SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K/A
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported) May 13, 1998
--------------
UCI Medical Affiliates, Inc.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware
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(State or Other Jurisdiction of Incorporation)
0-13265 59-2225346
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(Commission File Number) (IRS Employer Identification No.)
1901 Main Street, Suite 1200, Columbia, SC 29201
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(Address of Principal Executive Offices) (Zip Code)
(803) 252-3661
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(Registrant's Telephone Number, Including Area Code)
N/A
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(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
This Form 8-K/A amends the Form 8-K filed with the Securities and Exchange
Commission on February 17, 1998 by UCI Medical Affiliates, Inc., a Delaware
corporation ("UCI"); that certain Form 8-K/A filed with the Securities and
Exchange Commission on April 20, 1998; and that certain Form 8-K/A filed with
the Securities and Exchange Commission on May 28, 1998, and is filed to include
the financial statements and certain other exhibits required by Item 7 of Form
8-K.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(A) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
The consolidated financial statements for MainStreet Healthcare
Corporation, the business acquired by a wholly-owned subsidiary of UCI
Medical Affiliates, Inc., are included in this report beginning on page 5.
(B) PRO FORMA FINANCIAL INFORMATION.
The revised unaudited pro forma financial information prepared to
give effect to the acquisition was included in this report as an
attachment to that certain Form 8-K/A filed with the Securities and
Exchange Commission on May 28, 1998.
(C) EXHIBITS.
Exhibit 2 Acquisition Agreement and Plan of Reorganization dated
February 9, 1998, by and among UCI Medical Affiliates of
Georgia, Inc., a South Carolina corporation; UCI Medical
Affiliates, Inc., a Delaware corporation; MainStreet
Healthcare Corporation, a Delaware corporation; MainStreet
Healthcare Medical Group, PC, a Georgia professional
corporation; MainStreet Healthcare Medical Group, PC, a
Tennessee professional corporation; Prompt Care Medical
Center, Inc., a Georgia corporation; Michael J. Dare; A. Wayne
Johnson; PENMAN Private Equity and Mezzanine Fund, L.P., a
Delaware limited partnership; and Robert G. Riddett, Jr.
(Previously filed with the initial filing of this Report on
Form 8-K).
Exhibit 2.1 First Amendment To Acquisition Agreement and Plan of
Reorganization dated April 15, 1998, by and among UCI Medical
Affiliates of Georgia, Inc., a South Carolina corporation; UCI
Medical Affiliates, Inc., a Delaware corporation; MainStreet
Healthcare Corporation, a Delaware corporation; MainStreet
Healthcare Medical Group, P.C., a Georgia professional
corporation; MainStreet Healthcare Medical Group, PC, a
Tennessee professional corporation; Prompt Care Medical
Center, Inc., a Georgia corporation; Michael J. Dare; A. Wayne
Johnson; PENMAN Private Equity and Mezzanine Fund, L.P., a
Delaware limited partnership; and Robert G. Riddett, Jr.
(Previously filed with the filing of this Report on Form 8-K/A
filed on April 20,1998).
<PAGE>
Exhibit 2.2 Second Amendment To Acquisition Agreement and Plan of
Reorganization dated May 7, 1998, by and among UCI Medical
Affiliates of Georgia, Inc., a South Carolina corporation; UCI
Medical Affiliates, Inc., a Delaware corporation; MainStreet
Healthcare Corporation, a Delaware corporation; MainStreet
Healthcare Medical Group, P.C., a Georgia professional
corporation; MainStreet Healthcare Medical Group, PC, a
Tennessee professional corporation; Prompt Care Medical
Center, Inc., a Georgia corporation; Michael J. Dare; A. Wayne
Johnson; PENMAN Private Equity and Mezzanine Fund, L.P., a
Delaware limited partnership; and Robert G. Riddett, Jr.
(Previously filed with the filing of this Report on Form 8-K/A
filed on May 28,1998)
Exhibit 2.3 Conditional Delivery Agreement dated effective as of May
1, 1998, by and among UCI Medical Affiliates, Inc.; UCI
Medical Affiliates of Georgia, Inc.; and MainStreet Healthcare
Corporation.
Exhibit 2.4 Amendment to Conditional Delivery Agreement dated as of
July 21, 1998, by and among UCI Medical Affiliates, Inc.;
UCI Medical Affiliates of Georgia, Inc.; and MainStreet
Healthcare Corporation.
Exhibit 99 News release of UCI Medical Affiliates, Inc. dated February
13, 1998. (Previously filed with the initial filing of this
Report on Form 8-K).
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
UCI MEDICAL AFFILIATES, INC.
By: /s/ M. F. McFarland III, M.D.
-----------------------------
M. F. McFarland III, M.D.
President
Date: July 24, 1998 By: /s/ Jerry F. Wells, Jr. CPA
-----------------------------
Jerry F. Wells, Jr., CPA
Executive Vice President of Finance,
Chief Financial Officer, and
Principal Accounting Officer
<PAGE>
MAINSTREET HEALTHCARE CORPORATION
Consolidated Financial Statements
March 31, 1998 and 1997
With Independent Auditors' Report Thereon
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
MainStreet Healthcare Corporation:
We have audited the accompanying consolidated balance sheets of MainStreet
Healthcare Corporation as of March 31, 1998 and 1997, and the related
consolidated statements of operations, stockholders' deficit, and cash flows for
the year ended March 31, 1998 and 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of MainStreet
Healthcare Corporation at March 31, 1998 and 1997, and the results of its
operations and its cash flows for the year ended March 31, 1998 and 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) and note 13. The accompanying consolidated financial statements do
not include any adjustment that might result from the outcome of this
uncertainty.
/s/ KPMG Peat Marwick, LLP
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June 2, 1998, except as to the third paragraph of note 7,
which is as of July 6, 1998
Original signed opinion on KPMG Peat Marwick LLP letterhead is on file in the
corporate office of UCI Medical Affiliates, Inc.
