UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 13D
Under the Securities Exchange Act Of 1934
BMJ Medical Management, Inc.
(Name of Issuer)
Common Stock, $0.001 par value per share
(Title of Class of Securities)
055950 10 9
(CUSIP Number)
M. Steven Alexander with copies to:
Paribas John M. Reiss, Esq.
787 Seventh Avenue White & Case LLP
New York, NY 10019 1155 Avenue of the Americas
212-841-2000 New York, NY 10036
212-819-8200
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications)
June 30, 1998
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
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<PAGE>
CUSIP No. 055950 10 9
- -------- -----------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Paribas I.R.S. Identification No. 132937443
- -------- -----------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [X]
- -------- -----------------------------------------------------------------------
3 SEC USE ONLY
- -------- -----------------------------------------------------------------------
4 SOURCE OF FUNDS
WC
- -------- -----------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED [ ]
PURSUANT TO ITEMS 2(d) or 2(e)
- -------- -----------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Republic of France
- ----------------------------------- ------- ------------------------------------
NUMBER OF SHARES BENEFICIALLY 7 SOLE VOTING POWER
OWNED BY EACH REPORTING PERSON 340,000*
WITH (see discussion in Items 4 & 5)
------- ------------------------------------
8 SHARED VOTING POWER
0
------- ------------------------------------
9 SOLE DISPOSITIVE POWER
340,000*
(see discussion in Items 4 & 5)
------- ------------------------------------
10 SHARED DISPOSITIVE POWER
0
- -------- -----------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
340,000* (see discussion in Items 4 & 5)
- -------- -----------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES [ ]
------- -----------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
1.7% (see discussion in Items 4 & 5)
- -------- -----------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
BK
- -------- -----------------------------------------------------------------------
* Paribas may be deemed to be the beneficial owner of the common stock of BMJ
Medical Management, Inc. reported herein through its ownership of Paribas
Principal Inc. Such shares of BMJ Medical Management, Inc. are not included
above so as to avoid double counting.
<PAGE>
- -------- -----------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Paribas Principal Incorporated I.R.S. Identification No. 133529118
- -------- -----------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [X]
- -------- -----------------------------------------------------------------------
3 SEC USE ONLY
- -------- -----------------------------------------------------------------------
4 SOURCE OF FUNDS
WC
- -------- -----------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED [ ]
PURSUANT TO ITEMS 2(d) or 2(e)
- -------- -----------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
State of New York
- ----------------------------------- ------- ------------------------------------
NUMBER OF SHARES BENEFICIALLY 7 SOLE VOTING POWER
OWNED BY EACH REPORTING PERSON 1,580,135
WITH (see discussion in Items 4 & 5)
------- ------------------------------------
8 SHARED VOTING POWER
0
------- ------------------------------------
9 SOLE DISPOSITIVE POWER
1,580,135
(see discussion In Items 4 & 5)
------- ------------------------------------
10 SHARED DISPOSITIVE POWER
0
- -------- -----------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,580,135 (see discussion in Items 4 & 5)
- -------- -----------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES [ ]
- -------- -----------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
8.1%
- -------- -----------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
CO
- -------- -----------------------------------------------------------------------
<PAGE>
SCHEDULE 13D
BMJ Medical Management, Inc.
Item 1. Security and Issuer
This statement on Schedule 13D relates to the common stock, $0.001 par
value per share ("Common Stock") of BMJ Medical Management, Inc., a Delaware
corporation ("the Company"), the principal executive offices of which are
located at 4800 North Federal Highway, Suite 101-E, Boca Raton, Florida 33431.
Item 2. Identity and Background
This statement on Schedule 13D is being filed by (i) Paribas Principal
Incorporated ("PPI"), a corporation organized under New York law and (ii)
Paribas, a banking organization established under the laws of the Republic of
France which engages in activities and maintains holdings in a number of
jurisdictions. PPI and Paribas are hereinafter sometimes collectively referred
to as the "Reporting Persons."
PPI is a wholly-owned subsidiary of Paribas North America, Inc. which
in turn is a wholly-owned subsidiary of Paribas. PPI is a Small Business
Investment Company ("SBIC") licensed by the U.S. Small Business Administration
through which Paribas holds non-controlling investments in qualifying small
businesses. The address of PPI's principal place of business is 787 Seventh
Avenue, New York, New York 10019.
Paribas engages in banking and financial services world-wide. In
addition, Paribas holds operating subsidiaries that engage in a wide variety of
financial services, manufacturing, trading development and related activities.
The principal office address of Paribas is 3, rue d'Antin, 75002 Paris, France.
The attached Schedule I is a list of the executive officers and
directors of PPI and Paribas, which contains the following information with
respect to each such person: (i) name; (ii) business address; (iii) present
principal occupation or employment and the name, principal business and address
of any corporation or other organization in which such employment is conducted;
and (iv) place of citizenship.
During the last five years, neither PPI, Paribas nor, to the best of
PPI's or Paribas' knowledge, any person named on Schedule I hereto has been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) or has been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction as a result of which such person
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration
Pursuant to a Credit Agreement, dated as of June 30, 1998, among the
Company, Paribas (as agent) and various financial institutions party thereto
(the "Credit Agreement"), Paribas and such other financial institutions provided
loans to the Company to effect, in part, certain transactions. In connection
therewith, the Company, issued to Paribas two common stock purchase warrants,
dated June 30, 1998 (the "Paribas Warrants"). Pursuant to the Paribas Warrants,
certain rights were granted to Paribas relating to the Common Stock of the
Company as partial consideration to be paid in connection with the Credit
Agreement.
Pursuant to the Paribas Warrants, the Company issued to Paribas (i) a
warrant to purchase 175,000 shares of Common Stock exercisable at any time on or
after the date thereof and prior to June 30, 2008 at an exercise price of $9.00,
and (ii) a warrant to purchase 165,000 shares of Common Stock exercisable at any
time on or after the date thereof and prior to June 30, 2008 at an exercise
price of $0.01.
Pursuant to a Securities Purchase Agreement, dated as of June 30, 1998
(the "Securities Purchase Agreement") between the Company and PPI, the Company
sold to PPI for an aggregate consideration of $7,000,000 (i) 1,473,684 shares of
Series A Convertible Preferred Stock (the "Preferred Stock") convertible into
Common Stock at any time on or after the date of issuance thereof with the
rights and restrictions set forth in the Certificate of Designation for the
Preferred Stock and (ii) certain nominal exercise price common stock purchase
Warrants (the "Initial Warrants") to purchase, initially, subject to certain
anti-dilution provisions set forth in the Warrant Agreement (the "PPI Warrant
Agreement"), dated as of June 30, 1998 between the Company and PPI, 106,451
shares of Common Stock.
All cash payments made or to be made in connection with the purchase
of Initial Warrants and the Preferred Stock have been and are (in the case of
the exercise price, with respect to the Initial Warrants) expected to be from
working capital of Paribas or PPI, as the case may be.
Item 4. Purpose of the Transaction
The shares (or the rights to purchase shares pursuant to the Preferred
Stock, the Additional Preferred Stock and the Warrants), the ownership of which
is reported hereby, were acquired for investment purposes. The Reporting Persons
reserve the right from time to time to acquire additional shares, or to dispose
of some or all of their shares. The Reporting Persons may from time to time
discuss with management of the Company various ideas with a view to enhancing
the value of the shares.
In addition to the Preferred Stock, pursuant to the Securities
Purchase Agreement, PPI may, subject to the provisions of the Securities
Purchase Agreement and the Certificate of Designation for the Preferred Stock,
acquire (i) $3,000,000 of shares of a new series of convertible preferred stock
(the "Additional Preferred Stock") convertible into shares of Common Stock on or
before September 8, 1998, (ii) certain additional common stock purchase warrants
(the "Additional Warrants") on or before September 8, 1998, (iii) certain common
stock purchase warrants (the "Registration Warrants") for failure of the Company
to effect certain registration rights and (iv) certain common stock purchase
warrants for failure of the Company to achieve certain performance targets. The
amount of all such securities which may be purchased or received is dependent
upon various factors and cannot be determined at this time. Pursuant to the
Certificate of Designation for the Preferred Stock, PPI may acquire certain
common stock purchase warrants (the "Performance Warrants" and together with the
Additional Warrants and Registration Warrants, the "PPI Warrants" and
collectively with the Paribas Warrants, the "Warrants") for failure of the
Company to affect a redemption of the Preferred Stock under certain
circumstances.
In addition, the Company shall elect and maintain an eight member
Board of Directors of which PPI has the right to elect one member to the
Company's Board of Directors and a representative ("Observer") or alternatively
two Observers.
Except as described in this Item 4, none of the Reporting Persons nor,
to the best knowledge of any of the Reporting Persons, any of the persons set
forth on Schedule I, has any current plans or proposals that relate to or would
result in (a) the acquisition by any person of additional securities of the
Company or the disposition of securities of the Company; (b) an extraordinary
corporate transaction, such as a merger, reorganization or liquidation of the
Company or any of its subsidiaries; (c) a sale or transfer of a material amount
of assets of the Company or any of its subsidiaries; (d) any change in the
present board of directors or management of the Company, including any plans or
proposals to change the number or term of directors or to fill any existing
vacancies on the board; (e) any material change in the present capitalization or
dividend policy of the Company; (f) any other material change in the Company's
business or corporate structure; (g) changes in the Company's charter, by-laws
or instruments corresponding thereto, or other actions which may impede the
acquisition or the control of the Company by any person; (h) any of the
Company's securities being delisted from a national securities exchange or
ceasing to be authorized to be quoted in an inter-dealer quotation system of a
registered national securities exchange or association; (i) any of the Company's
securities becoming eligible for termination of registration pursuant to Section
12(g)(4) of the Securities Exchange Act of 1934, as amended; or (j) any action
similar to any of those enumerated above.
Item 5. Interest in Securities of the Issuer
(a) As of the date of this statement, Paribas' beneficial ownership of
340,000 shares of Common Stock constitutes beneficial ownership of 1.7% of the
total number of outstanding Common Stock (all of which Paribas has the right to
acquire pursuant to the Paribas Warrants issued to it).
PPI's beneficial ownership of 1,580,135 shares of Common Stock (all of
which PPI has the right to acquire either pursuant to the Initial Warrants or
conversion of the Preferred Stock) constitutes beneficial ownership of 8.1% of
the total number of shares of outstanding Common Stock. Paribas may be deemed to
be the beneficial owner of the shares of Common Stock beneficially owned by PPI.
(b) Pursuant to the Initial Warrants and Preferred Stock it holds,
which have voting rights equal to the number of shares of Common Stock into
which each is convertible, PPI has the sole power to vote or to direct the vote
of, and sole power to dispose or direct the disposition of, 1,580,135 shares of
Common Stock of the Company.
(c) During the past sixty days, neither PPI, Paribas nor, to the best
knowledge of PPI or Paribas, any of the persons set forth on Schedule I, has
effected any transactions in shares of Preferred or Common Stock except pursuant
to the Securities Purchase Agreement and the Warrant Purchase Agreement.
(d) Not applicable.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to
Securities of the Issuer
Securities Purchase Agreement. The Company and PPI entered into the
Securities Purchase Agreement, on June 30, 1998.
Subject to the terms and conditions set forth therein, pursuant to the
Securities Purchase Agreement (i) the Company issued, without additional
consideration, to PPI nominal exercise price Warrants exercisable for 106,451
shares of Common Stock of the Company, $0.001 par value, at an exercise price of
$0.01 per share and (ii) the Company sold, at $4.75 per share, to PPI 1,473,684
shares of Preferred Stock, $0.01 par value, with each such share initially
convertible into one share of Common Stock with a liquidation preference equal
to $4.75 per share.
PPI has customary preemptive rights with respect to all issuances of
Common Stock and other equity securities based on the holdings of Preferred
Stock and Warrants (each on an as converted basis). The foregoing preemptive
rights do not apply to issuances of securities in the ordinary course of
business to physicians in connection with entering into management service
agreements with physician practices, at no less than the fair market value at
such time.
For so long as PPI holds Preferred Stock, Warrants or Common Stock
issuable in respect thereof, PPI is entitled to comprehensive information,
access and inspection rights.
PPI is entitled to at least 1 board seat of an 8 member board, and
will retain such board representation so long as:
(a) PPI continues to own at least 50% of the investment contemplated
by the Securities Purchase Agreement (on an as converted basis), either in
the form of Preferred Stock, Warrants or Common Stock, or
(b) PPI holds at least 5% of Common Stock, on a fully diluted basis.
Pursuant to the Securities Purchase Agreement, and for so long as PPI
holds securities of the Company, the Company is prohibited from taking any of
the following actions without the prior
written approval of PPI:
(a) Declare a dividend, distribution, redemption or make any other
payment with respect to the equity of the Company (other than with respect
to the Preferred Stock).
(b) Enter into any line of business other than the management of
physician practices in the musculoskeletal services field;
(c) Amend the organizational documents of the Company in any manner
which would be detrimental to PPI;
(d) Enter into any transaction with affiliates unless made on an arms
length basis (other than certain material transactions set forth in the
Securities Purchase Agreement and management service agreements entered
into in the ordinary course of business and certain transactions where the
only affiliate is a subsidiary of the Company);
(e) Voluntarily file for bankruptcy or commence any other liquidation,
winding up or dissolution events;
(f) Issue of any class of capital stock with rights to dividends or in
liquidation in parity with, or superior to the rights of the Preferred
Stock or which contains a conversion price which is not fixed (other than
the series B preferred stock); and
(g) Allow any subsidiary of the Company or practice with whom the
Company has a management agreement, to sell any financial interest in such
person.
PPI has certain registration rights described in the Securities
Purchase Agreement (including without limitation the right to require the
Company to effect a shelf registration covering all of the securities issuable
upon exercise or conversion of the Preferred Stock and the Initial Warrants).
PPI is entitled to certain common stock purchase warrants if the Company fails
to cause a shelf registration to become effective within 90 days of the date of
the Securities Purchase Agreement.
Warrant Agreement. The Company and PPI entered into a Warrant
Agreement, dated as of June 30, 1998.
Subject to customary put rights exceptions, PPI has the right to
require the Company to purchase all or any part of the Warrants at the fair
market value, upon the earliest to occur of the following events:
(a) A change of control;
(b) Any merger or consolidation of the Company resulting in the
transfer of beneficial ownership of 50% or more of the voting securities of
the Company;
(c) Any sale, lease or other disposition of all or substantially all
of the assets of the Company resulting in the transfer of beneficial
ownership of 50% or more of the voting securities of the Company; and
(d) The occurrence of the fifth anniversary of the Closing Date so
long as the put does not violate the Credit Agreement.
The Warrants have certain anti-dilution protections more fully
described in the PPI Warrant Agreement. The PPI Warrants shall have the right to
vote (together as a single class with the Common Stock) and the right to receive
dividends on an as-converted basis each as more fully described in the PPI
Warrant Agreement.
If the Company achieves certain performance targets, the Company has
the option to cancel up to 25% of the Warrants if, within 12 months of the date
of the acquisition, the Company's average closing price for the Common Stock
exceeds a certain level set forth in the Warrant Agreement over a period of not
less than thirty (30) consecutive trading days (the "Cancellation Period") and
the average daily trading volume exceeds 100,000 shares during such Cancellation
Agreement.
Certificate of Designation. The Company filed a Certificate of
Designation with the Delaware Secretary of State on June 30, 1998.
Pursuant to the Certificate of Designation for the Preferred Stock,
PPI may acquire certain common stock purchase warrants for failure of the
Company to affect a redemption of the Preferred Stock under certain
circumstances.
Subject to customary put rights exceptions, PPI has the right to
require the Company to purchase all or any part of the Preferred Stock at a
price per share equal to the Purchase Price plus all accrued and unpaid
dividends, upon the earliest to occur of the following events:
(a) A change of control;
(b) Any merger or consolidation of the Company resulting in the
transfer of beneficial ownership of 50% or more of the voting securities of
the Company;
(c) Any sale, lease or other disposition of all or substantially all
of the assets of the Company resulting in the transfer of beneficial
ownership of 50% or more of the voting securities of the Company; and
(d) The occurrence of the fifth anniversary of the Closing Date so
long as the put does not violate the Credit Agreement.
The Company may repurchase any outstanding shares of Preferred Stock
upon written notice at any time following the earlier of (i) 6 years and 90 days
following the Closing Date, and (ii) the date on which the market value of
Common Stock of the Company equals or exceeds 150% of the purchase price per
share of Preferred Stock.
Common Stock Purchase Warrants. The Company issued Common Stock
Purchase Warrants, dated as of June 30, 1998 to Paribas.
Subject to the terms and conditions set forth therein, the Company
issued to Paribas (i) a Warrant exercisable for 175,000 shares of Common Stock
of the Company, $0.001 par value per share, at an exercise price of $9.00 and
(ii) a Warrant exercisable for 165,000 shares of Common Stock of the Company,
$0.001 par value per share, at an exercise price of $0.01. The Paribas Warrants
expire on the tenth anniversary of the date of issuance thereof.
The Warrants have certain anti-dilution protections more fully
described in the Paribas Warrants.
Except as described in Item 4 above and in this Item 6, neither PPI,
Paribas nor, to the best knowledge of PPI or Paribas, any of the individuals
identified in Schedule I has any contract, arrangement, understanding or
relationship with any person with respect to any security of the Company.
The foregoing description of each of the Securities Purchase
Agreement, Warrant Agreement, Paribas Warrants and Certificate of Designation
for the Preferred Stock is qualified on its entirety by the provisions of each
such document, copies of which are attached hereto as exhibits.
Item 7. Material to be filed as Exhibits
1. Joint Filing Agreement.
2. Securities Purchase Agreement, dated as of June 30, 1998, between the
Company and PPI.
3. Warrant Agreement, dated as of June 30, 1998, between the Company and
PPI.
4. Common Stock Purchase Warrant, dated as of June 30, 1998, exercisable
into 165,000 shares of Common Stock, between the Company and Paribas.
5. Common Stock Purchase Warrant, dated as of June 30, 1998, exercisable
into 175,000 shares of Common Stock, between the Company and Paribas.
6. Certificate of Designation, filed with the Delaware Secretary of State
on June 29, 1998.
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: July ___, 1998
PARIBAS
By: /s/ M. Steven Alexander
-------------------------
Name: M. Steven Alexander
Title: Managing Director
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: July ____, 1998
PARIBAS PRINCIPAL INCORPORATED
By: /s/ M. Steven Alexander
-------------------------
Name: M. Steven Alexander
Title: President
<PAGE>
SCHEDULE I
The following tables set forth for the directors and executive
officers of PPI and Paribas (i) the name and citizenship of each such person;
(ii) the present principal occupation or employment of each such person; and
(iii) the name, principal business and address of any business corporation or
other organization in which such occupation or employment is conducted.
A.
EXECUTIVE OFFICERS AND DIRECTORS OF PPI
<TABLE>
<CAPTION>
Present principal occupation or employment and
Name/Position Citizenship name and business address of employer
<S> <C> <C>
M. Steven Alexander/ United States Managing Director of Paribas,
Director and President of New York Branch
PPI 787 Seventh Avenue
New York, New York 10019
Philippe Blavier/ United States and Global Head of Corporate Banking of Paribas,
Director of PPI French 3 rue d'Antin 75002 Paris, France
Jeffrey Youle/ United States Managing Director of Paribas,
Director and Secretary of PPI New York Branch
787 Seventh Avenue
New York, New York 10019
Everett Schenk/ United States Managing Director of Paribas,
Director of PPI New York Branch
787 Seventh Avenue
New York, New York 10019
Herve Couffin/ French Member of the Executive
Director of PPI Committee of Paribas
Affaires Industrielles, 3 rue
d'Antin 75002 Paris, France
Gary Binning/ United States Managing Director of Paribas,
Director of PPI New York Branch
787 Seventh Avenue
New York, New York 10019
Stephen Eisenstein/ United States Managing Director of Paribas,
Director of PPI New York Branch
787 Seventh Avenue
New York, New York 10019
Donna Kiernan/ United States Chief Financial Officer of Paribas,
Chief Financial Officer of PPI New York Branch
787 Seventh Avenue
New York, New York 10019
</TABLE>
<PAGE>
B.
EXECUTIVE OFFICERS AND DIRECTORS OF
PARIBAS
Except as otherwise noted, the address of each such person in this
Part C is 3, rue d'Antin, 75002 Paris, France.
