") entered into among UCI, UCI-SC and the P.A., the P.A. was entitled
to receive a refund of a portion of the fees payable to UCI-SC under the
Facilities Agreement with respect to fourteen of the Centers. The Refund
Agreement was terminated effective October 1, 1995. During UCI's fiscal years
ended September 30, 1997 and 1996, UCI-SC made payments to the P.A. of $62,000
and $120,000, respectively, against accumulated refunds payable. At September
30, 1997 and 1996, UCI-SC had refunds payable to the P.A. of approximately
$94,000 and $156,000, respectively.
Facility Leases
UCI-SC leases six medical center facilities from CHC and one medical center
facility from CP&C under operating leases with fifteen year terms expiring in
2008, 2009 and 2010. The terms of these leases are believed to be no more or
less favorable to UCI-SC than those that would have been obtainable through
arm's-length negotiations with unrelated third parties for similar arrangements.
Each of these leases has a five year renewal option, and a rent guarantee by the
P.A. One of the leases has a purchase option allowing UCI-SC to purchase the
center at fair market value after February 1, 1995. Total lease payments made by
UCI-SC under these leases during the Company's fiscal years ended September 30,
1997 and 1996 were $319,730 and $306,178, respectively.
Several of the medical center facilities operated by UCI-SC are leased or were
leased from entities owned or controlled by certain principal shareholders
and/or members of the Company's management. The terms of these leases are
believed to be no more or less favorable to UCI-SC than those that would have
been obtainable through arm's-length negotiations with unrelated third parties
for similar arrangements.
24
<PAGE>
(bullet) The Doctor's Care Northeast facility is leased from a partnership
in which Dr. McFarland is a general partner. The lease was renewed
in October 1994 for a five year term. The lease has two five-year
renewal options and provides UCI-SC with an option to purchase the
facility at its fair market value after October 1995. Total lease
payments made by UCI-SC under this lease during the fiscal years
ended September 30, 1997 and 1996 were $45,600 and $45,600,
respectively, plus utilities and real estate taxes.
(bullet) The Doctor's Care Lexington facility was leased from a general
partnership in which Dr. McFarland and Dr. Stout were general
partners. The Doctor's Care Lexington facility was sold in
February 1996 to unrelated third parties who lease it to the
Company. Total lease payments made by UCI-SC under this lease
during the fiscal years ended September 30, 1997 and 1996 were
zero and $14,125, respectively, plus utilities and real estate
taxes.
(bullet) The Doctor's Care West Columbia and the Doctor's Care Beltline
facilities were leased from a general partnership in which Dr.
McFarland and Dr. Stout were general partners. Both of these
centers' facilities were sold in May 1996 to unrelated third
parties who lease them to the Company. Total lease payments made
by UCI-SC under these two leases during the fiscal years ended
September 30, 1997 and 1996 were zero and $46,516, respectively,
plus utilities and real estate taxes. In connection with its
agreement to lease these two facilities, UCI-SC guaranteed the
lessor's mortgage debt relating to the two facilities. At
September 30, 1997 and 1996, the outstanding balance of such debt
was zero and zero, respectively, plus utilities and real estate
taxes.
(bullet) The Doctor's Care Lugoff facility was leased directly from Dr.
McFarland. This facility was sold in May 1996 to an unrelated
third party who leases it to the Company. Total lease payments
made by UCI-SC under this lease during the fiscal years ended
September 30, 1997 and 1996 were zero and $16,613, respectively,
plus utilities and real estate taxes.
Other Transactions with Related Parties
Blue Cross Blue Shield of South Carolina ("BCBS") owns 100% of Companion
HealthCare Corporation ("CHC"), Companion Property & Casualty Insurance Company
("CP&C") and Companion Technologies, Inc. ("CT"). At September 30,1997, CHC
owned 2,006,442 shares of UCI's outstanding common stock and CP&C owned 618,181
shares of UCI's outstanding common stock, which combine to approximately 46% of
UCI's outstanding common stock.
The following is a historical summary of BCBS and its subsidiaries' purchases of
UCI's common stock.
Price Total
Date Number per Purchase
Purchased Entity of Shares Share Price
- ----------- ---------- -------------- ---------- --------------
12/10/93 CHC 333,333 1.50 $ 500,000
06/08/94 CHC 333,333 3.00 $ 1,000,000
01/16/95 CHC 470,588 2.13 $ 1,000,000
05/24/95 CHC 117,647 2.13 $ 250,000
11/03/95 CHC 218,180 2.75 $ 599,995
12/15/95 CHC 218,180 2.75 $ 599,995
03/01/96 CHC 109,091 2.75 $ 300,000
06/04/96 CP&C 218,181 2.75 $ 599,998
06/23/97 CP&C 400,000 1.50 $ 600,000
Including shares purchased by CHC from third parties, at September 30, 1997,
BCBS controls 2,624,623 shares, or approximately 46% of UCI's outstanding common
stock. The shares acquired by CHC
25
<PAGE>
and CP&C from UCI were purchased pursuant to stock purchase agreements and were
not registered. The shares acquired by CHC and CP&C were purchased at amounts
below fair value at time of purchase due to lower issuance costs incurred by UCI
of these unregistered securities. CHC and CP&C have the right to require
registration of the stock under certain circumstances as described in the
agreement. BCBS and its subsidiaries have the option to purchase as many shares
as may be necessary for BCBS to maintain ownership of 47% of the outstanding
common stock of UCI in the event that UCI issues additional stock to other
parties (excluding shares issued to employees or directors of UCI).
During the Company's fiscal year ended September 30, 1994, UCI-SC purchased a
new billing and accounts receivable system from CT for an aggregate purchase
price of $504,000. The Company entered into a capital lease agreement for this
system, which includes computer equipment. The Company has the option to
purchase the equipment at the end of the lease term for $1. The lease obligation
recorded at September 30, 1997 is $340,916, which includes lease addenda. The
terms of the purchase agreement are believed to have been no more or less
favorable to UCI-SC than the terms that would have been obtainable through
arm's-length negotiations with unrelated third parties for a similar billing and
accounts receivable system, which includes computer equipment.
During the Company's fiscal year ended September 30, 1994, UCI-SC entered into
an agreement with CP&C pursuant to which UCI-SC, through the P.A., acts as the
primary care provider for injured workers of firms carrying worker's
compensation insurance through CP&C. Additionally, during the Company's fiscal
year ended September 30, 1995, UCI-SC executed a $400,000.00 note payable to
CP&C payable in monthly installments of $4,546 (including 11% interest) from
April 1, 1995 to March 1, 2010, collateralized by certain accounts receivable.
The terms of the agreement with CP&C are believed to be no more or less
favorable to UCI-SC than those that would have been obtainable through
arm's-length negotiations with unrelated third parties for similar arrangements.
UCI-SC, through the P.A., provides services to members of a health maintenance
organization ("HMO") operated by CHC who have selected the P.A. as their primary
care provider. The terms of the agreement with CHC are believed to be no more or
less favorable to UCI-SC than those that would have been obtainable through
arm's-length negotiations with unrelated third parties for similar arrangements.
During the year ended September 30, 1996, BCBS provided a non-interest bearing
advance to the Company in the amount of $600,000. This advance was paid in full
in December 1996. Management of the Company believes that the terms of this
advance are no less favorable than those that would have been obtainable through
arm's-length negotiations with related third parties for similar services.
The employees of the Company are offered health, life, and dental insurance
coverage at group rates from BCBS and its subsidiaries. The group rates offered
to the employees of the Company are believed to be no more or less favorable to
the Company than those that would have been obtainable through arm's-length
negotiations with unrelated third parties for similar services.
The Company contracts with Adams and Associates for its workers compensation and
professional liability insurance coverage. Aggregate premiums paid during the
fiscal year ended September 30, 1997 in connection with such policies were
approximately $155,000. Adams and Associates contracts with CP&C to be the
insurance carrier for the Company's workers compensation insurance coverage.
During the fiscal year ended September 30, 1996, Adams and Associates provided
short-term financing to the Company for approximately $17,000 in workers
compensation audit premiums, which was paid in full during the fiscal year ended
September 30, 1997. Harold H. Adams, Jr. is the President and owner of Adams and
Associates and is also a director of the Company. Effective November 1, 1997,
the Company no longer contracts through Adams and Associates for any of its
insurance coverage. Management of the Company believes that the terms of its
contracts with Adams and Associates were no more or less favorable to the
Company than those that would have been obtainable through arm's-length
negotiations with unrelated third parties for similar services.
The Company has contracted since September 1994 with Global Consulting, Inc. for
financial and marketing consulting services. Russell J. Froneberger is the
President and owner of Global Consulting, Inc. and is also a
26
<PAGE>
director of the Company. Fees paid during the fiscal year ended September 30,
1997 in connection with these services were approximately $96,000. Management of
the Company believes that the terms of its contracts with Global Consulting,
Inc. are no more or less favorable to the Company than those that would have
been obtainable through arm's-length negotiations with unrelated third parties
for similar services.
Item 13. Exhibits and Reports on Form 8-K
A listing of the exhibits to the Form 10-KSB is set forth on the Exhibit Index
which immediately precedes such exhibits in this Form 10-KSB.
Reports on Form 8-K
The Company filed a Form 8-K on August 5, 1997 which reported the
acquisition by UCI-SC of Springwood Lake Family Practice Center, P.A. of
Columbia, South Carolina. Financial statements of the acquired entity and pro
forma financial information regarding the combined entity were filed in a Form
8-K/A on October 18, 1997.
The Company filed a Form 8-K on September 1, 1997 which reported the acquisition
by UCI-SC of Clifton G. Aycock, M.D., P.A. of Camden, South Carolina. Financial
statements of the acquired entity and pro forma financial information regarding
the combined entity were filed in a Form 8-K/A on November 13, 1997.
The Company filed a Form 8-K on September 9, 1997 which reported the acquisition
by UCI-SC of Leif Martin Adams, D.O., P.A. of Summerville, South Carolina.
Financial statements of the acquired entity and pro forma financial information
regarding the combined entity were filed in a Form 8-K/A on November 19, 1997.
27
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page(s)
Report of Independent Accountants........................... 30
Consolidated Balance Sheets at September 30, 1997 and 1996.. 31
Consolidated Statements of Operations for the years
ended September 30, 1997, 1996 and 1995 .......... 32
Consolidated Statements of Changes in Stockholders' Equity
for the years ended September 30, 1997, 1996 and 1995.. 33
Consolidated Statements of Cash Flows for the years
ended September 30, 1997, 1996 and 1995 .............. 34
Notes to Consolidated Financial Statements...................... 35-50
All other schedules are omitted because they are not applicable or the required
information is included in the consolidated financial statements or notes
thereto.
28
<PAGE>
UCI MEDICAL AFFILIATES, INC.
CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997 AND 1996
29
<PAGE>
Report of Independent Accountants
December 4, 1997
To the Board of Directors and
Stockholders of UCI Medical Affiliates, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of changes in stockholders' equity and of
cash flows present fairly, in all material respects, the financial position of
UCI Medical Affiliates, Inc. at September 30, 1997 and 1996, and the results of
its operations and its cash flows for each of the three years in the period
ended September 30, 1997, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
Columbia, South Carolina
ORIGINAL SIGNED OPINION ON PRICE WATERHOUSE LLP LETTERHEAD
IS ON FILE WITH
UCI MEDICAL AFFILIATES, INC.
30
<PAGE>
<TABLE>
<CAPTION>
UCI Medical Affiliates, Inc.
Consolidated Balance Sheets
September 30,
----------------------------------------
1997 1996
------------------- ----------------
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 14,676 $ 237,684
Accounts receivable, less allowance for doubtful accounts
of $878,469 and $1,021,856 5,943,884 4,187,394
Inventory 502,888 407,617
Deferred taxes 334,945 197,056
Prepaid expenses and other current assets 579,217 441,384
------------------- ----------------
Total current assets 7,375,610 5,471,135
Property and equipment less accumulated depreciation of
$2,724,222 and $2,025,970 4,002,699 3,300,048
Deferred taxes 1,417,237 855,126
Excess of cost over fair value of assets acquired, less
accumulated amortization of $1,664,739 and
$1,210,569 7,801,607 5,828,963
Other assets 266,379 277,422
------------------- ----------------
Total Assets $ 20,863,532 $15,732,694
=================== ================
Liabilities and Stockholders' Equity
Current liabilities
Current portion of long-term debt $ 840,879 $ 795,652
Current portion of long-term debt payable to employees 177,445 118,097
Accounts payable 2,039,506 1,391,858
Accrued salaries and payroll taxes 959,068 750,745
Other accrued liabilities 437,667 394,635
------------------- ----------------
Total current liabilities 4,454,565 3,450,987
Long-term debt, net of current portion 6,438,655 4,442,503
Long-term debt payable to employees, net of current portion 481,815 16,981
------------------- ----------------
Total Liabilities 11,375,035 7,910,471
------------------- ----------------
Commitments and contingencies
Stockholders' Equity
Preferred stock, par value $.01 per share:
Authorized shares - 10,000,000; none issued
0 0
Common stock, par value $.05 per share:
Authorized shares - 10,000,000
Issued and outstanding- 5,744,965 and 4,807,807
shares 287,248 240,390
Paid-in capital 15,435,535 13,732,393
Accumulated deficit (6,234,286) (6,150,560)
------------------- ----------------
Total Stockholders' Equity 9,488,497 7,822,223
------------------- ----------------
Total Liabilities and Stockholders' Equity $ 20,863,532 $ 15,732,694
=================== ================
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
31
<PAGE>
<TABLE>
<CAPTION>
UCI Medical Affiliates, Inc.
Consolidated Statements of Operations
For the Years Ended September 30,
-----------------------------------------------------------------
1997 1996 1995
----------------- ------------------- -------------------
<S> <C> <C> <C>
Revenues $ 27,924,772 $ 23,254,351 $ 17,987,147
Operating costs 26,466,294 21,525,421 18,180,080
----------------- ------------------- -------------------
Operating margin 1,458,478 1,728,930 (192,933)
General and administrative expenses 153,445 148,637 87,616
Depreciation and amortization 1,250,349 961,115 579,224
----------------- ------------------- -------------------
Income (loss) from operations 54,684 619,178 (859,773)
Other income (expenses)
Interest expense, net of interest income (812,749) (582,937) (505,459)
Gain (loss) on disposal of equipment 8,809 2,105 5,493
----------------- ------------------- -------------------
Other income (expense) (803,940) (580,832) (499,966)
Income (loss) before benefit for income taxes (749,256) 38,346 (1,359,739)
Benefit for income taxes 665,530 427,733 0
================= =================== ===================
Net income (loss) $ (83,726) $ 466,079 $ (1,359,739)
================= =================== ===================
Net Income (loss) per common and
common equivalent share $ (.02) $ .11 $ (.43)
================= =================== ===================
Weighted average common shares
outstanding 5,005,081 4,294,137 3,136,544
================= =================== ===================
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
32
<PAGE>
<TABLE>
<CAPTION>
UCI Medical Affiliates, Inc.
Consolidated Statements of Changes in Stockholders' Equity
Common Stock Paid-In Accumulated
--------------------------------
Shares Par Value Capital Deficit Total
---------------- ------------- --------------- ------------------ ----------------
<S> <C> <C> <C> <C> <C>
Balance, September 30, 1994 2,622,178 $131,109 $7,728,554 $ (5,256,896) $ 2,602,767
Net income (loss) --- --- --- (1,359,739) (1,359,739)
Issuance of common stock 885,888 44,294 1,975,706 -- 2,020,000
Other 98 5 (10,004) (4) (10,003)
---------------- ------------- --------------- ------------------ ----------------
Balance, September 30, 1995 3,508,164 175,408 9,694,256 (6,616,639) 3,253,025
---------------- ------------- --------------- ------------------ ----------------
Net income (loss) --- --- --- 466,079 466,079
Exercise of Stock Options 2,300 115 460 --- 575
Issuance of common stock 1,297,350 64,868 4,077,677 --- 4,142,545
Other (7) (1) (40,000) --- (40,001)
---------------- ------------- --------------- ------------------ ----------------
Balance, September 30, 1996 4,807,807 240,390 13,732,393 (6,150,560) 7,822,223
---------------- ------------- --------------- ------------------ ----------------
Net income (loss) --- --- --- (83,726) (83,726)
Issuance of common stock 937,162 46,858 1,703,142 --- 1,750,000
Other (4) --- --- --- ---
================ ============= =============== ================== ================
Balance, September 30, 1997 5,744,965 $ 287,248 $ 15,435,535 $ (6,234,286) $9,488,497
================ ============= =============== ================== ================
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
33
<PAGE>
<TABLE>
<CAPTION>
UCI Medical Affiliates, Inc.
Consolidated Statements of Cash Flows
For the Years Ended September 30,
-----------------------------------------------------------
1997 1996 1995
------------------ ---------------- ----------------
<S> <C> <C> <C>
Operating activities:
Net income (loss) $ (83,726) $ 466,079 $ (1,359,739)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
(Gain) loss on disposal of equipment (8,809) (2,105) (5,493)
Provision for losses on accounts receivable 1,106,252 627,508 544,208
Depreciation and amortization 1,250,349 961,115 579,224
Common stock issued 0 0 4,125
Deferred taxes (700,000) (440,000) 0
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (2,679,489) (2,447,650) (1,379,019)
(Increase) decrease in inventory (83,521) (142,549) (47,992)
(Increase) decrease in prepaid expenses and other
current assets (137,833) (159,324) (158,536)
Increase (decrease) in accounts payable and accrued
expenses 876,253 (59,707) 1,363,180
------------------ ---------------- ----------------
Cash provided by (used in) operating activities (460,524) (1,196,633) (460,042)
------------------ ---------------- ----------------
Investing activities:
Purchases of property and equipment (531,941) (438,491) (620,584)
Acquisitions of goodwill (286,896) (239,832) (24,426)
(Increase) decrease in other assets 11,042 (14,654) 2,760
------------------ ---------------- ----------------
Cash provided by (used in) investing activities (807,795) (692,977) (642,250)
------------------ ---------------- ----------------
Financing activities:
Proceeds from issuance of common stock,
net of redemptions 600,000 2,089,990 1,240,000
Net borrowings (payments) under line-of-credit agreement 2,030,844 400,000 475,000
Proceeds from issuance of common stock under
stock option plan 0 575 0
Proceeds from increase in long-term debt 280,000 600,095
Payments on long-term debt (1,865,533) (1,039,879) (746,481)
------------------ ---------------- ----------------
Cash provided by financing activities 1,045,311 2,050,781 968,519
------------------ ---------------- ----------------
Increase (decrease) in cash and cash equivalents (223,008) 161,171 (133,773)
Cash and cash equivalents at beginning of year 237,684 76,513 210,286
------------------ ---------------- ----------------
Cash and cash equivalents at end of year $ 14,676 $ 237,684 $ 76,513
================== ================ ================
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
34
<PAGE>
UCI MEDICAL AFFILIATES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
1. Significant Accounting Policies
Basis of Presentation
The consolidated financial statements of UCI Medical Affiliates, Inc. include
the accounts of UCI Medical Affiliates, Inc. ("UCI"), its wholly owned
subsidiary, UCI Medical Affiliates of South Carolina, Inc. ("UCI-SC") and
Doctor's Care, PA ("the P.A."), collectively the "Company". The financial
statements of the P.A. are consolidated with UCI because UCI-SC has unilateral
control over the assets and operations of the P.A. and, notwithstanding the lack
of technical majority ownership, consolidation of the P.A. with UCI is necessary
to present fairly the financial position and results of operations of UCI.
UCI-SC provides non-medical management and administrative functions for 40
medical clinics (the "Centers"). All medical services at the Centers are
provided by or under the supervision of the P.A., which has contracted with
UCI-SC to provide the medical direction of the Centers. The P.A. is wholly owned
by M.F. McFarland, III, M.D., who also serves as the President, Chairman and
Chief Executive Officer of the Company. The medical directors operate the
Centers under the financial and operational control of UCI-SC. However, medical
supervision of the centers is provided solely by the P.A. The P.A. remits to
UCI-SC all medical service revenues generated by the Centers, net of expenses
incurred by the P.A. All medical service revenues are recorded in the
accompanying financial statements as revenue. Control of the P.A. is perpetual
and other than temporary because of the nature of this relationship and the
management agreements between the entities. The management and facilities
agreement expires on September 30, 2010. The net assets of the P.A. are not
material for any period presented and intercompany accounts and transactions
have been eliminated.
Refer to Note 9 for additional information.
In November 1997 the Emerging Issue Task Force (EITF) finalized EITF 97-2 which
provides guidance on consolidation of physician practices and enhances related
disclosures of physician practice management companies. This EITF 97-2 is
effective for fiscal years ending after December 15, 1998. The Company is in the
process of evaluating any potential effect on its reporting format.
The P.A. enters into employment agreements with physicians for terms ranging
from one to ten years. All employment agreements have clauses that allow for
early termination of the agreement if certain events occur such as the loss of a
medical license. Over 80% of the physicians employed by the P.A. are paid on an
hourly basis for time scheduled and worked at the medical centers while other
physicians are salaried. A few of the physicians have incentive compensation
arrangements which are contractually based upon factors such as productivity,
collections and quality.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and revenues and expenses
and the disclosure of contingent assets and liabilities. Actual results could
differ from those estimates and assumptions. Significant estimates are discussed
in these footnotes, as applicable.
The Company operates as one segment as defined by SFAS 131.
Medical Supplies and Drug Inventory
The inventory of medical supplies and drugs is carried at the lower of average
cost or market.
35
<PAGE>
Property and Equipment
Depreciation is provided principally by the straight-line method over the
estimated useful lives of the assets, ranging from three to thirty years.
Maintenance, repairs and minor renewals are charged to expense. Major renewals
or betterments, which prolong the life of the assets, are capitalized.
Upon disposal of depreciable property, the asset accounts are reduced by the
related cost and accumulated depreciation. The resulting gains and losses are
reflected in the consolidated statements of operations.
Intangible Assets
Prior to September 30, 1994, the excess of cost over fair value of assets
acquired (goodwill) was amortized on the straight-line method over periods from
15 to 30 years. Since October 1, 1994, goodwill arising from acquisitions has
been amortized on the straight line method over 15 years. Subsequent to an
acquisition, the Company periodically evaluates whether later events and
circumstances have occurred that indicate that the remaining balance of goodwill
may not be recoverable or that the remaining useful life may warrant revision.
When external factors indicate that goodwill should be evaluated for possible
impairment, the Company uses an estimate of the related center's discounted cash
flows over the remaining life of the goodwill and compares it to the center's
goodwill balance to determine whether the goodwill is recoverable or if
impairment exists, in which case an adjustment is made to the carrying value of
the asset.
Revenue Recognition
Revenue is recognized at estimated net amounts to be received from employers,
third party payors, and others at the time the related services are rendered.
Capitation payments from payors are paid monthly and are recognized as revenue
during the period in which enrollees are entitled to receive services. The
Company recognizes capitation revenue from HMOs that contract with the Company
for the delivery of health care services on a monthly basis. This capitation
revenue is at the contractually agreed-upon per-member, per-month rates.
Capitation revenue was approximately $3,100,000, $2,400,000 and $1,400,000 for
the fiscal years ended September 30, 1997, 1996 and 1995, respectively.
Earnings Per Share
The computation of income per common and common equivalent share is based on the
weighted average number of common shares outstanding during the period plus (in
periods in which they have a dilutive effect) the effect of common shares
issuable from stock options and warrants, using the treasury stock method. SFAS
128 redefines the terms and method of calculating earnings per share. SFAS 128
is effective for periods ended after December 15, 1997. Had the Company adopted
SFAS 128 during the year ended September 30, 1997, there would be no change to
the earnings per share reported.
Income Taxes
Deferred tax assets and liabilities are recorded based on the difference between
the financial statement and tax bases of assets and liabilities as measured by
the enacted tax rates which are anticipated to be in effect when these
differences reverse. The deferred tax (benefit) provision is the result of the
net change in the deferred tax assets to amounts expected to be realized.
Cash and Cash Equivalents
The Company considers all short-term deposits with a maturity of three months or
less at acquisition date to be cash equivalents.