<PAGE>
MAINSTREET HEALTHCARE CORPORATION
Consolidated Balance Sheets
March 31, 1998 and 1997
Assets 1998 1997
------ ---- ----
Current assets:
Cash $ 34,231 1,950
Accounts receivable, less allowances for
contractual adjustments and uncollectible
accounts of $1,216,718 and $1,258,571 in
1998 and 1997, respectively 1,410,219 1,110,019
Redeemable preferred stock subscriptions
receivable (note 4) - 750,000
Other receivables 68,222 110,658
Prepaid and other 83,367 109,380
-------- --------
Total current assets 1,596,039 2,082,007
Property and equipment, net (notes 3 and 5) 1,520,503 1,422,594
Intangible assets, net (notes 3 and 6) 1,549,861 1,968,252
Other assets 39,859 323,023
--------- ---------
Total assets $ 4,706,262 5,795,876
========= =========
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<PAGE>
Liabilities and Stockholders' Deficit 1998 1997
------------------------------------- ---- ----
Current liabilities:
Accounts payable $ 1,136,606 695,411
Line of credit (note 7) 574,327 -
Accrued expenses and liabilities 1,928,547 615,237
Current portion of notes payable (notes 3 and 8) 477,095 357,053
Current portion of capital lease obligation (note 8) 48,693 3,401
Shareholder loan (note 9) 94,174 18,252
-------- --------
Total current liabilities 4,259,442 1,689,354
--------- ---------
Long-term liabilities:
Notes payable, less current portion (notes 3 and 8) 368,704 751,261
Capital lease obligation, less current portion
(note 8) 74,380 14,183
-------- --------
Total long-term liabilities 443,084 765,444
-------- --------
Total liabilities 4,702,526 2,454,798
Preferred stock, $.01 par value; 11,500 and 14,000
shares authorized, no shares issued and outstanding
at March 31, 1998 and 1997, respectively (note 4) - -
5% cumulative redeemable preferred stock, $1,000
redemption value; 6,000 shares authorized, 4,367
shares issued and outstanding at March 31, 1998
and 3,367shares issued and outstanding, 750 shares
subscribed at March 31, 1997 (notes 4, 9, and 12) 4,367,000 4,117,000
10% cumulative redeemable preferred stock, $1,000
redemption value; 2,500 and -0- shares authorized,
412 and -0- shares issued and outstanding at
March 31, 1998 and 1997, respectively
(notes 4, 9, and 12) 412,000 -
Class A nonvoting convertible common stock, $.01
par value; 5,000,000 shares authorized, 248,000
and 268,000 shares issued and outstanding at
March 31, 1998 and 1997, respectively (notes 3 and 4) 816,007 738,979
Stockholders' deficit:
Class B common stock, $.01 par value; 20,000,000
shares authorized, 6,460,452 and 5,875,000 shares
issued and outstanding at March 31, 1998 and 1997,
respectively (notes 4, 9, and 12) 64,605 58,750
Additional paid-in capital 42,516 38,586
Accumulated deficit (5,698,392) (1,612,237)
--------- ---------
Total stockholders' deficit (5,591,271) (1,514,901)
--------- ---------
Total liabilities and stockholders' deficit $ 4,706,262 5,795,876
========= =========
See accompanying notes to consolidated financial statements.
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<PAGE>
MAINSTREET HEALTHCARE CORPORATION
Consolidated Statements of Operations
<TABLE>
<CAPTION>
<S> <C>
For the period
February 6,
1996 (date of
Year ended incorporation)
March 31, to March 31,
1998 1997
---- ----
Net patient service revenue $6,436,950 3,665,982
--------- ---------
Operating expenses:
Cost of affiliated physician services 3,082,389 1,689,235
Clinic salaries, wages, and benefits 2,404,156 1,188,415
Clinic rent and lease expense (notes 8 and 9) 566,245 306,571
Clinic supplies 784,825 317,417
Other clinic costs 788,919 371,001
General corporate expenses (note 9) 1,655,974 587,404
Depreciation and amortization (notes 5 and 6) 466,121 217,029
Clinic start-up expenses - 307,419
--------- ---------
Total expenses 9,748,629 4,984,491
--------- ---------
Operating loss (3,311,679) (1,318,509)
Interest expense, net (note 8) 364,292 161,774
Deferred financing costs (note 2(f)) 273,224 -
Loss on clinic disposals (note 3) - 88,990
---------- ----------
Loss before income taxes (3,949,195) (1,569,273)
Income taxes (note 10) - -
---------- ----------
Net loss $ (3,949,195) (1,569,273)
============ =========
</TABLE>
See accompanying notes to consolidated financial statements.