<TABLE>
<CAPTION>
Present Principal occupation or
employment and name and business
Name/Position Citizenship address of employer
<S> <C> <C>
Michel Francois-Poncet/ French President of Supervisory Board of PARIBAS
President of Supervisory Board
Evan Baird/Member of Supervisory United Kingdom President
Board SCHLUMBERGER
42, rue Saint Dominique
75007 Paris, France
Claude Bebear/Member of French President
Supervisory Board AXA
21/23, avenue de Matignon
75008 Paris, France
Paul Desmarais/Member of Supervisory Canadian President
Board Power Corporation of Canada
751 Victoria Square
Montreal, Quebec Canada
Jean Gandois/Member of Supervisory French President
Board Cockerill Sambre
4 Rue Quentin Bauchart
75008 Paris, France
Antoine Jeancourt-Galignani/ Member French President
of Supervisory Board ASSURANCES GENERALE
DE FRANCE
87, rue de Richelieu
75002 Paris, France
Thierry Desmarest/Member of French President
Supervisory Board COMPAGNIE FRANCAISE
DES PETROLES TOTAL
Tour Total
24, Cours Michelet
92080 Puteaux, France
Andre Levy-Lang/ French President of Board of
President of Board of Management Management of PARIBAS
Philippe Dulac/ French Member of Board of
Member of Board of Management Management of PARIBAS
Christian Manset/ French Member of the Supervisory Board of
Member of Supervisory Board PARIBAS
Colette Neuville/Member of French Representative of the Minority
Supervisory Board Shareholders Association
4, rue Montescot
28000 Chartres, France
Dennis Kessler/Member of Supervisory French Directeur General
Board AXA
21/23, Avenue de Matignon
75008 Paris, France
Serge Tchuruk/Member of Supervisory French Alcatel Alsthom
Board 33, rue Emeriau
75015 Paris, France
Amaury-Daniel de Seze/ French Member of Board of
Member of Board of Management Management of PARIBAS
Antonio Borges/ Portuguese Dean of INSEAD Business School,
Member of the Supervisory Board Boulvard de Constance
77305 Fountainbleau Cedex
Philippe Degeilh/ French Member of the Supervisory Board of
Member of the Supervisory Board Paribas
Paul-Louis Halley/ French Chairman
Member of the Supervisory Board Promodes
123 rue Jules Guesde
12300 Levallois-Perret
Alexandre Lamfalussy/ Belgian President
Member of the Supervisory Board Insitute of European Studies
Place des Doyeus
1348 Louvairre, Neuve
Belgium
Jean Clamon/ French Member of the Board of Management
Member of the Board of Management of Paribas
Virin Moulin/ French Member of the Supervisory Board of
Member of the Supervisory Board Paribas
Pierre Nourrit/ French Member of the Supervisory Board of
Member of the Supervisory Board Paribas
Pierre Scohier/ Belgian President
Member of the Supervisory Board Compagnie Belge de
Particiaptions/Paribas
World Trade Center I, 162,
Boulevard Emille Jacqmain,
Boite postale 56 1210, Bruxelles
Dominique Hoenn/ French Member of the Board of Management
Member of the Board of Management of Paribas
Robert de Metz/ French Member of the Board of Management
Member of the Board of Management of Paribas
Bernard Muller/Member of the Board French Member of the Board of Management
of Management of Paribas
</TABLE>
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
99. Joint Filing Agreement
4.1. Warrant Agreement, dated as of June 30, 1998, between the Company and
PPI.
4.2. Certificate of Designation for the Preferred Stock, filed with the
Delaware Secretary of State on June 29, 1998
4.3. Securities Purchase Agreement, dated as of June 30, 1998, between the
Company and PPI.
4.4. Common Stock Purchase Warrant, dated as of June 30, 1998, exercisable
into 165,000 shares of Common Stock, between the Company and Paribas.
4.5. Common Stock Purchase Warrant, dated as of June 30, 1998, exercisable
into 175,000 shares of Common Stock, between the Company and Paribas.
EXHIBIT 1
JOINT FILING AGREEMENT
Pursuant to paragraph (iii) of Rule 13d-1(f)(1) promulgated by the
Securities and Exchange Commission (the "Commission") under the Securities
Exchange Act of 1934, as amended, each of the undersigned hereby agrees that the
statement on Schedule 13D to which this Agreement shall be attached as an
exhibit, including all amendments thereto, shall be filed with the Commission on
behalf of each of the undersigned.
Dated: July __, 1997
PARIBAS
By: /s/ M. Steven Alexander
-----------------------------
Name: M. Steven Alexander
Title: Managing Director
PARIBAS PRINCIPAL INCORPORATED INC.
By: /s/ M. Steven Alexander
-----------------------------
Name: M. Steven Alexander
Title: President
WARRANT AGREEMENT
THIS WARRANT AGREEMENT (this "Agreement") is dated as of June 30, 1998 and
entered into by and between BMJ MEDICAL MANAGEMENT, INC., a Delaware corporation
(the "Company") and PARIBAS PRINCIPAL INCORPORATED, a New York corporation
(together with its successors and assignors, the "Purchaser").
W I T N E S S E T H:
WHEREAS, the Company has agreed to issue to the Purchaser and the Purchaser
has agreed to purchase (i) on the date hereof, certain common stock purchase
warrants, as hereinafter described (the "Initial Warrants") to purchase
initially, subject to the terms of Section 9 hereof, 106,451 shares of Common
Stock, par value $.001 per share, of the Company ("Common Stock") and (ii)
certain additional common stock purchase warrants, as hereinafter described (the
"Additional Warrants", and together with the Initial Warrants and any other
common stock purchase warrants issued pursuant to the terms of the Securities
Purchase Agreement (as defined below) or pursuant to the certificate of
designation governing the Series A Preferred Stock, the "Warrants"), in each
case, pursuant to that certain securities purchase agreement, dated as of even
date herewith, by and between the Purchaser and the Company (the "Securities
Purchase Agreement");
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereto agree as follows:
SECTION 1.
DEFINED TERMS
(a) The following terms when used in this Agreement, including its preamble
and recitals, shall have the following meanings:
"1933 Act" shall mean the Securities Act of 1933, as amended.
"1934 Act" shall mean the Securities Exchange Act of 1934, as amended.
"Additional Shares" means any shares of Common Stock (including any shares
of Common Stock issued upon the conversion of Series B Preferred Stock) issued
after the date hereof except (i) Common Stock issued upon the exercise of any
Warrant, (ii) securities issued upon the direct or indirect conversion, exchange
or exercise of any securities issued by the Company on or prior to the Closing
Date and set forth on Schedule I to this Agreement, (iii) up to 100,000 shares
of Common Stock issued upon the exercise of non-qualified stock options issued
to employees, directors and independent contractors of the Company and/or its
Subsidiaries, (iv) up to 200,000 shares of Common Stock issued to physicians
with whose practice the Company is affiliated pursuant to commitments existing
on the Closing Date and described on Schedule II to this Agreement, (v) up to
291,461 shares of Common Stock issued upon the exercise of options issued after
the Closing Date pursuant to the Company's 1996 Amended and Restated Stock
Option Plan, as in effect on the date hereof, but only so long as the exercise
price of such options (1) is fixed and (2) equals or exceeds the fair market
value of a share of Common Stock (determined as of the date of issuance of such
options), (vi) shares of Common Stock issued upon conversion of Series A
Preferred Stock, (vii) shares of Common Stock issued upon conversion of
preferred stock of the Company issued in connection with the Second Closing and
(viii) Equity Securities issued pursuant to Section 10 of this Agreement.
"Additional Warrants" shall have the meaning provided in the recitals of
this Agreement.
"Adjustment Price" shall have the meaning provided in Section 9(b).
"Affiliate" shall mean, as applied to any Person, any other Person directly
or indirectly controlling (including, but not limited to, all directors and
officers of such Person), controlled by, or under direct or indirect common
control with, such Person and shall include, for purposes of determining whether
a Person is an Affiliate of the Company, any Person that directly or indirectly
owns more than 5% of any class of the capital stock of such Person. A Person
shall be deemed to "control" another Person if such Person possesses, directly
or indirectly, the power to direct or cause the direction of the management and
policies of such other Person, whether through the ownership of voting
securities, by contract or otherwise.
"Agreement" shall have the meaning provided in the preamble of this
Agreement.
"Applicable Law" shall mean all provisions of laws, statutes, ordinances,
rules, regulations, permits or certificates of any Governmental Authority
applicable to such Person or any of its assets or property, and all judgments,
injunctions, orders and decrees of all courts, arbitrators or Governmental
Authorities in proceedings or actions in which such Person is a party or by
which any of its assets or properties are bound.
"Base Purchase Price" shall mean $4.43.
"Business Day" shall mean any day except Saturday, Sunday and any day which
in New York shall be a legal holiday or a day on which banking institutions are
authorized or required by law or other government action to close.
"Cancellation Period" shall have the meaning provided in Section 9(o).
"Certificate" shall mean the Amended and Restated Certificate of
Incorporation of the Company, as amended through the date hereof (including,
without limitation, by the filing of any certificate of designation).
"Change of Control" shall mean the occurrence of one or more of the
following: (i) any Person, entity or "group" (within the meaning of Section
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) shall become
the "beneficial owner" (as defined in Rules 13(d) and 13(d)-5 under the
Securities Exchange Act, as amended except that a Person shall be deemed to have
"beneficial ownership" of all securities that such Person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time) of shares of any outstanding class of capital stock of the Company and
as a result, such Person, entity or "group" has 50% or more of the ordinary
voting power in the election of the Board of Directors of the Company or (ii)
the Board of Directors of the Company shall cease to consist of a majority of
Continuing Directors.
"Closing Date" shall mean the initial date of issuance of Initial Warrants
under this Agreement.
"Commission" shall mean the Securities and Exchange Commission or any other
federal agency at the time administering the 1933 Act.
"Common Stock" shall have the meaning provided in the recitals of this
Agreement.
"Common Stock Per Share Market Value" means the price per share of Common
Stock obtained by dividing (A) the Market Value by (B) the number of shares of
Common Stock outstanding (on a Fully-Diluted Basis) at the time of
determination.
"Company" shall have the meaning provided in the preamble of this
Agreement.
"Continuing Directors" shall mean, with respect to the Company, the
directors of the Company on the Closing Date and each other director, if such
other director's nomination for election to the Board of Directors of the
Company is recommended by a majority of the then Continuing Directors.
"Credit Agreement" shall mean the Credit Agreement, dated as of June 30,
1998, among the Corporation, the Lenders (as therein defined) and Paribas, as
agent, as amended, amended and restated, supplemented, restructured or otherwise
modified from time to time (in whole or in part and without limitation as to
terms, conditions or covenants and without regard to the principal amount
thereof) and in effect, including all related notes, collateral documents,
guaranties, instruments and agreements entered into in connection therewith, and
any successive restructurings, renewals, extensions, refundings or refinancings
thereof.
"Equity Securities" shall mean all shares of capital stock of the Company,
all securities convertible into or exchangeable for shares of capital stock of
the Company, and all options, warrants, and other rights to purchase or
otherwise acquire from the Company shares of such capital stock, or securities
convertible into or exchangeable for shares of such capital stock.
"Equivalent Nonvoting Security" means, with respect to any security issued
or to be issued by any Person, a security of such Person that is identical in
rights and benefits to such security, except that (a) the equivalent security
shall not be entitled to vote on any matter on which holders of voting
securities of such Person are entitled to vote, other than as required by
Applicable Law or with respect to any amendment or repeal of any provision of
the Organizational Documents of such Person or any other agreement or instrument
pursuant to which the equivalent security was issued which provision
specifically affects such equivalent security, (b) subject to such reasonable
restrictions as any affected Regulated Holder may request (including any
restriction necessary to prevent the violation by such Regulated Holder of any
provision of Applicable Law with respect to its ownership of voting securities),
the equivalent security shall be convertible in a one-to-one ratio into the
first security and (c) the terms of the equivalent security shall include such
provisions requested by any affected Regulated Holder as are reasonable and
equitable to ensure that (i) the equivalent security is treated comparably to
the first security with respect to dividends, distributions, stock splits,
reclassifications, capital reorganizations, mergers, consolidations and other
similar events and transactions, (ii) the conversion right provided in clause
(b) above is equitably protected and (iii) the acquisition of the equivalent
security will not cause such Regulated Holder to violate Applicable Law.
"Exercise Price" shall have the meaning provided in Section 5.
"Expiration Date" shall have the meaning provided in Section 5.
"Fully Diluted Basis" means, as applied to the calculation of the total
number of shares of Common Stock outstanding at any time, after giving effect to
(a) all shares of Common Stock outstanding at the time of determination, (b)
without duplication, all shares of Common Stock issuable upon the exercise,
exchange or conversion of Equity Securities to purchase or exchangeable or
convertible into Common Stock which are outstanding at the time of determination
(it being agreed that for purposes of determining the number of shares of Common
Stock issuable upon the exercise of any shares of Series B Preferred Stock, such
number shall be (A) from the date hereof until such time as such shares of
Series B Preferred Stock are no longer subject to "Optional Conversion" (as
defined in the certificate of designation governing the terms of the Series B
Preferred Stock), the higher of (x) the number of shares issuable upon a
conversion of such shares of Series B Preferred Stock at a conversion price
equal to the product of 1.25 and the "Market Price" (as defined in clause (b) of
the definition of "Market Price" appearing in the certificate of designation
governing the terms of the Series B Preferred Stock and determined at the time
of the original issuance of the shares of Series B Preferred Stock being
converted) and (y) the number of shares issuable upon a conversion of such
shares of Series B Preferred Stock at a conversion price equal to the "Market
Price" (as defined in clause (a) of the definition of "Market Price" appearing
in the certificate of designation governing the terms of the Series B Preferred
Stock but determined at the time of such determination of the number of shares
of Common Stock outstanding on a "Fully-Diluted Basis") or (B) after such time
as such shares of Series B Preferred Stock are no longer subject to "Optional
Conversion" (as defined in the certificate of designation governing the terms of
the Series B Preferred Stock), the number of shares issuable upon a conversion
of such shares at the "Market Price" (as defined in clause (b) of the definition
of "Market Price" appearing in the certificate of designation governing the
terms of the Series B Preferred Stock but determined at the time of such
determination of the number of shares of Common Stock outstanding on a
"Fully-Diluted Basis") and (c) all shares of Common Stock which the Company
could otherwise be required to issue in accordance with agreements in place at
the time of determination.
"Governmental Authority" means any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
or any court, in each case whether of the United States of America or foreign.
"Holder" means the Purchaser (so long as it holds any Warrants or Warrant
Shares) and any other registered holder of any of the Warrants or Warrant
Shares.
"Independent Financial Expert" means a nationally recognized investment
banking firm (a) that does not (and whose directors, officers, employees and
Affiliates do not) have a direct or indirect material financial interest in the
Company, (b) that has not been, and, at the time it is called upon to serve as
an Independent Financial Expert under this Agreement is not (and none of whose
directors, officers, employees or Affiliates is) a promoter, director or officer
of the Company, (c) that has not been retained during the preceding two years by
the Company for any purpose, and (d) that is otherwise qualified to serve as an
independent financial advisor. Any such Person may receive customary
compensation and indemnification by the Company for opinions or services it
provides as an Independent Financial Expert.
"Initial Warrants" shall have the meaning provided in the recitals of this
Agreement.
"Market Price" means, with respect to a share of Common Stock on any
Business Day:
(a) if the Common Stock is Publicly Traded at the time of
determination, the average of the closing prices on such day of the Common
Stock on all domestic securities exchanges on which the Common Stock is
then listed, or, if there have been no sales on any such exchange on such
day, the average of the highest bid and lowest asked prices on all such
exchanges at the end of such day or, if on any such day the Common Stock is
not so listed, the average closing price quoted on NASDAQ as reported in
the Wall Street Journal, or if on any day such security is not quoted on
NASDAQ, the average of the highest bid and lowest asked prices on such day
in the domestic over-the-counter market as reported by the National
Quotation Bureau, Incorporated, or any similar successor organization, in
each such case averaged over a period of 20 trading days consisting of the
day as of which "Market Price" is being determined and the nineteen
consecutive trading days prior to such day; or
(b) if the Common Stock is not Publicly Traded at the time of
determination, the Common Stock Per Share Market Value;
provided, however, that if Market Price is being determined in connection with a
Mandatory Conversion (as defined in the certificate of designation governing the
terms of the Series B Preferred Stock) of Series B Preferred Stock into Common
Stock and the Market Value of a share of Common Stock is lower on the date of
such conversion than it was on the date of original issuance of the Series B
Preferred Stock being converted, then Market Price shall be determined by
reference to the Market Price at the time of the original issuance of such
shares of Series B Preferred Stock; provided, further, however, for purposes of
Section 9(b), if Market Value is being determined in connection with an
"Optional Conversion" (as defined in the Series B Certificate of Designation) of
Series B Preferred Stock into Common Stock, Market Value shall be equal to the
product of 1.25 and the "Market Price" (as defined in the Series B Certificate
of Designation and determined as of the date of the original issuance of the
Series B Preferred Stock being converted).
"Market Value" means the highest price that would be paid for the entire
common equity of the Company on a going-concern basis in an arm's-length
transaction between a willing buyer and a willing seller (neither acting under
compulsion), using valuation techniques then prevailing in the securities
industry (but without giving effect to any discount in respect of a minority
interest and giving effect to any value attributed to the rights of the Holders
to receive dividends and distributions as provided in Section 10 hereof) and
determined in accordance with the Valuation Procedure, and assuming full
disclosure and understanding of all relevant information and a reasonable period
of time for effectuating such sale. For the purposes of determining the Market
Value, (a) the exercise price of options or warrants to acquire Common Stock
which are deemed to have been exercised for the purpose of determining the
number of shares of Common Stock outstanding on a Fully-Diluted Basis, shall be
deemed to have been received by the Company, (b)(i) the liquidation preference
or indebtedness, as the case may be, represented by securities which are deemed
exercised for or converted into Common Stock for the purpose of determining the
number of shares of Common Stock outstanding on a Fully-Diluted Basis and (ii)
any contractual limitation in respect of the shares of Common Stock relating to
voting rights, shall be deemed to have been eliminated or canceled .
"NASDAQ" means the National Association of Securities Dealers, Inc.,
Automated Quotation System.
"Organizational Documents" means, with respect to any Person, each
instrument or other document that (a) defines the existence of such Person,
including its articles or certificate of incorporation, as filed or recorded
with an applicable Governmental Authority or (b) governs the internal affairs of
such Person, including its bylaws, in each case as amended, supplemented or
restated.
"Permitted Transferee" shall mean any Affiliate of any Holder or any
officer, director or employee of any Holder.
"Person" or "Persons" means and includes natural persons, corporations,
limited partnerships, general partnerships, joint stock companies, joint
ventures, associations, companies, trusts, banks, trust companies, land trusts,
business trusts or other organizations, whether or not legal entities, and
governments and agencies and political subdivisions thereof.
"Publicly Traded" means, with respect to any security, that such security
is (a) listed on a domestic securities exchange, (b) quoted on NASDAQ or (c)
traded in the domestic over-the-counter market, which trades are reported by the
National Quotation Bureau, Incorporated.
"Purchaser" shall have the meaning provided in the preamble of this
Agreement.
"Put Effective Date" shall mean the earliest to occur of (x) a Change of
Control, (y) the date on which the Company consolidates with or merges with or
into another Person or sells, assigns, conveys, transfers, leases or otherwise
disposes of substantially all of its assets to any Person or any Person
consolidates with or merges with or into, the Company, in any such event
pursuant to a transaction in which the outstanding voting equity securities of
the Company are converted into or exchanged for cash, securities or other
property other than any such transaction in which immediately after such
transaction no "person" or "group" (as such terms are used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934) is the "beneficial owner" (as
defined in Rules 13(d) and 13(d)-5 under the Exchange Act, except that a person
shall be deemed to have "beneficial ownership" of all securities that such
person has the right to acquire, whether such right is exercised immediately or
only after the passage of time), directly or indirectly of more than 50% of the
total voting securities of the surviving or transferee corporation or its parent
corporation and (z) the occurrence of the fifth anniversary of the Closing Date.
"Put Notice" shall have the meaning provided in Section 11.1.
"Put Option Purchase Price" shall mean, with respect to the exercise of any
option to sell any Warrants or Warrant Shares pursuant to any Put Notice
delivered under Section 11 hereof by any Holder of Warrants or Warrant Shares
the fair market value of a share of Common Stock (determined by an independent
financial appraiser chosen by the Requisite Holders and retained pursuant to an
agreement acceptable to the Company and the Requisite Holders) as of the Put
Repurchase Date, multiplied by the number of Warrants and Warrant Shares subject
to the Put Notice, and in the case of Warrants subject to such Put Notice,
multiplied by the Warrant Number in effect on the date of delivery of the Put
Notice.
"Put Repurchase Date" shall mean, with respect to the exercise of any put
option pursuant to Section 11 of this Agreement, a date designated by the
Company which is not more than ninety (90) days after the date of receipt by the
Company of the Put Notice relating to the exercise of such put option.
"Regulated Holder" shall have the meaning provided in Section 8.
"Regulation Y" shall have the meaning provided in Section 8.
"Reorganization" shall have the meaning provided in Section 9(g).
"Requisite Holders" means Holders holding Warrants and/or Warrant Shares
representing at least a majority of all Warrant Shares issued or issuable upon
exercise of Warrants outstanding on the date of determination.
"Second Closing Date" shall have the meaning provided in the Securities
Purchase Agreement.
"Securities Purchase Agreement" shall have the meaning provided in the
recitals of this Agreement.
"Series A Preferred Stock" shall mean the Series A Convertible Preferred
Stock of the Company, par value $.01 per share.
"Series B Preferred Stock" shall mean the Series B Convertible Preferred
Stock of the Company, par value $.01 per share.
"Series B Certificate of Designation" shall mean the certificate of
designation creating and governing the Series B Preferred Stock.
"Valuation Procedure" means, with respect to the determination of any
amount or value required to be determined in accordance with such procedure, a
determination (which shall be final and binding on the Company and the Holders)
made (i) by agreement among the Company and the Requisite Holders within 20 days
following the event requiring such determination or (ii) in the absence of such
an agreement, by an Independent Financial Expert selected in accordance with the
further provisions of this definition. If required, an Independent Financial
Expert shall be selected within five days following the expiration of the 20-day
period referred to above, either by agreement among the Company and the
Requisite Holders or, in the absence of such agreement, by lot from a list of
four potential Independent Financial Experts remaining after the Company
nominates three, the Requisite Holders nominate three, and each side eliminates
one potential Independent Financial Expert. The Independent Financial Expert
shall be instructed by the Company and the Requisite Holders to make its
determination within 20 days of its selection. The fees and expenses of an
Independent Financial Expert selected hereunder shall be paid by the Company.