36
<PAGE>
Fair Value of Financial Instruments
The estimated fair value of financial instruments has been determined by the
Company using available market information and appropriate valuation
methodologies. However, considerable judgment is required in interpreting data
to develop the estimates of fair value. Accordingly, the estimates presented
herein are not necessarily indicative of the amounts that the Company could
realize in a current market exchange. The fair value estimates presented herein
are based on pertinent information available to management as of September 30,
1997 and 1996. Although management is not aware of any factors that would
significantly affect the estimated fair value amounts, such amounts have not
been comprehensively revalued for purposes of these financial statements since
that date and current estimates of fair value may differ significantly from the
amounts presented herein. The fair values of the Company's financial instruments
are estimated based on current market rates and instruments with the same risk
and maturities. The fair values of cash and cash equivalents, accounts
receivable, accounts payable, notes payable and payables to related parties
approximate the carrying values of these financial instruments.
Reclassifications
Certain 1995 amounts have been reclassified to conform with the 1996 and 1997
presentation.
2. Property and Equipment
Property and equipment consists of the following at September 30:
<TABLE>
<CAPTION>
1997 1996
--------------------- ---------------------
<S> <C> <C>
Leasehold improvements $ 827,218 $ 558,098
Property and equipment, including capitalized leases 5,899,703 4,767,920
--------------------- ---------------------
6,726,921 5,326,018
Less, accumulated depreciation and amortization (2,724,222) (2,025,970)
--------------------- --------------------
$ 4,002,699 $ 3,300,048
===================== =====================
</TABLE>
At September 30, 1997 and 1996 capitalized leased equipment included above
amounted to approximately $3,063,000 and $2,298,000, net of accumulated
amortization of $969,000 and $538,000, respectively. Depreciation and
amortization expense equaled $796,179, $619,817 and $384,638 for the years ended
September 30, 1997, 1996 and 1995, respectively.
3. Business Combinations
During the fiscal year ended September 30, 1997, the Company acquired the net
assets of five medical practices, and in most cases, entered into employment
agreements with the physician owners of those practices. The acquisitions were
accounted for under the purchase method, and the financial activity since the
date of acquisition of these acquired practices has been included in the
accompanying consolidated financial statements. The combined pro forma results
listed below reflect purchase price accounting adjustments assuming the
acquisitions occurred at the beginning of each fiscal year presented. Individual
pro forma disclosures are not provided here as the information is deemed to be
insignificant for separate presentation.
37
<PAGE>
Refer to Note 14 for details regarding business combinations in fiscal year
1997.
Unaudited
-----------------------------------
1997 1996
--------------- ---------------
Revenue $30,124,821 $26,287,192
Net income (loss) $ 26,717 $ 583,222
Net income (loss) per common
and common equivalent share $ 0 $ .12
4. Income Taxes
The components of the (benefit) provision for income taxes for the years ended
September 30 are as follows:
1997 1996
--------------- -----------------
Current:
Federal $ 31,675 $ 12,267
State 2,795 --
-------------- -----------------
34,470 12,267
-------------- -----------------
Deferred:
Federal
(643,243) (404,324)
State (56,757) (35,676)
-------------- -----------------
(700,000) (440,000)
-------------- -----------------
Total income tax benefit $(665,530) $(427,733)
============== =================
Deferred taxes result from temporary differences in the recognition of certain
items of income and expense, and the changes in the valuation allowance
attributable to deferred tax assets.
The principal sources of temporary differences and the related deferred tax
effects as of September 30, were as follows:
1997 1996 1995
------------- ------------ -------------
Allowance for doubtful accounts $ 53,053 $ (151,008) $ 169,043
Related party accruals 22,940 21,734 (7,673)
Operating loss carryforwards (238,726) 180,489 (687,242)
Accumulated depreciation 68,809 75,388 58,324
------------- ------------ -------------
(93,924) 126,603 (467,548)
Changes in valuation allowance (606,076) (566,603) 467,548
------------- ------------ -------------
$(700,000) $(440,000) $ ---
============= ============ =============
At September 30, 1997, 1996 and 1995 the Company's deferred tax assets
(liabilities) and the related valuation allowances are as follows:
1997 1996 1995
----------- ---------- ------------
Allowance for doubtful accounts $ 325,034 $ 378,087 $ 227,079
Related party accruals 58,420 81,360 103,094
Operating loss carryforwards 2,993,578 2,754,874 2,935,363
Accumulated depreciation (279,548) (210,762) (135,374)
----------- ----------- ------------
$3,097,483 $ 3,003,559 $ 3,130,162
=========== =========== ============
Valuation allowance $1,345,301 $ 1,951,377 $ 2,517,980
=========== =========== ============
38
<PAGE>
<TABLE>
<CAPTION>
The principal reasons for the differences between the consolidated income tax
(benefit) expense and the amount computed by applying the statutory federal
income tax rate of 34% to pre-tax income were as follows for the years ended
September 30:
1997 1996 1995
----------------- ----------------- ------------------
<S> <C> <C> <C>
Tax at federal statutory rate $ (254,747) $ 13,038 $ (462,311)
Effect on rate of:
Amortization of goodwill 67,528 48,704 15,708
Non deductible expenses 12,068 32,091 21,107
Life insurance premiums 815 5,392 3,044
Other, net 114,882 27,378 (45,096)
Change in valuation allowance (606,076) (566,603) 467,548
----------------- ------------------ -----------------
$ (665,530) $ (440,000) $ ---
================= ================= ==================
</TABLE>
At September 30, 1997, the Company has net tax operating loss (NOL)
carryforwards expiring in the following years ending September 30,
2000 $ 910,935
2001 1,783,595
2002 1,802,220
2003 458,112
2005 470,006
2006 76,306
2010 1,944,371
2012 645,206
----------------
$ 8,090,751
================
During the year ended September 30, 1996, the Company experienced an ownership
change which limits the amount of net operating losses the Company may use on an
annual basis for income tax purposes. The Company may use $893,507 of net
operating losses on an annual basis. This limitation should not severely limit
the Company's ability to utilize its net operating loss carryforwards.
In determining that it was more likely than not that the recorded deferred tax
asset would be realized, management of the Company considered the following:
(bullet) The generation of future taxable income in excess of income
reported on the consolidated financial statements.
(bullet) The budgets and forecasts that management and the Board of
Directors had adopted for the next five fiscal years including
plans for expansion.
(bullet) The ability to utilize NOL's prior to their expiration.
(bullet) The potential limitation of NOL utilization in the event of a
change in ownership.
The Company has $7,800 and $8,450 of investment tax credit carryforwards which
expire in 1999 and 2000, respectively.
39
<PAGE>
<TABLE>
<CAPTION>
5. Long-Term Debt
Long-term debt consists of the following at September 30:
1997 1996
----------------- -----------------
<S> <C> <C>
Line of Credit with a financial institution in the amount of $3,000,000 dated
December 9, 1996, bearing interest at a rate of prime plus 1% (prime rate is
8.5% as of September 30, 1997), secured by certain accounts receivable and
inventory, and the personal guarantee of an
officer of the Company, renewable annually in December of each year. $2,905,845 $ 0
Note payable in the amount of $1,600,000 with monthly installments of $8,889
plus interest at prime plus 6% (prime rate is 8.5% as of September 30, 1997),
through February 1, 2009 collateralized by certain accounts
receivable and leasehold interests and the guarantee of the P.A. 1,208,889 1,315,556
Note payable to Companion Property & Casualty Insurance Company (a shareholder)
in the amount of $400,000, with monthly installments of $4,546 (including 11%
interest) from April 1, 1995 to March 1, 2010,
collateralized by certain accounts receivable 368,624 381,832
Note payable to a financial institution in the amount of $280,000, dated March
11, 1997, with monthly installments (including interest at a variable rate of
prime plus 1%) (prime rate is 8.5% as of September 30, 1997) of $3,100 from
April 1997 to February 2002, with a final payment of all remaining principal and
accrued interest due in March 2002,
collateralized by a mortgage on one of the Company's medical facilities. 274,715 0
Note payable to a financial institution in the amount of $194,782, payable in
monthly installments of interest only at a rate of 9.25%, maturing on January 1,
2005, personally guaranteed by three physician
employees of the P.A. 194,782 0
Note payable in the amount of $250,000 with monthly installments of $1,389 plus
interest at prime plus 2% (prime rate is 8.5% as of September
30, 1997), through February 1, 2009 collateralized by a condominium 188,889 205,556
Note payable to a financial institution in the amount of $99,209, payable in
monthly installments of interest only at a rate of 9%, maturing on May
1, 2002, personally guaranteed by three physician employees of the P.A. 99,209 0
Note payable in the amount of $240,000 dated March 1, 1996, with monthly
installments of $11,075 (including 10% interest) from April 1, 1996 to March 1,
1998, collateralized by a security agreement executed by UCI-SC
and the P.A. 54,016 174,866
Note payable in the amount of $43,500 dated September 1, 1997, with monthly
installments (including 8% interest) of $1,500, payable from
January 1998 to September 2000. 43,500 0
Notes payable in monthly installments over three to four years at
interest rates ranging from 3.9% to 10.5%, collateralized by related 18,508 39,662
vehicles
40
<PAGE>
<CAPTION>
5. Long-Term Debt (Continued)
<S> <C> <C>
1997 1996
----------------- -----------------
Note payable in the amount of $725,000 dated March 22, 1996, bearing interest at
a rate of prime plus 1.5% (prime rate is 8.5% as of September
30, 1997), due October 23, 1996, collateralized by a personal investment 0 725,000
of an officer of the Company
Note payable in the amount of $150,000 dated August 15, 1996, bearing interest
at a rate of prime plus 1.5% (prime rate is 8.5% at September
30, 1997), due October 23, 1996, collateralized by a personal investment 0 150,000
of an officer of the Company
Advance payable to Blue Cross Blue Shield of SC (a shareholder) in the
amount of $600,000 dated September 24, 1996, bearing no interest. 0 600,000
----------------- -----------------
Subtotal 5,356,977 3,592,472
Note payable to a physician employee of the P.A. in the amount of
$294,000 with monthly installments (including 8.5% interest) of $6,032
from August 1997 to August 2002. 286,073 0
Note payable to a physician employee of the P.A. in the amount of
$294,000 with monthly installments (including 8.5% interest) of $6,032
from August 1997 to August 2002. 286,073 0
Note payable to a physician employee of the P.A. in the amount of $43,000, with
monthly principal payments of $4,000 from October 1997 to January 1998 and
$3,000 from February 1998 to October 1998, plus interest
at 8%. 39,000 0
Note payable to a physician employee of the P.A. in the amount of $80,000
with monthly installments (including 8.25% interest) of $3,174 from
October 1996 to October 1998. 36,438 0
Note payable to a physician employee of the P.A. in the amount of $12,000
with monthly installments (including 8.5% interest) of $246 from August
1997 to August 2002. 11,676 0
Note payable to a physician employee of the P.A. in the amount of $350,000 with
monthly installments (including 9% interest) of $25,000 from July 15, 1995 to
September 15, 1995, and $12,842 from October 15,
1995 to September 15, 1997. 0 135,078
----------------- -----------------
Subtotal - payable to employees 659,260 135,078
----------------- -----------------
Capitalized lease obligations 1,920,725 1,617,400
Other 1,832
28,283
----------------- -----------------
7,938,794 5,373,233
Less, current portion -840,879 -795,652
Less, current portion payable to employees -177,445 -118,097
----------------- -----------------
$ 6,920,470 $ 4,459,484
================= =================
</TABLE>
41
<PAGE>
Aggregate maturities of notes payable and capital leases in each of the five
years 1998 through 2002 are as follows:
Notes Payable Capital Leases
Year ending September 30: Total
-------------- -------------- ------------
1998 $ 402,144 $ 616,180 $ 1,018,324
1999 3,188,388 589,373 3,777,761
2000 292,597 390,557 683,154
2001 284,319 228,674 512,993
2002 598,929 95,941 694,870
Thereafter 1,251,692 0 1,251,692
================ ================= =============
$ 6,018,069 $ 1,920,725 $ 7,938,794
================ ================= =============
At September 30, 1997, the Company is in default of a debt covenant related to
the Line of Credit. The Company has received a written waiver from the financial
institution indicating that the financial institution does not intend to take
action related to this default. This Line of Credit is classified as long-term
debt on the Balance Sheet at September 30, 1997, as the line was renewed for an
additional twelve (12) month period in December 1997. (See Note 15, "Subsequent
Events.")
6. Employee Benefit Plans
The Company has an employee savings plan ( the "Savings Plan") that qualifies as
a deferred salary arrangement under Section 401(k) of the Internal Revenue Code.
Under the Savings Plan, participating employees may defer a portion of their
pretax earnings, up to the Internal Revenue Service annual contribution limit.
Effective in June 1995, the Company discontinued its matching contribution. In
February 1996, the Company reinstated its matching contribution. Effective
January 1, 1997, the Company increased its matching contribution from 50% to 75%
of each employee's contribution up to a maximum of 3.75% of the employee's
earnings. The company's matching contributions were $172,792, $97,610 and
$71,463 in fiscal years 1997, 1996, and 1995, respectively.
The incentive stock option plan adopted in 1984 (the "1984 Plan") expired under
its terms in December 1993.
Pursuant to the Company's incentive stock option plan adopted in 1994, (the
"1994 Plan"), "incentive stock options", within the meaning of Section 422 of
the Internal Revenue Code, may be granted to employees of the Company. The 1994
Plan provides for the granting of options for the purchase of 750,000 shares at
100% of the fair market value of the stock at the date of grant (or for 10% or
higher shareholders, at 110% of the fair market value of the stock at the date
of grant). Options granted under the 1994 Plan vest at a rate of 33% in each of
the three years following the grant. Vested options become exercisable one year
after the date of grant and can be exercised within ten years of the date of
grant, subject to earlier termination upon cessation of employment.
During the fiscal year ended September 30, 1996, the Company adopted a
Non-Employee Director Stock Option Plan (the "1996 Non-Employee Plan"). The 1996
Non-Employee Plan provides for the granting of options to two non-employee
directors for the purchase of 10,000 shares of the Company's common stock at the
fair market value as of the date of grant. Under this plan, 5,000 options were
issued to Harold H. Adams, Jr. and 5,000 options were issued to Russell J.
Froneberger. These options are exercisable during the period commencing on March
20, 1999 and ending on March 20, 2006.
During the fiscal year ended September 30, 1997, the Company adopted a
Non-Employee Director Stock Option Plan (the "1997 Non-Employee Plan"). The 1997
Non-Employee Plan provides for the granting of options to four non-employee
directors for the purchase of 20,000 shares of the Company's common stock at the
fair market value of the date of grant. Under this plan, 5,000 options were
issued each to Charles P. Cannon, Thomas G. Faulds, Ashby Jordan, M.D., and
Charles M. Potok. These options are exercisable during the period commencing on
March 28, 2000 and ending on March 28, 2007.
42
<PAGE>
Please refer to Note 7, "Stockholders' Equity" for activity information
regarding these four stock option plans.
7. Stockholders' Equity
On June 30, 1994, the Company's shareholders approved an amendment to, and a
restatement of, the Restated Certificate of Incorporation to provide for a 1 for
5 reverse stock split. The Amended and Restated Certificate of Incorporation
increased the number of authorized shares of common stock from 4,000,000 to
10,000,000 (as adjusted for the reverse stock split as discussed above) and
increased the par value per share of common stock from one cent ($.01) to five
cents ($.05). In addition, the Amended and Restated Certificate of Incorporation
authorized the Company to issue up to 10,000,000 shares of $.01 par value
preferred stock to be issued in one or more series. The Board of Directors is
authorized, without further action by the stockholders, to designate the rights,
preferences, limitations and restrictions of and upon shares of each series,
including dividend voting, redemption and conversion rights. All references in
the financial statements to average number of shares outstanding and related
prices, per share amounts, common stock and stock option plan data have been
restated to reflect the split . The following table summarizes activity and
weighted average fair value of options granted for the three previous fiscal
years for the Company's four stock option plans. (Please refer also to Note 6,
"Employee Benefit Plans.")
<TABLE>
<CAPTION>
1996 1996 Non- 1997 1997 Non-
1984 1984 1994 1994 Non-Employee Employee Non-Employee Employee
Stock Options Plan Plan Plan Plan Plan Plan Plan Plan
- ---------------------------- ---------- -------- ---------- -------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Outstanding at 10/01/94 20,600 0
Granted FY 94/95 0 242,000
Exercised FY 94/95 0 0
Forfeited FY 94/95 (5,100) 0
---------- ---------- ----------- ------------
Outstanding at 09/30/95 15,500 242,000
---------- ---------- ----------- ------------
Exercisable at 09/30/95 15,500 0
---------- ---------- ----------- ------------
Weighted average fair
value of options
grantedduring fiscal year
94/95
for options whose N/A 2.9318 N/A N/A
exercise price: N/A 2.8750 N/A N/A
(1) equals fair value
(2) exceeds fair
value
Granted FY 95/96 0 140,500 10,000
Exercised FY 95/96 (2,300) 0 0
Forfeited FY 95/96 (400) (23,000) 0
---------- ---------- ----------- ------------
Outstanding at 09/30/96 12,800 359,500 10,000
---------- ---------- ----------- ------------
Exercisable at 09/30/96 12,800 73,000 0
---------- ---------- ----------- ------------
Weighted average fair
value of options
granted
during fiscal year
95/96
for options whose N/A 3.5395 3.5000 N/A
exercise price: N/A 4.0000 N/A N/A
(1) equals fair value
(2) exceeds fair
value
Granted FY 96/97 0 445,500 0 20,000
Exercised FY 96/97 0 0 0 0
Forfeited FY 96/97 0 (55,000) 0 0
---------- ---------- ----------- ------------
Outstanding at 09/30/97 12,800 750,000 10,000 20,000
---------- ---------- ----------- ------------
Exercisable at 09/30/97 12,800 164,500 0 0
Weighted average fair
value of options
granted
during fiscal year
96/97
for options whose N/A 2.1608 N/A 2.5000
exercise price: N/A 2.6250 N/A N/A
(1) equals fair value
(2) exceeds fair value
</TABLE>
43
<PAGE>
<TABLE>
<CAPTION>
The following table summarizes the weighted average exercise price of stock
options exercisable at the end of each of the three previous fiscal years:
1996 1997
Weighted Average Non-Employee Non-Employee
Exercise Price 1984 Plan 1994 Plan Plan Plan
- ------------------------------------ ------------- ------------- ----------------- ------------------
<S> <C> <C> <C> <C>
Outstanding at 10/01/94 .25 0
Granted FY 94/95 0 2.9941
Exercised FY 94/95 0 0
Forfeited FY 94/95 .25 0
------------- ------------- ----------------- ------------------
Outstanding at 09/30/95 .25 2.9941
------------- ------------- ----------------- ------------------
Exercisable at 09/30/95 .25 0
------------- ------------- ----------------- ------------------
Granted FY 95/96 0 3.7055 3.50
Exercised FY 95/96 .25 0 0
Forfeited FY 95/96 .25 2.8750 0
------------- ------------- ----------------- ------------------
Outstanding at 09/30/96 .25 3.2797 3.50
------------- ------------- ----------------- ------------------
Exercisable at 09/30/96 .25 3.0066 0
------------- ------------- ----------------- ------------------
Granted FY 96/97 0 2.1934 0 2.50
Exercised FY 96/97 0 0 0 0
Forfeited FY 96/97 0 3.3409 0 0
------------- ------------- ----------------- ------------------
Outstanding at 09/30/97 .25 2.6320 3.50 2.50
------------- ------------- ----------------- ------------------
Exercisable at 09/30/97 .25 3.1591 0 0
------------- ------------- ----------------- ------------------
</TABLE>
The following table summarizes options outstanding and exercisable by price
range as of September 30, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
--------------------------------------------------- ------------------------------
Weighted-
Average Weighted Weighted
Remaining Average Average
Contractual Exercise Exercise
Range of Price Outstanding Life Price Exercisable Price
- ------------------- --------------- ---------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
$0.00 to $ .99 12,800 5.25 years .25 12,800 .25
$1.00 to $1.99 210,825 9.67 1.9375 0 N/A
$2.00 to $2.99 388,675 7.06 2.583 87,667 2.875
$3.00 to $3.99 137,500 6.81 3.364 62,500 3.301
$4.00 to $4.99 43,000 4.68 4.279 14,333 4.279
=============== ==============
792,800 177,300
=============== ==============
</TABLE>
The Company has adopted the disclosure-only provisions of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation."
Accordingly, no compensation cost has been recognized for the stock option
plans. Had compensation costs for the Company's stock option plans been
determined based on the fair value at the grant date for awards in fiscal 1997,
1996 and 1995 consistent with the provisions of SFAS
44
<PAGE>
No. 123, the Company's net income and earnings per share would have been
reduced to the pro forma amounts indicated below. The fair value of each option
granted is estimated on the date of grant using the Black-Scholes option-pricing
model.
Fiscal Year Ended September 30
---------------------------------------
1997 1996
----------------- ------------------
Net income - as reported (83,726) 466,079
Net income - pro forma (171,232) 455,188
Earnings per share - as reported (.02) .11
Earnings per share - pro forma (.03) .11
Weighted average number of shares 5,005,081 4,294,137
The fair value of each option granted is estimated on the date of grant using
the Black-Scholes option-pricing model with the following assumptions:
Expected Dividend Yield 0
Expected Stock Price Volatility 35.77%
Risk-free Interest Rate 5.45% to 6.75%
Expected Life of Options 1 to 6 years
During the year ended September 30, 1997, warrants for the purchase of shares of
the Company's common stock were issued, ranging in exercise price from $1.9375
to $5.00. Fifty-five thousand (55,000) warrants were issued in connection with
services to be rendered by an investor relations advisor to the Company. Two
hundred fifty thousand (250,000) warrants were issued in connection with
consulting and financial analysis services to be rendered (i.e., financial
analyst report, etc.). The following is a schedule of warrants issued and
outstanding during the year ended September 30, 1997:
<TABLE>
<CAPTION>
Number of Exercise Date Expiration
Warrants Price Exercisable Date
--------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Outstanding at 09/30/96 0
Activity during FY 96/97:
Issued at $1.9375 30,000 1.9375 06/18/97 06/18/02
Issued at $3.125 137,500 3.1250 10/09/96 09/16/99
Issued at $5.00 137,500 5.0000 10/09/96 09/16/99
Exercised 0
Expired 0
===============
Outstanding at 09/30/97 305,000
===============
</TABLE>
In accordance with SFAS No. 123, no expense has been recognized in relation
to these warrants.
8. Lease Commitments
UCI-SC leases office and medical center space under various operating lease
agreements. Certain operating leases provide for escalation payments, exclusive
of renewal options.
45
<PAGE>
Future minimum lease payments under noncancellable operating leases with a
remaining term in excess of one year as of September 30, 1997, are as follows:
Operating
Leases
---------------
Year ending September 30:
1998 $ 1,848,037
1999 1,836,627
2000 1,697,263
2001 1,605,596
2002 1,289,692
Thereafter 7,685,245
---------------
Total minimum lease payments $ 15,962,460
===============
Total rental expense under operating leases for fiscal 1997, 1996 and 1995 was
approximately $1,475,000, $1,188,000, and $923,000, respectively.
9. Related Party Transactions
Relationship between UCI-SC and the P.A.
Pursuant to an agreement between UCI-SC and the P.A., UCI-SC provides
non-medical management services and personnel, facilities, equipment and other
assets to the Centers . UCI-SC guarantees the compensation of the physicians
employed by the P.A. The agreement also allows UCI-SC to negotiate contracts
with HMOs and other organizations for the provision of medical services by the
P.A.'s physicians. Under the terms of the agreement, the P.A. assigns all
revenue generated from providing medical services to UCI-SC after paying
physician salaries. The P.A. is owned by M.F. McFarland, III, M.D. Dr. McFarland
is also President, Chief Executive Officer and Chairman of UCI and UCI-SC.
Relationship between the Company and Blue Cross Blue Shield of South Carolina
Blue Cross Blue Shield of South Carolina (BCBS) owns 100% of Companion
HealthCare Corporation ("CHC"), Companion Property & Casualty Insurance Company
("CP&C") and Companion Technologies, Inc. ("CT"). At September 30,1997, CHC
owned 2,006,442 shares of the Company's outstanding common stock and CP&C owned
618,181 shares of the Company's outstanding common stock, which combine to
approximately 46% of the Company's outstanding common stock.
Facility Leases
UCI-SC leases six medical center facilities from CHC and one medical center
facility from CP&C under operating leases with fifteen year terms expiring in
2008, 2009 and 2010. Each of these leases has a five year renewal option, and a
rent guarantee by the P.A. One of the leases has a purchase option allowing
UCI-SC to purchase the center at fair market value after February 1, 1995. Total
lease payments made by UCI-SC under these leases during the Company's fiscal
years ended September 30, 1997, 1996, and 1995 were $319,730, $306,178, and
$271,100, respectively.