-4-
<PAGE>
<TABLE>
<S> <C>
MAINSTREET HEALTHCARE CORPORATION
Consolidated Statements of Stockholders' Deficit
For the Year ended March 31, 1998 and the Period February 6, 1996
(Date of Incorporation) to March 31, 1997
Class B
common stock Additional Total
--------------------- paid-in Accumulated stockholder's
Shares Amount capital deficit deficit
------ ------ ------- ------- -------
Balance at February 6, 1996 $ - - - - -
Issuance of common stock (notes 4 and 9) 5,875,000 58,750 38,586 - 97,336
Accretion of difference between fair value
and repurchase 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 38,586 (1,612,237) (1,514,901)
Issuance of common stock (notes 4 and 9) 585,452 5,855 3,930 - 9,785
Accretion of difference between fair value -
and repurchase value of stock issued
in connection with acquisition (note 3) - - - (136,960) (136,960)
Net loss - - - (3,949,195) (3,949,195)
---------- ---------- ---------- ---------- ----------
Balance at March 31, 1998 6,460,452 $64,605 42,516 (5,698,392) (5,591,271)
========== ========== ========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE>
MAINSTREET HEALTHCARE CORPORATION
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
<S> <C>
For the period
February 6,
1996 (date of
Year ended incorporation)
March 31, to March 31,
1998 1997
---- ----
Operating activities:
Net loss $(3,949,195) (1,569,273)
Adjustments to reconcile net loss to net cash
provided (used) by operating activities:
Depreciation and amortization 466,121 217,029
Changes in operating assets and liabilities,
net of effects of acquisitions:
Accounts receivable, net (320,013) (517,720)
Other receivables 42,436 (110,658)
Prepaid expenses and other assets (75,061) (64,010)
Accounts payable 441,195 580,688
Other accrued expenses and liabilities 1,410,974 615,237
Deferred financing costs 273,224 -
-------- --------
Net cash used by operating activities (1,710,319) (848,707)
--------- --------
Investing activities:
Acquisitions of businesses, net of cash acquired - (1,226,480)
Purchases of property and equipment (236,730) (631,279)
--------- ---------
Net cash used by investment activities (236,730) (1,857,759)
--------- ---------
Financing activities:
Net proceeds from issuance of preferred stock 1,298,000 2,071,607
Proceeds from shareholder loans 192,500 1,370,300
Proceeds from issuance of common stock 7,207 65,810
Net borrowings under capital lease obligations 105,489 17,584
Net borrowings from line of credit 574,327 -
Repayment of notes payable (198,193) (423,363)
Repayment of shareholder loans - (393,522)
--------- ---------
Net cash provided by financing activities 1,979,330 2,708,416
--------- ---------
Net increase in cash 32,281 1,950
Cash at beginning of period 1,950 -
--------- ----------
Cash at end of period $ 34,231 1,950
========= ==========
Supplemental disclosure of cash flow information
cash paid during the period for:
Interest $ 117,077 55,476
========= ==========
Income taxes $ - -
========= ==========
</TABLE>
See accompanying notes to consolidated financial statements.
-6-
<PAGE>
MAINSTREET HEALTHCARE CORPORATION
Notes to Consolidated Financial Statements
March 31, 1998 and 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. From February 6, 1996 to March 31, 1998,
the Company has acquired 14 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 control exists by means other than ownership of stock.
Control by the Company is perpetual rather than temporary because (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 during consolidation.
The Company has experienced recurring losses of approximately $5,700,000
since its inception and has a net working capital deficiency of
approximately $2,700,000 at March 31, 1998. In addition, the liabilities
of the Company, including preferred stock and Class A common stock,
exceeded its assets by approximately $5,600,000. Effective May 1, 1998,
the Company sold substantially all of its assets for which the ultimate
proceeds will not be determined until the stock to be received is sold
(note 13). The Company is currently negotiating with its creditors and
preferred and Class A common shareholders to satisfy its debt
obligations. The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
-7-
<PAGE>
MAINSTREET HEALTHCARE CORPORATION
Notes to Consolidated Financial Statements
(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.
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 the 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.
-8-
<PAGE>
MAINSTREET HEALTHCARE CORPORATION
Notes to Consolidated Financial Statements
(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.
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
was 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 sheets.
(f) Redeemable Preferred Stock Offering Costs
Costs associated with the issuance of 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
1997 consolidated balance sheet. During 1998, the unamortized portion of
these costs was written off.
(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.
-9-
<PAGE>
MAINSTREET HEALTHCARE CORPORATION
Notes to Consolidated Financial Statements
(h) Reclassifications
Certain reclassifications have been made in the 1997 consolidated
financial statements to conform with the presentation in the 1998
consolidated financial statements.
(3) Clinic Acquisitions and Closures
Since its inception, the Company has acquired, through its wholly owned
subsidiaries, certain operating assets of 14 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.
-10-
<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 their fair
values at the dates of acquisition. In connection with these acquisitions,
the Company issued 268,000 shares of Class A common stock in MainStreet
Healthcare Corporation in 1997. The Company also entered into stock
repurchase agreements with the selling physicians whereby in the event
there has not been an initial public stock offering, or a sale of
substantially all of the Company's assets, or a change in control of the
Company's voting stock which would produce for the Class A shareholders a
value of $5 per share, the shareholders could compel the Company to
purchase the stock for $5 a share at a predetermined future date (the
"repurchase date"). The Company recorded the stock by discounting the $5
per share price from the repurchase date using a risk-based interest rate
of 15%. The difference between the recorded value and the maximum
repurchase value of its stock issued in connection with these acquisitions
was $643,395, which is being accreted over the period from the date of
issuance to the repurchase dates through periodic charges to accumulated
deficit. Effective May 1, 1998, the Company sold substantially all of the
assets of the Company (see note 13). The Company is in the process of
negotiating settlements with each Class A shareholder to satisfy these
obligations. The ultimate settlement amount has not been determined. The
Company also issued $71,876 and $1,531,677 in notes payable in 1998 and
1997, respectively. The excess of the purchase price over the fair values
of the net assets acquired was $29,612 and $1,813,179 in 1998 and 1997,
respectively, 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:
1998 1997
---- ----
Working capital, other than cash $12,264 477,577
Property and equipment 30,000 862,916
Noncompete agreements - 300,500
Excess of costs over fair value of
assets acquired 29,612 1,813,179
Less:
Value of stock issued - (696,015)
Value of notes payable issued (71,876) (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 statements of operations from the respective dates of
acquisition.
During 1998, the Company closed three physician clinics resulting in losses
of $88,990 which were accrued for at March 31, 1997. In connection with the
closure of the physician clinics, 28,000 shares of Class A common stock in
the Company and $50,000 in notes payable were canceled.
During 1998, in consideration for a release of a covenant not to compete, a
physician canceled $94,872 in notes payable which was used to reduce
goodwill. The Company then wrote off the remaining unamortized noncompete
agreement of $8,334.