"Warrant Certificates" shall have the meaning provided in Section 2.
"Warrant Documents" means this Agreement, the Warrant Certificates and the
Securities Purchase Agreement.
"Warrant Number" shall have the meaning provided in Section 9.
"Warrant Shares" means (a) the shares of Common Stock issued or issuable
upon exercise of a Warrant in accordance with Section 5 or upon exchange of a
Warrant in accordance with Section 5, (b) all other securities or other property
issued or issuable upon any such exercise or exchange in accordance with this
Agreement and (c) any securities of the Company distributed with respect to, or
issued upon the conversion of, the securities referred to in the preceding
clauses (a) and (b). As to any particular Warrant Shares, once issued such
securities shall cease to be Warrant Shares when (A) a registration statement
with respect to the sale of such securities shall have become effective under
the 1933 Act and such securities shall have been disposed of in accordance with
such registration statement, or (B) such securities shall have been sold in
accordance with Rule 144 (or any successor provision) under the 1933 Act.
"Warrants" shall have the meaning provided in the recitals of this
Agreement.
SECTION 2.
WARRANT CERTIFICATES
Concurrently with the execution and delivery of this Agreement and the
Securities Purchase Agreement, and upon the issuance of any additional Warrants
pursuant to the Securities Purchase Agreement or upon the transfer or exercise
of all or a portion of the Warrants represented by an existing Warrant
Certificate, the Company will issue and deliver certificates evidencing such
Warrants (the "Warrant Certificates") which certificates shall be in the form of
Exhibit A hereto. Warrant Certificates shall be dated the date of issuance by
the Company. The Warrant Certificates may have such letters, numbers or other
marks of identification or designation as may be required to comply with any law
or rule or regulation of any governmental authority, stock exchange or
self-regulatory organization.
SECTION 3.
EXECUTION OF WARRANT CERTIFICATES;
MUTILATED OR MISSING WARRANT CERTIFICATES
Warrant Certificates shall be signed on behalf of the Company by its
Chairman of the Board or its President or a Vice President of the Company. Each
Warrant Certificate shall also be manually signed on behalf of the Company by
its Secretary or an Assistant Secretary of the Company.
In case any of the Warrant Certificates shall be mutilated, lost, stolen or
destroyed, the Company shall, upon request of the Holder of any such Warrant
Certificate, issue, in exchange and substitution for and upon cancellation of
the mutilated Warrant Certificate, or in lieu of and substitution for the
Warrant Certificate lost, stolen or destroyed, a new Warrant Certificate of like
tenor and representing an equivalent number of Warrants, but only upon receipt
of evidence reasonably satisfactory to the Company of such loss, theft or
destruction of such Warrant Certificate and indemnity, if requested, also
reasonably satisfactory to the Company.
SECTION 4.
REGISTRATION/RESERVATION OF WARRANT SHARES
The Company shall number and register the Warrant Certificates in a
register as they are issued. The Company may deem and treat the registered
Holders of the Warrant Certificates as the absolute owners thereof
(notwithstanding any notation of ownership or other writing thereon made by
anyone) for all purposes and shall not be affected by any notice to the
contrary. The Warrants shall be registered initially in such name or names as
the Purchaser shall designate.
The Company shall at all times reserve and keep available, free from
preemptive rights, out of the aggregate of its authorized but unissued Common
Stock, for the purpose of enabling it to satisfy any obligation to issue Warrant
Shares upon exercise of Warrants, the maximum number of shares of Common Stock
which may then be deliverable upon the exercise of all outstanding options,
warrants (including the Warrants) or other securities, directly or indirectly,
convertible into or exchangeable for Common Stock.
The Company covenants that all Warrant Shares and other securities issuable
upon exercise of Warrants will, upon payment of the Exercise Price therefor and
issue thereof, be validly authorized and issued, fully paid, nonassessable, free
of preemptive rights and free from all taxes, liens, charges and security
interests with respect to the issue thereof.
So long as the outstanding Common Stock may be listed on any securities
exchange in the United States, the Company shall use its best efforts to cause
all reserved Warrant Shares to be listed on each such exchange upon official
notice of issuance upon such exercise.
SECTION 5.
WARRANTS; EXERCISE OF WARRANTS
Subject to the terms of this Agreement, each Holder shall have the right,
which may be exercised at any time or from time to time until 5:00 p.m., New
York time, on June 30, 2008 (the "Expiration Date") to receive from the Company
the number of fully paid and nonassessable Warrant Shares which the Holder may
at the time be entitled to receive on exercise of such Warrants and payment of
the Exercise Price then in effect for such Warrant Shares. Each Warrant not
exercised prior to 5:00 p.m., New York time, on the Expiration Date shall become
void and all rights thereunder and all rights in respect thereof under this
Agreement shall cease as of such time; provided that the occurrence of the
Expiration Date shall not relieve the Company of any obligation to any Holder
which arose pursuant to the terms of this Agreement prior to such date.
The price at which each Warrant shall be exercisable (as such price may be
adjusted from time to time, in accordance with the terms hereof, the "Exercise
Price") shall initially be $.01 per share. The Common Stock shall have a par
value of no greater than $.001 per share.
A Warrant may be exercised upon surrender to the Company at its address set
forth on the signature pages hereto of the Warrant Certificate or Warrant
Certificates to be exercised with the form of election to purchase attached
thereto duly completed and signed, and upon payment to the Company of the
Exercise Price for the number of Warrant Shares in respect of which such
Warrants are then exercised. Payment of the aggregate Exercise Price may be
made, at the option of the applicable Holder, (i) by cash, certified or bank
cashier's check or wire transfer, (ii) by surrendering to the Company the number
of Warrants which, when exercised, would entitle the Holder thereof to that
number of Warrant Shares which is equal to (A) such aggregate Exercise Price
divided by (B) the excess of (x) the product of the number of Warrant Shares
which may be purchased with one Warrant, multiplied by the Market Price per
share of Common Stock minus (y) the Exercise Price, (iii) by surrendering to the
Company the number of shares of Common Stock which is equal to (A) such
aggregate Exercise Price divided by (B) the Market Price per share of Common
Stock or (iv) any combination of the foregoing.
Subject to the provisions of Section 6, upon such surrender of Warrants and
payment of the Exercise Price the Company shall issue and cause to be delivered
with all reasonable dispatch to or upon the written order of the Holder and in
such name or names as such Holder may designate a certificate or certificates
for the number of full Warrant Shares issuable upon the exercise of such
Warrants (and such other consideration, if any, as may be deliverable upon
exercise of such Warrants) together with, at the sole option of the Company,
cash for fractional Warrant Shares as provided in Section 7. Such certificate or
certificates shall be deemed to have been issued and the Person so named therein
shall be deemed to have become a holder of record of such Warrant Shares as of
the date of the surrender of such Warrants and payment of the Exercise Price,
irrespective of the date of delivery of such certificate or certificates for
Warrant Shares.
Each Warrant shall be exercisable, at the election of the Holder thereof,
either in full or from time to time in part and, in the event that a Warrant
Certificate is exercised in respect of fewer than all of the Warrant Shares
issuable on such exercise at any time prior to the date of expiration of the
Warrants, a new certificate evidencing the remaining Warrant or Warrants will be
issued and delivered pursuant to the provisions of this Section 5 and of Section
2.
All Warrant Certificates surrendered upon exercise of Warrants shall be
canceled and disposed of by the Company. The Company shall keep copies of this
Agreement and any notices given or received hereunder available for inspection
by the Holders during normal business hours at its office designated for the
receipt of notices pursuant to Section 17(a).
SECTION 6.
PAYMENT OF TAXES
The Company will pay all taxes and other governmental charges (including
all documentary stamp taxes, but excluding all foreign, federal, state or local
income taxes payable by a Holder) in connection with the issuance or delivery of
the Warrants hereunder, including all such taxes attributable to the initial
issuance or delivery of Warrant Shares upon the exercise of Warrants and payment
of the Exercise Price. The Company shall not, however, be required to pay any
tax that may be payable in respect of any subsequent transfer of the Warrants or
any transfer involved in the issuance and delivery of Warrant Shares in a name
other than that in which the Warrants to which such issuance relates were
registered, and, if any such tax would otherwise be payable by the Company, no
such issuance or delivery shall be made unless and until the Person requesting
such issuance has paid to the Company the amount of any such tax and it is
established to the reasonable satisfaction of the Company that any such tax has
been paid.
SECTION 7.
FRACTIONAL INTERESTS
The Company shall not be required to issue fractional Warrant Shares on the
exercise of Warrants. If more than one Warrant shall be presented for exercise
in full at the same time by the same Holder, the number of full Warrant Shares
which shall be issuable upon the exercise thereof shall be computed on the basis
of the aggregate number of Warrant Shares purchasable on exercise of the
Warrants so presented. If any fraction of a Warrant Share would, except for the
provisions of this Section 7, be issuable on the exercise of any Warrants (or
specified portion thereof), the Company shall, at its sole option, pay an amount
in cash equal to the Market Price of the Warrant Share so issuable multiplied by
such fraction.
SECTION 8.
LIMITATIONS ON CERTAIN HOLDERS
Notwithstanding anything in this Agreement or any Warrant Certificate to
the contrary, no Holder which is subject to the provisions of Regulation Y
promulgated by the Board of Governors of the Federal Reserve, or any successor
regulation thereto ("Regulation Y"), or which is affiliated with any entity
subject to the provisions of Regulation Y (if such Affiliate holds securities of
the Company (any such Holder being referred to herein as a "Regulated Holder"))
and no transferee of such Regulated Holder, may exercise the Warrants for a
number of Warrant Shares which would permit such Regulated Holder, together with
its Affiliates and transferees, to own or control a number of Warrant Shares
greater than that permitted by Applicable Law including, without limitation,
Regulation Y.
SECTION 9.
ADJUSTMENT OF THE NUMBER OF WARRANT SHARES
ISSUABLE, THE BASE PURCHASE PRICE AND THE EXERCISE PRICE
The number of shares of Common Stock issuable upon the exercise of each
Warrant (the "Warrant Number") is initially one. The Warrant Number is subject
to adjustment from time to time upon the occurrence of any event enumerated in,
or as otherwise provided in this Section 9.
(a) Adjustment for Change in Capital Stock. If the Company:
(i) subdivides or reclassifies its outstanding shares of Common Stock
into a greater number of shares or declares a stock dividend payable in
shares of Common Stock;
(ii) combines or reclassifies its outstanding shares of Common Stock
into a smaller number of shares; or
(iii)issues by reclassification of its Common Stock any shares of its
capital stock;
then the Warrant Number in effect immediately prior to such action shall be
adjusted so that the Holder of any Warrant thereafter exercised may receive the
aggregate number and kind of shares of capital stock of the Company which it
would have owned immediately following such action if such Warrant had been
exercised immediately prior to such action. The adjustment shall become
effective immediately after the effective date thereof. Such adjustment shall be
made successively whenever any event listed above shall occur.
(b) Additional Issuance. (A) If the Company at any time shall issue any
Additional Shares (including, without limitation, shares of Common Stock issued
upon the conversion of shares of Series B Preferred Stock) at a price less than
the higher of (x) the Market Price per share of Common Stock and (y) the Base
Purchase Price in effect immediately prior to the issuance of such Additional
Shares (the higher of (x) and (y) being hereinafter referred to as the
"Adjustment Price") or any other Equity Securities (excluding any such issuance
for which the number of Warrant Shares purchasable hereunder shall have been
adjusted pursuant to subsection (a) of this Section 9 and excluding Equity
Securities which are (x) options or convertible securities described in clause
(iii) of the definition of Additional Shares or (y) shares of Series B Preferred
Stock or (z) shares of Series A Preferred Stock), which are exercisable or
convertible for Additional Shares at an exercise or conversion price less than
the Adjustment Price, the Warrant Number after such issuance shall be determined
by multiplying the Warrant Number in effect immediately prior to such issuance
by a fraction, (i) the denominator of which shall be the number of shares of
Common Stock on a Fully Diluted Basis immediately prior to such issuance plus
the number of shares that the aggregate consideration to be received by the
Company for the total number of such Additional Shares issued or issuable in
connection with the conversion or exercise of such other Equity Securities
(including the issue price of any such other Equity Securities) would purchase
at the Adjustment Price and (ii) the numerator of which shall be the number of
shares of Common Stock on a Fully Diluted Basis immediately after such issuance.
Shares of Common Stock owned by or held for the account of the Company or any
subsidiary on such date shall not be deemed outstanding for the purpose of any
such computation. Such adjustment shall be effective immediately after such
issuance. Such adjustment shall be made successively whenever any such event
shall occur. If the Company at any time shall issue two or more securities as a
unit and one or more of such securities shall be Additional Shares or other
Equity Securities subject to this subsection (b), the consideration allocated to
each such security shall be determined pursuant to the Valuation Procedure.
(B) Notwithstanding anything to the contrary contained in (A) above, in the
event the Company issues more than an aggregate (taking into account all such
issuances after the Closing Date) of $3,000,000 (determined by reference to the
Market Price on the date of issuance of such Additional Shares or the Market
Price of the Additional Shares into which such Equity Securities are convertible
rather than the amount of consideration received by the Company in respect of
such issuance) of Additional Shares or Equity Securities, without consideration
or for a consideration per share less than the Base Purchase Price in effect
immediately prior to such issuance, the Warrant Number shall not be adjusted as
provided in (A) above, but rather, the Warrant Number immediately prior to such
issuance shall be adjusted upon the occurrence of each subsequent issuance below
the Base Purchase Price in effect immediately prior to such issuance by
multiplying the Warrant Number in effect immediately prior to such issuance by a
fraction (x) the numerator of which is the number of shares of Common Stock
issuable upon the conversion of a single share of Series A Preferred Stock
immediately after such issuance (after giving effect to any "full ratchet"
anti-dilution adjustments made pursuant to Section 4(c)(iv)(B) of the
certificate of designation governing the Series A Preferred Stock, as in effect
on the date hereof) and (y) the denominator of which is the number of shares of
Common Stock issuable upon the conversion of a single share of Series A
Preferred Stock immediately prior to such issuance and adjustment; provided,
however, notwithstanding anything to the contrary contained in this clause (B),
in the event the "Purchaser" (as defined in the Securities Purchase Agreement)
shall have exercised the preemptive rights provided for in Section 8.11 of the
Securities Purchase Agreement in connection with any such issuance below the
then Base Purchase Price, the "full-ratchet" anti-dilution protection otherwise
provided in this clause (B) shall not apply with respect to such issuance (i.e.,
the anti-dilution protection provided for in Section 9(b)(A) shall apply to such
issuance and the Market Price of the securities issued in such issuance shall
not count toward the $3,000,000 threshold described above).
(C) With respect to any adjustment made pursuant to this Section 9(b) upon
the issuance of any Equity Securities which are convertible or exchangeable for
Additional Shares, (i) if such other Equity Securities by their terms provide,
with the passage of time or otherwise, for any increase in the consideration
payable to the Company, or decrease in the number of Additional Shares issuable,
upon the exercise or conversion thereof, the Warrant Number, as adjusted
pursuant to this Section 9(b), shall, upon any such increase or decrease
becoming effective, be recomputed in a manner consistent with this Section 9(b)
to reflect such increase or decrease and (ii) upon the expiration of any such
other Equity Securities or any rights or conversion or exchange under any such
other Equity Securities, to the extent not previously exercised or converted,
the Warrant Number, as adjusted by this Section 9(b) shall, upon such
expiration, be recomputed in a manner consistent with this Section 9(b), taking
into account the number of Additional Shares actually issued upon the conversion
or exercise thereof and the amount of consideration actually received by the
Company in connection with the original issuance of such Equity Securities and
such conversion or exercise; provided, further, however, that no readjustment
pursuant to the preceding proviso, shall have the effect of decreasing the
Warrant Number (or decreasing the Exercise Price or the Base Purchase Price in
connection with any corresponding adjustment made under Section 9(k)) by an
amount in excess of the amount of the adjustment initially made in respect of
the issuance of such other Equity Securities (calculated by adjusting the amount
of such readjustment to account for all adjustments made to the Warrant Number
(and Exercise Price and Base Purchase Price) after the date of the initial
adjustment).
(c) Adjustments for Certain Dividends; Distributions. If the Company at any
time shall declare a dividend or fix a record date for the making of a
distribution to any holder of its Common Stock or other class of common equity
(including any such distribution to be made in connection with a consolidation
or merger in which the Company is to be the continuing corporation) of evidences
of its indebtedness or assets (excluding dividends paid in or distributions of
Company capital stock for which the Warrant Number shall have been adjusted
pursuant to subsection (a) of this Section 9 or dividends or distributions which
have been paid to the Holder pursuant to Section 10) the Warrant Number after
such record date shall be determined by multiplying the Warrant Number
immediately prior to such record date by a fraction, of which the denominator
shall be the Market Price per share of Common Stock on such record date, less
the fair market value (as determined in accordance with the Valuation Procedure)
of the portion of the assets or evidences of indebtedness to be distributed to a
holder of one share of Common Stock, and the numerator shall be such Market
Price per share of Common Stock on such record date. Such adjustment shall
become effective immediately after such record date. Such adjustment shall be
made whenever such a record date is fixed; and in the event that such
distribution is not so made, the number of Warrant Shares purchasable hereunder
shall again be adjusted to be the number that was in effect immediately prior to
such record date (taking into account intervening adjustments).
(d) Consideration Received. For purposes of any computation respecting
consideration received pursuant to subsections (b) and (c) of this Section 9,
the following shall apply:
(i) in the case of an issuance of shares of Common Stock for cash, the
consideration shall be the amount of such cash (without any deduction being
made for any commissions, discounts or other expenses incurred by the
Company for any underwriting of the issue or otherwise in connection
therewith);
(ii) in the case of the issuance of shares of Common Stock for a
consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to be the fair market value thereof (irrespective
of the accounting treatment thereof) as determined in accordance with the
Valuation Procedure; and
(iii)in the case of the issuance of other Equity Securities, the
aggregate consideration received therefor shall be deemed to be the
consideration received by the Company for the issuance of such securities
plus the additional minimum consideration, to be received by the Company
upon the conversion, exchange or exercise thereof (the consideration in
each case to be determined in the same manner as provided in clauses (i)
and (ii) of this subsection);
provided, however, any Additional Share issued in connection with any legal
and/or equitable claim that has been asserted, or could have been asserted, by
plaintiffs Robert P. Lehmann, M.D., Alan Baum, M.D., David A. Dewahl, Jr., John
Finlay, Janet G. Keats and Harry Near (collectively, "Plaintiffs") against the
Company (the "Claims") in the civil action pending before the United States
District Court for the Southern District of Texas, Houston Division, docketed at
Civil Action No. H-97-3317, or any other current or future legal or equitable
action which any Plaintiff has brought or might bring against the Company
regarding, relating to, or constituting any Claim, shall be deemed to have been
issued for a per share consideration equal to the quotient of (A) $700,000 less
any cash or other property (valued in accordance with (i) and (ii) above) which
is paid in connection with the settlement or other resolution of any Claim
divided by (B) the total number of Additional Shares issued in connection with
all such Claims.
(e) When De Minimis Adjustment Deferred. No adjustment in the Warrant
Number need be made unless the adjustment would require an increase or decrease
of at least one-tenth of one percent in the Warrant Number in effect immediately
prior to the event giving rise to a potential adjustment. Any adjustments that
are not made shall be carried forward and taken into account in any subsequent
adjustment, provided that no such adjustment shall be deferred beyond the date
on which a Warrant is exercised. All calculations under this Section 9 shall be
made to the nearest 1/10th of a share.
(f) Notice of Adjustment. In each case of any adjustment or readjustment in
the Warrant Number pursuant to Section 9, the Company at its expense will
promptly deliver a certificate of its Chief Financial Officer showing in detail
the computation of such adjustment or readjustment in accordance with the terms
of Section 9 and the facts upon which such adjustment or readjustment is based.
The Company shall also cause, upon request of the Requisite Holders, at its own
expense, independent certified public accountants of recognized national
standing (which may be the regular auditors of the Company) selected by the
Company to verify such computation and prepare a report setting forth such
adjustment or readjustment and showing in detail the method of calculation
thereof and the facts upon which such adjustment or readjustment is based. The
Company will forthwith (and in any event not later than 10 Business Days
following the occurrence of the event requiring such adjustment) furnish a copy
of each such report to each Holder of Warrants, and will, upon the written
request at any time of any such Holder, promptly furnish to such Holder a like
report setting forth (i) such adjustments and readjustments, (ii) the Warrant
Number then in effect and (iii) the number of shares of Common Stock and the
amount, if any, of other property which, as of the date of such report, would be
received upon the exercise of a Warrant. The Company will also keep copies of
all such reports at its principal office and will cause the same to be available
for inspection at such office during normal business hours by any holder or any
prospective purchaser of Warrants designated by any Holder of Warrants.