Several of the medical center facilities operated by UCI-SC are leased or were
leased from entities owned or controlled by certain principal shareholders
and/or members of the Company's management. Total lease payments made by UCI-SC
under these leases during the fiscal years ended September 30, 1997, 1996 and
1995 were $45,600, $122,854, and $244,300, respectively.
46
<PAGE>
Ten of the medical center facilities operated by UCI-SC are or were leased from
physician employees of the P.A. Total lease payments made by UCI-SC under these
leases during the Company's fiscal years ended September 30, 1997, 1996 and 1995
were $258,026, $189,945, and $140,100, respectively.
Other Transactions with Related Parties
The following is a historical summary of BCBS and its subsidiaries' purchases of
the Company's common stock.
<TABLE>
<CAPTION>
Date Number Price Total
Purchased Entity of Shares Per Share Purchase Price
------------------ ----------- -------------- ------------- ------------------
<S> <C> <C> <C> <C>
12/10/93 CHC 333,333 1.50 $ 500,000
06/08/94 CHC 333,333 3.00 $ 1,000,000
01/16/95 CHC 470,588 2.13 $ 1,000,000
05/24/95 CHC 117,647 2.13 $ 250,000
11/03/95 CHC 218,180 2.75 $ 599,995
12/15/95 CHC 218,180 2.75 $ 599,995
03/01/96 CHC 109,091 2.75 $ 300,000
06/04/96 CP&C 218,181 2.75 $ 599,998
06/23/97 CP&C 400,000 1.50 $ 600,000
</TABLE>
Including shares purchased by CHC from third parties, at September 30, 1997,
BCBS controls 2,624,623 shares, or approximately 46% of the Company's
outstanding common stock. The shares acquired by CHC and CP&C from the Company
were purchased pursuant to stock purchase agreements and were not registered.
CHC and CP&C have the right to require registration of the stock under certain
circumstances as described in the agreement. BCBS and its subsidiaries have the
option to purchase as many shares as may be necessary for BCBS to maintain
ownership of 47% of the outstanding common stock of the Company in the event
that the Company issues additional stock to other parties (excluding shares
issued to employees or directors of the Company).
In June 1997, CP&C purchased 400,000 shares of the Company's common stock for
$600,000. The purchase price was below fair value due to lower issuance costs
incurred by the Company.
During the Company's fiscal year ended September 30, 1994, UCI-SC purchased a
new billing and accounts receivable system from CT for an aggregate purchase
price of $504,000. The Company entered into a capital lease agreement for this
system, which includes computer equipment. The Company has the option to
purchase the equipment at the end of the lease term for $1. The lease obligation
recorded at September 30, 1997 is $340,916, which includes lease addenda.
During the Company's fiscal year ended September 30, 1994, UCI-SC entered into
an agreement with CP&C pursuant to which UCI-SC, through the P.A., acts as the
primary care provider for injured workers of firms carrying worker's
compensation insurance through CP&C. Additionally, during the Company's fiscal
year ended September 30, 1995, UCI-SC executed a note payable to CP&C consisting
of monthly installments of $4,546 (including 11% interest) from April 1, 1995 to
March 1, 2010, collateralized by certain accounts receivable.
UCI-SC, through the P.A., provides services to members of a health maintenance
organization ("HMO") operated by CHC who have selected the P.A. as their primary
care provider.
During the year ended September 30, 1996, BCBS provided a non-interest bearing
advance to the Company in the amount of $600,000. This advance was paid in full
in December 1996.
47
<PAGE>
The employees of the Company are offered health, life, and dental insurance
coverage at group rates from BCBS and its subsidiaries.
The Company contracts with Adams and Associates for its workers compensation and
professional liability insurance coverage. Aggregate premiums paid during the
fiscal year ended September 30, 1997 in connection with such policies were
approximately $155,000. Adams and Associates contracts with CP&C to be the
insurance carrier for the Company's workers compensation insurance coverage.
During the fiscal year ended September 30, 1996, Adams and Associates provided
short-term financing to the Company for approximately $17,000 in workers
compensation audit premiums, which was paid in full during the fiscal year ended
September 30, 1997. Harold H. Adams, Jr. is the President and owner of Adams and
Associates and is also a director of the Company.
The Company has contracted since September 1994 with Global Consulting,
Inc. for financial and marketing consulting services. Russell J. Froneberger is
the President and owner of Global Consulting, Inc. and is also a director of the
Company. Fees paid during the fiscal year ended September 30, 1997 in connection
with these services were approximately $96,000.
10. Earnings Per Share
The calculation of earnings per share and common equivalent share is based on
the weighted average number of shares outstanding (5,005,081 in fiscal 1997,
4,294,137 in fiscal 1996 and 3,136,544 in fiscal 1995). Outstanding stock
options and warrants are common stock equivalents, but had no dilutive effects
on earnings per share in either of the three fiscal years presented.
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement No. 128, "Earnings Per Share," ("SFAS No. 128") which requires the
Company to disclose both basic and diluted earning per share. SFAS No. 128 is
effective for fiscal years ending after December 15, 1997. SFAS 128 would have
had no impact on the reported earnings per share for the Company for each of the
three years ended September 30, 1997.
11. Concentration of Credit Risk
In the normal course of providing health care services, the Company may extend
credit to patients without requiring collateral. Each individual's ability to
pay balances due the Company is assessed and reserves are established to provide
for management's estimate of uncollectible balances.
Future revenues of the Company are largely dependent on third-party payors and
private insurance companies, especially in instances where the Company accepts
assignment.
12. Commitments and Contingencies
In the ordinary course of conducting its business, the Company becomes involved
in litigation, claims, and administrative proceedings. Certain litigation,
claims, and proceedings were pending at September 30, 1997, and management
intends to vigorously defend the Company in such matters. While the ultimate
results cannot be predicted with certainty, management does not expect these
matters to have a material adverse effect on the financial position or results
of operations of the Company.
13. Significant Fourth Quarter Adjustment
During the quarter ended September 30, 1997, the Company made a change in an
accounting estimate totalling approximately $279,000 ($.06 per share). The
change involved increasing the allowance for doubtful accounts to provide for
higher than anticipated write-offs of uncollectible accounts. Bad debt expense
is reflected as a component of operating costs on the Statement of Operations.
48
<PAGE>
14. Supplemental Cash Flow Information
Supplemental Disclosure of Cash Flow Information
The Company made interest payments of $813,569, $583,981, and $448,311, in the
years ended September 30, 1997, 1996, and 1995, respectively. The Company made
income tax payments of $0, $15,350 and $0 in the years ended September 30, 1997,
1996 and 1995, respectively.
Supplemental Non-Cash Operating Activities
In July 1995, the Company paid for certain corporate expenses through an
issuance of 6,000 shares of common stock of the Company in the amount of
$16,500, of which $4,125 was expensed in fiscal 1995 and the remainder was
expensed in fiscal 1996.
Supplemental Non-Cash Financing Activities
Capital lease obligations of $1,004,837, $711,569 and $1,069,915 were incurred
in fiscal 1997, 1996 and 1995. Additionally, in February 1995, the Company
acquired property which was financed through a note payable in the amount of
$400,000.
In January 1995, the Company acquired certain assets of a medical practice in
West Columbia, South Carolina for $291,000, consisting of 145,500 shares of
common stock of the Company.
In May 1995, the Company acquired a medical practice in Cayce, South Carolina
for $150,000, consisting of 46,153 shares of common stock of the Company.
In August 1995, the Company acquired certain assets of a medical practice in
Greenville, South Carolina for $662,500, by financing $350,000 with the seller,
and issuing 100,000 shares of common stock of the Company.
In December 1995, the Company acquired certain assets of a medical practice in
Greenville, South Carolina for $300,000, by paying $30,000 at closing, financing
$30,000 with the seller, and issuing 60,000 shares of the common stock of the
Company.
In December 1995, the Company acquired a medical practice in Myrtle Beach, South
Carolina for $334,400, consisting of 70,400 shares of the common stock of the
Company. The Company commenced management of the facility in January 1995, prior
to the closing date of the acquisition in December 1995. Financial results of
operations of the acquired facility since January 1995 are included in these
consolidated financial statements for fiscal years 1995 and 1996.
In March 1996, the Company acquired certain assets of a medical practice in
Columbia, South Carolina for $125,000, by assuming $25,000 in the seller's
accounts payable, and issuing 24,243 shares of the common stock of the Company.
In March 1996, the Company acquired certain assets of a medical practice in
Murrells Inlet, South Carolina for $600,000, by paying $60,000 at closing,
financing $240,000 with the seller, and issuing 72,728 shares of the common
stock of the Company.
In April 1996, the Company acquired certain assets of a medical practice in
Greenville, South Carolina for $513,931, by paying $6,315 at closing, financing
$69,462 with the seller, and issuing 125,187 shares of the common stock of the
Company.
49
<PAGE>
In June 1996, the Company acquired certain assets of a medical practice in
Lugoff, South Carolina for $675,000, by paying $15,000 at closing, financing
$60,000 with the seller, and issuing 172,588 shares of the common stock of the
Company.
In October 1996, the Company acquired certain assets of a medical practice in
Aiken, South Carolina for $80,000 by financing $80,000 with the seller.
In October 1996, the Company acquired certain assets of a medical practice in
Simpsonville, South Carolina for $25,000 by financing $25,000 with the seller.
In August 1997, the Company acquired a three facility medical practice in
Columbia, South Carolina for $2,271,250, by paying $200,000 at closing, assuming
$371,250 in notes payable, financing $600,000 with the seller and issuing
517,649 shares of the common stock of the Company.
In September 1997, the Company acquired certain assets of a medical practice in
Camden, South Carolina for $45,000 by paying $1,500 at closing and financing
$43,500 with the seller.
In September 1997, the Company acquired certain assets of a medical practice in
Summerville, South Carolina for $100,000 by paying $7,000 at closing, financing
$43,000 with the seller and issuing 19,513 shares of the common stock of the
Company.
15. Subsequent Events
On October 1, 1997, the Company acquired certain assets of a three facility
physical therapy practice in Columbia, South Carolina for $856,756 by assuming
certain liabilities and issuing 276,976 shares of the common stock of the
Company. The Company entered into employment agreements with the physical
therapists who had been the owners of the practice. The Company also entered
into lease agreements or assumed existing lease agreements from the previous
owners. The practice previously had annual revenues of approximately $964,000.
On October 6, 1997, the Company completed a private placement of a $1.5 million,
6.5% five-year convertible subordinated debenture with FPA Medical Management,
Inc., a national physician practice management company headquartered in San
Diego, California. The debentures are convertible to common stock at any time
within the five year period at a fixed price premium to the current stock price
and are subject to Rule 144 of the Securities and Exchange Commission when
converted.
On November 1, 1997, the Company acquired certain assets of a medical practice
in New Ellenton, South Carolina for $262,004 by paying $17,468 at closing,
financing $159,536 with the seller, and issuing 30,223 shares of the common
stock of the Company. The Company entered into an employment agreement with the
physician who had been the sole shareholder of the acquired medical practice.
The Company also entered into a lease agreement with the physician owner for the
facility occupied by the acquired medical practice. The practice previously had
annual revenues of approximately $409,000.
On December 11, 1997, the Company renewed its long-term debt agreement with
Carolina First Bank for a $3,000,000 line of credit, bearing interest at an
annual rate of prime plus one (1%) percent (prime rate is 8.5% at September 30,
1997). This line of credit balance at September 30, 1997 is classified as
long-term on the accompanying balance sheet.
50
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
UCI MEDICAL AFFILIATES, INC.
Date: January 28, 1998 By: /s/ M. F. McFarland
----------------------
M.F. McFarland, III, M.D.
President and
Chief Executive Officer
By: /s/ Jerry F. Wells, Jr.
Jerry F. Wells, Jr.
Executive Vice President of
Finance, Chief Financial
Officer, and Principal
Accounting Officer
51
<PAGE>
<TABLE>
<CAPTION>
UCI MEDICAL AFFILIATES, INC.
EXHIBIT INDEX
PAGE NUMBER OR INCORPORATION BY
EXHIBIT NUMBER REFERENCE TO
DESCRIPTION
- ---------------- ------------------------------------------------------- -------------------------------------
<S> <C> <C>
3.1 Amended and Restated Certificate of Incorporation of Exhibit 3.1 on the Form 10-KSB
UCI Medical Affiliates, Inc. ("UCI") filed for fiscal year 1995
3.2 Amended and Restated Bylaws of UCI Exhibit 3.2 on the Form 10-KSB
filed for fiscal year 1995
3.3 Amendment to Amended and Restated Bylaws of UCI Exhibit 3.3 on the Form 10-KSB
filed for fiscal year 1996
4.1 Convertible Subordinated Debenture of UCI dated 54
October 6, 1997 payable to FPA Medical Management,
Inc. ("FPAMM")
4.2 Stock Purchase Warrant Agreement dated October 6, 60
1996 between UCI and FPAMM
10.1 Facilities Agreement dated May 8, 1984 by and between Exhibit 10.1 on the Form 10-KSB
UCI Medical Affiliates of South Carolina, Inc. filed for fiscal year 1996
("UCI-SC") and Doctor's Care, P.A., as amended
September 24, 1984 and January 13, 1995
10.2 Amendment No. 3 dated September 17, 1996 to the 65
Facilities Agreement listed as Exhibit 10.1 to this
report
10.3 Employment Agreement dated October 1, 1995 between Exhibit 10.4 on the Form 10-KSB
UCI-SC and M.F. McFarland, III, M.D. filed for fiscal year 1995
10.4 Employment Agreement dated October 1, 1995 between Exhibit 10.5 on the Form 10-KSB
Doctor's Care, P.A. and M.F. McFarland, III, M.D. filed for fiscal year 1995
10.5 Employment Agreement dated November 1, 1995 between Exhibit 10.6 on the Form 10-KSB
UCI-SC and D. Michael Stout, M.D. filed for fiscal year 1995
10.6 Employment Agreement November 1, 1995 between Exhibit 10.7 on the Form 10-KSB
Doctor's Care, P.A. and D. Michael Stout, M.D. filed for fiscal year 1995
10.7 Lease and License Agreement dated March 30, 1994 Exhibit 10.8 on the Form 10-KSB
between Doctor's Care, P.A. and Blue Cross Blue filed for fiscal year 1995
Shield of South Carolina
10.8 Note Payable dated February 28, 1995 between UCI-SC, 67
as payor, and Companion Property and Casualty
Insurance Company, as payee
</TABLE>
52
<PAGE>
<TABLE>
<CAPTION>
PAGE NUMBER OR INCORPORATION BY
EXHIBIT NUMBER REFERENCE TO
DESCRIPTION
- ---------------- ------------------------------------------------------- -------------------------------------
<S> <C> <C> <C>
10.9 Revolving Line of Credit dated November 11, 1996 70
between Carolina First Bank and UCI
10.10 Stock Option Agreement dated March 20, 1996 between 76
UCI and Harold H. Adams, Jr.
10.11 Stock Option Agreement dated March 20, 1996 between 79
UCI and Russell J. Froneberger
10.12 Stock Option Agreement dated March 27, 1997 between 82
UCI and Charles P. Cannon
10.13 Stock Option Agreement dated March 27, 1997 between 85
UCI and Thomas G. Faulds
10.14 Stock Option Agreement dated March 27, 1997 between 88
UCI and Ashby Jordan, M.D.
10.15 Stock Option Agreement dated March 27, 1997 between 91
UCI and Charles M. Potok
10.16 UCI Medical Affiliates, Inc. 1994 Incentive Stock Exhibit 10.9 on the Form 10-KSB
Option Plan filed for fiscal year 1995
10.17 Consulting Agreement dated December 10, 1996 between 94
UCI and Global Consulting, Inc.
21 Subsidiaries of the Registrant Exhibit 21 on the Form 10-KSB filed
for fiscal year 1996
27 Financial Data Schedule Filed separately as Article Type 5
via Edgar
</TABLE>
53
<PAGE>
EXHIBIT 4.1
CONVERTIBLE SUBORDINATED DEBENTURE
<PAGE>
UCI MEDICAL AFFILIATES, INC.
Convertible Subordinated Debenture
$1,500,000 Principal Amount Denomination
5-Year Maturity
6.50% Fixed Interest Rate
Issuance Date: October 6, 1997
FOR VALUE RECEIVED, UCI MEDICAL AFFILIATES, INC., a Delaware
corporation (the "Company"), hereby promises to pay to FPA MEDICAL MANAGEMENT,
INC., a Delaware corporation, or registered assigns (the "Holder"), the sum of
One Million Five Hundred Thousand and No/100 Dollars ($1,500,000.00) on October
5, 2002, upon presentation and surrender of this Debenture at the principal
offices of the Company at 1901 Main Street, Suite 1200, Columbia, South Carolina
29201, or at such other address as the Company may designate by notice to the
Holder (the "Company Office"), and to pay interest computed from October 6, 1997
(the "Issue Date") at the fixed rate of six and one-half (6.50%) percent per
annum payable annually on each anniversary of the Issue Date, until payment of
the principal amount of this Debenture has been made.
Payments of principal and the final payment of interest on this
Debenture will be made at the Company Office. All other payments of interest
shall be made by check mailed to the Holder at the address which shall appear on
the Register (as defined below).
1. Holder Deemed Owner. The Company shall cause to be kept at the
Company Office a register in which the Company shall provide for the
registration of transfers of this Debenture (the "Register"). The Company may
treat the person in whose name the Debenture is registered as the absolute owner
thereof for all purposes, whether or not the Debenture is overdue, and the
Company shall not be affected by notice to the contrary.
2. Transferability. This Debenture is transferable by the Holder only
on the Register of the Company, upon surrender of the Debenture for transfer at
the Company Office, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company duly executed by, the Holder or
such Holder's attorney duly authorized in writing, and thereupon a new
Debenture, for the same aggregate principal amount, will be issued to the
designated transferee. No service charge shall be made for any such transfer,
but the Company may require payment of a sum sufficient to cover any tax or
other governmental charge payable in connection therewith.
NEITHER THIS CONVERTIBLE SUBORDINATED DEBENTURE NOR THE SHARES OF COMMON STOCK
WHICH MAY BE ISSUED UPON CONVERSION HEREOF HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), 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. UCI MEDICAL AFFILIATES,
INC. (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. Subordination. The rights of the Holder of this Debenture to receive
payment of any principal or interest hereon is subject and subordinate to the
prior payment of the principal of, (and premium, if any) and the interest on,
all other indebtedness of the Company, whether now outstanding or subsequently
incurred, whether secured or unsecured, and any deferrals, renewals or
extensions of such indebtedness or any debentures, bonds or notes evidencing
such indebtedness (the "Senior Indebtedness"). Upon any receivership,
insolvency, assignment for the benefit of creditors, bankruptcy, reorganization,
sale of all or substantially all of the assets,
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dissolution, liquidation, or any other marshalling of the assets and liabilities
of the Company, or in the event this Debenture is declared due and payable upon
the occurrence of a default as defined in this Debenture, then no amount shall
be paid by the Company with respect to principal and interest hereon unless and
until the principal of, and interest on, all Senior Indebtedness then
outstanding is paid in full.
4. Conversion. Subject to the provisions hereof, the Holder shall have
the right, at its sole option, at any time after the date hereof and on or
before the maturity date of the Debenture to convert the outstanding principal
amount of this Debenture in whole but not in part into fully paid and
nonassessable shares of common stock, $0.05 par value per share (the "Common
Stock"), of the Company at the price of Three and 20/100 ($3.20) Dollars of
principal per share (the "Conversion Price") or, in the event the Conversion
Price has been adjusted as hereinafter provided, then at the Conversion Price as
last adjusted.
To convert this Debenture, the Holder shall surrender this Debenture to
the Company at the Company Office duly endorsed for conversion, or accompanied
by written notice to the Company stating that the Holder elects to convert the
Debenture (the "Notice of Conversion"). The conversion shall be deemed to have
been effected on the date (the "Conversion Date") on which the Company shall
have received the Debenture so endorsed or accompanied by such notice and at
such time the rights of the Holder as to the Debenture shall cease and the
Holder shall become the holder of record of the shares of Common Stock being
issued upon such conversion. As promptly as practicable thereafter the Company
shall issue, at its expense, and shall deliver or cause to be delivered to the
Holder a certificate or certificates for the number of whole shares of Common
Stock issuable upon the conversion. Also, immediately upon conversion, the
Company shall pay to the Holder the accrued and unpaid interest on the amount of
principal so converted. No fractional shares of Common Stock shall be issued
upon the conversion of the Debenture. In lieu of issuing a fractional share, the
Company shall pay a cash adjustment equal to the Conversion Price of such
fractional share.
The Company shall at all times reserve and keep available out of its
authorized Common Stock that number of shares of Common Stock equal to the
number of shares of Common Stock issuable upon conversion of the entire unpaid
principal amount of this Debenture. All Common Stock which is delivered upon
conversion shall be validly issued, fully paid and nonassessable and free and
clear of all liens, pledges, security interests and encumbrances of any kind.
No payment or adjustment shall be made by or on behalf of the Company
on the Common Stock issued upon conversion on account of any cash dividends
which were declared for payment to the holders of Common Stock of record as of a
date prior to the Conversion Date. The Holder shall have no right to receive
notice of or to vote as a stockholder at meetings of the Company's stockholders.
Notwithstanding anything herein to the contrary, if the Company shall
be a party to any transaction which involves any consolidation or merger of the
Company with another corporation, which corporation does not control, is not
controlled by or is not under common control with the Company, and which
transaction is effected in such a way that the holders of Common Stock shall be
entitled to receive stock, securities or other assets with respect to or in
exchange for Common Stock, then the right to convert this Debenture shall
terminate at the close of business on the date as of which the holders of Common
Stock of record shall be entitled to exchange their shares of Common Stock for
securities or other assets deliverable upon such consolidation, merger or sale
or, if later, twenty (20) days following written notice of such event to the
Holder.
If after the date hereof the Company (a) pays a dividend or makes a
distribution in shares of Common Stock, (b) subdivides its outstanding shares of
Common Stock into a greater number of shares, (c) combines its outstanding
shares of Common Stock into a smaller number of shares or (d) reclassifies or
recapitalizes its Common Stock or any other shares of capital stock of the
Company, the Conversion Price in effect immediately prior to such action shall
be adjusted so that the Holder may receive the number of shares of capital stock
to which such Holder would have been entitled upon such action if such Holder
had converted the entire principal amount of the Debenture immediately prior
thereto. Any such adjustment shall become effective immediately after the record
date for the determination of owners of Common Stock entitled thereto in the
case of a dividend or distribution and shall become effective immediately after
the effective date in the case of a subdivision,
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combination or reclassification. Whenever the Conversion Price is adjusted, as
provided herein, the Company promptly shall give written notice of such
adjustment to the Holder, at the Holder's last address appearing in the
Register.
5. Redemption. This Debenture may be redeemed at any time prior to
maturity in whole but not in part at the option of the Company, at the Company
Office, upon the notice referred to below and given as provided herein (the
"Notice of Redemption"), at the following redemption prices (expressed in
percentages of the principal amount of this Debenture) together with accrued
interest to the date of redemption:
Date of Redemption Percentage of Principal Amount
October 6, 1997, through April 5, 1998............................... 108.5
April 6, 1998 through October 5, 1998................................ 108
October 6, 1998 through April 5, 1999................................ 107.5
April 6, 1999 through October 5, 1999................................ 107
October 6, 1999 through April 5, 2000................................ 106.5
April 6, 2000 through October 5, 2000................................ 106
October 6, 2000 through April 5, 2001............................... 105.5
April 6, 2001 through October 5, 2001................................ 105
October 6, 2001 through April 5, 2002................................ 104.5
April 6, 2002 through October 5, 2002................................ 104
Where Notice of Conversion precedes Notice of Redemption, the Company's
redemption rights do not apply. Conversely, where Notice of Redemption precedes
Notice of Conversion, the Holder's conversion right does not apply. If Notice of
Conversion and Notice of Redemption are deemed given on the same day, then
Notice of Redemption will be considered to have been first given for purposes of
this Debenture.
Notice of Redemption to the Holder of this Debenture shall be given by
the Company not later than the 30th day, and not earlier than the 60th day,
before the date fixed for redemption to the Holder at the address of the Holder
as set forth in the Register. The Company shall have the right to revoke Notice
of Redemption upon notice of such revocation to the Holder at the address of the
Holder as set forth in the Register given by the Company not later than the 5th
day before the date fixed for redemption by the Notice of Redemption.