-11-
<PAGE>
MAINSTREET HEALTHCARE CORPORATION
Notes to Consolidated Financial Statements
(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. These shares were subsequently
used to issue five and ten percent cumulative redeemable preferred
stock in MainStreet Delaware during 1998 and 1997.
(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 substantially all of the assets;
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. On May 1, 1998, substantially all the assets
of the Company were sold. The Company is negotiating with
all Class A shareholders to either effect the conversion or
enter into a settlement agreement (note 13).
(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.
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 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 cumulative redeemable preferred stock in MainStreet Delaware
for $2,071,607, net of offering expenses of $368,393.
-12-
<PAGE>
MAINSTREET HEALTHCARE CORPORATION
Notes to Consolidated Financial Statements
On March 21, 1997, Penman subscribed to 750 shares of the five percent
cumulative redeemable preferred stock for $750,000. On April 8, 1997, the
Company received $750,000 for the subscribed preferred stock.
In 1998, an additional 423,458 shares of Class B common stock, 250 shares
of five percent cumulative redeemable preferred stock, and 298 shares of
ten percent cumulative redeemable preferred stock in MainStreet Delaware
were issued to Penman for $555,207. In addition, the shareholders of
MainStreet Georgia exchanged $116,578 of debt owed by MainStreet Georgia to
the shareholders for 161,994 shares of Class B common stock and 114 shares
of ten percent cumulative redeemable preferred stock in MainStreet
Delaware.
(5) Property and Equipment
Property and equipment consists of:
1998 1997
Land $ 104,600 104,600
Buildings and improvements 426,494 406,635
Furniture and fixtures 181,946 181,621
Clinic equipment 774,166 559,451
Office equipment 218,048 193,843
Leasehold improvements 50,143 48,046
-------- ---------
1,755,397 1,494,196
Accumulated depreciation and amortization (234,894) (71,602)
--------- ---------
$ 1,520,503 1,422,594
========= =========
(6) Intangible Assets
Intangible assets consists of:
1998 1997
---- ----
Excess of cost over fair value of
assets acquired $ 1,586,601 1,813,179
Noncompete agreements 275,500 300,500
Less accumulated amortization
and amounts written-off (312,240) (145,427)
--------- --------
$ 1,549,861 1,968,252
========= =========
(7) Line of Credit
On October 14, 1997, MainStreet entered into a loan and subservicing
agreement (the "Loan Agreement") with National Century Financial
Enterprises (NCFE) whereby the Company is allowed to borrow against its
accounts receivable. At March 31, 1998, the Company had outstanding
borrowings under this Loan Agreement aggregating $574,327, bearing interest
at 13% and collateralized by gross accounts receivable aggregating
$1,895,388.
-13-
<PAGE>
MAINSTREET HEALTHCARE CORPORATION
Notes to Consolidated Financial Statements
Pursuant to the Acquisition Agreement and Plan of Reorganization entered
into between UCI Medical Affiliates Inc. (UCI) and the Company, UCI
purchased the accounts receivable and assumed the liability for the
outstanding borrowings (see note 13).
The Loan Agreement contained certain terms and financial covenants for
which the Company was not in compliance at March 31, 1998. In a letter
dated May 1, 1998, NCFE acknowledged that the remedies available to NCFE
should the Company be in default of the terms of the Loan Agreement, would
not be pursued by NCFE so long as UCI satisfied the outstanding loan
balance on or before May 31, 1998. UCI did not pay off the loan by May 31,
1998 which subsequently put the Company in default. On July 6, 1998, the
loan was paid.
(8) Long-Term Debt and Leases
Long-term debt and capital leases consist of:
<TABLE>
<S> <C>
1998 1997
---- ----
Notes payable to physician groups with interest
rates ranging from 7% to 10.5%, with payments
due at varying intervals through March 1, 2006 $ 845,799 1,108,314
Capital leases 123,073 17,584
------- ----------
968,872 1,125,898
Less amounts due within one year 525,788 360,454
------- ----------
$ 443,084 765,444
======= ========
</TABLE>
The following is a schedule of principal maturities of long-term debt,
including capital leases, as of March 31, 1998.
1999 $ 525,788
2000 174,171
2001 52,503
2002 47,982
2003 35,466
Thereafter 132,962
-------
Total $ 968,872
=======
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 and amortization expense in the consolidated
statement of operations.
-14-
<PAGE>
MAINSTREET HEALTHCARE CORPORATION
Notes to Consolidated Financial Statements
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, 1998.
1999 $ 60,055
2000 47,055
2001 22,648
2002 13,908
2003 1,159
--------
Total minimum lease payments 144,825
Less amounts representing interest 21,752
--------
Obligation under capital leases 123,073
Less current portion of capital lease obligations 48,693
--------
Long-term obligations under capital leases $ 74,380
========
Capitalized equipment leases included in equipment were 169,007 and $18,600
at March 31, 1998 and 1997, respectively. Imputed interest rates ranged
from 6.20% to 16.45% at March 31, 1998 and 1997, respectively.
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 approximately $565,000 and $250,000 for 1998 and 1997,
respectively, 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, 1998.
1999 $ 515,583
2000 458,279
2001 423,524
2002 266,906
2003 82,732
---------
$1,747,024
=========
(9) Related Party Transactions
During 1998, Penman and the Chief Executive Officer made loans to the
Company of $42,500 and $12,500, respectively. The Chief Executive Officer
also made an additional loan in lieu of $137,500 in salary, of which
$114,000 was converted into ten percent cumulative redeemable preferred
stock and $2,578 was converted to Class B common stock. There were no cash
repayments made to the stockholders during 1998.
-15-
<PAGE>
MAINSTREET HEALTHCARE CORPORATION
Notes to Consolidated Financial Statements
In 1997, 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 five percent cumulative redeemable 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, 1998 and
1997. Of the $25,300, $10,500 was converted into Class B common stock, and
$14,800 was repaid during the year.