(g) Reorganizations. In case of any capital reorganization, other than in
the cases referred to in subsections 9(a), (b) or (c) hereof, or the
consolidation or merger of the Company with or into another Person (other than a
merger or consolidation in which the Company is the surviving entity and which
does not result in any reclassification of the outstanding shares of Common
Stock into shares of other stock or other securities or property), or the sale
of the property of the Company as an entirety or substantially as an entirety
other than in the cases referred to in Subsections 9(a), (b) or (c) hereof
(collectively, such actions being hereinafter referred to as "Reorganizations"),
there shall thereafter be deliverable upon exercise of any Warrant (in lieu of
the number of shares of Common Stock theretofore deliverable) the number of
shares of stock or other securities or property to which a holder, of the number
of shares of Common Stock that would otherwise have been deliverable upon the
exercise of such Warrant, would have been entitled upon such Reorganization if
such Warrant had been exercised in full immediately prior to such
Reorganization. In case of any Reorganization, appropriate adjustment, as
determined in good faith by the board of directors of the Company, whose
determination shall be described in a duly adopted resolution certified by the
Company's Secretary or Assistant Secretary, shall be made in the application of
the provisions herein set forth with respect to the rights and interests of
Holders so that the provisions set forth herein shall thereafter be applicable,
as nearly as possible, in relation to any shares or other property thereafter
deliverable upon exercise of Warrants. The Company shall not effect or permit
any such Reorganization unless (i) the successor entity resulting from such
Reorganization or the Person purchasing such assets is a corporation duly
organized and validly existing under the laws of a state of the United States
and (ii) prior to or simultaneously with the consummation of such Reorganization
the successor entity (if other than the Company) resulting from such
Reorganization or the Person purchasing such assets shall expressly assume, by a
supplemental Warrant Agreement or other acknowledgment executed and delivered to
the Holder(s) in form and substance satisfactory to the Requisite Holders, the
obligation to deliver to each such Holder such shares of stock, securities or
assets as, in accordance with the foregoing provisions, such Holder may be
entitled to purchase, and all other obligations and liabilities under this
Agreement.
(h) Form of Warrants. Irrespective of any adjustments in the number or kind
of shares purchasable upon the exercise of the Warrants, Warrants theretofore or
thereafter issued may continue to express the same price and number and kind of
shares as are stated in the Warrant Certificates initially issuable pursuant to
this Agreement.
(i) Adjustments in Other Securities. If as a result of any event or for any
other reason, any adjustment is made which increases the number of shares of
Common Stock issuable upon conversion, exercise or exchange of, or in the
conversion or exercise price or exchange ratio applicable to, any outstanding
Equity Securities, then a corresponding adjustment shall be made hereunder to
adjust the number of shares of Common Stock issuable upon exercise of the
Warrants, but only to the extent that no such adjustment has been made pursuant
to subsection 9(a), (b) or (c) with respect to such event or for such other
reason.
(j) Other Dilutive Events. If any corporate action shall occur as to which
the provisions of this Section 9 are not strictly applicable but as to which the
failure to make any adjustment would adversely affect the purchase rights or
value represented by the Warrants in accordance with the essential intent and
principles of this Section 9 then, in each such case, the Company shall appoint
a firm of independent certified public accountants of recognized national
standing (which may be the regular auditors of the Company) to give their
opinion upon the adjustment, if any, on a basis consistent with the essential
intent and principles established in this Section 9, necessary to preserve,
without dilution, the purchase rights represented by Warrants. Upon receipt of
such opinion, the Company will promptly mail a copy thereof to Holders and will
make the adjustments described therein.
(k) Exercise Price and Base Purchase Price Adjustment. Whenever the Warrant
Number is adjusted as herein provided, the Exercise Price payable upon exercise
of this Warrant and the Base Purchase Price shall each be adjusted by
multiplying such Exercise Price immediately prior to such adjustment and the
Base Purchase Price immediately prior to such adjustment by a fraction, of which
the numerator shall be the Warrant Number immediately prior to such adjustment,
and of which the denominator shall be the Warrant Number immediately thereafter.
(l) Dissolution, Liquidation or Winding Up. Notwithstanding any other
provision of this Agreement, in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Company, each Holder shall be
entitled to share, with respect to the Warrant Shares issuable upon exercise of
the Holder's Warrants, equally and ratably in any cash or non-cash distributions
payable to holders of Common Stock, less the aggregate Exercise Price payable
upon the exercise of such Warrants. The Company shall give notice to each Holder
at the earliest practicable time (and, in any event, not less than 20 days
before the date of such dissolution, liquidation or winding-up, as the case may
be) and each Holder of outstanding Warrants shall be entitled to share equally
and ratably in any cash or noncash distributions payable to holders of Common
Stock. In case of any such voluntary or involuntary dissolution, liquidation or
winding up of the Company, the Company shall hold in escrow any funds or other
property which a Holder is entitled to receive in respect of such Holder's
Warrant Shares at the time of any distribution. No such Holder will be entitled
to receive payment of any such distribution until such Holder has surrendered
the Warrant Certificates evidencing such Warrant to the Company. From and after
such voluntary or involuntary dissolution, liquidation or winding up with
respect to the Company, all rights of the Holders, except the right to receive
such distribution, without interest, upon the surrender of the Warrant
Certificates, shall cease and terminate and such Warrants shall not thereafter
be transferred (except with the consent of the Company) and such Warrants shall
not be deemed to be outstanding for any other purpose whatsoever. For the
purposes of this Agreement, neither the voluntary sale, lease, conveyance,
exchange or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all the property or assets of the
Company, nor the consolidation or merger of the Company with one or more other
corporations, shall be deemed to be a liquidation, dissolution or winding up,
voluntary or involuntary, with respect to the Company.
(m) Miscellaneous. In the event that at any time, as a result of an
adjustment made pursuant to this Section 9, the Holders shall become entitled to
purchase any securities of the Company other than, or in addition to, shares of
Common Stock, thereafter the number or amount of such other securities so
purchasable upon exercise of each Warrant shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Warrant Shares contained in this Section 9, and
the provisions of Sections 5, 6, 7 and 8 with respect to the Warrant Shares or
the Common Stock shall apply on like terms to any such other securities.
(n) Regulated Holders. If, in the written opinion of counsel to any
Regulated Holder (which may be internal counsel), the receipt by such Regulated
Holder of Warrant Shares (or any security included therein) upon any exercise or
exchange pursuant to this Section 9 or the receipt of any dividend or
distribution pursuant to Section 10 would cause such Regulated Holder to violate
any provision of Applicable Law with respect to its ownership of securities of
the Company, then the Company will use its best efforts (including using its
best efforts to cause its Organizational Documents to be amended) to create an
Equivalent Nonvoting Security with respect to Warrant Shares (or any such
security included therein) or any security received by such Regulated Holder in
connection with such dividend or distribution which would not cause the Holder
to violate any provision of Applicable Law, and such Regulated Holder shall be
entitled to receive upon such exercise or exchange or dividend or distribution,
in lieu of such number (as it shall specify) of shares or other units of Warrant
Shares (or any such security included therein) or other securities otherwise
receivable by such Regulated Holder, the same number of shares or other units of
such Equivalent Nonvoting Security; provided, however, that if the creation of
such Equivalent Nonvoting Security is determined by such Regulated Holder not to
remedy such violation of Applicable Law, the Company will take such other
actions that are reasonably requested by such Regulated Holder to remedy such
violation, including, without limitation, using its best efforts to sell such
Warrant Shares or other securities or property and remitting the proceeds of
such sale to such Regulated Holder.
(o) Additional Reduction of the Warrant Number Under Certain Circumstances.
In order to reduce the number of shares of Common Stock issuable upon exercise
of the Warrants by 25%, the Company shall have the option, which option shall be
exerciseable only during the twelve month period following the Second Closing
Date and shall be exercised by delivery of a written notice thereof to each
Holder within 30 days following the completion of the Cancellation Period, to
multiply the then-existing Warrant Number by 0.75 so long as: (w) the Second
Closing Date shall have occurred without any wavier by the Purchaser of any
conditions to the Second Closing, (x) the weighted average (on a volume basis)
of the closing price per share of Common Stock quoted on NASDAQ (as reported in
the Wall Street Journal) (or, if on any day such security is not quoted on the
NASDAQ System, the average of the highest bid and lowest asked prices on such
day in the domestic over-the-counter market as reported by the National
Quotation Bureau, Incorporated, or any similar successor organization) over a
period of not less than thirty (30) consecutive trading days (the "Cancellation
Period"), shall have equaled or exceeded $15.00 per share, (y) the average daily
trading volume for the Common Stock during the Cancellation Period above shall
have been greater than 100,000 shares and (z) all shares of Common Stock and
preferred stock of the Company issued pursuant to the terms of the Securities
Purchase Agreement (or which would be received upon the exercise or conversion
of any Securities (as defined in the Securities Purchase Agreement)) shall have
been and continue to be covered by an effective registration statement under the
1933 Act and freely tradeable for a minimum period of 30 days prior to the start
of the Cancellation Period and shall continue to be freely tradable during the
entire Cancellation Period.
SECTION 10.
PAYMENTS IN RESPECT OF DIVIDENDS AND DISTRIBUTIONS
If the Company pays any dividend or makes any distribution (whether in
cash, property or securities of the Company) on its capital stock (other than
with respect to any series of preferred stock of the Company), then the Company
shall simultaneously pay to each Holder of Warrants, other than to any Holder of
Warrants delivering a written notice to the Company within 10 Business Days of
the notice delivered to such Holder in connection with such dividend or
distribution pursuant to Section 14 hereof, an amount equal to the dividend or
distribution which would have been paid to such Holder on the Warrant Shares
receivable upon the exercise in full of such Warrant had such Warrant been fully
exercised immediately prior to the record date for such dividend or distribution
or, if no record is taken, the date as of which the record holders of shares of
Common Stock entitled to such dividend or distribution are to be determined;
provided however, that in the event the receipt by any Holder of any such asset
distribution would result in a violation of Applicable Law applicable to such
Holder, such Holder shall be entitled to receive an amount of cash in lieu of
such asset distribution equal to the value (determined in accordance with the
Valuation Procedure) of the asset distribution which would otherwise be received
by such Holder.
SECTION 11.
HOLDERS' PUT RIGHTS
11.1. Granting of Put, Put Option Purchase Price. Subject to the
limitations set forth in Section 11.5 hereof, at any time or from time to time
after the Put Effective Date but on or before the later of (x) the Expiration
Date and (y) the date 10 business days after the date on which there are no
limitations on the Company's obligation to purchase shares of Common Stock
pursuant to this Section 11.1 of the type described in Section 11.5, any Holder
of Warrants and/or Warrant Shares, upon written notice to the Company (a "Put
Notice"), shall be entitled to sell, and the Company shall be obligated to
purchase from such Holder, all or any portion of the Warrants and/or Warrant
Shares held by such Holder at the Put Option Purchase Price.
11.2. Put Notice. Each Put Notice delivered pursuant to Section 11.1 shall
specify:
(a) the name of the Holder of Warrants and/or Warrant Shares delivering
such Put Notice:
(b) that such Holder is exercising its option, pursuant to this Section 11,
to sell the Warrants and/or Warrant Shares held by such Holder; and
(c) the number of, and a description of, the Warrants and/or Warrant Shares
being tendered, including a statement, to the extent relevant, of:
(i) the number of Warrant Shares sought to be sold by such Holder that
were issued upon the exercise of any Warrant; and
(ii) the total number of Warrants and/or Warrant Shares sought to be
sold by such Holder that have not been exercised or canceled.
11.3. Company Notices.
(a) The Company, within thirty (30) days of receipt of such Put Notice,
shall deliver to the Holder or Holders exercising its or their put option
pursuant to this Section 11, a notice (i) specifying the Put Repurchase Date and
(ii) stating the type and number of the Warrants and/or Warrant Shares held by
each such other Holder.
(b) The Company, not less than ten (10) days prior to the Put Repurchase
Date, shall deliver to the Holder or Holders exercising its or their put option
pursuant to this Section 11, a notice containing a detailed calculation of the
Put Option Purchase Price with respect to the Warrants and/or Warrant Shares
which are to be so repurchased from such Holder.
11.4. Obligation to Purchase Warrant Shares. The Company shall be
obligated, subject to Section 11.5 hereof, to purchase all of such Holder's or
Holders' Warrants and/or Warrant Shares which are the subject of such Put
Notice, and shall pay the Put Option Purchase Price with respect to the exercise
of the put option which is the subject of each such Put Notice payable to such
Holder or Holders in cash, on the Put Repurchase Date with respect to such Put
Notice, against delivery by such Holder or Holders of any and all certificates
or other instruments evidencing the Warrants and/or Warrant Shares which are the
subject of such Put Notice, together with appropriate stock powers or other
instruments of transfer or assignment duly endorsed in blank.
11.5. Limitations on Right of Repurchase. Notwithstanding anything
contained in this Section 11 to the contrary, the Company shall not be obligated
to purchase Warrants and/or Warrant Shares which are the subject of a Put Notice
or be obligated to pay the Put Option Purchase Price in respect of a Put Notice,
if:
(a) at any time prior to the seventh anniversary of the Closing Date,
payment of the Put Option Purchase Price at such time would result in a
breach of, or default or event of default in respect of, the Credit
Agreement; or
(b) at any time, payment of the Put Option Purchase Price is, at such
time, prohibited by Applicable Law;
provided, however, with respect to (a) and (b) above, if such breach, event of
default, default or violation would not result from the purchase of any number
of Warrant Shares which is less than the total number of shares the Company is
obligated to purchase on the Put Repurchase Date, the Company shall purchase on
the Put Repurchase Date the maximum number of shares it may so purchase,
allocated among the Holders which have elected to have their Warrants and/or
Warrant Shares so repurchased ratably according to the number of Warrant Shares
so tendered; provided further, however, with respect to (a) and (b) above, the
Company shall use its best efforts to cure such default or violation in a timely
matter and remove any associated restrictions or limitations which are
applicable to the rights of the Holders contained in this Section 11.
SECTION 12.
VOTING RIGHTS
Each Holder of Warrants shall, whether or not such Holder shall have
exercised or exchanged any Warrants, (i) be entitled to vote (as a single class
with the holders of the Common Stock and any other holders of equity securities
entitled to vote as a single class with the holders of the Common Stock) on each
matter on which the holders of Common Stock shall be entitled to vote and (ii)
have, with respect to each Warrant held by such Holder on the applicable record
date for determining such voting rights, that number of votes which is equal to
the Warrant Number in effect on such date.
SECTION 13.
REPRESENTATIONS AND WARRANTIES
The Company hereby represents and warrants to the Holders that the
representations and warranties contained in the Securities Purchase Agreement
are incorporated herein by reference as representations and warranties to the
Holders as though specifically set forth in therein).
SECTION 14.
COVENANTS
(a) Notices of Certain Actions. In the event that the Company:
(i) shall have authorized the issuance of capital stock of the Company
or any Equity Securities or proposes to issue any capital stock of the
Company or any Equity Securities or proposes to commit itself to issue
capital stock of the Company or any Equity Securities, since the last
notice delivered pursuant to this Section 14(a)(i) or the date hereof,
whichever is later; or
(ii) shall authorize a dividend or other distribution of evidences of
its indebtedness, capital stock or Equity Securities, cash or other
property or assets to holders of any type of capital stock or Equity
Securities of the Company; or
(iii)proposes to become a party to any consolidation or merger for
which approval of any stockholders of the Company will be required, or to a
conveyance or transfer of the properties and assets of the Company
substantially as an entirety, or of any capital reorganization or
reclassification or change of any type of capital stock of the Company; or
(iv) commences a voluntary or involuntary dissolution, liquidation or
winding up; or
(v) proposes to register securities with the Commission; or
(vi) fails to comply with the provisions of this Agreement; or
(vii)proposes to take any other action which would require an
adjustment pursuant to Section 9;
then the Company shall provide a written notice to each Holder stating (i) the
terms and conditions of any such issuance (including price, the terms of the
offered securities and the proposed timing thereof), (ii) the date as of which
the holders of record of capital stock to be entitled to receive any such
rights, warrants or distribution are to be determined, (iii) the material terms
of any such consolidation or merger and the expected effective date thereof,
(iv) the material terms of any such conveyance or transfer, and the date on
which any such conveyance, transfer, dissolution, liquidation or winding up is
expected to become effective or consummated, and the date as of which it is
expected that holders of record of capital stock will be entitled to exchange
their shares for securities or other property, if any, deliverable upon such
reclassification, conveyance, transfer, dissolution, liquidation or winding up,
(v) the material terms of any such public offering (including a copy of any
prospectus, registration statement or offering statement) and the expected
effective date thereof, (vi) the nature of the lack of compliance, any
corrective action taken and any rights or remedies which such lack of compliance
has bestowed on the Holders or (vii) a notice as is required by Section 9(g).
Such notice shall be given not later than 10 Business Days prior to the
effective date (or the applicable record date, if earlier) of such event (and
the Company shall promptly provide amendments, and/or supplements to any such
notice to the extent necessary to keep all of the information contained in any
such notice (and each amendment or supplement thereto) true and correct in all
respects).
(b) Certain Restrictions. The Company will not without the consent of the
Requisite Holders, take any action, corporate or otherwise, the effect of which
would be to alter, impair or affect adversely either the rights of the Holders
or the duties and obligations of the Company under the Warrant Documents.
(c) Specific Performance. Each Holder shall have the right to specific
performance by the Company of the provisions of this Agreement, in addition to
any other remedies it may have at law or in equity. The Company hereby
irrevocably waives, to the extent that it may do so under Applicable Law, any
defense based on the adequacy of a remedy at law which may be asserted as a bar
to the remedy of specific performance in any action brought against the Company
for specific performance of this Agreement by any Holder of the Warrants or
Warrant Shares.
SECTION 15.
AMENDMENTS AND WAIVERS
(a) Consent of Holders. No amendment, modification, termination or waiver
of any provision of this Agreement and the Warrant Certificates or consent to
any departure by the Company therefrom, shall in any event be effective without
the written concurrence of the Requisite Holders; provided, however, that
without the consent of each Holder affected, no amendment, modification,
termination or waiver may:
(i) make any change to the definition of "Requisite Holders";
(ii) make any change to the transfer provisions of Section 16 that
adversely affects the ability of a Holder to make any transfer described
therein;
(iii)make any change in the foregoing amendment and waiver provisions;
or
(iv) make any change to Section 11 hereof and the definitions relating
thereto (insofar as such definitions relate to Section 11).
After an amendment, modification, termination or waiver under this Section
15 becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing such amendment, modification, termination or waiver.
Any failure of the Company to mail such notice, or any defect therein, shall
not, however, in any way impair or affect the validity of any such amendment,
modification, termination or waiver.
In connection with any amendment, modification, termination or waiver under
this Section 15, the Company may offer, but shall not be obligated to offer, to
any Holder who consents to such amendment, modification, termination or waiver,
consideration for such Holder's consent, so long as such consideration is
offered to all Holders.
(b) Solicitation of Holders. The Company will not effect any proposed
amendment, modification, termination or waiver of any of the provisions of this
Agreement or the Warrant Certificates unless each Holder (irrespective of the
amount of Warrants or Warrant Shares then owned by it) shall be informed thereof
by the Company prior to the effectuation thereof (but only to the extent the
Company has been provided with addresses for the Holders) and shall be afforded
the opportunity of considering the same and shall be supplied by the Company
with information which is sufficient in the Company's reasonable discretion to
enable such Holder to make an informed decision with respect thereto. Executed
or true and correct copies of any amendment, modification, termination or waiver
effected pursuant to the provisions of this Section 15 shall be delivered by the
Company to each Holder of outstanding Warrants or Warrant Shares forthwith
following the date on which the same shall have been executed and delivered by
the Holder or Holders of the requisite percentage of outstanding Warrant Shares
(but only to the extent the Company has been provided with the addresses for the
Holders).
(c) Revocation and Effect of Consents. Until an amendment, modification,
termination or waiver becomes effective, a consent to it by a Holder is a
continuing consent by the Holder and every subsequent Holder of a Warrant or
Warrant Shares, even if notation of the consent is not made on any Warrant
Certificate or stock certificate. However, any such Holder or subsequent Holder
may revoke any such consent by notice to the Company received before the date on
which the Requisite Holders have consented (and not theretofore revoked such
consent) to such amendment, modification, termination or waiver.
The Company may, but shall not be obligated to, fix a record date for the
purpose of determining the Holders entitled to consent to any amendment,
modification, termination or waiver, which record date shall be at least 10 days
prior to the first solicitation of such consent. If a record date is fixed, then
notwithstanding the last sentence of the immediately preceding paragraph, those
Persons who were Holders at such record date (or their duly designated proxies),
and only those Persons, shall be entitled to revoke any consent previously
given, whether or not such Persons continue to be Holders after such record
date. No such consent shall be valid or effective for more than 90 days after
such record date.
SECTION 16.
TRANSFERS
(a) Each Holder, subject to the provisions of subsection 16(c) below, shall
be permitted to transfer any Warrant or Warrant Share (and the rights relating
thereto under this Agreement and the other Warrant Documents) to any Permitted
Transferee.
(b) In addition to the rights of transfer under Section 16(a), each Holder,
subject to the provisions of subsection 16(c) below, shall be permitted to
transfer any Warrant or Warrant Share (and the rights relating thereto under
this Agreement and the other Warrant Documents) to any other Person; provided
that:
(i) such transfer is made pursuant to a registration statement under
the 1933 Act (it being acknowledged that the Company shall not be obligated
to assist in any manner in any such registration) or pursuant to an
exemption from the registration requirements of the 1933 Act;
(ii) if such transfer is being made pursuant to an exemption from such
registration requirements and if requested by the Company, counsel for such
Holder (which counsel may be internal counsel) furnishes to the Company an
opinion to the effect that such transfer is being made pursuant such an
exemption;
(iii)the applicable transferee (or, in the case of an account manager,
the managed account on behalf of which the account manager is acting) is an
"accredited investor" as defined in Regulation D promulgated under the 1933
Act; and
(iv) such transferee represents to the Company in writing that it is
acquiring such Warrant or Warrant Share solely for its own account (or in
the case of account managers, on behalf of managed accounts) and not as
nominee or agent for any other Person (other than for such managed
accounts, if applicable) and not with a view to, or for offer or sale in
connection with, any distribution thereof (within the meaning of the 1933
Act) that would be in violation of the securities laws of the United States
of America or any state thereof, without prejudice, however, to its right
at all times to sell or otherwise dispose of all or any part of said
Warrant or Warrant Shares pursuant to a registration statement under the
1933 Act or pursuant to an exemption from the registration requirements of
the 1933 Act, and subject, nevertheless, to the disposition of its property
being at all times within its control.