6. Default. An "Event of Default" or "Default" shall mean, whenever such
terms are used in this Debenture, any one or more of the following events:
(a) The Company fails to pay any interest on this
Debenture when it is due and payable, and the failure
continues for a period of five (5) days after notice
of non-payment is delivered to the Company by the
Holder;
(b) The Company fails to pay the principal of this
Debenture at its maturity;
(c) The Company commences any voluntary proceeding under
any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, receivership,
dissolution, or liquidation law or statute, of any
jurisdiction, whether now or subsequently in effect;
or the Company is adjudicated insolvent or bankrupt
by a court of competent jurisdiction; or the Company
petitions or applies for, acquiesces in, or consents
to, the appointment of any receiver or trustee of the
Company or for
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all or substantially all of its property or assets;
or the Company makes an assignment for the benefit of
its creditors; or the Company admits in writing its
inability to pay its debts as they mature; or
(d) There is commenced against the Company any proceeding
relating to the Company under any bankruptcy,
reorganization, arrangement, insolvency, readjustment
of debt, receivership, dissolution, or liquidation
law or statute, of any jurisdiction, whether now or
subsequently in effect, and the proceeding remains
undismissed for a period of ninety (90) days or the
Company by any act indicates its consent to, approval
of, or acquiescence in, the proceeding; or a receiver
or trustee is appointed for the Company or for all or
substantially all of its property or assets, and the
receivership or trusteeship remains undischarged for
a period of ninety (90) days; or a warrant of
attachment, execution or similar process is issued
against any substantial part of the property or
assets of the Company, and the warrant or similar
process is not dismissed or bonded within ninety (90)
days after the levy.
If an Event of Default shall have occurred and be continuing, the
entire amount of this Debenture plus all accrued interest shall be due and
payable immediately at the election of the Holder. It is further agreed that the
acceptance after maturity of any payment or payments shall not constitute a
waiver of the right of the Holder to demand payment in full of any unpaid
balance. The Holder may exercise this option to accelerate during any Event of
Default regardless of any prior forbearance. If suit is brought to collect this
Debenture, the Holder shall be entitled to collect all reasonable costs and
expenses of suit, including, but not limited to, reasonable attorney's fees.
No delay or failure on the part of the Holder in the exercise of any
right or remedy shall operate as a waiver thereof, and no single or partial
exercise by the Holder of any right or remedy shall preclude other or further
exercise thereof or the exercise of any other right or remedy. The Holder shall
be under no duty to exercise any or all of the rights and remedies given by this
Debenture, and the Company shall not be discharged from its obligations or
undertaking hereunder (a) should the Holder release or agree not to sue any
person against whom the Company has, to the knowledge of the Holder, a right of
recourse or (b) should the Holder agree to suspend its right to enforce this
Debenture or otherwise discharge such person.
The Company expressly waives presentment, protest and demand, notice of
protest, demand and dishonor and nonpayment of this Debenture. No recourse shall
be had for the payment of the principal of, or interest on, this Debenture or
for any claim based hereon, or otherwise in any manner in respect hereof,
against any incorporator, stockholder, officer or director, as such, past,
present or future, of the Company or of any predecessor or successor
corporation, whether by virtue of any constitutional provision or statute or
rule of law, or by the enforcement of any assessment or penalty or in any other
manner, all such liability being expressly waived and released by the acceptance
hereof and as part of the consideration for the issuance hereof.
7. Notices. All notices and other communications provided for herein
shall be in writing, signed by the sender or an authorized representative of the
sender, and addressed to the receiver as follows: if to the Company, at the
Company Office; and if to the Holder, at the address of the Holder as set forth
in the Register. Any notice or other communication hereunder shall be deemed
given and effective upon the first to occur of the following: (i) upon delivery
by hand to the receiver at the receiver's notice address, or (ii) upon being
deposited in the U.S. Mail, certified, with return receipt requested, directed
to the receiver's notice address.
8. Miscellaneous. This Debenture shall be enforced, governed and
construed in all respects in accordance with the laws of the State of South
Carolina. In case any one or more of the provisions contained in this Debenture
should be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby. This Debenture constitutes the
entire agreement of the Company respecting the subject matter hereof and shall
not be modified or amended except by written instrument signed by both parties
hereto. Whenever the context and construction so require, all words used in the
singular number herein shall be deemed to be used in the plural,
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and vice versa, and the masculine gender shall include the feminine and neuter
and the neuter shall include the masculine and feminine. The section and
paragraph headings contained in this Debenture are for reference purposes only
and shall not affect in any way the meaning or interpretation of this Debenture.
Terms such as "hereof", "hereunder", "hereto", "herein", and words of similar
import shall refer to this Debenture in its entirety and all references to
"Paragraphs", "Sections", and similar cross references shall refer to specified
portions of this Debenture, unless the context clearly requires otherwise. This
Debenture shall be binding upon the Company, the Holder, and their respective
assigns; and shall inure to the benefit of the Company and its successors and
permitted assigns, and the Holder and its permitted successors and assigns.
IN WITNESS WHEREOF, the Company has signed and sealed this Convertible
Subordinated Debenture as of this 6th day of October, 1997.
UCI MEDICAL AFFILIATES, INC.
ATTEST:
/s/ Jerry F. Wells By: /s/ M. F. McFarland
- --------------------- --------------------------
Its: Secretary Its: President and Chief Executive Officer
(Corporate Seal)
59
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EXHIBIT 4.2
STOCK PURCHASE WARRANT
60
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HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY OTHER JURISDICTION, AND NEITHER THIS WARRANT NOR THE
SHARES ISSUABLE UPON ITS EXERCISE OR CONVERSION MAY BE OFFERED FOR SALE, SOLD,
OR OTHERWISE TRANSFERRED, ASSIGNED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND THE SECURITIES LAWS OF
APPLICABLE JURISDICTIONS, OR UNLESS IN THE OPINION OF COUNSEL SATISFACTORY IN
FORM AND SUBSTANCE TO THE COMPANY, SUCH OFFER, SALE, HYPOTHECATION OR TRANSFER
IS EXEMPT FROM THE REGISTRATION PROVISIONS OF SUCH ACT AND SUCH LAWS.
STOCK PURCHASE WARRANT
UCI MEDICAL AFFILIATES, INC.
COMMON STOCK
($0.05 Par Value)
50,000 Shares Dated: October 6, 1997
This certifies that, for value received, FPA MEDICAL MANAGEMENT, INC.,
a Delaware corporation ("FPA"), is entitled upon the due exercise hereof to
purchase up to Fifty Thousand (50,000) shares of Common Stock, $0.05 par value,
(the "Warrant Shares"), of UCI MEDICAL AFFILIATES, INC., a Delaware corporation
(hereinafter called the "Company"), upon the terms and conditions set forth
herein.
1. Grant of Warrants
A. First Warrant. At any time during the period commencing on
the date hereof and terminating at 5:00 P.M. Columbia, South Carolina time on
September 30, 2000, FPA may purchase up to Twenty-Five Thousand (25,000) Warrant
Shares for a cash purchase price of $2.5625 per Warrant Share (the "Exercise
Price"), payable upon the exercise of this First Warrant, subject to adjustment
upon the occurrence of the contingencies set forth hereinbelow. This First
Warrant may be exercised in whole or in part but not as to a fractional share of
Common Stock.
B. Second Warrant. So long as on April 6, 1998 (a) the
principal amount of the Convertible Subordinated Debenture described in Section
2 below (the "Debenture") remains outstanding, and (b) the Debenture has not
been converted into Common Stock pursuant to the terms thereof, the Company on
such date grants to FPA a warrant (the "Second Warrant") to purchase up to Ten
Thousand (10,000) additional Warrant Shares at any time during the period
commencing on April 6, 1998 and terminating at 5:00 P.M. Columbia, South
Carolina time on April 5, 2001 for the Exercise Price per Warrant Share payable
upon the exercise of this Second Warrant, subject to adjustment upon the
occurrence of the contingencies set forth hereinbelow. This Second Warrant may
be exercised in whole or in part but not as to a fractional share of Common
Stock.
C. Third Warrant. So long as on October 6, 1998 (a) the
principal amount of the Debenture remains outstanding, and (b) the Debenture has
not been converted into Common Stock pursuant to the terms thereof, the Company
on such date grants to FPA a warrant (the "Third Warrant") to purchase up to Ten
Thousand (10,000) additional Warrant Shares at any time during the period
commencing on October 6, 1998 and terminating at 5:00 P.M. Columbia, South
Carolina time on October 5, 2001 for the Exercise Price per Warrant Share
payable upon the exercise of this Third Warrant, subject to adjustment upon the
occurrence of the contingencies set forth hereinbelow. This Third Warrant may be
exercised in whole or in part but not as to a fractional share of Common Stock.
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D. Fourth Warrant. So long as on October 6, 1999 (a) the
principal amount of the Debenture remains outstanding, and (b) the Debenture has
not been converted into Common Stock pursuant to the terms thereof, the Company
on such date grants to FPA a warrant (the "Fourth Warrant") to purchase up to
Ten Thousand (10,000) additional Warrant Shares at any time during the period
commencing on October 6, 1999 and terminating at 5:00 P.M. Columbia, South
Carolina time on October 5, 2002 for the Exercise Price per Warrant Share
payable upon the exercise of this Fourth Warrant, subject to adjustment upon the
occurrence of the contingencies set forth hereinbelow. This Fourth Warrant may
be exercised in whole or in part but not as to a fractional share of Common
Stock.
E. Fifth Warrant. So long as on October 6, 2000 (a) the
principal amount of the Debenture remains outstanding, and (b) the Debenture has
not been converted into Common Stock pursuant to the terms thereof, the Company
on such date grants to FPA a warrant (the "Fifth Warrant") to purchase up to Ten
Thousand (10,000) additional Warrant Shares at any time during the period
commencing on October 6, 2000 and terminating at 5:00 P.M. Columbia, South
Carolina time on October 5, 2003 for the Exercise Price per Warrant Share
payable upon the exercise of this Fifth Warrant, subject to adjustment upon the
occurrence of the contingencies set forth hereinbelow. This Fifth Warrant may be
exercised in whole or in part but not as to a fractional share of Common Stock.
2. Subject to Debenture. This Stock Purchase Warrant is executed in
connection with, and is subject to, that certain Convertible Subordinated
Debenture in the original principal amount of One Million Five Hundred Thousand
and No/100 Dollars ($1,500,000.00) executed as of the date hereof by the Company
in favor of FPA.
3. Exercise. Upon delivery of notice of exercise, duly executed,
together with payment of the Exercise Price in cash or by check for the shares
of Common Stock thereby purchased, at the principal executive offices of the
Company, FPA shall be entitled to receive, and shall promptly receive, a
certificate or certificates in proper form for the shares of Common Stock so
purchased.
4. No Transfer of Warrant. This Warrant and all rights hereunder may
not be sold, transferred, assigned, pledged or hypothecated in whole or in part,
except FPA upon written notice to the Company may assign its rights and
obligations, if any, hereunder to any corporation wholly-owned by FPA.
5. Adjustment of Exercise Price and Number of Shares Purchasable
Hereunder. In case the Company shall at any time after the date of this
Agreement (i) declare a dividend or make a distribution on the Common Stock in
shares of its Common Stock, (ii) subdivide the outstanding Common Stock, (iii)
combine or reclassify the outstanding Common Stock into a smaller number of
shares, or (iv) issue any shares of its capital stock in a reclassification of
the Common Stock (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing corporation), the
Exercise Price in effect at the time of the record date for such dividend or of
the effective date of such subdivision, combination or reclassification shall be
proportionately adjusted so that the holder of the Warrant exercised after such
time shall be entitled to receive the aggregate number and kind of shares of
capital stock which, if such Warrant had been exercised immediately prior to
such date, he would have owned upon such exercise and been entitled to receive
by virtue of such dividend, subdivision, combination or reclassification. Such
adjustment shall be made successively whenever any event listed above shall
occur.
6. Charges, Taxes and Expenses. The issuance of certificates of shares
of Common Stock upon any exercise or conversion of this Warrant shall be made
without charge to the holder hereof for any tax or other expense in respect to
the issuance of such certificates, all of which taxes and expenses shall be paid
by the Company.
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7. Covenants of Issuer. The Company covenants and agrees that all
Common Stock and, if applicable, other securities that may be issued upon the
exercise of the rights represented by this Warrant will, upon issuance, be fully
paid and nonassessable and free from all taxes, liens and charges with respect
to the issue thereof (other than taxes in respect of any transfer to a person
other than the holder of this Warrant occurring contemporaneously with such
issue). The Company further covenants and agrees that during the period within
which the rights represented by this Warrant may be exercised, the Company will
at all times have authorized and reserved a sufficient number of shares of
Common Stock and, if applicable, other securities to provide for the exercise in
full of the rights represented by this Warrant. The Company will provide to, or
make available to, as the case may be, the holder of this Warrant the same
information, reports and notices as it shall provide to, or make available to,
the holders of its Common Stock.
8. Holder's Rights. No holder of this Warrant, as such, shall be entitled
to vote or receive dividends or be deemed to be a shareholder of the Company for
any purpose.
9. Applicable Law. The validity, interpretation, and performance of this
Warrant shall be governed by the laws of the State of South Carolina.
10. Successors and Assigns. This Warrant and the rights evidenced
hereby shall inure to the benefit of and be binding upon the successors and
assigns of the Company and the holder hereof.
11. Headings. Headings of the paragraphs in this Warrant are for
convenience and reference only and shall not, for any purpose, be deemed a part
of this Warrant.
12. Notices. Any notice, request, approval, consent, demand or other
communication shall be effective upon the first to occur of the following: (i)
upon receipt by the party to whom such notice, request, approval, consent,
demand or other communication is being given; or (ii) three (3) business days
after being duly deposited in the United States mail, registered or certified,
return receipt requested, and addressed as follows:
Company: UCI Medical Affiliates, Inc.
1901 Main Street
Suite 1200
Columbia, SC 29201
Attn: Jerry F. Wells, Jr.
FPA: FPA Medical Management, Inc.
3636 Nobel Drive
Suite 200
San Diego, CA 92122
Attn: Steve Lash
The parties hereto may change their respective addresses by notice in writing
given to the other party to this Agreement.
13. Number of Days. In computing the number of days for purposes of
this Agreement, all days shall be counted, including Saturdays, Sundays and
holidays; provided, however, that if the final day of any time period falls on a
Saturday, Sunday or holiday on which Federal banks are or may elect to be
closed, then the final day shall be deemed to be the next day which is not a
Saturday, Sunday or holiday.
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IN WITNESS WHEREOF, the Company has caused this Stock Purchase Warrant
to be signed by its duly authorized officer and its corporate seal to be affixed
hereto.
UCI MEDICAL AFFILIATES, INC.
By: /s/ M. F. McFarland
---------------------------
ATTEST: Its: President and Chief Executive Officer
--------------------------------------------
/s/ Jerry F. Wells
- --------------------
Secretary
64
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EXHIBIT 10.2
AMENDMENT NO. 3 TO FACILITIES AGREEMENT
65
<PAGE>
AMENDMENT NO. 3 TO FACILITIES AGREEMENT
This Amendment to Facilities Agreement (this "Amendment") entered into
to be effective as of this 27th day of September, 1996, by and between UCI
Medical Affiliates of South Carolina, Inc., a South Carolina corporation and
wholly-owned subsidiary of UCI Medical Affiliates, Inc. ("UCISC") and Doctor's
Care, P.A.
("Doctor's Care").
Introduction. UCISC and Doctor's Care previously entered into that
certain Facilities Agreement dated May 8, 1984 (the "Agreement") whereby
Doctor's Care agreed to provide medical and medically related services at
certain primary care clinics in South Carolina owned and/or leased by UCISC. The
Agreement was amended on September 24, 1984 and on January 13, 1995. The parties
hereto desire to further amend the terms of the Agreement to extend the term of
the Agreement as set forth in this Amendment. All capitalized terms not
otherwise defined herein shall have the respective meanings set forth in the
Agreement.
Agreement. NOW, THEREFORE, for and in consideration of the mutual
promises set forth herein and other good and valuable consideration, the receipt
and adequacy of which are hereby acknowledged, the parties do hereby agree as
follows:
1. The Agreement shall continue, unless earlier terminated by the parties, until
September 30, 2010.
2. All terms and conditions of the Agreement, except as modified hereby,
shall remain in full force and effect.
UCI MEDICAL AFFILIATES OF
SOUTH CAROLINA, INC. (SEAL)
By: /s/ M. F. McFarland
--------------------------
Its: President
--------------------------
DOCTOR'S CARE, P.A. (SEAL)
By: /s/ M. F. McFarland
--------------------------
Its: President
--------------------------
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<PAGE>
EXHIBIT 10.8
NOTE PAYABLE
DATED FEBRUARY 28, 1995
BETWEEN UCI-SC, AS PAYOR,
AND
COMPANION PROPERTY AND CASUALTY INSURANCE COMPANY, AS PAYEE
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<PAGE>
PROMISSORY NOTE
$400,000.00 Columbia, South Carolina
February 28, 1995
FOR VALUE RECEIVED, UCI MEDICAL AFFILIATES OF SOUTH CAROLINA, INC. (the
"Borrower"), promises to pay to the order of COMPANION PROPERTY AND CASUALTY
INSURANCE COMPANY the principal sum of FOUR HUNDRED THOUSAND AND NO/100 DOLLARS
($400,000.00) with interest thereon at an annual rate equal to Eleven percent
(11.0%).
Borrower shall pay monthly payments of principal and interest in the
amount of Four Thousand Five Hundred Forty-Six and 39/100 ($4,546.39) Dollars
beginning April 1, 1995, and continuing on the first day of each month
thereafter through the Maturity Date.
The entire outstanding principal balance of this Note and any
outstanding accrued interest shall be due and payable in full on the fifteenth
anniversary of the date of this Note (the "Maturity Date").
All payments under this Note shall be applied first to late charges, if
any, then to accrued interest and then to principal. All installments of
principal and all interest are payable in lawful money of the United States of
America, which shall be legal tender in payment of all debts and dues, public
and private, at the time of payment; and in the event of (a) failure to pay this
Note in full on the Maturity Date, or (b) default in the payment of any other
installment of interest or principal or any other sum payable pursuant to the
terms of this Note or any lien document securing this Note, not cured within ten
days after written notice from Lender, then or at any time thereafter, at the
option of lender, the whole of the principal sum then remaining unpaid hereunder
together with all interest accrued thereof shall immediately become due and
payable without further notice, and the liens given to secure the payment of
this Note may be foreclosed. From and after the maturity of this Note either
according to its terms or as the result of a declaration of maturity, the entire
principal remaining unpaid hereunder shall bear interest at a rate of five (5%)
percent per annum above the rate otherwise in effect hereunder (the "Default
Rate"), or the highest applicable lawful rate, whichever is the lesser. Failure
to exercise such option or any other rights Lender may in the event of any such
default be entitled to, shall not constitute a waiver of the right to exercise
such option or any other rights in the event of any subsequent default, whether
of the same or different nature.
If this Note is placed in the hands of an attorney for collection or is
collected through any legal proceedings, Borrower promises to pay all expenses
of collection and reasonable attorney's fees incurred by Lender.
In the event the interest provisions hereof or any exactions provided
for herein or in the lien documents or any other instruments securing this Note
shall result, because of the monthly reduction of principal or any other reason
related or unrelated to the interest provisions, at any time during the life of
the loan, in an effective rate of interest which, for any period of time,
transcends the limit of the usury or any other law applicable to the loan
evidenced hereby, all sums in excess of those lawfully collectible as interest
for the period in question shall, without further agreement or notice between or
by any party hereto, be applied to principal immediately upon receipt of such
monies by Lender with the same force and effect as though the payor had
specifically designated such and agreed to accept such extra payment(s) as a
premium free payment.
Lender may collect a late charge of five (5%) percent of any
installment of principal or interest which is not paid within ten (10) days of
the due date thereof to cover the extra time and expense involved in handling
delinquent payments. Such late charge shall apply to late payments prior to
maturity or acceleration. Upon maturity or acceleration, no further late charges
shall be assessed, but Borrower shall pay the Default Rate of interest on all
amounts due from the date of maturity or acceleration until the Note is paid in
full. The collection
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of the late charge shall not be deemed a waiver by Lender of interest accruing
after the due date of any installment or of any of Lender's other rights under
this Note.
Borrower agrees that the large charge provided above is fair and
reasonable compensation to Lender for the additional administrative time and
effort incurred in collecting and processing delinquent payments. Borrower
further agrees that the Default Rate is a fair and reasonable rate of interest
to be charged after maturity or acceleration of this Note in light of the
increased risks to Lender inherent in a past due loan and the administrative
time and effort incurred in collecting a past due loan.
Borrower and all endorsers, guarantors and all persons liable or to
become liable on this Note waive presentment, protest and demand, note of
protest, demand and dishonor and nonpayment of this Note, ad consent to any and
all renewals and extensions of the time of payment hereof, and agree, further,
that at any time and from time to time without notice, the terms of payment
herein may be modified or the security described in the lien document securing
the Note released in whole or in part, or increased, changed or exchanged by
agreement between lender and any owner of premises affected by said lien
document securing this Note without in anywise affecting the liability of any
party to this instrument or any person liable with respect to any indebtedness
evidenced hereby.
Lender is not required to rely on the collateral for the payment of the
Note in the event of default by the maker, but may proceed directly against the
maker, endorsers, or guarantors, if any, in such manner as it deems desirable.
None of the rights and remedies of Lender hereunder is to be waived or affected
by failure or delay to exercise them. All remedies conferred on Lender by this
Note or any other instrument or agreement shall be cumulative, and none is
exclusive. Such remedies may be exercised concurrently or consecutively at
Lender's option.
The Borrower may prepay this Note at any time without penalty.
This Note shall be governed as to validity, interpretation,
construction, effect, and in all other respects by the laws and decisions of the
State of South Carolina.
UCI MEDICAL AFFILIATES OF SOUTH CAROLINA, INC.
By: /s/ M.F. McFarland, III (SEAL)
----------------------------------------------
Its: President
----------------------------------------------
The undersigned hereby guarantees payment in full of this Promissory
Note. The undersigned's obligation is primary and not secondary, and Lender
shall not be required to bring suit against Borrower or to foreclose on this
Promissory Note before enforcing this Guaranty. The undersigned shall also pay
all reasonable attorney's fees and expenses incurred in enforcing this Guaranty.
DOCTOR'S CARE, P.A.
By: /s/ M.F. McFarland, III, MD (SEAL)
------------------------------------------------
Its: President
-----------------------------------------------
69
<PAGE>
EXHIBIT 10.9
REVOLVING LINE OF CREDIT
70
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
UCI Medical Affiliates, Inc. Carolina First Bank ID # 1971
1901 Main Street, Ste 1200 1225 Lady Street Loan Number __________
Columbia, SC 29201 Columbia, SC 29201 Date _________________
Maturity Date __________
BORROWER'S NAME AND ADDRESS LENDER'S NAME AND ADDRESS Loan Amount $3,000,000
---------
"I" includes each borrower above, "You" means the lender, its Renewal Of ___________
joint and severally. successors and assigns. 57-07844959
</TABLE>
For value received, I promise to pay to you, or your order, at your address
listed above the PRINCIPAL sum of Three Million and 00/100 Dollars
($3,000,000.00).
_____ Single Advance: I will receive all of this principal sum on
_____________. No additional advances are contemplated under this note.
XX Multiple Advance: The principal sum shown above is the maximum amount
of principal I can borrow under this note. On _____________ I will
receive the amount of $__________ and future principal advances are
contemplated.
Conditions: The conditions for future advances are
XX Open End Credit: You and I agree that I may borrow up to the maximum
amount of principal more than one time. This feature is subject to all
other conditions and expires on December 2, 1998.
_____ Closed End Credit: You and I agree that I may borrow up to the
maximum only one time (and subject to all other conditions).
INTEREST: I agree to pay interest on the outstanding principal balance from
_________________ at the rate of P + 1.0% per year until date the Index Rate
changes.
XX Variable Rate: This rate may then change as stated below.
XX Index Rate: The future rate will be 1.0% above the following index
rate: CAROLINA FIRST BANK PRIME RATE AS ANNOUNCED FROM TIME TO TIME.
______ No Index: The future rate will not be subject to any internal or
external index. It will be entirely in your control.
XX Frequency and Timing: The rate on this note may change as often as
DAILY. A change in the interest rate will take effect IMMEDIATELY THE
DAY OF SUCH CHANGE.