During the year ended March 31, 1998 and the period ended March 31, 1997,
the Company made payments of $21,624 and $14,270, respectively, to related
parties for rent expense in connection with the clinic facilities. Also,
the Company made principal and interest payments of $9,000 and $423,363,
respectively, 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 during 1997, the
Company paid $47,650 to a consultant who became an officer of the Company.
The Company did not make any similar payments in 1998.
(10) Income Taxes
Because of operating losses, the Company has not provided any income tax
expense for the year ended March 31, 1998 and the period ended March 31,
1997. The Company has operating loss carryforwards, which may be used to
reduce future taxable income, of approximately $3,296,000 and $280,000 at
March 31, 1998 and 1997, respectively, which expire beginning in 2013.
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.
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, 1998 and 1997. The increase in the valuation allowance
of approximately $1,413,000 during 1998 was equal to the increase in the
deferred asset.
-16-
<PAGE>
MAINSTREET HEALTHCARE CORPORATION
Notes to Consolidated Financial Statements
The tax effects of significant items comprising the Company's deferred
income taxes for March 31, 1998 and 1997 are as follows:
1998 1997
---- ----
Deferred tax assets:
Accrual to cash $ 31,300 62,600
Net operating loss carryforwards 1,252,600 106,400
Allowance for doubtful accounts 438,800 144,400
Intangible assets 35,800 15,500
Accrued expenses 64,500 33,800
-------- ------
1,823,000 362,700
Less valuation allowance (1,731,700) (318,600)
--------- -------
Net deferred tax assets 91,300 44,100
Deferred tax liabilities - depreciation (91,300) (44,100)
-------- -------
Net deferred taxes $ - -
======== ======
The significant components of the deferred income tax expense (benefit) for
the year ended March 31, 1998 and the period ended March 31, 1997 are as
follows:
1998 1997
---- ----
Deferred income tax benefit $1,413,100 420,100
Change in tax status from S Corporation
to C Corporation - (101,500)
Increase in valuation allowance (1,413,100) (318,600)
Deferred income tax expense $ - -
======== =======
(11) 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. In connection with
the sale of substantially all the assets of the Company, the Company did
not extend its medical malpractice beyond May 1, 1998. However, general
liability will be extended through May 1, 1999.
-17-
<PAGE>
MAINSTREET HEALTHCARE CORPORATION
Notes to Consolidated Financial Statements
(12) Redeemable Preferred Stock
The five and ten percent preferred stock is cumulative, mandatory
redeemable nonvoting shares issued in connection with the reorganization
described in note 4. The five percent preferred stock dividend is payable
when declared by the Company. During 1998 and 1997, the Company declared a
dividend on the five percent preferred stock of $215,674 and $47,046,
respectively, based on the preferred stock issuance date of December 12,
1996. During 1998, the Company also declared a dividend on the ten percent
preferred stock issued in 1998 of $29,793. Upon sale of the Company or a
qualified public offering and providing that sufficient proceeds remain
after satisfying secured and unsecured obligations (see note 1(b)), 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.
During 1997, 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.
(13) Sale of Company
Pursuant to an Acquisition Agreement and Plan of Reorganization (the
"Agreement") dated February 9, 1998 and as amended on April 15, 1998 and
May 7, 1998, the Company sold effective May 1, 1998, substantially all of
its assets to UCI Medical Affiliates, Inc. (UCI). The purchase price by UCI
to the Company for the assets, as defined in the agreement consisted of:
(i) cash of $450,000; (ii) a promissory note receivable of $800,000 due
August 1, 1998; (iii) 2,901,396 shares of UCI common stock; (iv) the
assumption of capital leases aggregating $123,073 at March 31, 1998; and
(v) the assumption of the line of credit having a balance of $574,327 at
March 31, 1998.
The issuance of the shares of UCI common stock to the Company is contingent
upon the approval of UCI shareholders which is expected to take place on
July 31, 1998. The market value of the shares to be received based on the
closing price of UCI common stock at May 1, 1998 was approximately
$4,442,000; however, the ultimate value will be determined when the Company
sells the common stock which cannot take place prior to November 1, 1998.
-18-
<PAGE>
EXHIBIT INDEX
Exhibit 2 Acquisition Agreement And Plan of Reorganization dated February 9,
1998, by and among UCI Medical Affiliates of Georgia, Inc., a South
Carolina corporation; UCI Medical Affiliates, Inc., a Delaware
corporation; MainStreet Healthcare Corporation, a Delaware
corporation; MainStreet Healthcare Medical Group, P.C., a Georgia
professional corporation; MainStreet Healthcare Medical Group, PC, a
Tennessee professional corporation; Prompt Care Medical Center,
Inc., a Georgia corporation; Michael J. Dare; A. Wayne Johnson;
PENMAN Private Equity and Mezzanine Fund, L.P., a Delaware limited
partnership; and Robert G. Riddett, Jr. (Previously filed with the
initial filing of this Report on Form 8-K).