(c) The Company shall promptly register the transfer of any outstanding
Warrants in the Warrant register and any outstanding Warrant Shares in a Common
Stock register to be maintained by the Company upon surrender thereof
accompanied by a written instrument or instruments of transfer in form
satisfactory to the Company, duly executed by the registered Holder or Holders
thereof or by the duly appointed legal representative thereof or by a duly
authorized attorney. Upon any such registration of transfer, a new Warrant or
Warrant Share, as the case may be, shall be issued and delivered with all
reasonable dispatch to the transferee(s) and such transferee(s) shall be deemed
to have become the Holder(s) of record of such Warrant or Warrant Share, as the
case may be, and the surrendered Warrant or Warrant Share, as the case may be,
shall be canceled and disposed of by the Company.
SECTION 17.
MISCELLANEOUS
(a) Notices. Unless otherwise specifically provided herein, any notice or
other communication herein required or permitted to be given shall be in writing
and shall be made by personal service, telecopy, United States mail or reputable
courier service:
(i) if to the Purchaser or subsequent Holder, at the address or
telecopy number set forth on the signature pages to this Agreement, or such
other address as shall be designated in a written notice delivered to the
Company; and
(ii) if to the Company, at the address or telecopy number set forth on
the signature pages to this Agreement, or such other address as shall be
designated in a written notice delivered to the other parties hereto.
Unless otherwise specifically provided herein, any notice or other
communication shall be deemed to have been given when delivered in person or by
courier service, upon receipt of telecopy, or three Business Days after
depositing it in the United States mail with postage prepaid and properly
addressed.
(b) Failure or Indulgence Not Waiver: Remedies Cumulative. No failure or
delay on the part of any Holder in the exercise of any power, right or privilege
hereunder or under any other Warrant Document shall impair such power, right or
privilege or be construed to be a waiver of any default or acquiescence therein,
nor shall any single or partial exercise of any such power, right or privilege
preclude other or further exercise thereof or of any other power, right or
privilege. All rights and remedies existing under this Agreement and the other
Warrant Documents are cumulative to, and not exclusive of, any rights or
remedies otherwise available.
(c) Severability. In case any provision in or obligation under this
Agreement or the Warrant Certificates shall be invalid, illegal or unenforceable
in any jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
(d) Headings. Section and subsection headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose or be given any substantive effect.
(e) Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
(f) Successors and Assigns. This Agreement shall be binding on the parties
hereto and their respective successors and assigns and shall insure to the
benefit of the parties hereto and the successors and assigns and Permitted
Transferees of the Purchaser (including each Holder and its successors and
assigns and Permitted Transferees).
(g) Counterparts. This Agreement and any amendments, waivers, consents or
supplements hereto or in connection herewith may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
(h) Survival of Representation and Warranties, Entire Agreement. All
representations and warranties contained herein or made in writing or on behalf
of the Company in connection herewith shall survive the execution and delivery
of this Agreement and the Warrant Shares and the transfer by the Purchaser of
any Warrant Shares or any portion thereof on interest therein, and may be relied
upon by the Purchaser regardless of any investigation made at any time by or on
behalf of any Purchaser. This Agreement, the Warrant Certificates and the
Securities Purchase Agreement embody the entire agreement and understanding
between the parties hereto and supersede all prior agreements and
understandings, if any, relating to the subject matter hereof.
* * * * *
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers thereunto duly authorized as of the
day and year first above written.
Notice Address: BMJ MEDICAL MANAGEMENT, INC.
BMJ Medical Management, Inc.
4800 N. Federal Highway
Suite 101-E By__________________________
Boca Raton, Florida 33432 Name:
Attention: David H. Fater, Title:
Executive Vice President and
Chief Financial Officer
Telephone: (561) 391-1311
Telecopier: (561) 391-1389
With a copy to:
Jones, Day, Reavis & Pogue
901 Lakeside Avenue
Cleveland, Ohio 44114
Attention: Chares W. Hardin, Jr.
Telephone: (216) 586-7276
Telecopier: (216) 579-0212
Notice Address: PARIBAS PRINCIPAL INCORPORATED
Paribas Principal Incorporated
The Equitable Tower By__________________________
787 Seventh Avenue Name:
New York, New York 10019 Title:
Tel: (212) 841-2047
Fax: (212) 841-2502
Attention: Eric Toizer
with a copy to:
White & Case LLP
1155 Avenue of the Americas
New York, New York 10036
Tel: (212) 819-8200
Fax: (212) 254-8113
Attention: John M. Reiss, Esq.
<PAGE>
Schedule I
Existing Equity Securities
<PAGE>
Schedule II
Existing Commitments to Issue Common Stock
BMJ MEDICAL MANAGEMENT, INC.
_________________________________________
CERTIFICATE OF DESIGNATION
Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
_________________________________________
Series A Convertible Preferred Stock
_________________________________________
The undersigned, Neil F. Luria, Secretary of BMJ Medical Management, Inc.,
a Delaware corporation (the "Corporation"), does hereby certify that the
following resolution has been duly adopted by the Board of Directors of the
Corporation (the "Board of Directors"):
RESOLVED, that pursuant to the authority expressly granted to and vested in
the Board of Directors by the provisions of the Amended and Restated Certificate
of Incorporation of the Corporation (the "Certificate of Incorporation"), there
hereby is created, out of the shares of Preferred Stock of the Corporation
authorized in Article IV of the Certificate of Incorporation (the "Preferred
Stock"), a series of the Preferred Stock consisting of 1,473,684 shares, par
value $0.01 per share, which series shall have the following powers,
designations, preferences and relative, participating, optional and other
rights, and the following qualifications, limitations and restrictions (in
addition to the powers, designations, preferences and relative, participating,
optional and other rights, and the qualifications, limitations and restrictions,
set forth in the Certificate of Incorporation which are applicable to the
Preferred Stock generally):
1. Designation and Amount; Ranking.
(a) This series of Preferred Stock shall be designated as the Series A
Convertible Preferred Stock (the "Convertible Preferred Stock"), and the
authorized number of shares constituting such series shall be 1,473,684, par
value $0.01 per share. The price and liquidation preference of shares of
Convertible Preferred Stock shall be $4.75 per share (the "Liquidation Value").
(b) The shares of Convertible Preferred Stock shall rank senior to each
other series of Preferred Stock and to all other classes of equity securities of
the Corporation as to the payment of dividends and the distribution of assets
upon a liquidation, dissolution or winding up of the Corporation.
2. Dividends.
(a) Beginning on the date of issuance of the Convertible Preferred Stock
(the "Issue Date"), each holder of outstanding Convertible Preferred Stock shall
be entitled to receive, out of the assets of the Corporation legally available
therefor, dividends ("Dividends") on each share of Convertible Preferred Stock
held by such holder at a per annum rate of six percent (6%) (as the same may be
adjusted pursuant to Section 7(k), the "Dividend Rate") on the sum of (A) the
Liquidation Value of each share of Convertible Preferred Stock held by such
holder plus (B) any and all accrued but theretofore unpaid Dividends
(collectively, the "Preference Amount"). From and after the Issue Date, all
Dividends shall be cumulative, whether or not earned or declared, and shall be
payable quarterly in arrears on the first Business Day of each January, April,
July and October of each year (each a "Dividend Payment Date") commencing on the
first Dividend Payment Date after the Issue Date (excluding the first Business
Day of July 1998); provided, with respect to any Dividend Payment Date, the
Board of Directors may irrevocably elect not to pay cash Dividends on the
Convertible Preferred Stock, in which case, the amount of any such unpaid
Dividends shall be a dividend arrearage to which the Dividend Rate shall apply
for purposes of determining the amount of Dividends accruing after such Dividend
Payment (i.e., such amount shall be added to the Preference Amount in effect
immediately prior to such Dividend Payment Date). Dividends which are declared
and paid in full in cash shall not accumulate. The Board of Directors may fix in
advance a record date for the determination of holders of shares of Convertible
Preferred Stock entitled to receive payment of a dividend thereon, which record
date shall be no more than thirty (30) days nor less than ten (10) days prior to
the date fixed for the payment thereof.
(b) All Dividends paid with respect to shares of Convertible Preferred
Stock pursuant to paragraph 2(a) above shall be paid pro rata to the holders
entitled thereto.
(c) Dividends payable on the Convertible Preferred Stock for any period
less than a year shall be computed on the basis of a 360-day year and the actual
number of days elapsed in the period for which payable.
3. Liquidation Rights.
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Corporation (a "Liquidation"), the holders of
Convertible Preferred Stock shall be entitled to receive, out of the remaining
assets of the Corporation available for distribution to its stockholders, with
respect to each share of Convertible Preferred Stock held by such holder, an
amount of cash equal to the greater of (x) the then Preference Amount and (y)
the amount that such holder would have been entitled to receive in such
Liquidation if such share of Convertible Preferred Stock had been converted into
Common Stock immediately prior to such Liquidation (the greater of (x) and (y)
the "Adjusted Preference Amount") before any payment or distribution of any type
may be made to the holders of Junior Stock. If upon any Liquidation, the assets
of the Corporation available for distribution to the holders of the Convertible
Preferred Stock shall be insufficient to pay such holders the full Adjusted
Preference Amount, the assets of the Corporation available for distribution to
the holders of Convertible Preferred Stock shall be distributed to such holders
who shall share pro rata in such distribution in accordance with the number of
shares of Convertible Preferred Stock held by such holders.
4. Conversion Rights. The holder of any shares of Convertible Preferred Stock
shall have conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each issued and outstanding share of Convertible
Preferred Stock shall be convertible, without the payment of any additional
consideration by the holder thereof and at the option of the holder thereof, at
any time after the date of issuance of such share, upon exercise in accordance
with Section 4(b) into that number of fully paid and non-assessable shares of
Common Stock (excluding fractional shares which shall be rounded to the nearest
full share) as is determined by dividing the Preference Amount of such share by
the Conversion Price, determined as hereinafter provided, in effect at the time
of such conversion. The conversion price at which shares of Common Stock shall
be deliverable upon conversion of Convertible Preferred Stock without the
payment of any additional consideration by the holder thereof (the "Conversion
Price") shall initially be equal to $4.75. Such initial Conversion Price shall
be subject to adjustment, in order to adjust the number of shares of Common
Stock into which the Convertible Preferred Stock is convertible, as hereinafter
provided.
(b) Mechanics of Conversion. Before any holder of Convertible Preferred
Stock shall be entitled to convert the same into shares of Common Stock, he
shall surrender the certificate or certificates therefor, duly endorsed, at the
principal executive office of the Corporation or of any transfer agent for the
Convertible Preferred Stock, and shall give written notice (a "Conversion
Demand") to the Corporation at such principal executive office that he elects to
convert the same and shall state therein his name or the name or names of his
nominees in which he wishes the certificate or certificates for shares of Common
Stock to be issued, the number of shares to be converted and the date (the
"Conversion Date") of such conversion which shall be a Business Day. The
Corporation shall, as soon as practicable thereafter, issue and deliver at such
principal executive office to such holder of such Convertible Preferred Stock,
or to his nominee or nominees, a certificate or certificates for the number of
shares of Common Stock to which he shall be entitled as aforesaid and a
certificate or certificates for such Convertible Preferred Stock as were
represented by the certificates surrendered and not converted. Such conversion
shall be deemed to have been made immediately prior to the close of business on
the Conversion Date and the person or persons entitled to receive the shares of
Common Stock issuable upon conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock on such date.
(c) Adjustments to the Conversion Price and the Base Purchase Price for
Diluting Issues:
(i) No Adjustment of the Conversion Price and the Base Purchase Price. No
adjustment in either the number of shares of Common Stock into which the
Convertible Preferred Stock is convertible or the Base Purchase Price shall be
made pursuant to Section 4(c)(iv) hereof, by adjustment of the Conversion Price
and Base Purchase Price in respect of the issuance of Additional Shares of
Common Stock, unless the consideration paid per share (or deemed to be paid) for
an Additional Share of Common Stock issued or deemed to be issued by the
Corporation is less than the higher of (x) the Fair Market Value per share of
Common Stock and (y) the Base Purchase Price in effect immediately prior to the
issuance of such Additional Shares (the higher of (x) and (y) being hereinafter
referred to as the "Adjustment Price").
(ii) Issue of Options and Convertible Securities Deemed Issue of Additional
Shares of Common Stock. In the event the Corporation at any time or from time to
time after the Issue Date shall issue or sell any Options or Convertible
Securities (other than (w) Performance Warrants (as defined in the Securities
Purchase Agreement), (x) shares of Preferred Stock issued to Paribas Principal
Incorporated or its designee in connection with the Second Closing, (y) shares
of Series B Preferred Stock or (z) shares of Convertible Preferred Stock issued
pursuant to Section 8.13 of the Securities Purchase Agreement) or shall fix a
record date for the determination of holders of any class of securities entitled
to receive any such Options or Convertible Securities, then the maximum number
of shares (as set forth in the instrument relating thereto without regard to any
provisions contained therein for a subsequent adjustment of such number) of
Common Stock issuable upon the exercise of such Options or, in the case of
Convertible Securities and Options therefor, issuable upon the conversion or
exchange of such Convertible Securities, shall be deemed to be Additional Shares
of Common Stock issued as of the time of such issue or, in case such a record
date shall have been fixed, as of the close of business on such record date;
provided, however, that in the case of the Registration Warrants (as defined in
the Securities Purchase Agreement) the Additional Shares of Common Stock
issuable upon the exercise of such Warrants will not be deemed issued until such
time as such Warrants are no longer subject to cancellation pursuant to Section
8.14 of the Securities Purchase Agreement; provided, further, however, that in
any such case in which Additional Shares of Common Stock are deemed to be
issued:
(1) other than adjustments made in connection with a conversion of
shares of Series B Preferred Stock into Common Stock, no further adjustment
in the Conversion Price or Base Purchase Price shall be made upon any
subsequent issue of Convertible Securities or shares of Common Stock
issuable upon the exercise of such Options or conversion or exchange of
such Convertible Securities;
(2) if such Options or Convertible Securities by their terms provide,
with the passage of' time or otherwise, for any increase in the
consideration payable to the Corporation, or a decrease in the number of
shares of Common Stock issuable, upon the exercise, conversion or exchange
thereof, the Conversion Price and Base Purchase Price computed upon the
original issue thereof (or upon the occurrence of a record date with
respect thereto), and any subsequent adjustments based thereon, shall, upon
any such increase or decrease becoming effective, be recomputed to reflect
such increase or decrease insofar as it affects such Options or the rights
of conversion or exchange under such Convertible Securities;
(3) upon the expiration of any such Options or any rights of
conversion or exchange under such Convertible Securities which shall not
have been exercised, the Conversion Price and Base Purchase Price computed
upon the original issue thereof (or upon the occurrence of a record date
with respect thereto), and any subsequent adjustments based thereon, shall,
upon such expiration, be recomputed as if:
(x) in the case of Convertible Securities or Options for Common
Stock the only Additional Shares of Common Stock issued were the
shares of Common Stock, if any, actually issued upon the exercise of
such Options or the conversion or exchange of such Convertible
Securities and the consideration received therefor was the
consideration actually received by the Corporation for the issue of
all such Options, whether or not exercised, plus the consideration
actually received by the Corporation upon such exercise, or for the
issue of all such Convertible Securities which were actually converted
or exchanged, plus the additional consideration, if any, actually
received by the Corporation upon such conversion or exchange; and
(y) in the case of Options for Convertible Securities only the
Convertible Securities, if any, actually issued upon the exercise
thereof were issued at the time of issue of such Options, and the
consideration received by the Corporation for the Additional Shares of
Common Stock deemed to have been then issued was the consideration
actually received by the Corporation for the issue of all such
Options, whether or not exercised, plus the consideration deemed to
have been received by the Corporation (determined pursuant to Section
4(c)(v)) upon the issue of the Convertible Securities with respect to
which such Options were actually exercised;
(4) (a) no readjustment pursuant to clause (2) or (3) above shall have
the effect of increasing the Conversion Price to an amount which exceeds
the lower of (x) the Conversion Price on the original adjustment date, or
(y) the Conversion Price that would have resulted from any issuance of
Additional Shares of Common Stock between the original adjustment date and
such readjustment date without taking into account the adjustment of the
Conversion Price based upon the issuance of Options or Convertible
Securities which required such initial adjustment;
(b) no readjustment pursuant to clause (2) or (3) above shall have the
effect of increasing the Base Purchase Price to an amount which exceeds the
lower of (x) the Base Purchase Price on the original adjustment date, or
(y) the Base Purchase Price that would have resulted from any issuance of
Additional Shares of Common Stock between the original adjustment date and
such readjustment date without taking into account the adjustment of the
Base Purchase Price based upon the issuance of Options or Convertible
Securities which required such initial adjustment;
(5) in the case of any Options which expire by their terms not more
than thirty (30) days after the date of issue thereof, no adjustment of the
Conversion Price and Base Purchase Price shall be made until the expiration
or exercise of all such Options, whereupon such adjustment shall be made in
the same manner provided in clause (3) above; and
(6) if such record date shall have been fixed and such Options or
Convertible Securities are not issued on the date fixed therefor, the
adjustment previously made in the Conversion Price and the Base Purchase
Price which became effective on such record date shall be canceled as of
the close of business on such record date, and thereafter the Conversion
Price and Base Purchase Price shall be adjusted pursuant to this Section
4(c)(ii) as of the actual date of their issuance.
(iii) Stock Dividends, Stock and Subdivisions. In the event the Corporation
any time or from time to time after the Issue Date shall declare or pay a
dividend or make any other distribution on the Common Stock payable in Common
Stock, or effect a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in Common Stock),
then and in any such event, Additional Shares of Common Stock shall be deemed to
have been issued:
(A) in the case of any such dividend or distribution, immediately
after the close of business on the record date for the determination of
holders of any class of securities entitled to receive such dividend or
distribution, or
(B) in the case of any such subdivision, at the close of business on
the date immediately prior to the date upon which such corporate action
becomes effective.
If such record date shall have been fixed and such dividend shall not have been
fully paid on the date fixed therefor, the adjustment previously made in the
Conversion Price and Base Purchase Price which became effective on such record
date shall be canceled as of the close of business on such record date, and
thereafter the Conversion Price and Base Purchase Price shall be adjusted
pursuant to this Section 4(c)(iii) as of the time of actual payment of such
dividend.
(iv) Adjustment of the Conversion Price and Base Purchase Price Upon
Issuance of Additional Shares of Common Stock. (A) In the event the Corporation
at any time or from time to time after the Issue Date shall issue or sell
Additional Shares of Common Stock (including, without limitation, Additional
Shares of Common Stock deemed to be issued pursuant to Section 4(c)(ii) and
shares of Common Stock issued upon the conversion of any shares of Series B
Preferred Stock, but excluding Additional Shares of Common Stock deemed to be
issued pursuant to Section 4(c)(iii), which event is dealt with in Section
4(c)(vi)), without consideration or for a consideration per share less than the
Adjustment Price, then and in such event, the Conversion Price in effect
immediately prior to such issuance and Base Purchase Price in effect immediately
prior to such issuance shall each be reduced, concurrently with such issue in
order to increase the number of shares of Common Stock into which the
Convertible Preferred Stock is convertible, to a price (calculated to the
nearest cent) determined by multiplying (i) in the case of the Conversion Price,
the Conversion Price in effect immediately prior to such issuance by a fraction
(x) the numerator of which shall be the sum of (1) the number of shares of
Common Stock outstanding immediately prior to such issuance (exclusive of any
treasury shares) plus (2) the number of shares of Common Stock which the
aggregate consideration received by the Corporation for the total number of
Additional Shares of Common Stock so issued would purchase at the Adjustment
Price and (y) the denominator of which shall be the sum of (1) the number of
shares of Common Stock outstanding immediately prior to such issuance (exclusive
of treasury shares), plus (2) the number of such Additional Shares of Common
Stock so issued and (ii) in the case of the Base Purchase Price, the Base
Purchase Price in effect immediately prior to such issuance by a fraction (x)
the numerator of which shall be the sum of (1) the number of shares of Common
Stock outstanding immediately prior to such issuance (exclusive of any treasury
shares) plus (2) the number of shares of Common Stock which the aggregate
consideration received by the Corporation for the total number of Additional
Shares of Common Stock so issued would purchase at the Adjustment Price and (y)
the denominator of which shall be the sum of (1) the number of shares of Common
Stock outstanding immediately prior to such issuance (exclusive of treasury
shares), plus (2) the number of such Additional Shares of Common Stock so
issued.