______ Limitations: During the term of this loan, the applicable annual
interest rate will not be more than _____% or less than _____%.
Effect of Variable Rate: A change in the interest rate will have the
following effect on the payments:
XX The amount of each scheduled payment will change.
______ The amount of the final payment will change.
ACCRUAL METHOD: Interest will be calculated on a ACTUAL/360 day basis.
71
<PAGE>
POST MATURITY RATE: I agree to pay interest on the unpaid balance of this note
owing after maturity, and until paid in full, as stated below:
XX on the same fixed or variable rate basis in effect before maturity (as
indicated above).
_____ at a rate equal to __________.
XX LATE CHARGE: If a payment is made more than 20 days after it is due, I
agree to pay a late charge of the greater of 5% of pmt or $25.00.
XX ADDITIONAL CHARGES: In addition to interest, I agree to pay the
following charges which ___ are XX are not included in the principal
amount above: $15,000 fee.
PAYMENTS: I agree to pay this note as follows:
XX Interest: I agree to pay accrued interest due monthly beginning January 2,
1997.
XX Principal: I agree to pay the principal at maturity, December 2, 1998.
_____ Installments: I agree to pay this note in ____ payments. The first
payment will be in the amount of $_________ and will be due _________________. A
payment of $_______ will be due _______________ thereafter. The final payment of
the entire unpaid balance of principal and interest will be due -----------.
ADDITIONAL TERMS: This loan is secured by A/R, inventory, and stock.
PURPOSE: The purpose of this loan is Line of Credit.
SIGNATURES: I AGREE TO THE TERMS OF THIS NOTE (INCLUDING THOSE ON PAGE 2).
I have received a copy on today's date.
UCI Medical Affiliates, Inc.
/s/ M.F. McFarland, CEO
Signature for Lender
/s/ Alfred H. Barnett, Vice President
72
<PAGE>
APPLICABLE LAW: The law of the state in which you are located will govern this
note. Any term of this note which contrary to applicable law will not be
effective, unless the law permits you and me to agree to such a variation. If
any provision of this agreement cannot be enforced according to its terms, this
face will not affect the enforceability of the remainder of this agreement. No
modification of this agreement may be made without your express written consent.
Time is of the essence in this agreement.
PAYMENTS: Each payment I make on this note will first reduce the amount I owe
you for charges which are neither interest nor principal. The remainder of each
payment will then reduce accrued unpaid interest, and then unpaid principal. If
you and I agree to a different application of payments, we will describe our
agreement on this note. I may prepay a part of, or the entire balance of this
loan without penalty, unless we specify to the contrary of this note. Any
partial prepayment will not excuse or reduce any later scheduled payment until
this note is paid in full (unless, when I make the prepayment, you and I agree
in writing to the contrary).
INTEREST: If I receive the principal in more than one advance, each advance will
start to earn interest only when I receive the advance. The interest rate in
effect on this note at any given time will apply to the entire principal advance
at that time. Notwithstanding anything to the contrary, I do not agree to pay
and you do not intend to charge any rate of interest that is higher than the
maximum rate of interest you could charge under applicable law for the extension
of credit that is agreed to here (either before or after maturity). If any
notice of interest accrual is sent and is in error, we mutually agree to correct
it, and if you actually collect more interest than allowed by law and this
agreement, you agree to refund it to me.
INDEX RATE: The index will serve only as a device for setting the rate on this
note. You do not guarantee by selecting this index, or the margin, that the rate
on this note will be the same rate you charge on any other loans or class of
loans to me or other borrowers.
ACCRUAL METHOD: The amount of interest that I will pay on this loan will be
calculated using the interest rate and accrual method stated on page 1 of this
note. For the purpose of interest calculation, the accrual method will determine
the number of days in a "year". If no accrual method is stated, then you may use
any reasonable accrual method for calculating interest.
POST MATURITY RATE: For purposes of deciding when the "Post Maturity Rate"
(shown on page 1) applies, the term "maturity" means the date of the last
scheduled payment indicated on page 1 of this note or the date you accelerate
payment on the note, whichever is earlier.
SINGLE ADVANCE LOANS: If this is a single advance loan, you and I expect that
you will make only one advance of principal. However, you may add other amounts
to the principal if you make any payments described in the "PAYMENTS BY LENDER"
paragraph below.
MULTIPLE ADVANCE LOANS: If this is a multiple advance loan, you and I expect
that you will make more than one advance of principal. If this is closed end
credit, repaying a part of the principal will not entitle me to additional
credit.
PAYMENTS BY LENDER: If you are authorized to pay, on my behalf, charges I am
obligated to pay (such as property insurance premiums), then you may treat those
payments made by you as advances and add them to the unpaid principal under this
note, or you may demand immediate payment of the charges.
SET-OFF: I agree that you may set off any amount due and payable under this note
against any right I have to receive money from you.
"Right to receive money from you" means:
1. any deposit account balance I have with you;
2. any money owed to me on an item presented to you or in your possession
for collection or exchange; and
3. any repurchase agreement or other nondeposit obligation.
73
<PAGE>
"Any amount due and payable under this note" means the total amount of which you
are entitled to demand payment under the terms of this note at the time you set
off. This total includes any balance the due date for which you properly
accelerate under this note.
If my right to receive money from you is also owned by someone who has not
agreed to pay this note, your right of set-off will apply to my interest in the
obligation and to any other amounts I could withdraw on my sole request or
endorsement. Your right of set-off does not apply to an account or other
obligation where my rights are only as a representative. It also does not apply
to any Individual Retirement Account or other tax-deferred retirement account.
You will not be liable for the dishonor of any check when the dishonor occurs
because you set off this debt against any of my accounts. I agree to hold you
harmless from any such claims arising as a result of your exercise of your right
of set-off.
REAL ESTATE OR RESIDENCE SECURITY: If this note is secured by real estate or a
residence that is personal property, the existence of a default and your
remedies for such a default will be determined by applicable law, by the terms
of any separate instrument creating the security interest and, to the extent not
prohibited by law and not contrary to the terms of the separate security
instrument, by the "Default" and "Remedies" paragraphs herein.
DEFAULT: I will be in default if any one or more of the following occur: (1) I
fail to make a payment on time or in the amount due; (2) I fail to keep the
property insured, if required; (3) I fail to pay, or keep any promise, on any
debt or agreement I have with you; (4) any other creditor of mine attempts to
collect any debt I owe him through court proceedings; (5) I die, am declared
incompetent, make an assignment for the benefit of creditors, or become
insolvent (either because my liabilities exceed my assets or I am unable to pay
my debts as they become due); (6) I make any written statement or provide any
financial information that is untrue or inaccurate at the time it was provided;
(7) I do or fail to do something which causes you to believe that you will have
difficulty collecting the amount I owe you; (8) any collateral securing this
note is used in a manner or for a purpose which threatens confiscation by a
legal authority; (9) I change my name or assume an additional name without first
notifying you before making such a change; (10) I fail to plant, cultivate and
harvest crops in due season; (11) any loan proceeds are used for a purpose that
will contribute to excessive erosion of highly erodible land or to the
conversion of wetlands to produce an agricultural commodity, as further
explained in 7 C.F.R. Part 1940, Subpart G, Exhibit M.
REMEDIES: If I am in default on this note you have, but are not limited to,
the following remedies:
1. You may demand immediate payment of all I owe you under this note
(principal, accrued unpaid interest and other accrued charges).
2. You may set off this debt against any right I have to the payment of money
from you, subject to the terms of the "Set-Off" paragraph herein.
3. You may demand security, additional security, or additional parties to be
obligated to pay this note as a condition for not using any other remedy.
4. You may refuse to make advances to me or allow purchases on credit by me.
5. You may use any remedy you have under state or federal law.
By selecting any one or more of these remedies you do not give up your right to
later use any other remedy. By waiving your right to declare an event to be a
default, you do not waive your right to later consider the event as a default if
it continues or happens again.
74
<PAGE>
COLLECTION COSTS AND ATTORNEY'S FEES: I agree to pay all costs of collection,
replevin or any other or similar type of cost if I am in default. In addition,
if you hire an attorney to collect this note, I also agree to pay any fee you
incur with such attorney plus court costs (except where prohibited by law). To
the extent permitted by the United States Bankruptcy Code, I also agree to pay
the reasonable attorney's fees and costs you incur to collect this debt as
awarded by any court exercising jurisdiction under the Bankruptcy Code.
WAIVER: I give up my rights to require you to do certain things. I will not
require you to:
1. demand payment of amounts due (presentment);
2. obtain official certification of nonpayment (protest); or
3. give notice that amounts due have not been paid (notice of dishonor).
OBLIGATIONS INDEPENDENT: I understand that I must pay this note even if someone
else has also agreed to pay it (by, for example, signing this form or a separate
guarantee or endorsement). You may sue me alone, or anyone else who is obligated
on this note, or any number of us together, to collect this note. You may do so
without any notice that it has not been paid (notice of dishonor). You may
without notice release any party to this agreement without releasing any other
party. If you give up any of your rights, with or without notice, it will not
affect my duty to pay this note. Any extension of new credit to any of us, or
renewal of this note by all or less than all of us will not release me from my
duty to pay it. (Of course, you are entitled to only one payment in full.) I
agree that you may at your option extend this note or the debt represented by
this note, or any portion of the note or debt, from time to time without limit
or notice and for any term without affecting my liability for payment of the
note. I will not assign my obligation under this agreement without your prior
written approval.
CREDIT INFORMATION: I agree and authorize you to obtain credit information about
me from time to time (for example, by requesting a credit report) and to report
to others your credit experience with me *such as a credit reporting agency). I
agree to provide you, upon request, any financial statement or information you
may deem necessary. I warrant that the financial statements and information I
provide to you are or will be accurate, correct and complete.
NOTICE: Unless otherwise required by law, any notice to me shall be given by
delivering it or by mailing it by first class mail addressed to me at my last
known address. My current address is on page 1. I agree to inform you in writing
of any change in my address. I will give any notice to you by mailing it first
class to your address stated on page 1 of this agreement, or to any other
address that you have designated.
<TABLE>
<CAPTION>
Borrower's Interest
Date of Principal Initials Principal Principal Interest Interest Paid
Transaction Advance (not Payments Balance Rate Payments Through
required)
- ---------------- ------------ -------------- ------------ ------------ ---------- ------------- -----------
<S> <C> <C> <C> <C> <C>
$ $ $ % $
$ $ $ % $
$ $ $ % $
$ $ $ % $
$ $ $ % $
$ $ $ % $
</TABLE>
75
<PAGE>
EXHIBIT 10.10
NON-EMPLOYEE DIRECTOR
STOCK OPTION AGREEMENT
76
<PAGE>
UCI MEDICAL AFFILIATES, INC.
NON-EMPLOYEE DIRECTOR
STOCK OPTION AGREEMENT
This Option Agreement is made to be effective as of the 20th day of March,
1996, by and between UCI MEDICAL AFFILIATES, INC., a Delaware corporation (the
"Company"), and Harold H. Adams, Jr. ("Optionee").
Preliminary Statement
The Board of Directors has deemed that it is in the best interest of
the Company and its shareholders that each non-employee director of the Company
on the effective date hereof be granted a non-statutory option for the purchase
of shares of the common stock of the Company, $0.05 par value (the "Stock"), in
connection with their service on the Board of Directors of the Company. In
accordance therewith and in consideration of the mutual agreements and other
matters set forth herein, the Company and Optionee hereby agree as follows:
1. Grant of Option. The Company hereby grants to Optionee the right and
option (the "Option") to purchase from the Company all or any part of an
aggregate of Five Thousand (5,000) shares of the Stock, on the terms and
conditions set forth herein. This Option shall not be treated as an incentive
stock option within the meaning of Section 422A(b) of the Internal Revenue Code
of 1986, as amended (the "Code").
2. Purchase Price. The purchase price per share of the Stock to be
purchased pursuant to the exercise of this Option (the "Purchase Price") shall
be Three and 50/100 ($3.50) Dollars, the closing ask price of the Stock on the
effective date hereof which price is hereby confirmed by the Company to be the
fair market value of the Stock on the effective date hereof.
3. Term. This Option shall be exercisable during the period commencing
on March 20, 1999 and ending at 11:59 p.m. eastern time on March 20, 2006. This
Option shall expire on March 21, 2006. This Option may be exercised during the
term hereof only by Optionee during Optionee's lifetime, except that if Optionee
dies during the term of this Option Agreement, Optionee's estate may exercise
this Option in full at any time during the period of six (6) months following
the date of Optionee's death, but only as to the number of shares of the Stock
that Optionee was entitled to purchase hereunder as of the date of Optionee's
death.
4. Exercise and Closing. This Option shall be exercisable by written
notice to the Company at its principal executive offices, addressed to the
attention of its Chief Financial Officer, at any time and from time to time
during the term of this Option as set forth herein, for any or all of the
aggregate number of shares covered by this Option. No fraction of a share of the
Stock shall be issued by the Company upon any exercise of this Option. Multiple
exercises of this Option shall be permitted so long as the total number of
shares of the Stock purchased pursuant to this Option does not exceed in the
aggregate the total number of shares as to which this Option is exercisable as
set forth in Paragraph 1 hereof. Closing of the purchase of the shares of the
Stock as to which this Option may be exercised shall take place in the offices
of the Company on or before thirty (30) days following the receipt by the
Company of the written notice of exercise by Optionee. The Purchase Price
multiplied by the number of shares as to which this Option is exercised shall be
paid in full to the Company at the time of such closing in cash (including
check, bank draft, or money order payable to the order of the Company).
5. Stock Restrictions. Option understands that at the time of the
execution of this Option Agreement, the shares of the Stock issuable upon
exercise of this Option have not been registered under the Securities Act of
1933, as amended (the "Act"), or under any state securities law, and that the
Company currently does not intend to effect any such registration. Optionee
agrees that the shares of the Stock which Optionee may acquire by exercising
this Option shall be purchased by Optionee for investment without a view to
distribution within the meaning of the Act, and shall not be sold, transferred,
assigned, pledged, or hypothecated
77
<PAGE>
unless such transfer has been registered under the Act and applicable state
securities laws, or the transfer duly qualifies for an applicable exemption from
the registration requirements of the Act and any applicable state securities
laws. In any event, Optionee agrees that the shares of the Stock which Optionee
may acquire by exercising this Option shall not be sold or otherwise disposed of
in any manner which would constitute a violation of any applicable securities
laws, whether federal or state. In addition, Optionee agrees that (i) the
certificates representing the shares of the Stock purchased under this Option
may bear such restrictive legend or legends as the Company's legal counsel deems
appropriate in order to assure compliance with applicable securities laws, (ii)
the Company may refuse to register the transfer of the shares of the Stock
purchased under this Option on the stock transfer records of the Company if such
proposed transfer would, in the opinion of counsel satisfactory to the Company,
constitute a violation of any applicable securities laws, and (iii) the Company
may give related instructions to its transfer agent to stop registration of the
transfer of the shares of Stock purchased under this Option.
6. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of any successors to the Company and all persons lawfully claiming under
Optionee.
7. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of South Carolina.
8. Transferability. This Option is not transferable or assignable, in whole
or in part, by Optionee.
IN WITNESS WHEREOF, the Company has caused this Option Agreement to be
duly executed by its officer thereunto duly authorized, and Optionee has
executed this Option Agreement, all to be effective as of the day and year first
above written.
UCI MEDICAL AFFILIATES, INC.
By: /s/ M. F. McFarland
---------------------------
M.F. McFarland, III, M.D.
Its: President and Chief Executive Officer
OPTIONEE:
/s/ Harold H. Adams, Jr.
------------------------------------
Print Name: Harold H. Adams, Jr.
78
<PAGE>
EXHIBIT 10.11
NON-EMPLOYEE DIRECTOR
STOCK OPTION AGREEMENT
79
<PAGE>
UCI MEDICAL AFFILIATES, INC.
NON-EMPLOYEE DIRECTOR
STOCK OPTION AGREEMENT
This Option Agreement is made to be effective as of the 20th day of
March, 1996, by and between UCI MEDICAL AFFILIATES, INC., a Delaware corporation
(the "Company"), and Russell J. Froneberger ("Optionee").
Preliminary Statement
The Board of Directors has deemed that it is in the best interest of
the Company and its shareholders that each non-employee director of the Company
on the effective date hereof be granted a non-statutory option for the purchase
of shares of the common stock of the Company, $0.05 par value (the "Stock"), in
connection with their service on the Board of Directors of the Company. In
accordance therewith and in consideration of the mutual agreements and other
matters set forth herein, the Company and Optionee hereby agree as follows:
1. Grant of Option. The Company hereby grants to Optionee the right and
option (the "Option") to purchase from the Company all or any part of an
aggregate of Five Thousand (5,000) shares of the Stock, on the terms and
conditions set forth herein. This Option shall not be treated as an incentive
stock option within the meaning of Section 422A(b) of the Internal Revenue Code
of 1986, as amended (the "Code").
2. Purchase Price. The purchase price per share of the Stock to be
purchased pursuant to the exercise of this Option (the "Purchase Price") shall
be Three and 50/100 ($3.50) Dollars, the closing ask price of the Stock on the
effective date hereof which price is hereby confirmed by the Company to be the
fair market value of the Stock on the effective date hereof.
3. Term. This Option shall be exercisable during the period commencing
on March 20, 1999 and ending at 11:59 p.m. eastern time on March 20, 2006. This
Option shall expire on March 21, 2006. This Option may be exercised during the
term hereof only by Optionee during Optionee's lifetime, except that if Optionee
dies during the term of this Option Agreement, Optionee's estate may exercise
this Option in full at any time during the period of six (6) months following
the date of Optionee's death, but only as to the number of shares of the Stock
that Optionee was entitled to purchase hereunder as of the date of Optionee's
death.
4. Exercise and Closing. This Option shall be exercisable by written
notice to the Company at its principal executive offices, addressed to the
attention of its Chief Financial Officer, at any time and from time to time
during the term of this Option as set forth herein, for any or all of the
aggregate number of shares covered by this Option. No fraction of a share of the
Stock shall be issued by the Company upon any exercise of this Option. Multiple
exercises of this Option shall be permitted so long as the total number of
shares of the Stock purchased pursuant to this Option does not exceed in the
aggregate the total number of shares as to which this Option is exercisable as
set forth in Paragraph 1 hereof. Closing of the purchase of the shares of the
Stock as to which this Option may be exercised shall take place in the offices
of the Company on or before thirty (30) days following the receipt by the
Company of the written notice of exercise by Optionee. The Purchase Price
multiplied by the number of shares as to which this Option is exercised shall be
paid in full to the Company at the time of such closing in cash (including
check, bank draft, or money order payable to the order of the Company).
5. Stock Restrictions. Option understands that at the time of the
execution of this Option Agreement, the shares of the Stock issuable upon
exercise of this Option have not been registered under the Securities Act of
1933, as amended (the "Act"), or under any state securities law, and that the
Company currently does not intend to effect any such registration. Optionee
agrees that the shares of the Stock which Optionee may acquire by exercising
this Option shall be purchased by Optionee for investment without a view to
distribution within the meaning of the Act, and shall not be sold, transferred,
assigned, pledged, or hypothecated
80
<PAGE>
unless such transfer has been registered under the Act and applicable state
securities laws, or the transfer duly qualifies for an applicable exemption from
the registration requirements of the Act and any applicable state securities
laws. In any event, Optionee agrees that the shares of the Stock which Optionee
may acquire by exercising this Option shall not be sold or otherwise disposed of
in any manner which would constitute a violation of any applicable securities
laws, whether federal or state. In addition, Optionee agrees that (i) the
certificates representing the shares of the Stock purchased under this Option
may bear such restrictive legend or legends as the Company's legal counsel deems
appropriate in order to assure compliance with applicable securities laws, (ii)
the Company may refuse to register the transfer of the shares of the Stock
purchased under this Option on the stock transfer records of the Company if such
proposed transfer would, in the opinion of counsel satisfactory to the Company,
constitute a violation of any applicable securities laws, and (iii) the Company
may give related instructions to its transfer agent to stop registration of the
transfer of the shares of Stock purchased under this Option.
6. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of any successors to the Company and all persons lawfully claiming under
Optionee.
7. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of South Carolina.
8. Transferability. This Option is not transferable or assignable, in whole
or in part, by Optionee.
IN WITNESS WHEREOF, the Company has caused this Option Agreement to be
duly executed by its officer thereunto duly authorized, and Optionee has
executed this Option Agreement, all to be effective as of the day and year first
above written.
UCI MEDICAL AFFILIATES, INC.
By: /s/ M. F. McFarland
------------------------
M.F. McFarland, III, M.D.
Its: President and Chief Executive Officer
OPTIONEE:
/s/ Russell J. Froneberger
-------------------------------
Print Name: Russell J. Froneberger
81
<PAGE>
EXHIBIT 10.12
NON-EMPLOYEE DIRECTOR
STOCK OPTION AGREEMENT
82
<PAGE>
UCI MEDICAL AFFILIATES, INC.
NON-EMPLOYEE DIRECTOR
STOCK OPTION AGREEMENT
This Option Agreement is made to be effective as of the 27th day of
March, 1997, by and between UCI MEDICAL AFFILIATES, INC., a Delaware corporation
(the "Company"), and Charles P. Cannon ("Optionee").
Preliminary Statement
The Board of Directors has deemed that it is in the best interest of
the Company and its shareholders that each non-employee director of the Company
on the effective date hereof be granted a non-statutory option for the purchase
of shares of the common stock of the Company, $0.05 par value (the "Stock"), in
connection with their service on the Board of Directors of the Company. In
accordance therewith and in consideration of the mutual agreements and other
matters set forth herein, the Company and Optionee hereby agree as follows:
1. Grant of Option. The Company hereby grants to Optionee the right and
option (the "Option") to purchase from the Company all or any part of an
aggregate of Five Thousand (5,000) shares of the Stock, on the terms and
conditions set forth herein. This Option shall not be treated as an incentive
stock option within the meaning of Section 422A(b) of the Internal Revenue Code
of 1986, as amended (the "Code").
2. Purchase Price. The purchase price per share of the Stock to be
purchased pursuant to the exercise of this Option (the "Purchase Price") shall
be Two and 50/100 ($2.50) Dollars, the closing ask price of the Stock on the
effective date hereof which price is hereby confirmed by the Company to be the
fair market value of the Stock on the effective date hereof.
3. Term. This Option shall be exercisable during the period commencing
on March 27, 2000 and ending at 11:59 p.m. eastern time on March 27, 2007. This
Option shall expire on March 28, 2007. This Option may be exercised during the
term hereof only by Optionee during Optionee's lifetime, except that if Optionee
dies during the term of this Option Agreement, Optionee's estate may exercise
this Option in full at any time during the period of six (6) months following
the date of Optionee's death, but only as to the number of shares of the Stock
that Optionee was entitled to purchase hereunder as of the date of Optionee's
death.
4. Exercise and Closing. This Option shall be exercisable by written
notice to the Company at its principal executive offices, addressed to the
attention of its Chief Financial Officer, at any time and from time to time
during the term of this Option as set forth herein, for any or all of the
aggregate number of shares covered by this Option. No fraction of a share of the
Stock shall be issued by the Company upon any exercise of this Option. Multiple
exercises of this Option shall be permitted so long as the total number of
shares of the Stock purchased pursuant to this Option does not exceed in the
aggregate the total number of shares as to which this Option is exercisable as
set forth in Paragraph 1 hereof. Closing of the purchase of the shares of the
Stock as to which this Option may be exercised shall take place in the offices
of the Company on or before thirty (30) days following the receipt by the
Company of the written notice of exercise by Optionee. The Purchase Price
multiplied by the number of shares as to which this Option is exercised shall be
paid in full to the Company at the time of such closing in cash (including
check, bank draft, or money order payable to the order of the Company).
5. Stock Restrictions. Optionee understands that at the time of the
execution of this Option Agreement, the shares of the Stock issuable upon
exercise of this Option have not been registered under the Securities Act of
1933, as amended (the "Act"), or under any state securities law, and that the
Company currently does not intend to effect any such registration. Optionee
agrees that the shares of the Stock which Optionee may acquire by exercising
this Option shall be purchased by Optionee for investment without a view to
distribution within the meaning of the Act, and shall not be sold, transferred,
assigned, pledged, or hypothecated unless such transfer has been registered
under the Act and applicable state securities laws, or the transfer duly
83
<PAGE>
qualifies for an applicable exemption from the registration requirements of the
Act and any applicable state securities laws. In any event, Optionee agrees that
the shares of the Stock which Optionee may acquire by exercising this Option
shall not be sold or otherwise disposed of in any manner which would constitute
a violation of any applicable securities laws, whether federal or state. In
addition, Optionee agrees that (i) the certificates representing the shares of
the Stock purchased under this Option may bear such restrictive legend or
legends as the Company's legal counsel deems appropriate in order to assure
compliance with applicable securities laws, (ii) the Company may refuse to
register the transfer of the shares of the Stock purchased under this Option on
the stock transfer records of the Company if such proposed transfer would, in
the opinion of counsel satisfactory to the Company, constitute a violation of
any applicable securities laws, and (iii) the Company may give related
instructions to its transfer agent to stop registration of the transfer of the
shares of Stock purchased under this Option.
6. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of any successors to the Company and all persons lawfully claiming under
Optionee.
7. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of South Carolina.
8. Transferability. This Option is not transferable or assignable, in whole
or in part, by Optionee.
IN WITNESS WHEREOF, the Company has caused this Option Agreement to be
duly executed by its officer thereunto duly authorized, and Optionee has
executed this Option Agreement, all to be effective as of the day and year first
above written.
UCI MEDICAL AFFILIATES, INC.
By: /s/ M. F. McFarland
------------------------
M.F. McFarland, III, M.D.
Its: President and Chief Executive Officer
OPTIONEE:
/s/ Charles P. Cannon
----------------------
Charles P. Cannon
84
<PAGE>
EXHIBIT 10.13
NON-EMPLOYEE DIRECTOR
STOCK OPTION AGREEMENT
85
<PAGE>
UCI MEDICAL AFFILIATES, INC.
NON-EMPLOYEE DIRECTOR
STOCK OPTION AGREEMENT
This Option Agreement is made to be effective as of the 27th day of
March, 1997, by and between UCI MEDICAL AFFILIATES, INC., a Delaware corporation
(the "Company"), and Thomas G. Faulds ("Optionee").
Preliminary Statement
The Board of Directors has deemed that it is in the best interest of
the Company and its shareholders that each non-employee director of the Company
on the effective date hereof be granted a non-statutory option for the purchase
of shares of the common stock of the Company, $0.05 par value (the "Stock"), in
connection with their service on the Board of Directors of the Company. In
accordance therewith and in consideration of the mutual agreements and other
matters set forth herein, the Company and Optionee hereby agree as follows:
1. Grant of Option. The Company hereby grants to Optionee the right and
option (the "Option") to purchase from the Company all or any part of an
aggregate of Five Thousand (5,000) shares of the Stock, on the terms and
conditions set forth herein. This Option shall not be treated as an incentive
stock option within the meaning of Section 422A(b) of the Internal Revenue Code
of 1986, as amended (the "Code").
2. Purchase Price. The purchase price per share of the Stock to be
purchased pursuant to the exercise of this Option (the "Purchase Price") shall
be Two and 50/100 ($2.50) Dollars, the closing ask price of the Stock on the
effective date hereof which price is hereby confirmed by the Company to be the
fair market value of the Stock on the effective date hereof.
3. Term. This Option shall be exercisable during the period commencing
on March 27, 2000 and ending at 11:59 p.m. eastern time on March 27, 2007. This
Option shall expire on March 28, 2007. This Option may be exercised during the
term hereof only by Optionee during Optionee's lifetime, except that if Optionee
dies during the term of this Option Agreement, Optionee's estate may exercise
this Option in full at any time during the period of six (6) months following
the date of Optionee's death, but only as to the number of shares of the Stock
that Optionee was entitled to purchase hereunder as of the date of Optionee's
death.
4. Exercise and Closing. This Option shall be exercisable by written
notice to the Company at its principal executive offices, addressed to the
attention of its Chief Financial Officer, at any time and from time to time
during the term of this Option as set forth herein, for any or all of the
aggregate number of shares covered by this Option. No fraction of a share of the
Stock shall be issued by the Company upon any exercise of this Option. Multiple
exercises of this Option shall be permitted so long as the total number of
shares of the Stock purchased pursuant to this Option does not exceed in the
aggregate the total number of shares as to which this Option is exercisable as
set forth in Paragraph 1 hereof. Closing of the purchase of the shares of the
Stock as to which this Option may be exercised shall take place in the offices
of the Company on or before thirty (30) days following the receipt by the
Company of the written notice of exercise by Optionee. The Purchase Price
multiplied by the number of shares as to which this Option is exercised shall be
paid in full to the Company at the time of such closing in cash (including
check, bank draft, or money order payable to the order of the Company).
5. Stock Restrictions. Optionee understands that at the time of the
execution of this Option Agreement, the shares of the Stock issuable upon
exercise of this Option have not been registered under the Securities Act of
1933, as amended (the "Act"), or under any state securities law, and that the
Company currently does not intend to effect any such registration. Optionee
agrees that the shares of the Stock which Optionee may acquire by exercising
this Option shall be purchased by Optionee for investment without a view to
distribution within the meaning of the Act, and shall not be sold, transferred,
assigned, pledged, or hypothecated unless such transfer has been registered
under the Act and applicable state securities laws, or the transfer duly
86
<PAGE>
qualifies for an applicable exemption from the registration requirements of the
Act and any applicable state securities laws. In any event, Optionee agrees that
the shares of the Stock which Optionee may acquire by exercising this Option
shall not be sold or otherwise disposed of in any manner which would constitute
a violation of any applicable securities laws, whether federal or state. In
addition, Optionee agrees that (i) the certificates representing the shares of
the Stock purchased under this Option may bear such restrictive legend or
legends as the Company's legal counsel deems appropriate in order to assure
compliance with applicable securities laws, (ii) the Company may refuse to
register the transfer of the shares of the Stock purchased under this Option on
the stock transfer records of the Company if such proposed transfer would, in
the opinion of counsel satisfactory to the Company, constitute a violation of
any applicable securities laws, and (iii) the Company may give related
instructions to its transfer agent to stop registration of the transfer of the
shares of Stock purchased under this Option.
6. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of any successors to the Company and all persons lawfully claiming under
Optionee.
7. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of South Carolina.
8. Transferability. This Option is not transferable or assignable, in whole
or in part, by Optionee.
IN WITNESS WHEREOF, the Company has caused this Option Agreement to be
duly executed by its officer thereunto duly authorized, and Optionee has
executed this Option Agreement, all to be effective as of the day and year first
above written.
UCI MEDICAL AFFILIATES, INC.
By: /s/ M. F. McFarland
-------------------------------------
M.F. McFarland, III, M.D.
Its: President and Chief Executive Officer
OPTIONEE:
/s/ Thomas G. Faulds
----------------------
Thomas G. Faulds
87
<PAGE>
EXHIBIT 10.14
NON-EMPLOYEE DIRECTOR
STOCK OPTION AGREEMENT
88
<PAGE>
UCI MEDICAL AFFILIATES, INC.
NON-EMPLOYEE DIRECTOR
STOCK OPTION AGREEMENT
This Option Agreement is made to be effective as of the 27th day of March,
1997, by and between UCI MEDICAL AFFILIATES, INC., a Delaware corporation (the
"Company"), and Ashby Jordan, M.D. ("Optionee").
Preliminary Statement
The Board of Directors has deemed that it is in the best interest of
the Company and its shareholders that each non-employee director of the Company
on the effective date hereof be granted a non-statutory option for the purchase
of shares of the common stock of the Company, $0.05 par value (the "Stock"), in
connection with their service on the Board of Directors of the Company. In
accordance therewith and in consideration of the mutual agreements and other
matters set forth herein, the Company and Optionee hereby agree as follows:
1. Grant of Option. The Company hereby grants to Optionee the right and
option (the "Option") to purchase from the Company all or any part of an
aggregate of Five Thousand (5,000) shares of the Stock, on the terms and
conditions set forth herein. This Option shall not be treated as an incentive
stock option within the meaning of Section 422A(b) of the Internal Revenue Code
of 1986, as amended (the "Code").
2. Purchase Price. The purchase price per share of the Stock to be
purchased pursuant to the exercise of this Option (the "Purchase Price") shall
be Two and 50/100 ($2.50) Dollars, the closing ask price of the Stock on the
effective date hereof which price is hereby confirmed by the Company to be the
fair market value of the Stock on the effective date hereof.
3. Term. This Option shall be exercisable during the period commencing
on March 27, 2000 and ending at 11:59 p.m. eastern time on March 27, 2007. This
Option shall expire on March 28, 2007. This Option may be exercised during the
term hereof only by Optionee during Optionee's lifetime, except that if Optionee
dies during the term of this Option Agreement, Optionee's estate may exercise
this Option in full at any time during the period of six (6) months following
the date of Optionee's death, but only as to the number of shares of the Stock
that Optionee was entitled to purchase hereunder as of the date of Optionee's
death.
4. Exercise and Closing. This Option shall be exercisable by written
notice to the Company at its principal executive offices, addressed to the
attention of its Chief Financial Officer, at any time and from time to time
during the term of this Option as set forth herein, for any or all of the
aggregate number of shares covered by this Option. No fraction of a share of the
Stock shall be issued by the Company upon any exercise of this Option. Multiple
exercises of this Option shall be permitted so long as the total number of
shares of the Stock purchased pursuant to this Option does not exceed in the
aggregate the total number of shares as to which this Option is exercisable as
set forth in Paragraph 1 hereof. Closing of the purchase of the shares of the
Stock as to which this Option may be exercised shall take place in the offices
of the Company on or before thirty (30) days following the receipt by the
Company of the written notice of exercise by Optionee. The Purchase Price
multiplied by the number of shares as to which this Option is exercised shall be
paid in full to the Company at the time of such closing in cash (including
check, bank draft, or money order payable to the order of the Company).
5. Stock Restrictions. Optionee understands that at the time of the
execution of this Option Agreement, the shares of the Stock issuable upon
exercise of this Option have not been registered under the Securities Act of
1933, as amended (the "Act"), or under any state securities law, and that the
Company currently does not intend to effect any such registration. Optionee
agrees that the shares of the Stock which Optionee may acquire by exercising
this Option shall be purchased by Optionee for investment without a view to
distribution within the meaning of the Act, and shall not be sold, transferred,
assigned, pledged, or hypothecated
89
<PAGE>
unless such transfer has been registered under the Act and applicable state
securities laws, or the transfer duly qualifies for an applicable exemption from
the registration requirements of the Act and any applicable state securities
laws. In any event, Optionee agrees that the shares of the Stock which Optionee
may acquire by exercising this Option shall not be sold or otherwise disposed of
in any manner which would constitute a violation of any applicable securities
laws, whether federal or state. In addition, Optionee agrees that (i) the
certificates representing the shares of the Stock purchased under this Option
may bear such restrictive legend or legends as the Company's legal counsel deems
appropriate in order to assure compliance with applicable securities laws, (ii)
the Company may refuse to register the transfer of the shares of the Stock
purchased under this Option on the stock transfer records of the Company if such
proposed transfer would, in the opinion of counsel satisfactory to the Company,
constitute a violation of any applicable securities laws, and (iii) the Company
may give related instructions to its transfer agent to stop registration of the
transfer of the shares of Stock purchased under this Option.
6. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of any successors to the Company and all persons lawfully claiming under
Optionee.
7. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of South Carolina.
8. Transferability. This Option is not transferable or assignable, in whole
or in part, by Optionee.
IN WITNESS WHEREOF, the Company has caused this Option Agreement to be
duly executed by its officer thereunto duly authorized, and Optionee has
executed this Option Agreement, all to be effective as of the day and year first
above written.
UCI MEDICAL AFFILIATES, INC.
By: /s/ M. F. McFarland
---------------------------------------------
M.F. McFarland, III, M.D.
Its: President and Chief Executive Officer
OPTIONEE:
/s/ Ashby Jordan
------------------
Ashby Jordan, M.D.
90
<PAGE>
EXHIBIT 10.15
NON-EMPLOYEE DIRECTOR
STOCK OPTION AGREEMENT
91
<PAGE>
UCI MEDICAL AFFILIATES, INC.
NON-EMPLOYEE DIRECTOR
STOCK OPTION AGREEMENT
This Option Agreement is made to be effective as of the 27th day of
March, 1997, by and between UCI MEDICAL AFFILIATES, INC., a Delaware corporation
(the "Company"), and Charles M. Potok ("Optionee").
Preliminary Statement
The Board of Directors has deemed that it is in the best interest of
the Company and its shareholders that each non-employee director of the Company
on the effective date hereof be granted a non-statutory option for the purchase
of shares of the common stock of the Company, $0.05 par value (the "Stock"), in
connection with their service on the Board of Directors of the Company. In
accordance therewith and in consideration of the mutual agreements and other
matters set forth herein, the Company and Optionee hereby agree as follows:
1. Grant of Option. The Company hereby grants to Optionee the right and
option (the "Option") to purchase from the Company all or any part of an
aggregate of Five Thousand (5,000) shares of the Stock, on the terms and
conditions set forth herein. This Option shall not be treated as an incentive
stock option within the meaning of Section 422A(b) of the Internal Revenue Code
of 1986, as amended (the "Code").
2. Purchase Price. The purchase price per share of the Stock to be
purchased pursuant to the exercise of this Option (the "Purchase Price") shall
be Two and 50/100 ($2.50) Dollars, the closing ask price of the Stock on the
effective date hereof which price is hereby confirmed by the Company to be the
fair market value of the Stock on the effective date hereof.
3. Term. This Option shall be exercisable during the period commencing
on March 27, 2000 and ending at 11:59 p.m. eastern time on March 27, 2007. This
Option shall expire on March 28, 2007. This Option may be exercised during the
term hereof only by Optionee during Optionee's lifetime, except that if Optionee
dies during the term of this Option Agreement, Optionee's estate may exercise
this Option in full at any time during the period of six (6) months following
the date of Optionee's death, but only as to the number of shares of the Stock
that Optionee was entitled to purchase hereunder as of the date of Optionee's
death.
4. Exercise and Closing. This Option shall be exercisable by written
notice to the Company at its principal executive offices, addressed to the
attention of its Chief Financial Officer, at any time and from time to time
during the term of this Option as set forth herein, for any or all of the
aggregate number of shares covered by this Option. No fraction of a share of the
Stock shall be issued by the Company upon any exercise of this Option. Multiple
exercises of this Option shall be permitted so long as the total number of
shares of the Stock purchased pursuant to this Option does not exceed in the
aggregate the total number of shares as to which this Option is exercisable as
set forth in Paragraph 1 hereof. Closing of the purchase of the shares of the
Stock as to which this Option may be exercised shall take place in the offices
of the Company on or before thirty (30) days following the receipt by the
Company of the written notice of exercise by Optionee. The Purchase Price
multiplied by the number of shares as to which this Option is exercised shall be
paid in full to the Company at the time of such closing in cash (including
check, bank draft, or money order payable to the order of the Company).
5. Stock Restrictions. Optionee understands that at the time of the
execution of this Option Agreement, the shares of the Stock issuable upon
exercise of this Option have not been registered under the Securities Act of
1933, as amended (the "Act"), or under any state securities law, and that the
Company currently does not intend to effect any such registration. Optionee
agrees that the shares of the Stock which Optionee may acquire by exercising
this Option shall be purchased by Optionee for investment without a view to
distribution within the meaning of the Act, and shall not be sold, transferred,
assigned, pledged, or hypothecated unless such transfer has been registered
under the Act and applicable state securities laws, or the transfer duly
92
<PAGE>
qualifies for an applicable exemption from the registration requirements of the
Act and any applicable state securities laws. In any event, Optionee agrees that
the shares of the Stock which Optionee may acquire by exercising this Option
shall not be sold or otherwise disposed of in any manner which would constitute
a violation of any applicable securities laws, whether federal or state. In
addition, Optionee agrees that (i) the certificates representing the shares of
the Stock purchased under this Option may bear such restrictive legend or
legends as the Company's legal counsel deems appropriate in order to assure
compliance with applicable securities laws, (ii) the Company may refuse to
register the transfer of the shares of the Stock purchased under this Option on
the stock transfer records of the Company if such proposed transfer would, in
the opinion of counsel satisfactory to the Company, constitute a violation of
any applicable securities laws, and (iii) the Company may give related
instructions to its transfer agent to stop registration of the transfer of the
shares of Stock purchased under this Option.
6. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of any successors to the Company and all persons lawfully claiming under
Optionee.
7. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of South Carolina.
8. Transferability. This Option is not transferable or assignable, in whole
or in part, by Optionee.
IN WITNESS WHEREOF, the Company has caused this Option Agreement to be
duly executed by its officer thereunto duly authorized, and Optionee has
executed this Option Agreement, all to be effective as of the day and year first
above written.
UCI MEDICAL AFFILIATES, INC.
By: /s/ M. F. McFarland
-------------------------------------------
M.F. McFarland, III, M.D.
Its: President and Chief Executive Officer
OPTIONEE:
/s/ Charles M. Potok
---------------------
Charles M. Potok
93
<PAGE>
EXHIBIT 10.17
CONSULTING AGREEMENT
94
<PAGE>
ORIGINAL SIGNED AGREEMENT ON GLOBAL CONSULTING, INC. LETTERHEAD
IS ON FILE IN THE CORPORATE OFFICE OF UCI MEDICAL AFFILIATES, INC.
December 10, 1996
Dr. M.F. McFarland, III
Chairman and Chief Executive Officer
UCI Medical Affiliates, Incorporated
1901 Main Street, Suite 1200
Columbia, South Carolina 29201
Dear M.F.:
Re: Agreement dated September 20, 1996 (copy attached for immediate
reference).
The subject Agreement is amended as follows:
1. The term is extended from March 31, 1997 to September 30, 1998 at ten
(10) hours per month (at $2,000 per month).
2. The Agreement may be terminated by either UCI or Global, upon ninety
(90) days written notice, with or without reason.
3. Section 5. Additional Hours: will include a calendar semi-annual
adjustment on September 30, 1997, March 31, 1998 and September 30, 1998.
All other terms and conditions of the subject Agreement remain unchanged.
I hope this amendment meets your requirements. If it does, please sign and date
in the spaces provided below and return one original of this amendment to me.
Sincerely,
/s/ Russ
Russell J. Froneberger
For UCI Medical Affiliates, Inc.
Authorized Signature: /s/ M.F. McFarland, III, M.D.
Date: /s/ 12/10/96
95
<PAGE>
ORIGINAL SIGNED AGREEMENT ON GLOBAL CONSULTING, INC. LETTERHEAD
IS ON FILE IN THE CORPORATE OFFICE OF UCI MEDICAL AFFILIATES, INC.
September 20, 1996
Dr. M.F. McFarland, III
Chairman and Chief Executive Officer
UCI Medical Affiliates, Incorporated
1901 Main Street, Suite 1200
Columbia, South Carolina 29201
Dear M.F.
This letter is intended to serve as an agreement between UCI Medical Affiliates,
Incorporated ("UCI") and Global Consulting ("Global").
Global will become UCI's financial and marketing consultant and will perform
duties as follows: update and facilitate in the implementation of the firm's
business and marketing plans; assist the Chief Financial Officer in developing
and maintaining sufficient banking and other financing facilities which will
comfortably provide for UCI's working capital and other credit needs; and, to
advise the Chief Executive Officer in the growth and development of UCI as a
leading primary health care provider.
To accomplish the preceding, UCI and Global agree to the following:
1. Term: Six (6) months, beginning October 1, 1996 and ending March 31,
1997, renewable in six (6) month increments.
2. Monthly Retainer Amount: $5,000, payable on or about the end of each month,
beginning October 1, 1996. Global will bill UCI approximately ten days
before each due date.
3. Hours: The Monthly Retainer Amount provides for up to twenty-five (25)
hours of consultant's time each month.
4. Hours Not Utilized: Hours not utilized in one month will be carried forward
to subsequent months for so long as this agreement is in force.
5. Additional Hours: Where Global's services are required beyond twenty-five
(25) hours per month, and there are no accumulated hours (number 4. above),
such additional hours will be carried forward to March 31, 1997 at which
time these hours will be multiplied by $200 per hour. The resultant amount
will be payable to Global by April 15, 1997.
6. Expenses: Out-of-pocket expenses (such as travel and long-distance
telephone) will be billed and payable at the same time as the Monthly
Retainer Amount.
UCI also agrees to reimburse Global for consulting done between August 1, 1996
and September 30, 1996, at $175 per hour, plus out-of-pocket expenses. Global
will bill UCI for this time/expense on or about October 1, 1996 with the sum
payable by October 9, 1996.
Both parties agree that any modification to this agreement shall be set out in
writing and agreed to by both parties.
96
<PAGE>
Page Two
M.F. McFarland
September 20, 1996
I hope this arrangement meets your requirements. If it does, please sign and
date in the spaces provided and return one original to me, after which this
agreement will be in force.
Sincerely,
Russell J. Froneberger
For UCI Medical Affiliates, Inc. For Global Consulting
/s/ M.F. McFarland, III /s/ Russ
Authorized Signature Russell J. Froneberger
Date: /s/09/24/96 Date: September 20, 1996
97
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-QSB
(Mark One)
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended: December 31, 1997
----------------------------------
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from: to
--------------- ------------------
Commission file number: 0-13265
----------------------------------------------------
UCI MEDICAL AFFILIATES, INC,
- ------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 59-2225346
- -------------------------------- --------------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation
or organization)
1901 Main Street, Suite 1200, Mail Code 1105, Columbia, SC 29201
- -----------------------------------------------------------------------------
(Address of principal executive offices)
(803) 252-3661
- -----------------------------------------------------------------------------
(Issuer's telephone number)
- -----------------------------------------------------------------------------
(Former name, address or fiscal year, if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. ( X )Yes ( )
No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13, or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. ( )Yes ( ) No
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
6,052,164 shares of $.05 common stock outstanding at December 31, 1997
Transitional Small Business Disclosure Format (check one): ( )Yes ( X ) No
1
<PAGE>
<TABLE>
<CAPTION>
UCI MEDICAL AFFILIATES, INC.
INDEX
Page
Number
-------
PART I FINANCIAL INFORMATION
<S> <C> <C>
Item 1 Financial Statements
Consolidated Balance Sheets - December 31, 1997
and September 30, 1997 3
Consolidated Statements of Operations for the quarters
ended December 31, 1997 and December 31, 1996 4
Consolidated Statements of Cash Flows for the quarters
ended December 31, 1997 and December 31, 1996 5
Notes to Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 7 - 9
PART II OTHER INFORMATION
Items 1-6 10
SIGNATURES 11
</TABLE>
2
<PAGE>
UCI Medical Affiliates, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31, 1997 September 30,
1997
------------------- -----------------
(unaudited) (audited)
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 0 $ 14,676
Accounts receivable, less allowance for doubtful accounts
of $923,721 and $878,469 6,862,480 5,943,884
Inventory 538,396 502,888
Deferred taxes 334,945 334,945
Prepaid expenses and other current assets 629,653 579,217
------------------- ----------------
Total current assets 8,365,474 7,375,610
Property and equipment less accumulated depreciation of
$2,957,691 and $2,724,222 4,474,621 4,002,699
Deferred taxes 1,417,237 1,417,237
Excess of cost over fair value of assets acquired, less
accumulated amortization of $1,821,679 and
$1,664,739 8,437,440 7,801,607
Other assets 266,380 266,379
------------------- -----------------
Total Assets $ 22,961,152 $ 20,863,532
=================== =================
Liabilities and Stockholders' Equity
Current liabilities
Current portion of long-term debt $ 916,411 $ 840,879
Current portion of long-term debt payable to employees 201,518 177,445
Accounts payable 2,956,625 2,039,506
Accrued salaries and payroll taxes 676,107 959,068
Other accrued liabilities 371,630 437,667
---------------- -----------------
Total current liabilities 5,122,291 4,454,565
Long-term debt, net of current portion 7,833,551 6,438,655
Long-term debt payable to employees, net of current portion 564,782 481,815
------------------- -----------------
Total Liabilities 13,520,624 11,375,035
------------------- -----------------
Commitments and contingencies 0 0
Stockholders' Equity
Preferred stock, par value $.01 per share:
Authorized shares - 10,000,000; none issued 0 0
Common stock, par value $.05 per share:
Authorized shares - 10,000,000
Issued and outstanding- 6,052,164 and 5,744,965 shares 302,608 287,248
Paid-in capital 16,249,546 15,435,535
Accumulated deficit (7,111,626) (6,234,286)
------------------- -----------------
Total Stockholders' Equity 9,440,528 9,488,497
------------------- -----------------
Total Liabilities and Stockholders' Equity $ 22,961,152 $ 20,863,532
=================== =================
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
3
<PAGE>
UCI Medical Affiliates, Inc.