Exhibit 2.1 First Amendment to Acquisition Agreement And Plan of
Reorganization dated April 15, 1998, by and among UCI Medical
Affiliates of Georgia, Inc., a South Carolina corporation; UCI
Medical Affiliates, Inc., a Delaware corporation; MainStreet
Healthcare Corporation, a Delaware corporation; MainStreet
Healthcare Medical Group, P.C., a Georgia professional corporation;
MainStreet Healthcare Medical Group, PC, a Tennessee professional
corporation; Prompt Care Medical Center, Inc., a Georgia
corporation; Michael J. Dare; A. Wayne Johnson; PENMAN Private
Equity and Mezzanine Fund, L.P., a Delaware limited partnership; and
Robert G. Riddett, Jr. (Previously filed with the filing of this
Report on Form 8-K/A on April 20, 1998)
Exhibit 2.2 Second Amendment to Acquisition Agreement And Plan of
Reorganization dated May 7, 1998, by and among UCI Medical
Affiliates of Georgia, Inc., a South Carolina corporation; UCI
Medical Affiliates, Inc., a Delaware corporation; MainStreet
Healthcare Corporation, a Delaware corporation; MainStreet
Healthcare Medical Group, P.C., a Georgia professional corporation;
MainStreet Healthcare Medical Group, PC, a Tennessee professional
corporation; Prompt Care Medical Center, Inc., a Georgia
corporation; Michael J. Dare; A. Wayne Johnson; PENMAN Private
Equity and Mezzanine Fund, L.P., a Delaware limited partnership; and
Robert G. Riddett, Jr. (Previously filed with the filing of this
Report on Form 8-K/A on May 28, 1998)
Exhibit 2.3 Conditional Delivery Agreement dated effective as of May 1,
1998, by and among UCI Medical Affiliates, Inc.; UCI Medical
Affiliates of Georgia, Inc.; and MainStreet Healthcare Corporation.
Exhibit 2.4 Amendment to Conditional Delivery Agreement dated as of July
21, 1998, by and among UCI Medical Affiliates, Inc.; UCI Medical
Affiliates of Georgia, Inc.; and MainStreet Healthcare Corporation.
Exhibit 99 News release of UCI Medical Affiliates, Inc. dated February 13,
1998 (Previously filed with the initial filing of this Report on
Form 8-K).
Exhibit 2.3
Conditional Delivery Agreement dated effective as of May 1, 1998, by
and among UCI Medical Affiliates, Inc.; UCI Medical Affiliates of
Georgia, Inc.; and MainStreet Healthcare Corporation.
<PAGE>
CONDITIONAL DELIVERY AGREEMENT
This Conditional Delivery Agreement ("Agreement") is made to be effective
as of 12:01 a.m. on the 1st day of May, 1998, by, between and among UCI Medical
Affiliates, Inc., a Delaware corporation ("UCI"); UCI Medical Affiliates of
Georgia, Inc., a South Carolina corporation ("UCI of GA"); and MainStreet
Healthcare Corporation, a Delaware corporation ("MainStreet").
INTRODUCTION.
In connection with the closing on the date hereof of the transfer of
substantially all of the assets of MainStreet to UCI of GA (the "Closing") as
contemplated by that certain Acquisition Agreement and Plan of Reorganization
dated February 9, 1998, by and among UCI; UCI of GA; MainStreet; MainStreet
Healthcare Medical Group, P.C., a Georgia professional corporation; MainStreet
Healthcare Medical Group, PC, a Tennessee professional corporation; Prompt Care
Medical Center, Inc., a Georgia corporation; Michael J. Dare; A. Wayne Johnson;
PENMAN Private Equity and Mezzanine Fund, L.P., a Delaware limited partnership;
and Robert G. Riddett, Jr., as amended (the "Acquisition Agreement"), the
parties hereto desire to provide for the issuance in consideration thereof of
Two Million Nine Hundred One Thousand Three Hundred Ninety-Six (2,901,396)
shares of the $0.05 par value voting common stock of UCI to MainStreet (the
"Shares"), pursuant to the terms and conditions set forth in the Acquisition
Agreement and herein.
The parties hereto acknowledge and agree that the prior approval of the
shareholders of UCI (in accordance with applicable Marketplace Rules of the
National Association of Securities Dealers, Inc. and as necessary to amend the
Certificate of Incorporation of UCI) is a condition for the issuance of the
Shares which represent a portion of the consideration to be delivered to
MainStreet for the assets of MainStreet, all as set forth in the Acquisition
Agreement. As a result of the review by the Securities and Exchange Commission
of the Preliminary Proxy Statement of UCI relating to the meeting of the
shareholders of UCI at which such shareholder approval is to be solicited, such
meeting cannot be held prior to the scheduled date of Closing. As a result of
the foregoing, the parties hereto desire to enter into this Agreement whereby
upon satisfaction of the conditions set forth herein UCI shall deliver the
Shares to MainStreet, all upon the terms and conditions set forth herein.
AGREEMENT.
NOW, THEREFORE, in consideration of these premises and the mutual
covenants hereinafter set forth, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Issuance of Shares. Upon satisfaction of the conditions set forth in
Section 2 below, UCI shall tender to MainStreet the Shares as contemplated by
Section 7.1 of the Acquisition Agreement. At such time, UCI shall deliver a
copy of the instructions to the transfer agent of UCI's common stock
instructing the transfer agent to issue certificates evidencing the Shares to
MainStreet and will do all things necessary to cause the issuance of the
Shares and the prompt delivery of the certificates representing the Shares to
MainStreet by the transfer agent. The transfer agent shall be instructed to
deliver a certificate evidencing the HoldBack Shares to Nexsen Pruet Jacobs &
Pollard, LLP pursuant to Section 13.6.1 of the Acquisition Agreement. The
Shares, when issued, shall be duly
<PAGE>
authorized, validly issued, fully paid and non-assessable and not subject to
preemptive rights. The parties hereto acknowledge that the Shares shall be
issued to MainStreet pursuant to an exemption from registration under the
securities laws, such as Rule 506 of SEC Regulation D, and the Shares shall
be restricted shares subject to Rule 144 of the Securities Act of 1933. The
certificates evidencing the Shares shall bear a restrictive legend in
substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER
ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, PLEDGED, TRANSFERRED,
ASSIGNED OR OTHERWISE DISPOSED OF EXCEPT IN ACCORDANCE WITH SUCH ACT
AND THE RULES AND REGULATIONS THEREUNDER AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS. THE COMPANY WILL TRANSFER SUCH
SECURITIES ONLY UPON RECEIPT OF EVIDENCE SATISFACTORY TO THE
COMPANY, WHICH MAY INCLUDE AN OPINION OF COUNSEL, THAT THE
REGISTRATION PROVISIONS OF SUCH ACT HAVE BEEN COMPLIED WITH OR THAT
SUCH REGISTRATION IS NOT REQUIRED AND THAT SUCH TRANSFER WILL NOT
VIOLATE ANY APPLICABLE STATE SECURITIES LAWS.