(B) Notwithstanding anything to the contrary contained in (A) above, in the
event the Corporation issues more than an aggregate (taking into account all
such issuances after the Issue Date) of $3,000,000 (determined at the time of
issuance by reference to the Fair Market Value of such Additional Shares of
Common Stock so issued and not the amount of consideration received by the
Corporation in respect of such issuances) of Additional Shares of Common Stock
(including all Additional Shares of Common Stock deemed to be issued pursuant to
Section 4(c)(ii) except any Additional Shares of Common Stock deemed issued
pursuant to Section 4(c)(ii) in connection with the issuance of any Registration
Warrants (as defined in the Securities Purchase Agreement) or the issuance of
Warrants pursuant to Section 7(k)), without consideration or for a consideration
per share less than the Base Purchase Price in effect immediately prior to such
issuance, the Conversion Price and the Base Purchase Price shall not be adjusted
as provided in (A) above, but rather, the Conversion Price then in effect and
the Base Purchase Price then in effect shall each be adjusted, upon each
subsequent issuance (or deemed issuance) of Additional Shares (except Additional
Shares of Common Stock deemed issued pursuant to Section 4(c)(ii) in connection
with the issuance of any Registration Warrants (as defined in the Securities
Purchase Agreement) or the issuance of Warrants pursuant to Section 7(k)) below
the Base Purchase Price occurring thereafter, by decreasing (but not increasing)
such amounts to an amount equal to the quotient of (x) the amount of
consideration received or deemed received by the Corporation in respect of any
such issuance of Additional Shares of Common Stock below the then Base Purchase
Price divided by (y) the number of Additional Shares of Common Stock so issued;
provided, however, notwithstanding anything to the contrary contained in this
clause (B), in the event the "Purchaser" (as defined in the Securities Purchase
Agreement) shall have exercised the preemptive rights provided for in Section
8.11 of the Securities Purchase Agreement in connection with an issuance of
Additional Shares below the Base Purchase Price then in effect, the
"full-ratchet" anti-dilution protection otherwise provided in this clause (B)
shall not apply with respect to such issuance of Additional Shares of Common
Stock (i.e., the anti-dilution protection provided for in Section 4(c)(iv)(A)
shall apply to such issuance and the Fair Market Value of the Additional Shares
of Common Stock shall not count toward the $3,000,000 threshold described
above).
(v) Determination of Consideration. For purposes of this Section 4(c), the
consideration received by the Corporation for the issue of any Additional Shares
of Common Stock, or in the case of a dividend, the amount received by the
holders of capital stock of the Corporation, shall be computed as follows:
(A) Cash and Property. Such consideration or amount shall:
(1) insofar as it consists of cash be computed at the aggregate
amount of cash received (or distributed, in the case of a dividend) by
the Corporation;
(2) insofar as it consists of property other than cash, be
computed at the fair value thereof at the time of such issue, (or
distribution in the case of a dividend) as determined pursuant to the
Valuation Procedure; and
(3) in the event Additional Shares of Common Stock are issued
(or, in the case of a dividend, distributed) together with other
shares or securities or other assets of the Corporation for
consideration which covers (or in a distribution which contains) both,
be the proportion, as determined pursuant to the Valuation Procedure
of such consideration so received (or amounts to be distributed, as
the case may be), computed as provided in clauses (1) and (2) above.
; provided, however, any Additional Share issued in connection with any legal
and/or equitable claim that has been asserted, or could have been asserted, by
plaintiffs Robert P. Lehmann, M.D., Alan Baum, M.D., David A. Dewahl, Jr., John
Finlay, Janet G. Keats and Harry Near (collectively, "Plaintiffs") against the
Corporation (the "Claims") in the civil action pending before the United States
District Court for the Southern District of Texas, Houston Division, docketed at
Civil Action No. H-97-3317, and any other current or future legal or equitable
action of any sort whatsoever which any Plaintiff has brought or might bring
against the Corporation regarding, relating to, or constituting any Claim, shall
be deemed to have been issued for a per share consideration equal to the
quotient of (A) $700,000 less any cash or other property (valued in accordance
with (1) and (2) above) which is paid in connection with the settlement or other
resolution of any Claim divided by (B) the total number of Additional Shares
issued in connection with all such Claims.
(B) Options and Convertible Securities. The consideration per share
received by the Corporation for Additional Shares of Common Stock deemed to
have been issued pursuant to Section 4(c)(ii), relating to Options and
Convertible Securities, shall be determined by dividing:
(1) the total amount, if any, received or receivable by the
Corporation as consideration for the issue of such Options or
Convertible Securities, plus the minimum aggregate amount of
additional consideration (as set forth in the instruments relating
thereto, without regard to any provision contained therein for a
subsequent adjustment of such consideration) payable to the
Corporation upon the exercise of such Options or the conversion or
exchange of such Convertible Securities, or in the case of Options for
Convertible Securities, the exercise of such Options for Convertible
Securities and the conversion or exchange of such Convertible
Securities, by
(2) the maximum number of shares of Common Stock (as set forth in
the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number) issuable
upon the exercise of such Options or the conversion or exchange of
such Convertible Securities.
(vi) Adjustment for Dividends, Distributions, Subdivisions, Combinations or
Consolidation of Common Stock.
(A) Stock Dividends, Distributions or Subdivisions. In the event the
Corporation shall issue at any time or from time to time and after the
Issue Date Additional Shares of Common Stock pursuant to Section 4(c)(iii)
in a stock dividend, stock distribution or subdivision, the Conversion
Price in effect immediately prior to such stock dividend, stock
distribution or subdivision and the Base Purchase Price in effect
immediately prior to such stock dividend, stock distribution or subdivision
shall each, concurrently with the effectiveness of such stock dividend,
stock distribution or subdivision, be proportionately decreased.
(B) Combinations or Consolidations. In the event the outstanding
shares of Common Stock shall at any time or from time to time from and
after the Issue Date be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, the Conversion
Price in effect immediately prior to such combination or consolidation and
the Base Purchase Price in effect immediately prior to such combination or
consolidation shall, concurrently with the effectiveness of such
combination or consolidation, be proportionately increased.
(vii) Adjustment for Merger or Reorganization, etc. In case of any
consolidation or merger of the Corporation with or into another corporation or
the conveyance of all or substantially all of the assets of the Corporation or
the Corporation and its subsidiaries taken as a whole to another corporation, in
each case, occurring after the Issue Date (a "Transaction"), as a condition to
the consummation of such Transaction, lawful and adequate provisions shall be
made so that each share of the Convertible Preferred Stock shall thereafter be
convertible into the number of shares of stock or other securities or property
to which a holder of the number of shares of Common Stock deliverable upon
conversion of such Convertible Preferred Stock would have been entitled upon
such consolidation, merger or conveyance; and, in any such case, appropriate
adjustment (as determined by the Board of Directors) shall be made in the
application of the provisions herein set forth with respect to the rights and
interest thereafter of the holders of the Convertible Preferred Stock, to the
end that the provisions set forth herein (including provisions with respect to
changes in and other adjustments of, the Conversion Price) shall thereafter be
applicable, as nearly as reasonably may be, in relation to any shares of stock
or other property thereafter deliverable upon the conversion of the Convertible
Preferred Stock; provided that nothing herein is intended to increase or
decrease the rights of the holders of the Convertible Preferred Stock set forth
in this Certificate of Designation. Notwithstanding anything contained herein to
the contrary, the Corporation shall not effect any such Transaction unless prior
to the consummation thereof each corporation or entity (other than the
Corporation) that may be required to deliver any securities, cash or other
property upon the conversion of shares of Convertible Preferred Stock as
provided herein shall assume, by written instrument delivered to, and reasonably
satisfactory to holders of shares of Convertible Preferred Stock representing a
majority of the shares of the outstanding Convertible Preferred Stock, the
obligation to deliver to such holder such securities, cash or other property as
to which, in accordance with the foregoing provisions, such holder may be
entitled, and such corporation or entity shall have similarly delivered to the
holder of the shares of Convertible Preferred Stock an opinion of counsel for
such corporation or entity, satisfactory to the holders, which opinion shall
state that the shares of Convertible Preferred Stock and the provisions of this
certificate of designation, including without limitation, the conversion
provisions, shall thereafter continue in full force and effect and shall be
enforceable against the Corporation and such corporation or entity in accordance
with the terms hereof and thereof, together with such other matters as such
holder may reasonably request.
(viii) Adjustments In Other Securities. If the purchase price provided for
in any Options, the additional consideration, if any, payable upon the
conversion or exchange of any Convertible Securities, or the rate at which any
Convertible Securities are convertible into or exchangeable for Common Stock,
shall change at any time after the Issue Date, the Conversion Price in effect at
the time of such change and the Base Purchase Price in effect at the time of
such change shall each be readjusted to the Conversion Price and the Base
Purchase Price which would have been in effect at such time had such Options or
Convertible Securities still outstanding provided for such changed purchase
price, additional consideration or changed conversion rate, as the case may be,
at the time initially granted, issued or sold.
(ix) No Impairment. The Corporation will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Corporation but will at
all times in good faith assist in the carrying out of all the provisions of this
Section 4 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of the
Convertible Preferred Stock against impairment.
(x) Certain Miscellaneous Events. If any corporate action shall occur as to
which the provisions of this Section 4(c) are not strictly applicable but as to
which the failure to make any adjustment would adversely affect the Conversion
Rights in accordance with the essential intent and principles of this Section
4(c) then, in each such case, the Corporation shall appoint a firm of
independent certified public accountants of recognized national standing (which
may be the regular auditors of the Corporation) to give their opinion upon the
adjustment, if any, on a basis consistent with the essential intent and
principles established in this Section 4(c), necessary to preserve, without
dilution, the Conversion Rights. Upon receipt of such opinion, the Corporation
will promptly mail a copy thereof to each holder of the Convertible Preferred
Stock and will make the adjustments described therein.
(xi) Common Stock Reserved. The Corporation shall at all times when any
shares of Convertible Preferred Stock shall be outstanding, reserve and keep
available out of its authorized but unissued Common Stock such number of shares
of Common Stock free from preemptive rights and other rights to purchase or
subscribe as shall from time to time be sufficient to effect conversion of all
shares of Convertible Preferred Stock (after giving effect to the conversion of
all other securities of the Corporation which are convertible into Common
Stock).
(xii) Par Value of Common Stock. Before taking any action which would cause
an adjustment reducing the Conversion Price to an amount below the then par
value of the Common Stock, issuable upon conversion of the Convertible Preferred
Stock, the Corporation will take any action which may, in the opinion of
independent counsel experienced in such matters, be necessary in order that the
Corporation may validly and legally issue fully paid and nonassessable shares of
such Common Stock at such adjusted conversion price.
(xiii) Adjustment for Certain Dividends; Distributions. In the event the
Corporation shall, at any time or from time to time after the Issue Date,
declare a dividend or fix a record date for the making of any other distribution
of evidences of indebtedness or assets upon or to the Common Stock or other
class of common equity of the Corporation (other than dividends payable in
shares of Common Stock), then, (a) the Conversion Price shall be reduced by
multiplying the Conversion Price in effect immediately prior to such dividend by
the quotient obtained by dividing (1) the Fair Market Value per share of Common
Stock determined on a Fully-Diluted Basis immediately prior to such dividend
minus the amount of such dividend in respect of each share of Common Stock by
(2) the Fair Market Value per share of Common Stock determined on a
Fully-Diluted Basis immediately prior to such dividend and (b) the Base Purchase
Price shall be reduced by multiplying the Base Purchase Price in effect
immediately prior to such dividend by the quotient obtained by dividing (1) the
Fair Market Value per share of Common Stock determined on a Fully-Diluted Basis
immediately prior to such dividend minus the amount of such dividend in respect
of each share of Common Stock by (2) the Fair Market Value per share of Common
Stock determined on a Fully-Diluted Basis immediately prior to such dividend.
Each such adjustment shall be made whenever such a record date is fixed and, in
the event that such dividend or distribution is not made, the Conversion Price
and the Base Purchase Price shall be readjusted to the numbers in effect
immediately prior to such record date (taking into account intervening
adjustments).
(xiv) Miscellaneous. The Corporation covenants that all shares of Common
Stock and other securities issuable upon conversion of the Convertible Preferred
Stock will, upon issue thereof, be validly authorized and issued, fully paid,
nonassessable, free of preemptive rights and free from all taxes, liens, charges
and security interest with respect to the issue thereof. So long as the
outstanding Common Stock may be listed on any securities exchange in the United
States, the Corporation shall use its best efforts to cause all reserved shares
of Common Stock and other securities reserved for issuance upon conversion of
the Convertible Preferred Stock to be listed on each such exchange upon official
notice of issuance of such securities upon such conversion.
5. Report or Certificate as to Adjustments.
In each case of any adjustment or readjustment in the Conversion Price
and/or Base Purchase Price pursuant to Section 4, the Corporation at its expense
will promptly deliver a certificate of its Chief Financial Officer showing in
detail the computation of such adjustment or readjustment in accordance with the
terms of Section 4 and the facts upon which such adjustment or readjustment is
based. The Corporation shall also cause, upon the request of holders of a
majority of the then outstanding shares of Convertible Preferred Stock, at its
own expense, independent certified public accountants of recognized national
standing (which may be the regular auditors of the Corporation) selected by the
Corporation to verify such computation and prepare a report setting forth such
adjustment or readjustment and showing in detail the method of calculation
thereof and the facts upon which such adjustment or readjustment is based. The
Corporation will forthwith (and in any event not later than 10 Business Days
following the occurrence of the event requiring such adjustment) furnish a copy
of each such report to each holder of Convertible Preferred Stock, and will,
upon the written request at any time of any such holder, promptly furnish to
such holder a like report setting forth (i) such adjustments and readjustments,
(ii) the Conversion Price and Base Purchase Price and (iii) the number of shares
of Common Stock and the amount, if any, of other property which, as of the date
of such report, would be received upon the conversion of a share of the
Convertible Preferred Stock. The Corporation will also keep copies of all such
reports at its principal office and will cause the same to be available for
inspection at such office during normal business hours by any holder or any
prospective purchaser of shares of Convertible Preferred Stock designated by any
holder thereof.
6. Notices of Certain Actions. In the event of:
(a) any taking by the Corporation of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, or
(b) any capital reorganization of the Corporation, any reclassification or
recapitalization of the capital stock of the Corporation, any consolidation or
merger involving the Corporation and any other Person or any transfer of all or
substantially all the assets of the Corporation to any other Person, or
(c) any voluntary or involuntary dissolution, liquidation or winding-up of
the Corporation, or
(d) authorization of an issuance of capital stock of the Corporation or any
Options or Convertible Securities or a proposal to issue any capital stock of
the Corporation or any Options or Convertible Securities or a proposal to commit
the Corporation to issue capital stock of the Corporation or any Options or
Convertible Securities; or
(e) the failure to comply with the provisions of this Certificate of
Designation; or
(f) any plan or proposal by the Corporation to register securities of the
Corporation with the Securities and Exchange Commission (or any successor
agency); or
(g) any proposal to take any other action which would require an adjustment
pursuant to Section 4(c);
the Corporation will deliver to the holder a notice specifying (i) the date or
expected date on which any such record is to be taken for the purpose of such
dividend, distribution or right, and the amount and character of such dividend,
distribution or right, (ii) the date or expected date on which any such
reorganization, reclassification, recapitalization, consolidation, merger,
transfer, dissolution, liquidation or winding-up is to take place and the time,
if any such time is to be fixed, as of which the holders of record of Common
Stock (or other securities) shall be entitled to exchange their shares of Common
Stock (or other securities) for the securities or other property deliverable
upon such reorganization, reclassification, recapitalization, consolidation,
merger, transfer, dissolution, liquidation or winding-up, (iii) the terms and
conditions of any such issuance (including price, the terms of the offered
securities and the proposed timing thereof), (iv) the nature of the lack of
compliance, any corrective action taken and any rights or remedies which such
lack of compliance has bestowed on the holders of Convertible Preferred Stock,
(v) the date or expected date of the filing of the Corporation's initial
registration statement with respect to such offering and the material terms
thereof or (vi) the notice required by Section 5. Such notice shall be furnished
at least 10 Business Days prior to the date therein specified (and the
Corporation shall promptly provide amendments and/or supplements to any such
notice to the extent necessary to keep all of the information contained in any
such notice (and each amendment or supplement thereto) true and correct in all
respects).
7. Redemption.
(a) Redemption at the Option of the Corporation. At any time on and after
the Section 7(a) Redemption Effective Date, the Corporation may, at its sole
discretion, redeem all or less than all of the outstanding shares of Convertible
Preferred Stock at the Redemption Price (as defined below).
(b) Redemption at the Option of the Holder. At any time on and after the
Section 7(b) Redemption Effective Date, each Holder shall have the option, in
its sole discretion, to require the Corporation, upon written notice (a "Holder
Redemption Notice") to redeem all or less than all of its outstanding shares of
Convertible Preferred Stock at the Redemption Price (as defined below).
(c) The redemption price per share of the Convertible Preferred Stock shall
be paid in cash in an amount equal to the Preference Amount as of the date of
redemption of such shares (the "Redemption Price").
(d) Written notice of any redemption of shares of Convertible Preferred
Stock pursuant to Section 7(a), specifying the time and place of such
redemption, shall be mailed by certified mail, return receipt requested, at
least 45, and not more than 60 days prior to the date specified for redemption
(the "Section 7(a) Redemption Date"), to each registered holder of the shares of
Convertible Preferred Stock at such holder's last address as it appears on the
Corporation's books. On or after the Section 7(a) Redemption Date, each holder
of shares of Convertible Preferred Stock called for redemption shall surrender
his or her certificates for such shares to the Corporation at the place
specified in the notice and then the Corporation shall pay the holder (or shall
cause such holder to be paid) the Redemption Price in cash.
(e) Receipt of a Section 7(a) Notice of Redemption shall not prevent a
holder from exercising the conversion rights granted pursuant to Section 4.
Notwithstanding the foregoing, any holder exercising such conversion rights must
make a Conversion Demand not later than 15 Business Days after receipt of such
Section 7(a) Notice of Redemption.
(f) Each Holder Redemption Notice delivered pursuant to Section 7(b) shall
specify:
(1) the name of the holder of shares of Convertible Preferred Stock
delivering such Holder Redemption Notice;
(2) that such holder is exercising its option, pursuant to Section
7(b), to require the Corporation to redeem shares of Convertible Preferred
Stock held by such holder; and
(3) the number of, and a description of, the shares of Convertible
Preferred Stock to be subject to such redemption.
(g) The Corporation shall, within thirty (30) days of receipt of such
Holder Redemption Notice, deliver to the holder exercising its rights to require
redemption of shares pursuant to Section 7(b), a notice specifying the date set
for such redemption (the "Section 7(b) Redemption Date").
(h) Notwithstanding anything contained in Section 7(b) to the contrary, the
Corporation shall not be obligated to redeem shares of Convertible Preferred
Stock which are the subject of a Holder Redemption Notice or be obligated to pay
the Redemption Price in respect of a Holder Redemption Notice, if:
(1) at any time prior to the seventh anniversary of the Issue Date,
payment of the Redemption Price at such time would result in a breach of,
or default or event of default in respect of, the Credit Agreement; or
(2) at any time, payment of the Redemption Price is, at such time,
prohibited by Applicable Law;
provided, however, with respect to (1) and (2) above, if such breach, event of
default, default or violation would not result from the purchase of any number
of shares of Convertible Preferred Stock which is less than the total number of
shares the Corporation is obligated to redeem on the Section 7(b) Redemption
Date, the Corporation shall purchase on the Section 7(b) Redemption Date the
maximum number of shares of Convertible Preferred Stock it may so purchase,
allocated among the holders which have elected to have their shares so
repurchased ratably according to the number of shares so tendered; provided,
further, however, with respect to (1) and (2) above, the Corporation shall use
its best efforts to cure such default or violation in a timely manner and remove
any associated restrictions or limitations which are applicable to the rights of
the holders of Convertible Preferred Stock contained in Section 7(b).
(i) In the case of any redemption pursuant to this Section 7, unless the
Corporation defaults in the payment in full of the Redemption Price, dividends
on the shares called for redemption shall cease to accumulate on the applicable
redemption date, and all rights of the holders of the shares of Convertible
Preferred Stock subject to such redemption by reason of their ownership of such
shares shall cease on such redemption date, except the right to receive the
Redemption Price on surrender to the Corporation of the certificates
representing such shares. After the applicable redemption date, the shares shall
not be deemed to be outstanding and shall not be transferable on the books of
the Corporation, except to the Corporation.
(j) Any shares of Convertible Preferred Stock redeemed, converted or
purchased by the Corporation shall be canceled and shall have the status of
authorized and unissued shares of preferred stock, without designation as to
series.