Consolidated Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended December 31,
1997 1996
-------------------- ------------------
<S> <C> <C>
Revenues $ 8,077,876 $ 6,487,908
Operating costs 8,243,266 6,130,191
-------------------- ------------------
Operating margin (165,390) 357,717
General and administrative expenses 25,434 37,709
Depreciation and amortization 406,168 289,474
-------------------- ------------------
Income (loss) from operations (596,992) 30,534
Other income (expense)
Interest expense, net of interest income (279,351) (166,794)
Gain (loss) on disposal of equipment (439) 0
-------------------- ------------------
Other income (expense) (279,790) (166,794)
Income (loss) before benefit (provision ) for
income taxes (876,782) (136,260)
Benefit (provision )for income taxes (558) 166,382
-------------------- ------------------
Net income (loss) $ (877,340) $ 30,122
================== ====================
Basic earnings (loss) per share $ (.15) $ .01
==================== ==================
Basic weighted average common shares outstanding 6,041,980 4,807,807
==================== ==================
Diluted earnings (loss) per share $ (.14) $ .01
==================== ==================
Diluted weighted average common shares outstanding 6,061,945 4,819,491
==================== ==================
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
4
<PAGE>
UCI Medical Affiliates, Inc.
Consolidated Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended December 31,
1997 1996
------------------ ----------------
<S> <C> <C>
Operating activities:
Net income (loss) $ (877,340) $ 30,122
Adjustments to reconcile net income (loss) to net
cash provided by (used-in) operating activities:
(Gain) loss on disposal of equipment 439 0
Provision for losses on accounts receivable 244,613 130,720
Depreciation and amortization 406,168 289,474
Deferred Taxes 0 (175,000)
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (899,080) (684,836)
(Increase) decrease in inventory (35,508) (4,776)
(Increase) decrease in prepaid expenses and other
current assets (50,435) (165,981)
Increase (decrease) in accounts payable and accrued
expenses 562,078 (164,782)
---------------- ------------------
Cash provided by (used in) operating activities (649,065) (745,059)
------------------ ------------------
Investing activities:
Purchases of property and equipment (289,260) (135,519)
Acquisitions of goodwill (106,863) (20,718)
(Increase) decrease in other assets 0 (377)
---------------- ------------------
Cash provided by (used in) investing activities (396,123) (156,614)
------------------ ----------------
Financing activities:
Net borrowings (payments) under line-of-credit agreement (125,921) 1,355,760
Increase in long-term debt 1,500,000 269,400
Payments on long-term debt (343,567) (882,949)
------------------ ----------------
Cash provided by (used in) financing activities 1,030,512 742,211
------------------ ----------------
Increase (decrease) in cash and cash equivalents (14,676) (159,462)
Cash and cash equivalents at beginning of period 14,676 237,684
------------------ ---------------
Cash and cash equivalents at end of period $ 0 $ 78,222
================== ================
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
5
<PAGE>
UCI MEDICAL AFFILIATES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
BASIS OF PRESENTATION:
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Article 10 of
Regulation S-X of the Securities and Exchange Commission. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting only of those of a normal recurring
nature) considered necessary for a fair presentation have been included.
Operating results for the three month period ended December 31, 1997 are not
necessarily indicative of the results that may be expected for the fiscal year
ending September 30, 1998. For further information, refer to the audited
consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-KSB for the year ended September 30, 1997.
The consolidated financial statements of the Company include the accounts
of UCI Medical Affiliates, Inc. ("UCI"), UCI Medical Affiliates of South
Carolina, Inc. ("UCI-SC") and Doctor's Care, P.A. (the "P.A."). The financial
statements of the P.A. are consolidated with UCI because UCI-SC has unilateral
control over the assets and operations of the P.A., and notwithstanding the lack
of majority ownership of the P.A. by UCI and UCI-SC, consolidation of the P.A.
with UCI and UCI-SC is necessary to present fairly the financial position and
results of operations of UCI and UCI-SC. The management agreement between UCI-SC
and the P.A. conveys to UCI-SC perpetual, unilateral control over the assets and
operations of the P.A. Control is perpetual rather than temporary because of (i)
the length of the term of the agreement, (ii) the continuing investment of
capital by UCI-SC, (iii) the employment of all of the non-physician personnel by
UCI-SC and (iv) the nature of the services provided to the P.A. by UCI-SC.
In November 1997 the Emerging Issue Task Force (EITF) finalized EITF 97-2 which
provides guidance on consolidation of physician practices and enhances related
disclosures of physician practice management companies. This EITF 97-2 is
effective for fiscal years ending after December 15, 1998. The Company is in the
process of evaluating any potential effect on its financial reporting format.
Procedurally, the management agreement calls for the P.A. to provide medical
services and charge a fee to the patient or to the patient's insurance carrier
or employer for such services. Physician salaries are paid out of these revenues
and all remaining revenues are passed to UCI-SC as a management fee. UCI-SC
provides all support personnel (nurses, technicians, receptionists), all
administrative functions (billing, collecting, vendor payment), and all
facilities, supplies and equipment. The consolidated accounts of the Company
include all revenue and all expenses (including physician salaries) of all three
entities.
The net assets of the P.A. are not material for any period presented and
intercompany accounts and transactions have been eliminated.
EARNINGS PER SHARE
The computation of basic earnings (loss) per share and diluted earnings (loss)
per share is in conformity with the provisions of Statement of Financial
Accounting Standards No. 128.
6
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion and analysis provides information which the Company
believes is relevant to an assessment and understanding of the Company's
consolidated results of operations and financial condition. This discussion
should be read in conjunction with the consolidated financial statements and
notes thereto.
The consolidated financial statements of the Company include the accounts of
UCI, UCI-SC and the P.A. The financial statements of the P.A. are consolidated
with UCI because UCI-SC has unilateral control over the assets and operations of
the P.A., and notwithstanding the lack of majority ownership of the P.A. by UCI
and UCI-SC, consolidation of the P.A. with UCI and UCI-SC is necessary to
present fairly the financial position and results of operations of UCI and
UCI-SC. The management agreement between UCI-SC and the P.A. conveys to UCI-SC
perpetual, unilateral control over the assets and operations of the P.A. Control
is perpetual rather than temporary because of (i) the length of the term of the
agreement, (ii) the continuing investment of capital by UCI-SC, (iii) the
employment of all of the non-physician personnel by UCI-SC and (iv) the nature
of the services provided to the P.A. by UCI-SC.
In November 1997 the Emerging Issue Task Force (EITF) finalized EITF 97-2 which
provides guidance on consolidation of physician practices and enhances related
disclosures of physician practice management companies. This EITF 97-2 is
effective for fiscal years ending after December 15 1998. The Company is in the
process of evaluating any potential effect on its financial reporting format.
Procedurally, the management agreement calls for the P.A. to provide medical
services and charge a fee to the patient or to the patient's insurance carrier
or employer for such services. Physician salaries are paid out of these revenues
and all remaining revenues are passed to UCI-SC as a management fee. UCI-SC
provides all support personnel (nurses, technicians, receptionists), all
administrative functions (billing, collecting, vendor payment), and all
facilities, supplies and equipment. The consolidated accounts of the Company
include all revenue and all expenses (including physician salaries) of all three
entities.
The P.A. enters into employment agreements with physicians for terms ranging
from one to ten years. All employment agreements have clauses that allow for
early termination of the agreement if certain events occur such as the loss of a
medical license. Over 80% of the physicians employed by the P.A. are paid on an
hourly basis for time scheduled and worked at the medical centers. The other
physicians are salaried. A few of the physicians have incentive compensation
arrangements, however, no amounts were accrued or paid during the Company's
three prior fiscal years that were significant. As of December 31, 1997 and
1996, the P.A. employed 98 and 71 medical providers, respectively.
The net assets of the P.A. are not material for any period presented and
intercompany accounts and transactions have been eliminated.
Results of Operations
Revenues of $8,078,000 for the quarter ending December 31, 1997 reflect an
increase of 25% from those of the quarter ending December 31, 1996.
This increase in revenue is attributable to a number of factors. The Company
engaged in a significant expansion, increasing the number of medical centers
from 30 to 40. This expansion included Springwood Lake Family Practice, Woodhill
Family Practice and Midtown Family Practice, all of Columbia, South Carolina and
all acquired in August 1997; Doctor's Care - Camden acquired in September 1997;
three Progressive Therapy Services offices
7
<PAGE>
all located in Columbia, South Carolina and all acquired in October 1997;
Doctor's Care - New Ellenton acquired in November 1997; a Physical Therapy
practice in Columbia, South Carolina opened in November 1997; and Ridgeview
Family Practice of Columbia, South Carolina opened in December 1997. Of the
$1,590,000 in revenue growth for the first quarter of fiscal 1997 to the first
quarter of fiscal 1998, approximately $1,080,000 or 68% of this growth was from
the ten locations opened after December 31, 1996.
The Company has increased its services provided to members of Health Maintenance
Organizations (HMOs). In such arrangements, the Company, through Doctor's Care,
P.A., acts as the designated primary caregiver for members of the HMO who have
selected Doctor's Care as their primary care provider. The Company began
participating in an HMO operated by Companion HealthCare Corporation
("Companion"), a wholly owned subsidiary of Blue Cross Blue Shield of South
Carolina. The Company now acts as primary care provider for four HMOs, including
Companion and is the primary care "gatekeeper" for more than 23,000 capitated
lives. While HMOs do not, at this time, have a significant penetration into the
South Carolina market, the Company believes that HMOs and other managed care
plans will experience a substantial increase in market share in the next few
years, and the Company is therefore positioning itself for that possibility.
Capitated revenue grew from approximately $705,000 in the first quarter of
fiscal 1997 to approximately $900,000 in the first quarter of fiscal 1998.
The Company negotiates contracts with HMOs for the P.A.'s physicians to provide
health care on a capitated reimbursement basis. Under these contracts, which
typically are automatically renewed on an annual basis, the P.A. physicians
provide virtually all covered primary care services and receive a fixed monthly
capitation payment from the HMOs for each member who chooses a P.A. physician as
his or her primary care physician. The capitation amount is fixed depending upon
the age and sex of the HMO enrollee. Contracts with HMOs accounted for
approximately 11% of the Company's net revenue in fiscal 1997 and in the first
quarter of fiscal 1998.
To the extent that enrollees require more care than is anticipated, aggregate
capitation payments may be insufficient to cover the costs associated with the
treatment of enrollees. Higher capitation rates are typically received for
senior patients because their medical needs are generally greater and
consequently the cost of covered care is higher.
Increased revenues also reflect the Company's heightened focus on occupational
medicine and industrial health services. Focused marketing materials, including
quarterly newsletters for employers, were developed to spotlight the Company's
services for industry. The Company also entered into an agreement with Companion
Property and Casualty Insurance Company, wherein the Company acts as the primary
care provider for injured workers of firms insured through Companion Property
and Casualty Insurance Company. Companion Property and Casualty Insurance
Company is wholly owned by Blue Cross Blue Shield of South Carolina and is a
primary shareholder of the Company.
Patient encounters increased to 115,000 in the first quarter of fiscal 1998
from 96,000 in the first quarter of fiscal 1997.
Even with the positive effects of the factors mentioned above, revenues were
short of goals for the quarter, due in part to the increased competition from
hospitals and other providers in Columbia, Greenville, Sumter and Myrtle Beach.
In each of these areas, regional hospitals have acquired or opened new primary
care physician practices that compete directly with the Company for patients. In
each case, the hospital owner of our competition is believed to have
significantly greater resources than the Company. Management believes that such
competition will continue into the future and plans to compete on a basis of
quality service and accessibility.
An operating margin of $358,000 was earned during the first quarter of fiscal
1997 as compared to an operating deficit of $165,000 for the first quarter of
fiscal 1998.
Management believes that this margin deterioration is mainly the result of some
start-up costs being absorbed for the locations added since December 1996.
Additionally, patient visits did not meet budget for the first quarter of fiscal
1998, possibly due to the competition factors discussed above. Management does
not currently believe that this negative trend is indicative of the results that
may be expected for the fiscal year 1998.
8
<PAGE>
This margin deterioration is also attributable to increased cost-cutting
pressures being applied by managed care insurance payors that cover many of the
Company's patients. As managed care plans attempt to cut costs, they typically
increase the administrative burden of providers such as the Company by requiring
referral approvals and by requesting hard copies of medical records before they
will pay claims. The number of patients at the Company's Centers that are
covered by a managed care plan versus a traditional indemnity plan continues to
grow.
Management expects this trend to continue.
Depreciation and amortization expense increased to $406,000 in the first quarter
of fiscal 1998, up from $289,000 in the first quarter of fiscal 1997. This
increase reflects higher depreciation expense as a result of significant
leasehold improvements and equipment upgrades at a number of the Company's
medical centers, as well as an increase in amortization expense related to the
intangible assets acquired from the Company's purchase of existing practices as
noted above. Interest expense increased from $167,000 in the first quarter of
fiscal 1997 to $279,000 in the first quarter of fiscal 1998 primarily as a
result of the interest costs associated with the indebtedness incurred in the
Company's purchase of these assets and centers and for the usage of the
operating line of credit.
Financial Condition at December 31, 1997
Cash and cash equivalents decreased by $15,000 during the quarter ended December
31, 1997 and were utilized mainly for working capital needs and to fund the
expansion previously discussed.
Accounts receivable increased 15% during the quarter, reflecting the addition of
the ten centers described above and the overall growth in patient visits to
existing centers.
The increase in goodwill attributable to the purchases of the eight practices
since December 31, 1996 was somewhat offset by the amortization recorded.
Long-term debt increased from $6,920,000 at September 30, 1997 to $8,398,000 at
December 31, 1997 primarily as a result of indebtedness incurred in capital
leases for Center upfits, the utilization of an operating line of credit, and
the debt incurred as a result of practice acquisitions. Management believes that
it will be able to fund debt service requirements out of cash generated through
operations.
On October 6, 1997, the Company completed a private placement of $1.5 million,
6.5% five-year convertible subordinated debenture with FPA Medical Management,
Inc., a national physician practice management company headquartered in San
Diego, California. The debentures are convertible to common stock at any time
within the five year period at a fixed price premium to the current stock price
and are subject to Rule 144 of the Securities and Exchange Commission when
converted.
Overall, the Company's current assets exceeded its current liabilities at
December 31, 1997 by $3,243,000.
Liquidity and Capital Resources
The Company requires capital principally to fund growth (acquire new centers),
for working capital needs and for the retirement of indebtedness. The Company's
capital requirements and working capital needs have been funded through a
combination of external financing (including bank debt and proceeds from the
sale of common stock to Companion HealthCare Corporation and Companion Property
& Casualty Insurance Company), internally generated funds and credit extended by
suppliers.
Operating activities used $649,000 of cash during the first quarter of fiscal
1998. This reflects growth in the Company's accounts receivable as well as
prepaid expenses and a decrease in accounts payable and accrued expenses. The
growth in accounts receivable is the result of growth in the number of Centers,
patient visits and charges per patient visit.
Investing activities used $396,000 of cash during the quarter as a result of
expansion efforts. Continued growth is anticipated during the remainder of
fiscal 1998.
9
<PAGE>
PART II
OTHER INFORMATION
Item 1 Legal Proceedings
The Company is not a party to any pending litigation other
than routine litigation incidental to the business or that
which is immaterial in amount of damages sought.
Item 2 Changes in Securities
Recent Sales of Unregistered Securities
During the three months ended December 31, 1997, the
securities identified below were issued by the Company without
registration under the Securities Act of 1933. In each case,
all of the shares were issued pursuant to the exemption from
registration contained in Section 4(2) of the Securities Act
of 1933 as a transaction, not involving a general
solicitation, in which the purchaser was purchasing for
investment. The Company believes that each purchaser was given
or had access to detailed financial and other information with
respect to the Company and possessed requisite financial
sophistication.
On October 1, 1997, the Company issued 163,102 shares of its
common stock to L.D., P.A. (formerly Progressive Therapy
Services, P.A.) and 113,874 shares to L.D., Jr., P.C.
(formerly Bar-Ed, Professional Corporation) as part of the
purchase prices in connection with the Company's acquisition
of substantially all the assets of such entities' physical
therapy practices.
On November 1, 1997, the Company issued 30,223 shares of its
common stock to Marvin Dees, M.D. as part of the purchase
price in connection with the Company's acquisition of
substantially all the assets of the medical practice of Dr.
Dees.
Item 3 Defaults upon Senior Securities
This item is not applicable.
Item 4 Submission of Matters to a Vote of Security Holders
This item is not applicable.
Item 5 Other Information
This item is not applicable.
10
<PAGE>
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits. The exhibits included on the attached Exhibit
Index are filed as part of this report.
(b) Reports on Form 8-K.
The Company filed a Form 8-K on October 15, 1997 which
reported the acquisition by UCI-SC of Progressive Therapy
Services, P.A. and Bar-Ed, Professional Corporation, each of
Columbia, South Carolina. Financial statements of the acquired
entity and pro forma financial information regarding the
combined entity were filed in a Form 8-K/A on December 11,
1997.
The Company filed a Form 8-K on November 5, 1997 which
reported the acquisition by UCI-SC of Marvin Dees, M.D. of New
Ellenton, South Carolina. Financial statements of the acquired
entity and pro forma financial information regarding the
combined entity were filed in a Form 8-K/A on January 7, 1998.
11
<PAGE>
SIGNATURE
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.
(Registrant)
/s/ M.F. McFarland, III, M.D. /s/ Jerry F. Wells, Jr.
- ------------------------------ -------------------------------
Marion F. McFarland, III, M.D. Jerry F. Wells, Jr.
President, Chief Executive Officer, Executive Vice President of Finance,
and Chairman of the Board Chief Financial Officer and
Principal Accounting Officer
Date: February 12, 1998
12
<PAGE>
UCI MEDICAL AFFILIATES, INC.
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE NUMBER
- ---------------- ------------------------------------------------------- -------------------------------------
<S> <C> <C>
10.18 Employment Agreement dated January 23, 1997 between 14
UCI Medical Affiliates of South Carolina, Inc. and
Jon G. Keith
21 Subsidiaries of the Registrant 26
27 Financial Data Schedule Filed separately as Article Type 5
via Edgar
</TABLE>
13
<PAGE>
EXHIBIT 10.18
EMPLOYMENT AGREEMENT DATED JANUARY 23, 1997
BETWEEN UCI MEDICAL AFFILIATES OF SOUTH CAROLINA, INC.
AND JON G. KEITH
14
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made this 23rd day of January, 1997, by
and between UCI Medical Affiliates of South Carolina, Inc., a South Carolina
corporation (UCI), and Jon G. Keith ("Employee").
WHEREAS, UCI is a wholly-owned subsidiary of UCI Medical Affiliates, Inc.,
a Delaware Corporation ("Parent");
WHEREAS, Doctor's Care, P.A., a South Carolina corporation ("Doctor's
Care"), is an affiliate of UCI and shall benefit from this Agreement; and
WHEREAS, UCI desires to employ Employee and Employee desires to be
employed by UCI, in accordance with the terms and conditions hereinafter set
forth:
NOW, THEREFORE, in consideration of the mutual promises herein set
forth, and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties, intending to be legally bound, agree
as follows:
1. Employment. UCI hereby agrees to employ Employee to perform the
duties described in Section 3 below subject to and in accordance with the terms
and conditions hereof, and Employee hereby accepts such employment.
2. Term. Employee's employment shall commence on the 27th day of
January, 1997, and shall continue for a period of three (3) years unless earlier
terminated in accordance with the provisions of Section 8 of this Agreement.
3. Duties of Employee.
A. In accepting employment by UCI, Employee shall undertake
and assume the responsibility of performing for and on behalf of UCI the duties
of the Chief Operating Officer of UCI in Columbia, South Carolina. Except with
his written consent, Employee shall not be assigned to any other position or
required to spend a significant amount of time assigned to any location(s)
outside of Richland or Lexington Counties, South Carolina.
B. During the term of this Agreement, Employee shall be a
full-time employee of UCI, and shall devote his full working time and efforts to
his duties hereunder. Employee shall perform all of his duties hereunder to the
best of his ability and shall not, directly or indirectly, engage or participate
in any activities in conflict with the best interests of UCI. Without limiting
the generality of the foregoing, Employee shall not engage in any activity for
compensation or pecuniary gain other than his employment hereunder and passive
investing for the account of himself or members of his household. "Passive
investing" shall include, but not be limited to the owning and leasing of real
properties and the ownership of securities, partnership interests or other
investments which do not require active participation by Employee during
Employee's normal work day.
4. Compensation. As compensation for the services to be rendered by
Employee for UCI under this Agreement, Employee shall be compensated by UCI on
the following basis:
A. Base Salary; Signing Bonus. During the term of this
Agreement Employee shall receive from UCI an annual salary of One Hundred
Fifteen Thousand Dollars ($115,000), payable in pay periods as determined by
UCI, but in no event less frequently than monthly (the "Base Salary"). In
addition, Employee shall be entitled to receive a "signing" bonus of Six
Thousand Dollars ($6,000), payable within 15 days after the commencement of his
employment.
15
<PAGE>
B. Dues. During the term of this Agreement, UCI shall pay the
initiation or initial membership fee and all dues of Employee as a member of one
private dining/social club, so long as the aggregate annualized cost for such
fees and dues does not exceed Two Hundred Dollars ($200) per month, for the
purpose of entertainment of UCI's clients in connection with the performance of
the duties of Employee.
C. Vacation. During the term of this Agreement Employee shall
be entitled to a total of 10 business days of paid vacation during the first two
years of this Agreement and 15 business days during the third year and, if this
Agreement is extended by mutual agreement, thereafter. Such vacation days are to
be taken at such time or times as Employee may reasonably request, subject to
UCI's convenience and prior approval, which approval shall not be unreasonably
withheld. Vacation time may cumulate from year to year up to a maximum of 60
days.
D. Automobiles. During the term of this Agreement, UCI shall
provide to Employee the use of one automobile, at least comparable to a new
Toyota Avalon, with all gasoline, taxes, insurance, maintenance and repairs to
be paid by UCI.
E. Reimbursement For Expenses. During the term of this
Agreement, UCI shall reimburse Employee for all reasonable expenses incurred by
Employee for the benefit of UCI in the performance of his duties hereunder;
provided, however, reimbursement for aggregate expenses each calendar year in
excess of $7,500 shall require the prior written approval of the CEO of UCI.
F. Other Benefits. During the term of this Agreement, Employee
shall receive from UCI such other benefits (e.g., family health insurance
coverage, life insurance coverage, participation in pension plans, and
participation in stock option plans of Parent, etc.) reasonably comparable to,
and no worse than, those benefits, if any, generally provided to other senior
executives of UCI. Additionally, UCI will furnish to Employee, at UCI's expense,
a term life insurance policy that at the time of his death will pay to his
spouse or other designated beneficiary(s) a benefit of at least two times
Employee's Base Salary. The health insurance coverage shall begin immediately as
of the effective date of Employee's employment, but if the insurer requires a
waiting period prior to coverage, UCI shall reimburse Employee for the amount of
premiums payable by him for family coverage under the plan of his prior
employer, promptly upon presentation to UCI of the premium notice(s).
G. Incentive Bonus. During the term of this Agreement,
annually on or about the end of UCI's fiscal year, Employee shall be eligible to
receive from UCI an incentive bonus up to 20% of his Base Salary, provided that
he has met or exceeded the performance criteria set forth in Exhibit "A", to be
attached hereto. It is acknowledged that, upon the signing of this Agreement,
the final terms of Exhibit "A" have not been negotiated; however, UCI and
Employee agree to negotiate in good faith to reach mutual agreement on the
performance criteria to be incorporated into Exhibit "A", within forty-five (45)
days of the date of Employee's commencement of employment. Exhibit "A" will be
signed by UCI and Employee and may be amended by mutual written agreement from
time to time.
H. Stock Options. UCI hereby agrees to grant to Employee an
option to purchase 60,000 shares of common stock of Parent (the "Option Shares")
pursuant to the terms of the 1994 Incentive Stock Option Plan (the "Plan")
attached hereto as Exhibit "B". With respect to the plan and the Option Shares,
UCI represents and warrants to Employee as follows:
(i) The Plan was duly approved by Parent's
shareholders and is in full force and effect, and the Option Shares are
available for issuance thereunder to Employee, as an employee of UCI;
(ii) Parent has taken any actions necessary or
appropriate to reserve the Option Shares for issuance to Employee, and
the Directors of Parent and the Stock Option Committee have approved
the execution by M. F. McFarland, III, M.D., as CEO of UCI, of the
Incentive Stock Option Agreement attached hereto as Exhibit "C".