2. Conditions. The obligation of UCI to issue the Shares shall be subject,
to the extent not waived by UCI, to the satisfaction of each of the following
conditions:
a. Approval of Shareholders of UCI. The shareholders of UCI approve
(i) the amendment to UCI's Certificate of Incorporation to increase the number
of authorized shares of the common stock, $0.05 par value, of UCI from
10,000,000 to 30,000,000 shares (the "Charter Amendment"); and (ii) the
issuance of the Shares to MainStreet.
b. Filing of Amendment to Charter. Upon the approval of the Charter
Amendment, UCI shall cause the filing with the Delaware Secretary of State of
the Charter Amendment, which UCI agrees shall be filed no more than three (3)
business days after the approval of such Charter Amendment by the shareholders
of UCI as contemplated in Section 2(A)(i) above.
c. Bringdown of Investment Letters. MainStreet and each of the
security holders of MainStreet (including without limitation the Class A and
Class B shareholders of MainStreet) shall execute and deliver to UCI an
affirmation, in form and substance acceptable to UCI, that each of the
representations and warranties set forth in such entity or person's Investment
Letter, executed and delivered to UCI at Closing pursuant to Section 8.3.8 of
the Acquisition Agreement, is true and accurate in all material respects as of
the date of the issuance of the Shares as set forth in Section 1 above.
3. Registration Rights Agreement. Prior to the issuance of the Shares to
MainStreet, UCI, MainStreet and each of the security holders of MainStreet
(including without limitation the Class A and Class B shareholders of
MainStreet) shall execute and deliver the registration rights agreement
substantially in the form attached as Exhibit 8.4.2 to the Acquisition
Agreement.
<PAGE>
4) Failure of Conditions. In the event that as of July 1, 1998 for
any reason any of the conditions set forth in Section 2 (the "Conditions") are
not met, MainStreet shall have the option, exercisable by written notice to
UCI on or before July 8, 1998 to either (i) require UCI to continue to use its
reasonable best efforts to complete the Conditions no later than July 31,
1998, or (ii) unwind the transactions as herein provided (an "Unwind Event").
In the case of an Unwind Event or if the Conditions have not been met by July
31, 1998, the parties to the Acquisition Agreement shall immediately take all
actions in their best efforts to restore the parties to the respective
positions they held prior to the closing of the transactions contemplated in
the Acquisition Agreement. In this connection, without limiting the generality
of the foregoing, each party to the Acquisition Agreement shall (a) undertake
all such actions necessary so that, to the greatest extent reasonably
practicable, all liabilities and assets transferred from any party in the
Acquisition are transferred back to such party, (b) shall execute and deliver
any and all deeds, bills of sale, assignments, assumptions, and other
instruments of conveyance or assumption as shall be reasonably required to
return such liabilities and assets, and (c) perform such other acts as set
forth in the Acquisition Agreement concerning the unwinding of the
transactions contemplated in the Acquisition Agreement. The Transferees will
use commercially reasonable efforts to hold separate and segregate the Assets
until the conditions set forth in Section 2 above are satisfied. In the event
for any reason a party (the Maker") is unable to return to any other party
(the "Holder") any assets (including any cash) or liabilities received by or
from the Holder pursuant to the Acquisition Agreement, the Maker shall
immediately execute and delivery to the Holder a promissory note (the "Note")
in favor of the Holder in an original principal amount equal to, with respect
to any party, the excess, if any, of the amount of the fair market value of
any and all assets which are not returned by such party as set forth above
over the fair market value of any and all liabilities which are not returned
by such party in each case taking into account the terms of the Acquisition
Agreement. Such Note shall bear interest at the then "Prime Rate" as listed in
the Money Rates Section of the Wall Street Journal, and all interest and
principal thereunder shall be due and payable one month after the date of
execution of such Note.
5) Subject to Acquisition Agreement. This Agreement is made,
executed and delivered in connection with the Acquisition Agreement, and is
subject to all the terms, provisions, and conditions thereof. To the extent of
any conflict between the terms hereof and thereof, the terms of the
Acquisition Agreement shall be controlling.
6) Miscellaneous. In the event any provision hereof is held to be
invalid or unenforceable, such invalidity or unenforceability shall not affect
the validity or enforceability of any other provision hereof. This Agreement
contains the entire agreement of the parties hereto with respect to the
subject matter hereof, and no representations, inducements, promises or
agreements, oral or otherwise, not expressly set forth herein shall be of any
force or effect. No amendment to this Agreement shall be binding upon any of
the parties hereto unless said amendment is in writing and signed by the party
against whom enforcement of said amendment is sought. No party hereto shall
assign this Agreement or any interest or obligation herein. All titles or
captions of the paragraphs set forth in this Agreement are inserted only as a
matter of convenience and for reference and in no way define, limit, extend or
describe the scope of this Agreement, or the intent of any provision hereof.
All references to Sections and Exhibits shall mean the Sections and Exhibits
of this Agreement unless otherwise specified. Time is of the essence of this
Agreement. This Agreement shall be governed by and construed in accordance
with the laws of the State of South Carolina. No provision of this Agreement
shall be interpreted against any party because such party or its legal
representative drafted such provision. All rights and remedies of a party
hereunder shall be cumulative and in addition to such rights and remedies as
may be available to a party at law or equity. This Agreement may be executed
simultaneously in several counterparts, each of which shall be deemed an
original but which together shall constitute one and the same original.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Conditional Delivery
Agreement under seal with the corporate parties acting by and through their duly
authorized officers, effective as of the date first above written.