(k) In the event that a Holder Redemption Notice and/or a Put Notice (as
defined in the Warrant Agreement) is delivered to the Corporation on or after
July 29, 2003 and the Corporation is unable to comply with both Section 7(b) and
Section 11 of the Warrant Agreement by affecting a redemption of all of the
shares of Convertible Preferred Stock subject to such Holder Redemption Notice
and honoring such put rights with respect to all Warrants and/or Warrant Shares
subject to any such Put Notice because limitations of the type described in
Section 7(h)(1) and 11.5 of the Warrant Agreement then exist, then, upon such
delivery of such Holder Redemption Notice and/or Put Notice and until such time
as the Corporation shall have redeemed all such shares of Convertible Preferred
Stock and repurchased all such Warrants and/or Warrant Shares:
(1) the Dividend Rate shall be increased to twelve percent (12%);
(2) the Corporation shall use its best efforts to register all shares
of Convertible Preferred Stock under the Securities Act of 1933 in a manner
which is consistent with the registration rights provided to the
"Purchaser" (as defined in the Securities Purchase Agreement) pursuant to
the Securities Purchase Agreement;
(3) the Corporation shall take any action necessary or appropriate to
provide the holders of a majority of the outstanding shares of Convertible
Preferred Stock the right to elect not less than twenty-five percent (25%)
of the Board of Directors (including, without limitation, expanding the
number of directors on the Board of Directors); and
(4) the Corporation shall issue (on the five year and six month
anniversary of the Issue Date and each 180th day thereafter) to the holders
of outstanding shares of Convertible Preferred Stock (on a pro rata basis)
that number of additional Warrants which is initially exerciseable into
that number of shares of Common Stock which is equal to the product of (x)
0.02, (y) the number of shares of Common Stock then outstanding (determined
on a Fully-Diluted Basis) and (z) the quotient of (A) the aggregate
liquidation value of all shares of Preferred Stock outstanding at such time
divided by (B) the aggregate liquidation value of all shares of Preferred
Stock outstanding on the Second Closing Date (or the Issue Date in the
event the Second Closing Date shall not have occurred);
provided, however, notwithstanding anything to the contrary contained above,
should the quotient of (A) the aggregate liquidation value of all shares of
Preferred Stock outstanding at such time divided by (B) the aggregate
liquidation value of all shares of Preferred Stock outstanding on the Second
Closing Date (or the Issue Date if the Second Closing Date shall not have
occurred), be less than 0.33, the Corporation shall not be obligated to (x)
register shares as provided in (2) above or (y) provide the holders of
Convertible Preferred the increased Board representation provided for in (3)
above.
8. Voting Rights.
The holders of shares of Convertible Preferred Stock shall (i) be entitled
to vote as a single class (together with the holders of Warrants (on an as
converted basis) and the holders Common Stock) on each matter on which the
holders of Common Stock shall be entitled to vote and (ii) have, with respect to
each share of Convertible Preferred Stock held by such holder on the applicable
record date for determining such voting rights, that number of votes which is
equal to the number of shares of Common Stock into which each such share of
Convertible Preferred Stock is convertible pursuant to Section 4.
9. Consents Required of Holders of Convertible Preferred Stock.
In addition to any other rights provided in the Securities Purchase
Agreement or otherwise, so long as any shares of Convertible Preferred Stock are
outstanding, the Corporation shall not, by amendment to its Certificate of
Incorporation, by resolution of the Board of Directors, by consolidation of the
Corporation with, or merger of the Corporation with or into, another Person, or
in any other manner, without the consent of the holders of a majority of such
outstanding shares of Convertible Preferred Stock voting together as one class,
either given by affirmative vote in person or by proxy at a meeting called for
that purpose or given in writing:
(i) alter any provision of this Certificate of Designation;
(ii) increase or decrease the authorized number of shares of Convertible
Preferred Stock;
(iii) authorize or issue any class or series of the Corporation's capital
stock (other than the "Additional Preferred Stock" (as defined in the Securities
Purchase Agreement)) (or any securities convertible or exerciseable into or
exchangeable for any class or series of the Corporation's capital stock) the
terms of which provide that shares of such class or series rank senior to or on
parity with shares of the Convertible Preferred Stock as to voting rights,
redemptions, distributions of dividends or other assets and distributions upon
the Liquidation of the Corporation;
(iv) reclassify any shares of capital stock of the Corporation into shares
of any class or series of the Corporation's capital stock the terms of which
provide that shares of such class or series rank senior to or on parity with
shares of the Convertible Preferred Stock as to voting rights, redemptions,
distributions of dividends or other assets and distributions upon the
Liquidation of the Corporation;
(v) (A) apply any of its or its subsidiaries' assets to or make any payment
on account of (other than dividends payable in shares of Junior Stock in respect
of shares of such class of Junior Stock), or set apart for payment money for a
sinking or other similar fund for, the purchase, redemption, retirement of, or
any other acquisition of, directly or indirectly, any shares of Junior Stock or
(B) permit any corporation or other entity directly or indirectly controlled by
the Corporation to purchase or redeem or otherwise acquire any shares of any
Junior Stock, whether directly or indirectly and whether in cash, obligations or
shares of the Corporation or other property;
(vi) amend or repeal any provision of, or add any provision to, the
Corporation's Certificate of Incorporation or Bylaws if such action would
adversely alter or change the preferences, rights, privileges or powers of, or
the restrictions provided for the benefit of the Convertible Preferred Stock
whether pursuant to this Certificate of Designation, the Securities Purchase
Agreement or otherwise;
(vii) pay or declare any dividend or make any other distribution on any
shares of the Corporation's capital stock (without limiting the right to accrue
dividends) other than (i) in respect of the Convertible Preferred Stock or (ii)
dividends payable in shares of Junior Stock in respect of shares of such class
of Junior Stock;
(viii) amend or change any provision of this Section 9; or
(ix) agree to do any of the foregoing.
10. Definitions.
As used in this Certificate of Designation, and unless the context requires
a different meaning, the following terms have the meanings indicated:
"Additional Shares of Common Stock" shall mean all shares of Common
Stock (including any shares of Common Stock issued upon the conversion of Series
B Preferred Stock) issued (or, pursuant to Section 4(c)(ii), deemed to be
issued) by the Corporation after the Issue Date, except (i) securities issued
upon the direct or indirect conversion, exchange or exercise of any securities
issued by the Corporation on or prior to the Issue Date) and set forth on
Schedule I to this Certificate of Designation, (ii) up to 100,000 shares of
Common Stock issued upon the exercise of non-qualified stock options issued to
employees, directors and independent contractors of the Corporation and/or its
subsidiaries, (iii) up to 200,000 shares of Common Stock issued to physicians
with whose practice the Corporation is affiliated pursuant to commitments
existing on the Issue Date and described on Schedule II to this Certificate of
Designation, (iv) up to 291,461 shares of Common Stock upon the exercise of
options issued after the Issue Date pursuant to the Corporation's 1996 Amended
and Restated Stock Option Plan, as in effect on the date hereof, but only so
long as the exercise price of such options, (1) is fixed and (2) equals or
exceeds the fair market value of a share of Common Stock (determined as of the
date of issuance of such options), (v) shares of Common Stock issued upon the
conversion of Convertible Preferred Stock, (vi) shares of Common Stock issued
upon the conversion of Preferred Stock issued in connection with the Second
Closing and (vii) shares of Common Stock issued upon exercise of Performance
Warrants (as defined in the Securities Purchase Agreement).
"Adjusted Preference Amount" shall have the meaning set forth in
Section 3(a) of this Certificate of Designation.
"Adjustment Price" shall have the meaning set forth in Section 4(c)(i)
of this Certificate of Designation.
"Affiliate" shall mean, as applied to any Person, any other Person
directly or indirectly controlling (including, but not limited to, all directors
and officers of such Person), controlled by, or under direct or indirect common
control with, such Person and shall include, for purposes of determining whether
a Person is an Affiliate of the Corporation, any Person that directly or
indirectly owns more than 5% of any class of the capital stock of such Person. A
Person shall be deemed to "control" another Person if such Person possesses,
directly or indirectly, the power to direct or cause the direction of the
management and policies of such other Person, whether through the ownership of
voting securities, by contract or otherwise.
"Applicable Law" shall mean all provisions of laws, statutes,
ordinances, rules, regulations, permits or certificates of any Governmental
Authority applicable to such Person or any of its assets or property, and all
judgments, injunctions, orders and decrees of all courts, arbitrators or
Governmental Authorities in proceedings or actions in which such Person is a
party or by which any of its assets or properties are bound.
"Base Purchase Price" shall mean $4.43.
"Board of Directors" shall have the meaning set forth in the first
paragraph of this Certificate of Designation.
"Business Day" shall mean any day except Saturday, Sunday and any day
which in New York shall be a legal holiday or a day on which banking
institutions are authorized or required by law or other government action to
close.
"Certificate of Incorporation" shall have the meaning set forth in the
Resolved clause of this Certificate of Designation.
"Change of Control" shall mean the occurrence of one or more of the
following: (i) any Person, entity or "group" (within the meaning of Section
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) shall become
the "beneficial owner" (as defined in Rules 13(d) and 13(d)-5 under the
Securities Exchange Act, as amended except that a Person shall be deemed to have
"beneficial ownership" of all securities that such Person has the right to
acquire, whether such right is exerciseable immediately or only after the
passage of time) of shares of any outstanding class of capital stock of the
Corporation and as a result, such Person, entity or "group" has 50% or more of
the ordinary voting power in the election of the Board of Directors or (ii) the
Board of Directors shall cease to consist of a majority of Continuing Directors.
"Claims" shall have the meaning set forth in Section 4(c)(v) of this
Certificate of Designation.
"Common Stock" shall mean the Common Stock of the Corporation, par
value $.001 per share.
"Common Stock Per Share Market Value" shall mean the price per share
of Common Stock obtained by dividing (A) the Market Value by (B) the number of
shares of Common Stock outstanding (on a Fully-Diluted Basis) at the time of
determination.
"Continuing Directors" shall mean, with respect to the Corporation,
the directors of the Corporation on the Issue Date and each other director, if
such other director's nomination for election to the Board of Directors is
recommended by a majority of the then Continuing Directors.
"Conversion Date" shall have the meaning set forth in Section 4(b) of
this Certificate of Designation.
"Conversion Demand" shall have the meaning set forth in Section 4(b)
of this Certificate of Designation.
"Conversion Price" shall have the meaning set forth in Section 4(a) of
this Certificate of Designation.
"Conversion Rights" shall have the meaning set forth in the first
sentence of Section 4 of this Certificate of Designation.
"Convertible Preferred Stock" shall have the meaning set forth in
Section 1(a) of this Certificate of Designation.
"Convertible Securities" shall mean any evidences of indebtedness,
capital stock (other than Common Stock) or other securities directly or
indirectly convertible into or exchangeable for Common Stock.
"Corporation" shall have the meaning set forth in the first paragraph
of this Certificate of Designation.
"Credit Agreement" shall mean the Credit Agreement, dated as of June
30, 1998, among the Corporation, the Lenders (as therein defined) and Paribas,
as agent, as amended, amended and restated, supplemented, restructured or
otherwise modified from time to time (in whole or in part and without limitation
as to terms, conditions or covenants and without regard to the principal amount
thereof) and in effect, including all related notes, collateral documents,
guaranties, instruments and agreements entered into in connection therewith, and
any successive restructurings, renewals, extensions, refundings or refinancings
thereof.
"Dividend Payment Date" shall have the meaning set forth in Section
2(a) of this Certificate of Designation.
"Dividend Rate" shall have the meaning set forth in Section 2(a) of
this Certificate of Designation.
"Dividends" shall have the meaning set forth in Section 2(a) of this
Certificate of Designation.
"Fair Market Value" shall mean, with respect to a share of Common
Stock on any Business Day:
(1) if the Common Stock is not Publicly Traded at the time of such
determination, the Common Stock Per Share Market Value; or
(2) if the Common Stock is Publicly Traded at the time of such
determination, the closing price on such day of the Common Stock on
all domestic securities exchanges on which the Common Stock is then
listed, or, if there have been no sales on any such exchange on such
day, the average of the highest bid and lowest asked prices on all
such exchanges at the end of such day or, if on any such day the
Common Stock is not so listed, the average closing price quoted on
NASDAQ as reported in the Wall Street Journal, on such day, or if on
any day such security is not quoted on the NASDAQ System, the average
of the highest bid and lowest asked prices on such day in the domestic
over-the-counter market as reported by the National Quotation Bureau,
Incorporated, or any similar successor organization, in each such case
based on a weighted average (on a volume basis) over a period of 20
trading days consisting of the day as of which "Fair Market Value" is
being determined and the nineteen consecutive trading days prior to
such day;
provided, however, for purposes of Section 4(c)(iv), if Fair Market Value is
being determined in connection with a "Mandatory Conversion" (as defined in the
certificate of designation governing the terms of the Series B Preferred Stock)
of Series B Preferred Stock into Common Stock and the Fair Market Value of a
share of Common Stock is lower on the date of such conversion than it was on the
date of the original issuance of the Series B Preferred Stock being converted,
then Fair Market Value shall be determined by reference to the Fair Market Value
of Common Stock at the time of the original issuance of such shares of Series B
Preferred Stock; provided, further, however, for purposes of Section 4(c)(iv),
if Fair Market Value is being determined in connection with an "Optional
Conversion" (as defined in the certificate of designation governing the terms of
the Series B Preferred Stock) of Series B Preferred Stock into Common Stock,
Fair Market Value shall be equal to the product of 1.25 and the "Market Price"
(as defined in the certificate of designation governing the terms of the Series
B Preferred Stock and determined at the time of the original issuance of the
shares of Series B Preferred Stock being converted).
"Fully-Diluted Basis"' shall mean, as applied to the calculation of
the total number of shares of Common Stock outstanding at any time, after giving
effect to (a) all shares of Common Stock outstanding at the time of such
determination, (b) all shares of Common Stock issuable upon the exercise of any
rights to subscribe for or to purchase, or any warrants or options for the
purchase of, Common Stock or any evidences of indebtedness or capital stock or
other securities directly or indirectly convertible into or exchangeable or
exerciseable for Common Stock outstanding at the time of such determination (it
being agreed that for purposes of determining the number of shares of Common
Stock issuable upon the exercise of any shares of Series B Preferred Stock, such
number shall be (A) from the date hereof until such time as such shares of
Series B Preferred Stock are no longer subject to "Optional Conversion" (as
defined in the certificate of designation governing the terms of the Series B
Preferred Stock), the higher of (x) the number of shares issuable upon a
conversion of such shares of Series B Preferred Stock at a conversion price
equal to the product of 1.25 and the "Market Price" (as defined in clause (b) of
the definition of "Market Price" appearing in the certificate of designation
governing the terms of the Series B Preferred Stock and determined at the time
of the original issuance of the shares of Series B Preferred Stock being
converted) and (y) the number of shares issuable upon a conversion of such
shares of Series B Preferred Stock at a conversion price equal to the "Market
Price" (as defined in clause (a) of the definition of "Market Price" appearing
in the certificate of designation governing the terms of the Series B Preferred
Stock but determined at the time of such determination of the number of shares
of Common Stock outstanding on a "Fully-Diluted Basis") or (B) after such time
as such shares of Series B Preferred Stock are no longer subject to "Optional
Conversion" (as defined in the certificate of designation governing the terms of
the Series B Preferred Stock), the number of shares issuable upon a conversion
of such shares at the "Market Price" (as defined in clause (b) of the definition
of "Market Price" appearing in the certificate of designation governing the
terms of the Series B Preferred Stock but determined at the time of such
determination of the number of shares of Common Stock outstanding on a
"Fully-Diluted Basis") and (c) all shares of Common Stock which the Corporation
could otherwise be required to issue in accordance with agreements in place at
the time of determination.
"Holder Redemption Notice" shall have the meaning set forth in Section
7(b) of this Agreement.
"Independent Financial Expert" shall mean a nationally recognized
investment banking firm (a) that does not (and whose directors, officers,
employees and Affiliates do not) have a direct or indirect material financial
interest in the Corporation or any of its Affiliates, (b) that has not been,
and, at the time it is called upon to serve as an Independent Financial Expert
is not (and none of whose directors, officers, employees or Affiliates is) a
promoter, director or officer of the Corporation, (c) that has not been retained
during the preceding two years by the Corporation or any of its Affiliates for
any purpose, and (d) that is otherwise qualified to serve as an independent
financial advisor. Any such person shall receive customary compensation and
indemnification by the Corporation for opinions or services it provides as an
Independent Financial Expert.
"Issue Date" shall have the meaning set forth in Section 2(a) of this
Certificate of Designation.
"Junior Stock" shall mean (i) the Common Stock, (ii) the Series B
Preferred Stock and (iii) each other class of the Corporation's capital stock or
series of the Corporation's preferred stock.
"Liquidation" shall have the meaning set forth in Section 3(a) of this
Certificate of Designation.
"Liquidation Value" shall have the meaning set forth in Section 1(a)
of this Certificate of Designation.
"Market Value" shall mean the price that would be paid for the entire
common equity of the Corporation on a going-concern basis in an arm's-length
transaction between a willing buyer and a willing seller (neither acting under
compulsion), using valuation techniques then prevailing in the securities
industry (but without giving effect to any discount in respect of a minority
interest) and determined in accordance with the Valuation Procedure, and
assuming full disclosure and understanding of all relevant information and a
reasonable period of time for effectuating such sale. For the purposes of
determining the Market Value, (a) the exercise price of options or warrants to
acquire Common Stock which are deemed to have been exercised for the purpose of
determining the number of shares of Common Stock outstanding on a Fully-Diluted
Basis, shall be deemed to have been received by the Corporation, (b)(i) the
liquidation preference or indebtedness, as the case may be, represented by
securities which are deemed exercised for or converted into Common Stock for the
purpose of determining the number of shares of Common Stock outstanding on a
Fully-Diluted Basis and (ii) any contractual limitation in respect of the shares
of Common Stock relating to voting rights, shall be deemed to have been
eliminated or canceled and (c) no effect shall be given to any discount that may
arise as the result of the fact that the shares of Common Stock are not Publicly
Traded.
"NASDAQ" means the National Association of Securities Dealers, Inc.,
Automated Quotation System.
"Option" shall mean rights, options or warrants to subscribe for,
purchase or otherwise acquire either Common Stock or Convertible Securities.
"Person" or "Persons" means and includes natural persons,
corporations, limited partnerships, general partnerships, joint stock companies,
joint ventures, associations, companies, trusts, banks, trust companies, land
trusts, business trusts or other organizations, whether or not legal entities,
and governments and agencies and political subdivisions thereto
"Plaintiffs" shall have the meaning set forth in Section 4(c)(v) of
this Certificate of Designation.
"Preference Amount" shall have the meaning set forth in Section 2(a)
of this Certificate of Designation.
"Preferred Stock" shall have the meaning set forth in the Resolved
clause of this Certificate of Designation.
"Publicly Traded" shall mean, with respect to any security, that such
security is (a) listed on a domestic securities exchange, (b) quoted on NASDAQ
or (c) traded in the domestic over-the-counter market, which trades are reported
by the National Quotation Bureau, Incorporated.
"Redemption Price" shall have the meaning set forth in Section 7(c) of
this Certificate of Designation.
"Second Closing" shall have the meaning set forth in the Securities
Purchase Agreement.
"Second Closing Date" shall have the meaning set forth in the
Securities Purchase Agreement.
"Section 7(a) Redemption Date" shall have the meaning set forth in
Section 7(d) of this Certificate of Designation.
"Section 7(a) Redemption Effective Date" shall mean the ninetieth day
following the sixth anniversary of the Issue Date; provided, however, if at any
time after the second anniversary of the Issue Date and prior to the ninetieth
day following the sixth anniversary of the Issue Date the average closing price
quoted on NASDAQ as reported in the Wall Street Journal (or, if on any day such
security is not quoted on the NASDAQ System, the average of the highest bid and
lowest asked prices on such day in the domestic over-the-counter market as
reported by the National Quotation Bureau, Incorporated, or any similar
successor organization) over the twenty (20) consecutive trading days
immediately preceding the Section 7(a) Redemption Effective Date, equals or
exceeds the product of (x) 1.50 and (y) the per share Liquidation Value, the
Section 7(a) Redemption Effective Date shall be such earlier date.
"Section 7(b) Redemption Date" shall have the meaning set forth in
Section 7(f) of this Certificate of Designation.
"Section 7(b) Redemption Effective Date" shall mean the earliest to
occur of (x) a Change of Control, (y) the date on which the Corporation
consolidates with or mergers with or into another Person or sells, assigns,
conveys, transfers, leases or otherwise disposes of substantially all of its
assets to any Person or any Person consolidates with or mergers with or into,
the Corporation, in any such event pursuant to a transaction in which the
outstanding voting equity securities of the Corporation are converted into or
exchanged for cash, securities or other property other than any such transaction
in which immediately after such transaction no "person" or "group" (as such
terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934) is the "beneficial owner" (as defined in Rules 13(d) and 13(d)-5 under the
Exchange Act, except that a person shall be deemed to have "beneficial
ownership" of all securities that such person has the right to acquire, whether
such right is exercised immediately or only after the passage of time), directly
or indirectly of more than 50% of the total voting securities of the surviving
or transferee corporation or its parent corporation and (z) the occurrence of
the fifth anniversary of the Issue Date.
"Securities Purchase Agreement" shall mean the Securities Purchase
Agreement, dated as of even date herewith by and between the Corporation and
Paribas Principal Incorporated, a New York corporation.
"Series B Preferred Stock" shall mean the Series B Convertible
Preferred Stock of the Corporation, par value $.01 per share.
"Transaction" shall have the meaning set forth in Section 4(c)(vii) of
this Certificate of Designation.
"Valuation Procedure" shall mean, with respect to a determination of
any amount or value required to be determined in accordance with such procedure,
a determination (which shall be final and binding on the Corporation and the
holders of the Convertible Preferred Stock) made (i) by agreement among the
Corporation and the holders of a majority of the outstanding shares of
Convertible Preferred Stock within twenty (20) days following the event
requiring such determination or (ii) in the absence of such an agreement, by an
Independent Financial Expert selected in accordance with the further provisions
of this definition. If required, an Independent Financial Expert shall be
selected within five days following the expiration of the 20-day period referred
to above, either by agreement among the Corporation and the holders of a
majority of the outstanding shares of Convertible Preferred Stock or, in the
absence of such agreement, by lot from a list of four potential Independent
Financial Experts remaining after the Corporation nominates three, the holders
of a majority of the outstanding shares of Convertible Preferred Stock nominate
three, and each side eliminates one potential Independent Financial Expert. The
Independent Financial Expert shall be instructed by the Corporation and the
holders of a majority of the outstanding shares of Convertible Preferred Stock
to make its determination within 20 days of its selection. The fees and expenses
of an Independent Financial Expert selected hereunder shall be paid by the
Corporation.