16
<PAGE>
(iii) The Plan and the Option Shares have been
registered for public sale pursuant to an S-8 Registration Statement
No. 333-02943 dated May 29, 1996; and
(iv) UCI acknowledges that the grant of the Incentive Stock Options was a
material factor in Employee's decision to accept employment with UCI.
5. Confidentiality and Secrecy. Employee acknowledges that in and as a
result of his employment hereunder, he will be making use of, acquiring, and/or
adding to confidential information of a special and unique nature and value
relating to UCI, Parent, and Doctor's Care's business, including without
limitation technological know-how, copyrights, proprietary information, trade
secrets, systems, procedures, manuals, confidential reports, records,
operational expertise, lists of customers and projects, the nature and type of
services rendered by UCI, Parent and Doctor's Care, the equipment and methods
used and preferred by UCI customers, and the fees paid by them (all of which are
deemed for all purposes confidential and proprietary). As a material inducement
to UCI to enter into this Agreement and to pay Employee the compensation stated
in Section 4 herein, Employee covenants and agrees that during the term of his
employment hereunder, and for five (5) years after the termination thereof, he
shall not, directly or indirectly, make use of, or disclose to any person, any
confidential information of UCI, Parent, and/or Doctor's Care.
6. Covenants Against Competition. In view of the unique value to UCI of
the services of Employee for which UCI has contracted hereunder, because of the
confidential information to be obtained by or disclosed to Employee, as
hereinabove set forth, and because of the employment of Employee hereunder will
result in Employee's development of a unique relationship with customers,
suppliers and employees, as a material inducement to UCI to enter into this
Agreement and to pay to Employee the compensation stated in Section 4 hereof,
Employee covenants and agrees as follows:
A. During the employment of Employee hereunder, and for a
period of two (2) years after the termination of the employment of Employee
hereunder for any reason, Employee shall not directly or indirectly solicit or
divert employment of any employee of UCI, Parent, or Doctor Care's business or
employ any person employed by UCI, Parent and/or Doctor's Care during the term
of Employee employment by UCI.
B. During the employment of Employee hereunder, and for a
period of two (2) years after the termination of Employee hereunder for any
reason, Employee shall not directly or indirectly solicit, divert, or convert,
or assist another person or entity to solicit, divert or convert, the customers
of UCI, Parent, and/or Doctor's Care to any other company or entity.
C. During the employment of Employee hereunder, and for a
period of one (1) year after the termination of Employee's employment with UCI
for any reason other than UCI's termination of Employee "without cause" as
defined in Section 8 hereof, Employee shall not within the geographic area
specified below engage in any business or perform any services, directly or
indirectly, in competition with the business of UCI, Parent and/or Doctor's Care
or have any interest, whether as a proprietor, partner, employee, stockholder
(directly or beneficially), principal, agent, consultant, director, officer, or
in any other capacity or manner whatsoever, in any consultant, director,
officer, or in any other capacity or manner whatsoever, in any enterprise that
shall so engage; except that Employee shall be permitted to own for investment
purposes only, directly or beneficially, up to (but not more than) 2% in the
aggregate of the stock of a competing corporation which is publicly traded on a
national stock exchange or the NASDAQ National Market System, so long as
Employee is not a controlling person of, or a member of a group that controls,
such corporation and Employee is not otherwise affiliated in any capacity with
such corporation. The restrictions of this Section 6(c) shall apply everywhere
within a five (5) mile radius of (1) any primary or urgent care facility owned
or operated by UCI, Parent, or Doctor's Care, and (iii) each other location
where UCI, Parent, or Doctor's Care maintains an office which is in existence as
of the date of such termination.
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<PAGE>
7. Reasonableness, Enforceability and Remedies.
A. Employee has carefully read and considered the provisions
of Sections 5, 6, and 7, and, having done so, agrees that the restrictions set
forth in these Sections, including, but not limited to, the time period of
restriction and geographic limitations set forth in Section 6, are fair and
reasonable and are reasonably required for the protection of the interest of
UCI, Parent and Doctor's Care and their respective officers, directors,
shareholders and employees.
B. In the event that, notwithstanding the foregoing, any of
the provisions of Sections 5, 6, or 7 hereof or any parts thereof shall be held
to be invalid or unenforceable, the remaining provisions or parts thereof shall
nevertheless continue to be valid and enforceable as though the invalid or
unenforceable portions or parts had not been included therein. In the event that
any provision of Sections 5 or 6 hereof relating to the time period and/or
geographic restrictions and/or related aspects shall be declared by a court of
competent jurisdiction to exceed the maximum restrictiveness such court deems
reasonable and enforceable, the time period and/or geographic restrictions
and/or related aspects deemed reasonable and enforceable by the court shall
become and thereafter be the maximum restriction in such regard, and the
restriction shall remain enforceable to the fullest extent deemed reasonable by
such court.
C. Employee acknowledges that the services he is to render are
of a special and unusual character with a unique value to UCI, Parent, and
Doctor's Care, the loss of which cannot adequately be compensated by damages in
an action at law. In the event of a breach or threatened breach by Employee of
any provision of Sections 5 or 6 hereof, UCI, Parent, and Doctor's Care, in
addition to and not in limitation of, any other rights, remedies, or damages
available to UCI, Parent, and Doctor's Care under this Agreement, shall be
entitled to a permanent injunction in order to prevent or restrain any such
breach by Employee and/or any person or entity directly or indirectly acting for
or with Employee.
D. Employee covenants and agrees that if he shall violate any
of his covenants or agreements under Sections 5 or 6 hereof, UCI, Parent, and
Doctor's Care shall be entitled to: (1) an accounting and repayment of all
profits, compensation, commissions, remuneration, or other benefits that
Employee directly or indirectly has realized and/or is likely to realize as a
result of, growing out of, or in connection with any such violation; (ii)
recover actual damages incurred by UCI, Parent and Doctor's Care as a result of
any such violation; (iii) any injunctive relief to which UCI, Parent and
Doctor's Care are or may be entitled at law or in equity or under this
Agreement; and (iv) exercise its other rights respecting a breach of this
Agreement as set forth herein.
E. The obligations of Employee under Sections 5 and 6 hereof
shall survive any termination of employment hereunder, except that the
provisions of Section 6(c) shall not apply in the event of a termination by UCI
of Employee's employment without cause pursuant to Section 8(B) below.
8. Termination.
A. For Cause by UCI. Notwithstanding any other provision
hereof, UCI may terminate the employment of Employee under this Agreement
immediately at any time for "cause", upon written notice to Employee. For
purposes hereof, the term "cause" shall be defined as the commission of any of
the following by Employee: embezzlement; theft; fraudulent breach of trust;
indictment of a felony or a misdemeanor involving moral turpitude; drug or
alcohol addiction; repeated incompetence in the performance of material duties
on behalf of UCI; gross negligence or willful misconduct detrimental to UCI's
business; violation of the terms and provisions of this Agreement; or willful or
recurring refusal to comply with reasonable, good faith instructions of UCI or
Parent. All compensation (including without limitation the Base Salary, and all
perquisites and fringe benefits) to which Employee would otherwise be entitled,
shall be discontinued and forfeited as of the effective date of such
termination.
18
<PAGE>
B. Without Cause by UCI. UCI may terminate this Agreement
"without cause" at anytime upon sixty (60) days prior written notice to
Employee. In the event of such termination, Employee shall be paid: a lump sum
severance payment equal to two times Employee's Base Salary for the remaining
term of this Agreement. All other compensation (including without limitation any
perquisites and fringe benefits, if any) to which Employee would otherwise be
entitled (for periods after the effective date of such termination) shall be
discontinued and forfeited as of the effective date of such termination.
C. Termination By Employee. Employee may with or without cause
terminate this Agreement upon 90 days prior written notice to UCI. In the event
of such termination, all compensation (including without limitation the Base
Salary and any perquisites and fringe benefits, if any) to which Employee would
otherwise be entitled (for periods after the effective date of the termination)
shall be discontinued and forfeited as of the effective date of such
termination.
D. Disability. In the event of the disability (as defined
below) of Employee during the term of his employment with UCI, Employee's
employment under this Agreement shall terminate. For purposes of this Agreement,
"disability" shall mean the inability of Employee, due to sickness or other
incapacity, to perform his duties under this Agreement for a period in excess of
one hundred eighty (180) substantially consecutive days. Such termination shall
become effective upon the expiration of such one hundred eighty (180) day
period. Upon termination of employment under this Agreement due to the
disability of Employee, then Employee shall be entitled to payment of his Base
Salary and other benefits up to the date of termination.
E. Death. In the event Employee dies during the term of this
Agreement, this Agreement shall terminate and UCI shall pay to the estate of
Employee all Base Salary accrued but unpaid through the date of the death of
Employee, together with any incentive bonus amounts which have accrued but are
unpaid at the time of his death.
9. Burden and Benefit. This Agreement shall be binding upon, and shall
inure to the benefit of UCI, Parent, Doctor's Care, and Employee, and their
respective heirs, personal and legal representatives, successors, and assigns.
10. Assignment. This Agreement and any rights hereunder are personal to
Employee and shall not be assigned or otherwise transferred by Employee.
11. Governing Law/Jurisdiction. The construction and interpretation of
this Agreement shall at all times and in all respects be governed by the laws of
the State of South Carolina. Employee and UCI hereby (1) agree that any
litigation, action or proceeding arising out of or relating to this Agreement
may be instituted in a state or federal court in Columbia, South Carolina, (ii)
waive any objection which they might have now or hereafter to any such
litigation, action or proceeding based upon improper venue or inconvenient
forum, and (iii) irrevocably submit to the jurisdiction of such courts in any
such litigation, action or proceeding. For all purposes of this Agreement,
Employee and UCI hereby further agree that service of process upon either party
may be effected pursuant to United States mail.
12. Usage. The section and paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Terms such as "hereof', "hereof',
"herein" and words of similar import shall refer to this Agreement in its
entirety and all references shall refer to specified portions of this Agreement,
unless the context clearly requires otherwise.
13. Severability. The provisions of this Agreement shall be deemed
severable, and the invalidity or unenforceability of any one or more of the
provisions of this Agreement shall not affect validity and enforceability of any
other provision.
19
<PAGE>
14. Notice. Any notice, request, approval, consent, demand or other
communication hereunder shall be effective if in writing and upon the first to
occur of the following (1) upon receipt by the party to whom such notice,
request, approval, consent, demand or other communications being given; or (ii)
three (3) business days after being duly deposited in the U. S. Mail, Certified,
Return Receipt Requested, and addressed as follows:
To Employee: Jon G. Keith
320 Post Oak Way
Columbia, SC 29212
To UCI: UCI Medical Affiliates of South Carolina, Inc.
1901 Main Street, Suite 1200
Mail Code 1105
Columbia, SC 29201
Attention: M. F. McFarland, III, MD
The parties hereto may change their respective addresses by notice in writing
given to the other parties within this Agreement.
15. Entire Agreement. This Agreement contains the entire agreement and
understanding by and between UCI and Employee with respect to the employment of
Employee and no representations, promises, agreements, or understandings,
written or oral not contained herein shall be of any force or effect. No change
or modification of this Agreement shall be valid or binding unless it is in
writing and signed by the party against whom the waiver is sought to be
enforced. No valid waiver of any provision of this Agreement at any time shall
be deemed a waiver of any other provision of this Agreement at such time or at
any other time.
16. Litigation Expenses. If either party should institute litigation
against the other party to enforce its rights under this Agreement, the
prevailing party in such action shall be entitled to recover its litigation
costs and expenses, including without limitation, reasonable attorneys fees.
IN WITNESS WHEREOF, UCI and Employee have duly executed this Agreement
under seal to be effective as of the day and year first above written.
IN THE PRESENCE OF:
UCI MEDICAL AFFILIATES OF
SOUTH CAROLINA, INC.
/s/ Elaine H. Fowler
/s/ Patricia J. Hammond By: /s/ M.F. McFarland, III, M.D. (SEAL)
M. F. McFarland, III, M.D.
Chief Executive Officer
/s/ Elaine H. Fowler
/s/ Pat Paschal /s/ Jon G. Keith (SEAL)
Jon G. Keith
20
<PAGE>
EXHIBIT A
UCI Medical Affiliates, Inc.
Executive Bonus Plan for Jon G. Keith
Bonus Potential - 20%
<TABLE>
<CAPTION>
Percentage of Bonus
Earned
---------------------
<S> <C> <C>
1. Site Development Develop feasibility plan for new facilities and begin 10%
implementation within six months of commencement of employment
2. Diagnostic Services Develop plan and proforma for diagnostic facility concept 5%
within twelve months and be prepared to implement within
eighteen months of commencement of employment
3. Clinic Organization Develop a standardization plan for all clinic sites that 25%
attempts to bring consistency to the organization and
operation of each site within nine months of commencement of
employment
4. Business Planning Develop and begin implementation of comprehensive business 20%
plan that includes all 29 facilities within twelve months of
commencement of employment
5. Budget Attain budgeted net income for the UCI (less extraordinary 25%
items not within Employee's control), annually
6. Specialty Integration Develop, plan and initiate dialog with local physicians and 15%
hospitals that may lead to acquisitions, mergers or
cooperative ventures
</TABLE>
21
<PAGE>
EXHIBIT B
UCI MEDICAL AFFILIATES, INC.
INCENTIVE STOCK OPTION AGREEMENT
GRANT OF INCENTIVE STOCK OPTION
Date of Grant: January 27, 1997
THIS GRANT, dated as of the date of grant first stated above (the "Date
of Grant"), is delivered to UCI Medical Affiliates, Inc., a Delaware corporation
(the "Company"), to Jon G. Keith,(the "Grantee"), who is an officer or employee
of the Company or a subsidiary of the Company.
WHEREAS, the Board of Directors of the Company (the "Board") has
adopted, subject to shareholder approval, the UCI Medical Affiliates, Inc. 1994
Incentive Stock Option Plan (the "Plan"); and,
WHEREAS, the Plan provides for the granting of incentive stock options
by the Board to officers and employees of the Company and its subsidiaries to
purchase shares of the Common Stock of the Company (the "Stock"), in accordance
with the terms and provisions thereof; and,
WHEREAS, the Board considers the Grantee to be a person who is eligible
for a grant of incentive stock options under the Plan, and has determined that
it would be in the best interest of the Company to grant the incentive stock
options documented herein.
NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. Grant of Option. Subject to the terms and conditions hereinafter set forth,
the Company, with the approval and at the direction of the Board, hereby grants
to the Grantee, as of the Date of Grant, an option to purchase up to 60,000
shares of Stock at a price of $2.75 per share, the fair market value on the date
hereof. Such option is hereinafter referred to as the "Option" and the shares of
Stock purchasable upon exercise of the Option are hereinafter sometimes referred
to as the "Option Shares". The Option is intended by the parties hereto to be,
and shall be treated as, an incentive stock option (as such term is defined
under Section 422 of the Internal Revenue Code of 1986 (the "Code")).
2. Installment Exercise. Subject to such further limitations as are provided
herein, the Option shall become exercisable in three (3) installments, the
Grantee having the right hereunder to purchase from the Company the following
number of Option Shares upon exercise of the Option, on and after the following
dates, in cumulative fashion:
(a) on and after the first anniversary of the Date of Grant, up to
one-third (ignoring fractional shares) of the total number of Option Shares;
(b) on and after the second anniversary of the Date of Grant, up to an
additional one-third (ignoring fractional shares) of the total number of Option
Shares; and,
(c) on and after the third anniversary of the Date of Grant, the
remaining Option Shares.
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<PAGE>
3. Termination of Option.
(a) The Option and all rights hereunder with respect thereto, to the
extent such rights shall not have been exercised, shall terminate and become
null and void after the expiration of ten (10) years from the Date of Grant (the
"Expiration Date").
(b) Upon the occurrence of the Grantee's ceasing for any reason to be
employed by the Company (such occurrence being a "termination of the Grantee's
employment"), the Option, to the extent not previously exercised, shall
terminate and become null and void immediately upon such termination of the
Grantee's employment, except in a case where the termination of the Grantee's
employment is by reason of retirement, disability or death, the Option may be
exercised during the following periods, but only to the extent that the Option
was outstanding and exercisable on any such date of retirement, disability or
death:
(i) the one-year period following the date of such termination of the
Grantees employment in the case of a disability (within the meaning of
Section 22(e)(3) of the Code),
(ii) the six-month period following the date of issuance of letters
testamentary or letters of administration to the executor or
administrator of a deceased Grantee, in the case of the Grantee's death
during his employment by the Company, but not later than one year after
the Grantee's death, and
(iii) the three-month period following the date of such termination in
the case of retirement on or after attainment of age 65, or in the case
of disability other than as described in (i) above.
In no event, however, shall any such period extend beyond the Expiration Date.
(c) In the event of the death of the Grantee, the Option may be
exercised by the Grantee's legal representative(s), but only to the extent that
the Option would otherwise have been exercisable by the Grantee.
(d) A transfer of the Grantee's employment between the Company and any
subsidiary of the Company, or between any subsidiaries of the Company, shall not
be deemed to be a termination of the Grantee's employment.
(e) Notwithstanding any other provisions set forth herein or in the
Plan, if the Grantee shall (i) commit any act of malfeasance or wrongdoing
affecting the Company, (ii) breach any covenant not to compete or employment
contract with the Company, or (iii) engage in conduct that would warrant the
Grantee's discharge for cause (excluding general dissatisfaction with the
performance of the Grantee's duties, but including any act of disloyalty or any
conduct clearly tending to bring discredit upon the Company), any unexercised
portion of the Option shall immediately terminate and be void.
4. Exercise of Options.
(a) Subject to such further limitations as are provided herein, the
Option shall be exercisable at any time and from time to time during the period
commencing one (1) year from the Date of Grant and ending ten (10) years (five
(5) years for 10 percent shareholders as described in the Plan) from the Date of
Grant. The Grantee may exercise the Option with respect to all or any part of
the number of Option Shares then exercisable hereunder by giving the Secretary
of the Company written notice of intent to exercise. The notice of exercise
shall specify the number of Option Shares as to which the Option is to be
exercised and the date of exercise thereof, which date shall be at least five
days after the giving of such notice unless an earlier time shall have been
mutually agreed upon.
(b) Full payment (in U.S. dollars) by the Grantee of the option price
for the Option Shares purchased shall be made on or before the exercise date
specified in the notice of exercise in cash, or, with the prior written consent
of the Secretary, in whole or in part through the surrender of previously
acquired shares of Stock at their fair market value on the exercise date.
23
<PAGE>
On the exercise date specified in the Grantee's notice or as soon
thereafter as is practicable, the Company shall cause to be delivered to the
Grantee, a certificate or certificates for the Option Shares then being
purchased (out of theretofore unissued Stock or reacquired Stock, as the Company
may elect) upon full payment of such Option Shares. The Grantee shall upon each
exercise of a part or all of the option granted represent and warrant that his
purchase of stock pursuant to such option is for investment only, and not with a
view to distribution involving a public offering. The obligation of the Company
to deliver Stock shall, however, be subject to the condition that if at any time
the Board shall determine in its discretion that the listing, registration or
qualification of the Option or the Option Shares upon any securities exchange or
under any state or federal law, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition of, or in connection
with, the Option or the issuance or purchase of Stock thereunder, the Option may
not be exercised in whole or in part unless such listing, registration,
qualification, consent or approval shall have been effected or obtained free of
any conditions not acceptable to the Board.
(c) If the Grantee fails to pay for any of the Option Shares specified
in such notice or fails to accept delivery thereof, the Grantee's right to
purchase such Option Shares may be terminated by the Company. The date specified
in the Grantee's notice as the date of exercise shall be deemed the date of
exercise of the Option, provided that payment in full for the Option Shares to
be purchased upon such exercise shall have been received by such date.
5. Adjustment of and Changes in Stock of the Company. In the event of a
reorganization, recapitalization, change of shares, stock split, spin-off, stock
dividend, reclassification, subdivision, consolidation or combination of shares,
merger, consolidation, rights offering, or any other change in the corporate
structure or shares of capital stock of the Company, the Board may make such
adjustment as it deems appropriate in the number and kind of shares of Stock
subject to the Option or in the option price; provided, however, that no such
adjustment shall give the Grantee any additional benefits under the Option.
6. No Rights of Stockholders. Neither the Grantee nor any personal
representative shall be, or shall have any of the rights and privileges of, a
stockholder of the Company with respect to any shares of Stock purchasable or
usable upon the exercise of the Option, in whole or in part, prior to the date
of exercise of the Option.
7. Non-Transferability of Option. During the Grantee's lifetime, the Option
hereunder shall be exercisable only by the Grantee or any guardian or legal
representative of the Grantee, and the Option shall not be transferable except,
in case of the death of the Grantee, by will or the laws of descent and
distribution or pursuant to a qualified domestic relations order as defined by
the Internal Revenue Code of 1986, as amended, or Title I of the Employee
Retirement Income Security Act, or the Rules thereunder, nor shall the Option be
subject to attachment, execution or other similar process. In the event of (a)
any attempt by the Grantee to alienate, assign, pledge, hypothecate or otherwise
dispose of the Option, except as provided for herein, or (b) the levy of any
attachment, execution or similar process upon the rights or interest hereby
conferred, the Company may terminate the Option by notice to the Grantee and it
shall thereupon become null and void.
8. Employment Not Affected. Neither the granting of the Option nor its exercise
shall be construed as granting to the Grantee any right with respect to
continuance of employment with the Company or any of its subsidiaries. Except as
may otherwise be limited by a written agreement between the Company and the
Grantee, the right of the Company or any subsidiary of the Company to terminate
at will the Grantee's employment with it at any time (whether by dismissal,
discharge, retirement or otherwise) is specifically reserved by the Company or
any subsidiary of the Company, as the employer, and is acknowledged by the
Grantee.
9. Amendment of Option. The Option may be amended by the Board or the Committee
at any time (i) if the Board or the Stock Option Committee determines, in its
sole discretion, that amendment is necessary or advisable in the light of any
addition to or change in the Internal Revenue Code of 1986 or in the regulations
issued thereunder, or any federal or state securities law or other law or
regulation, which change occurs after the Date of Grant and by its terms applies
to the Option; or (ii) other than in the circumstances described in clause (i),
with the consent of the Grantee.
24
<PAGE>
10. Notice. Any notice to the Company provided for in this instrument shall be
addressed to it in care of its Secretary at its executive offices at 1901 Main
Street, Suite 1200, Mail Code 1105, Columbia, South Carolina 29201, and any
notice to the Grantee shall be addressed to the Grantee at the current address
shown on the payroll records of the Company. Any notice shall be deemed to be
duly given if and when properly addressed and posted by registered or certified
mail, postage prepaid.
11. Incorporation of Plan by Reference. The Option is granted pursuant to the
terms of the Plan, the terms of which are incorporated herein by reference, and
the Option shall in all respects be interpreted in accordance with the Plan. The
Stock Option Committee shall interpret and construe the Plan and this
instrument, and its interpretations and determinations shall be conclusive and
binding on the parties hereto and any other person claiming an interest
hereunder, with respect to any issue arising hereunder or thereunder.
12. Governing Law. The validity, construction, interpretation and effect of this
instrument shall exclusively be governed by and determined in accordance with
the law of the State of South Carolina, except to the extent preempted by
federal law, which shall to such extent govern.
IN WITNESS WHEREOF, the Company has caused its duly authorized officers
to execute and attest this Grant of Incentive Stock Option, and the Grantee has
placed his or her signature hereon, effective as of the Date of Grant.
UCI MEDICAL AFFILIATES, INC.
By: /s/ Jerry F. Wells, Jr.
Its:EVP of Finance and Chief Financial Officer
ACCEPTED AND AGREED TO:
By: /s/ Jon G. Keith
Jon G. Keith, Grantee
25
<PAGE>
EXHIBIT NO. 21
SUBSIDIARIES OF THE REGISTRANT
26
<PAGE>
SUBSIDIARIES OF UCI MEDICAL AFFILIATES, INC.
<TABLE>
<CAPTION>
Name Under Which
State of Jurisdiction Subsidiary Does
Name of Subsidiary of Incorporation Business
<S> <C> <C>
UCI Medical Affiliates
of South Carolina, Inc. South Carolina Doctor's Care
UCI Medical Affiliates
of Georgia, Inc. South Carolina Doctor's Care
</TABLE>
27