UCI MEDICAL AFFILIATES, INC. MAINSTREET HEALTHCARE CORPORATION
By: /S/ JERRY WELLS, JR. By: /S/ ROBERT G. RIDDETT, JR.
------------------------------ ---------------------------
Jerry F. Wells, Jr. Robert G. Riddett, Jr.
Its: Executive Vice President of Finance Its: President
and Chief Financial Officer
UCI MEDICAL AFFILIATES OF
GEORGIA, INC.
By: /S/ JERRY F. WELLS, JR.
---------------------------------
Jerry F. Wells, Jr.
Its: Executive Vice President of Finance
and Chief Financial Officer
Exhibit 2.4
Amendment to Conditional Delivery Agreement dated as of July 21, 1998,
by and among UCI Medical Affiliates, Inc.; UCI Medical Affiliates of
Georgia, Inc.; and MainStreet Healthcare Corporation.
<PAGE>
AMENDMENT
TO
CONDITIONAL DELIVERY AGREEMENT
This Amendment to Conditional Delivery Agreement ("Amendment") is made
as of this 21st day of July, 1998, by, between and among UCI Medical
Affiliates, Inc., a Delaware corporation ("UCI"); UCI Medical Affiliates of
Georgia, Inc., a South Carolina corporation ("UCI of GA"); and MainStreet
Healthcare Corporation, a Delaware corporation ("MainStreet").
INTRODUCTION.
At the closing effective as of May 1, 1998 of the transfer of
substantially all of the assets of MainStreet to UCI of GA as contemplated by
that certain Acquisition Agreement and Plan of Reorganization dated February 9,
1998, by and between among others UCI, UCI of GA, and MainStreet, as amended
(the "Acquisition Agreement"), UCI delivered to MainStreet that certain
Conditional Delivery Agreement dated effective as of May 1, 1998, by and among
UCI, UCI of GA and MainStreet (the "Conditional Delivery Agreement") which
provides for the issuance of 2,901,396 shares of the $0.05 par value voting
common stock of UCI to MainStreet, pursuant to the terms and conditions set
forth in the Acquisition Agreement and therein. UCI, UCI of GA and MainStreet
desire to enter into this Amendment to reflect certain amendments to the
Conditional Delivery Agreement as reflected 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 Section 4 of the Conditional Delivery Agreement is hereby deleted and
the following substituted in lieu thereof:
4. Failure of Conditions. In the event that as of September 30, 1998
for any reason any of the conditions set forth in Section 2 (the
"Conditions") are not met, MainStreet shall have the option, exercisable
by written notice to UCI on or before October 5, 1998, to either (i)
require UCI to continue to use its reasonable best efforts to complete the
Conditions no later than October 31, 1998, or (ii) unwind the transactions
as herein provided (an "Unwind Event"). In the case of an Unwind Event or
if the Conditions have not been met by October 31, 1998, the parties to
the Acquisition Agreement shall immediately take all actions in their best
efforts to restore the parties to the respective positions they held prior
to the closing of the transactions contemplated in the Acquisition
Agreement. In this connection, without limiting the generality of the
foregoing, each party to the Acquisition Agreement shall (a) undertake all
such actions necessary so that, to the greatest extent reasonably
practicable, all liabilities and assets transferred from any party in the
Acquisition are transferred back
<PAGE>
to such party, (b) shall execute and deliver any and all deeds, bills of
sale, assignments, assumptions, and other instruments of conveyance or
assumption as shall be reasonably required to return such liabilities and
assets, and (c) perform such other acts as set forth in the Acquisition
Agreement concerning the unwinding of the transactions contemplated in the
Acquisition Agreement. The Transferees will use commercially reasonable
efforts to hold separate and segregate the Assets until the conditions set
forth in Section 2 above are satisfied. In the event for any reason a
party (the Maker") is unable to return to any other party (the "Holder")
any assets (including any cash) or liabilities received by or from the
Holder pursuant to the Acquisition Agreement, the Maker shall immediately
execute and delivery to the Holder a promissory note (the "Note") in favor
of the Holder in an original principal amount equal to, with respect to
any party, the excess, if any, of the amount of the fair market value of
any and all assets which are not returned by such party as set forth above
over the fair market value of any and all liabilities which are not
returned by such party in each case taking into account the terms of the
Acquisition Agreement. Such Note shall bear interest at the then "Prime
Rate" as listed in the Money Rates Section of the Wall Street Journal, and
all interest and principal thereunder shall be due and payable one month
after the date of execution of such Note.
2. Except as otherwise modified hereby, the terms and provisions of the
Conditional Delivery Agreement shall remain in full force and effect. This
Amendment may be executed in any number of counterparts, all of which taken
together shall constitute one Amendment, and any party hereto may execute this
Amendment by signing any such counterpart. The authorized attachment of
counterpart signature pages shall constitute execution by the parties. This
Amendment shall be governed by and construed in accordance with the laws of the
State of South Carolina.
IN WITNESS WHEREOF, the parties have executed this Amendment to
Conditional Delivery Agreement under seal with the corporate parties acting by
and through their duly authorized officers, effective as
of the date first above written.
UCI MEDICAL AFFILIATES, INC. MAINSTREET HEALTHCARE CORPORATION
By: /S/ JERRY WELLS, JR. By: /S/ ROBERT G. RIDDETT, JR.
---------------------------------- -----------------------------
Jerry F. Wells, Jr. Robert G. Riddett, Jr.
Its: Executive Vice President of Finance Its: President
and Chief Financial Officer
UCI MEDICAL AFFILIATES OF
GEORGIA, INC.
By: /S/ JERRY F. WELLS, JR.
------------------------------------
Jerry F. Wells, Jr.
Its: Executive Vice President of Finance
and Chief Financial Officer