"Warrant Agreement" shall mean the Warrant Agreement, dated as of even
date herewith, by and between the Corporation and Paribas Principal
Incorporated, a New York corporation.
"Warrants" shall have the meaning set forth in the Warrant Agreement.
11. Remedies Cumulative.
No failure or delay on the part of the holders of the Convertible Preferred
Stock in the exercise of any power, right or privilege under this Certificate of
Designation shall impair such power, right or privilege or be construed to be a
waiver of any default or acquiescence therein, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege. All rights and
remedies existing under this Certificate of Designation are cumulative to and
not exclusive of any rights or remedies otherwise available.
BMJ MEDICAL MANAGEMENT, INC.
By:_________________________
Name: Neil F. Luria
Title: Secretary
<PAGE>
SCHEDULE I
Existing Convertible Securities and Options
<PAGE>
SCHEDULE II
Existing Commitments Relating to Common Stock
================================================================================
SECURITIES PURCHASE AGREEMENT
Dated as of June 30, 1998
By and Among
BMJ MEDICAL MANAGEMENT, INC.
and
PARIBAS PRINCIPAL INCORPORATED
================================================================================
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
ARTICLE I DEFINITIONS..............................................................................................2
1.0 Definitions...........................................................................................2
ARTICLE II REPRESENTATIONS OF THE COMPANY.........................................................................11
2.0 Representations of the Company.......................................................................11
2.1 Existence and Good Standing..........................................................................11
2.2 Capital Stock........................................................................................12
2.3 Authorization and Validity of the Documents..........................................................12
2.4 Subsidiaries and Investments.........................................................................13
2.5 SEC and Other Documents; Financial Statements; Undisclosed Liabilities...............................13
2.6 Title to Properties; Encumbrances; Leases............................................................15
2.7 Intellectual Property................................................................................15
2.8 Material Contracts...................................................................................16
2.9 Consents and Approvals; No Violations................................................................17
2.10 Litigation..........................................................................................17
2.11 Taxes...............................................................................................17
2.12 Liabilities.........................................................................................18
2.13 Compliance with Laws; Permits; Billing Practices....................................................19
2.14 Employment Relations................................................................................20
2.15 Employee Benefit Plans..............................................................................21
2.16 Environmental Laws and Regulations..................................................................24
2.17 Interests in Clients, Suppliers, Etc................................................................24
2.18 Physician Relationships.............................................................................24
2.19 Accounts Receivable.................................................................................25
2.20 No Misstatements or Omissions; Projections..........................................................25
2.21 Brokers or Finders Fees.............................................................................25
2.22 Investment Company Act..............................................................................25
2.23 Delaware Takeover Law...............................................................................25
2.24 Year 2000 Reprogramming.............................................................................25
2.25 Practice Management Agreements; Affiliations........................................................26
2.26 Securities Law Compliance...........................................................................26
2.27 Transactions with Affiliates........................................................................26
2.28 Capital Stock Reserved..............................................................................26
2.29 No Conflict of Rights...............................................................................26
2.30 Other Representations and Warranties................................................................26
2.31 SBIC Information....................................................................................26
2.32 SBIC Eligibility....................................................................................26
2.33 Company Awareness...................................................................................27
2.34 Use of Proceeds.....................................................................................27
2.35 Employee Licensing Matters..........................................................................27
2.36 Representations Related to the Practices............................................................27
ARTICLE III REPRESENTATIONS OF THE PURCHASER......................................................................27
3.0 Representations of the Purchaser.....................................................................27
3.1 Existence and Good Standing; Power and Authority.....................................................27
3.2 Restrictive Documents................................................................................27
3.3 Purchase for Investment..............................................................................28
3.4 Brokers or Finders Fees..............................................................................28
ARTICLE IV ISSUANCE OF SECURITIES; PAYMENT OF SUBSCRIPTION PRICE; CLOSINGS........................................28
4.1 Issuance of Initial Securities.......................................................................28
4.2 Issuance of Additional Securities....................................................................29
4.3 Purchase Price.......................................................................................29
4.4 Time and Place of Closings...........................................................................30
4.5 Closing Deliveries...................................................................................30
4.6 Issuance of Performance Warrants.....................................................................30
4.7 Issuance of Registration Warrants....................................................................30
ARTICLE V CONDITIONS TO THE PURCHASERS OBLIGATIONS................................................................31
5.0 Conditions to the Purchasers Obligations.............................................................31
5.1 Opinions of Counsel..................................................................................31
5.2 Good Standing and Other Certificates.................................................................31
5.3 No Material Adverse Change...........................................................................31
5.4 Truth of Representations and Warranties..............................................................32
5.5 Performance of Agreements............................................................................32
5.6 No Litigation Threatened.............................................................................32
5.7 Third Party Consents; Governmental Approvals.........................................................32
5.8 Proceedings..........................................................................................32
5.9 Certificate of Designation...........................................................................32
5.10 SBA Forms...........................................................................................33
5.11 Due Diligence.......................................................................................33
5.12 Warrant Agreement...................................................................................33
5.13 Repayment of Indebtedness to Third Parties; Termination of Security Interests.......................33
5.14 Credit Agreement Funding............................................................................33
5.15 Additional Second Closing Condition.................................................................33
ARTICLE VI CONDITIONS TO THE COMPANYS OBLIGATIONS.................................................................33
6.0 Conditions to the Companys Obligations...............................................................33
6.1 Truth of Representations and Warranties..............................................................33
6.2 Third Party Consents; Governmental Approvals.........................................................34
6.3 Performance of Agreement.............................................................................34
6.4 No Litigation Threatened.............................................................................34
ARTICLE VII REGISTRATION RIGHTS...................................................................................34
7.1 Shelf Registration...................................................................................34
7.2 Incidental Registrations.............................................................................36
7.3 Registration Procedures..............................................................................37
7.4 Requested Underwritten Offerings.....................................................................40
7.5 Preparation; Reasonable Investigation................................................................40
7.6 Indemnification......................................................................................41
7.7 Rule 144.............................................................................................43
ARTICLE VIII POST-CLOSING AGREEMENTS..............................................................................43
8.1 Accountants..........................................................................................43
8.2 Financial Statements and Other Information...........................................................43
8.3 Inspection...........................................................................................45
8.4 Regulatory Sale or Disposition.......................................................................45
8.5 Limitation on Dividend Restrictions..................................................................46
8.6 SBIC Information.....................................................................................46
8.7 Non-Discrimination...................................................................................47
8.8 Reservation of Common Stock; Valid Issuance..........................................................47
8.9 Prohibited Actions...................................................................................47
8.10 Board of Directors..................................................................................48
8.12 Second Closing......................................................................................50
8.13 Post Closing Legal Opinion and Certificate..........................................................50
8.14 Adjusted Deliveries.................................................................................50
8.15 Stockholder Consent.................................................................................50
ARTICLE IX SURVIVAL..............................................................................................51
9.1 Survival............................................................................................51
ARTICLE X INDEMNIFICATION........................................................................................51
10.1 Indemnification.....................................................................................51
10.2 Contribution........................................................................................51
10.3 Remedies............................................................................................51
10.4 Limitation on Indemnification.......................................................................52
ARTICLE XI MISCELLANEOUS.........................................................................................52
11.1 Knowledge of the Transaction Parties................................................................52
11.2 Expenses............................................................................................52
11.3 Governing Law.......................................................................................52
11.4 Captions............................................................................................52
11.5 Publicity...........................................................................................53
11.6 Notices.............................................................................................53
11.7 Parties in Interest.................................................................................54
11.8 Counterparts........................................................................................54
11.9 Entire Agreement....................................................................................54
11.10 Amendments.........................................................................................54
11.11 Severability.......................................................................................54
11.12 Third Party Beneficiaries..........................................................................54
11.13 Jurisdiction.......................................................................................55
SCHEDULES
Schedule 1.0 Potential Affiliations
Schedule 2.2 Other Agreement Relating To Capital Stock
Schedule 2.4 Subsidiaries and Investments
Schedule 2.5(a) Company Reports
Schedule 2.5(c) Material Adverse Change
Schedule 2.7 Intellectual Property
Schedule 2.8 Material Contracts
Schedule 2.11 Tax Matters
Schedule 2.12 Liabilities
Schedule 2.15 Plans
Schedule 2.17 Interests in Clients, Suppliers, Etc.
Schedule 2.25 Practice Management Agreements
Schedule 2.28 Transactions with Affiliates
Schedule 2.29 Registration Rights
Schedule 5.14 Existing Indebtedness
Schedule 8.2 Transaction Summaries
Schedule 11.1 Officers
EXHIBITS
A Opinion of Jones Day Reavis & Pogue
</TABLE>
<PAGE>
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT dated as of June 30, 1998 by and
among BMJ MEDICAL MANAGEMENT, INC., a Delaware corporation (the "Company"), and
PARIBAS PRINCIPAL INCORPORATED, a New York corporation (the "Purchaser").
W I T N E S S E T H:
WHEREAS, the Purchaser desires to subscribe for, and the Company
desires to issue, certain shares of Preferred Stock, par value $ 0.01 per share,
of the Company which after giving effect to the transactions contemplated hereby
shall constitute 100% of the Series A Preferred Stock of the Company (the
"Preferred Stock");
WHEREAS, on or prior to the execution and delivery of this Agreement,
the Company shall have filed with the Secretary of State of the State of
Delaware, a certificate of designation setting forth the rights and obligations
relating to the Preferred Stock (the "Certificate of Designation") including
without limitation, provisions relating to the conversion of the Preferred Stock
into the Company's Common Stock, par value $0.001 per share (the "Common
Stock");
WHEREAS, the Purchaser wishes to purchase from the Company, and the
Company wishes to sell to the Purchaser, certain Warrants (the "Warrants" and
together with the Preferred Stock and the Additional Preferred Stock, if any,
the "Securities"), which shall be exercisable into shares of Common Stock,
pursuant to the terms set forth in the warrant agreement, dated as of the date
hereof, by and between the Company and the Purchaser (the "Warrant Agreement");
and
WHEREAS, simultaneously with the execution and delivery of this
Agreement, the Company and Paribas, acting as Agent, have entered into a Credit
Agreement, together with certain financial institutions from time to time party
thereto (the "Lenders") (as in effect on the date hereof, the "Credit
Agreement") and the Company and its Subsidiaries have entered into related
agreements with Paribas, as Agent, pursuant to which, the Lenders shall make
loans to the Company and issue letters of credit pursuant to the terms contained
therein (the Credit Agreement and all related agreements, as in effect on the
date hereof, the "Senior Credit Documents"; and together with this Agreement,
the Preferred Stock, the Certificate of Designation, the Warrants, the Warrant
Agreement and the Senior Credit Documents, collectively, the "Documents").
NOW, THEREFORE, IT IS AGREED:
ARTICLE I
DEFINITIONS
ss.1.0 Definitions. As used in this Agreement, and unless the context
requires a different meaning, the following terms have the meanings indicated:
"Additional Preferred Stock" shall have the meaning set forth in
Section 4.2(b) of this Agreement.
"Additional Preferred Stock Price Per Share" shall mean the lesser of
(i) $5.50 and (ii) the average closing price quoted on NASDAQ as reported in the
Wall Street Journal on the twenty consecutive Business Days prior to the Second
Closing Date, or if on any such day such security is not quoted on NASDAQ, the
average of the highest bid and lowest asked prices on such day in the domestic
over-the-counter market as reported by the National Quotation Bureau,
Incorporated, or any similar successor organization.
"Additional Securities" shall mean (i) a number of shares of
Additional Preferred Stock equal to the quotient obtained by dividing (A) the
Second Closing Purchase Price by (B) the Additional Preferred Stock Price Per
Share and (ii) the Additional Warrants.
"Additional Warrants" shall mean a number of Warrants equal to the
Gross Second Closing Number minus the number of shares of Additional Preferred
Stock issued pursuant to Section 4.2 of this Agreement.
"Adjusted Price" shall mean the quotient obtained by dividing (A) the
EBITDA Multiple Value at such time of determination by (B) the total number of
shares of Common Stock outstanding at such time of determination, on a
Fully-Diluted Basis.
"Affiliate" shall mean, with respect to any Person, any other Person
directly or indirectly controlling (including but not limited to all directors
and officers of such Person), controlled by, or under direct or indirect common
control with, such Person; provided, however, that, an Affiliate shall include
any entity that directly or indirectly (including through limited partner or
general partner interests) owns more than 5% of any class of the equity of any
other entity.
"Affiliation Date" shall mean September 8, 1998.
"Agreement" shall mean this Agreement, as the same may be amended,
supplemented or modified in accordance with the terms hereof, from time to time.
"Anti-Kickback Statute" shall have the meaning set forth in Section
2.13(a) of this Agreement.
"Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in the City of New
York are authorized or obligated by law or executive order to close.
"Certificate of Designation" shall have the meaning set forth in the
recitals of this Agreement.
"Closing" shall have the meaning set forth in Section 4.4 of this
Agreement.
"Closing Date" shall mean either the Initial Closing Date or Second
Closing Date, as the case may be.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
the regulations promulgated and rulings issued thereunder.
"Collected Revenues" shall mean, at any time, actual collected cash
revenues in the ordinary course of business for the preceding twelve months, as
demonstrated to the reasonable satisfaction of the Purchaser.
"Commission" shall mean, at any time, the Securities and Exchange
Commission or any other Federal agency then administering the Securities Act and
other Federal securities laws.
"Common Stock" shall have the meaning set forth in the recitals of
this Agreement.
"Company" shall have the meaning set forth in the first paragraph of
this Agreement.
"Company Notice" shall have the meaning set forth in Section 7.2(a) of
this Agreement.
"Company Property" shall mean any real property and improvements
owned, leased, used, operated or occupied by any Transaction Party.
"Company Registration Statement" shall have the meaning set forth in
Section 2.5 of this Agreement.
"Company Reports" shall have the meaning set forth in Section 2.5 of
this Agreement.
"Consolidated EBITDA" shall mean, as to the Company and its
Subsidiaries (but not the Practices) and for any period, the income from
continuing operations before income taxes and any extraordinary items plus the
following expenses to the extent deducted in the determination of income from
continuing operations before income taxes:
(i) interest and
(ii) depreciation and amortization.
"Consolidated Pro Forma EBITDA" shall mean the sum of (i) the
Consolidated EBITDA of the Company for the fiscal quarter ending June 30, 1998
multiplied by four, plus (ii) the sum of the following, with respect to each
Practice with which the Company has executed a management service agreement on
or after June 30, 1998, the product of (I) the Collected Revenues for the twelve
months ending on the date of execution of such management service agreement for
each such Practice, multiplied by (II) the "Applicable Percentage" set forth in
such management service agreement or similar amount set forth in each such
management service agreement, multiplied by (III) 0.85.
"Copyrights" shall have the meaning set forth in Section 2.7 of this
Agreement.
"Credit Agreement" shall have the meaning set forth in the recitals of
this Agreement.
"Damages" shall have the meaning set forth in Section 10.1 of this
Agreement.
"Documents" shall have the meaning set forth in the recitals of this
Agreement.
"EBITDA Multiple Value" shall mean, on any date, (i) (A) the
Consolidated Pro Forma EBITDA, multiplied by (B) nine, minus (ii) the total
Indebtedness of the Company and its Subsidiaries outstanding as of such date.
"Employee Benefit Plan" shall have the meaning set forth in Section
2.15(a) of this Agreement.
"Encumbrances" shall have the meaning set forth in Section 2.6 of this
Agreement.
"Environmental Claims" shall mean all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens, notices of
non-compliance or violation, investigations or proceedings relating in any way
to any Environmental Law or any permit issued under any such Law (hereinafter
"Claims"), including (a) Claims by governmental or regulatory authorities for
enforcement, cleanup, removal, response, remedial or other actions or damages
pursuant to any applicable Environmental Law, and (b) Claims by any third party
seeking damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from Hazardous Materials or arising from alleged
injury or threat of injury to health, safety or the environment.
"Environmental Law" shall mean any federal, state or local statute,
law, rule, regulation, ordinance, code, policy or rule of common law in effect
and in each case as amended as of the Closing Date, and any judicial or
administrative interpretation thereof as of the Closing Date, including any
judicial or administrative order, consent decree or judgment, relating to the
environment, health, safety or Hazardous Materials, including the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended, 42
U.S.C. ss.9601 et seq.; the Resource Conservation and Recovery Act, as amended,
42 U.S.C. ss.6901 et seq.; the Federal Water Pollution Control Act, as amended,
33 U.S.C. ss.1351 et seq.; the Toxic Substances Control Act, 15 U.S.C. ss.3601
et seq.; the Clean Air Act, 42 U.S.C. ss.7401 et seq.; the Safe Drinking Water
Act, 42 U.S.C. ss.300f et seq.; the Oil Pollution Act of 1990, 33 U.S.C. ss.3701
et seq.; and their state and local counterparts and equivalents.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, and the regulations promulgated and rulings issued thereunder.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated thereunder.
"Fully-Diluted Basis" shall mean the total number of shares of Common
Stock outstanding at any time, after giving effect to (a) all Common Stock
outstanding at the time of such determination and (b) all Common Stock issuable
upon the exercise of any outstanding rights, options and/or warrants to acquire
Common Stock and outstanding securities that are, or may be, pursuant to their
terms convertible into or exchangeable for Common Stock or that may be required
to be issued pursuant to any other agreement, including, without limitation, any
agreements to issue stock to physicians (it being agreed that for purposes of
determining the number of shares of Common Stock issuable upon the exercise of
any shares of Series B Preferred Stock, such number shall be (A) from the date
hereof until such time as such shares of Series B Preferred Stock are no longer
subject to "Optional Conversion" (as defined in the certificate of designation
governing the terms of the Series B Preferred Stock), the higher of (x) the
number of shares issuable upon a conversion of such shares of Series B Preferred
Stock at a conversion price equal to the product of 1.25 and the "Market Price"
(as defined in clause (b) of the definition of "Market Price" appearing in the
certificate of designation governing the terms of the Series B Preferred Stock
and determined at the time of the original issuance of the shares of Series B
Preferred Stock being converted) and (y) the number of shares issuable upon a
conversion of such shares of Series B Preferred Stock at a conversion price
equal to the "Market Price" (as defined in clause (a) of the definition of
"Market Price" appearing in the certificate of designation governing the terms
of the Series B Preferred Stock but determined at the time of such determination
of the number of shares of Common Stock outstanding on a "Fully-Diluted Basis")
or (B) after such time as such shares of Series B Preferred Stock are no longer
subject to "Optional Conversion" (as defined in the certificate of designation
governing the terms of the Series B Preferred Stock), the number of shares
issuable upon a conversion of such shares at the "Market Price" (as defined in
clause (b) of the definition of "Market Price" appearing in the certificate of
designation governing the terms of the Series B Preferred Stock but determined
at the time of such determination of the number of shares of Common Stock
outstanding on a "Fully-Diluted Basis").
"GAAP" shall have the meaning set forth in Section 2.5(b) of this
Agreement.
"Governmental Authority" shall mean any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, or any court, in each case whether of the United States of
America or foreign.
"Gross Second Closing Number" shall mean the Second Closing Purchase
Price divided by the lesser of (i) $4.50 and (ii) the Additional Preferred Stock
Price Per Share multiplied by 0.85.
"Hazardous Materials" shall mean (a) any petroleum or petroleum
products, radioactive materials, asbestos in any form that is friable, urea
formaldehyde foam insulation, transformers or other equipment that contain
dielectric fluid containing polychlorinated biphenyls, and radon gas; and (b)
any chemicals, materials or substances defined as or included in the definition
of "hazardous substances," "hazardous wastes," "hazardous materials," "extremely
hazardous wastes," "restricted hazardous wastes," "toxic substances," "toxic
pollutants," or words of similar import, pursuant to any applicable
Environmental Law.
"Incidental Registration" shall have the meaning set forth in Section
7.2(a) of this Agreement.
"Indebtedness" of any Person shall mean, without duplication, (i) all
indebtedness for borrowed money or for the deferred purchase price of property
or services, including, without limitation, notes issued to Practices or
physicians in connection with reconciliations pursuant to management service
agreements (other than trade payables or accrued expenses arising in the
ordinary course of business), (ii) the maximum amount available to be drawn
under letters of credit, (iii) all indebtedness of the type otherwise described
in this definition secured by any lien on any property owned by such Person or
any of its Subsidiaries, (iv) capitalized lease obligations, (v) all guarantees
of any type of indebtedness otherwise described in this definition, (vi) all
obligations of such Person to pay a specified purchase price for goods or
services, whether or not delivered or accepted, i.e., take-or-pay or similar
obligations and (vii) interest rate protection hedging agreements, currency
hedging agreements or commodity hedging agreements.
"Initial Closing Date" shall mean the date hereof, on which the
Purchaser shall purchase, and the Company shall issue, the Initial Securities.
"Initial Preferred Stock" shall mean 1,473,684 shares of Preferred
Stock issued on the Initial Closing Date.
"Initial Purchase Price" shall have the meaning provided in Section
4.3(a) of this Agreement.
"Initial Securities" shall mean the Initial Preferred Stock and the
Initial Warrants.
"Initial Warrants" shall mean 106,451 Warrants issued on the Initial
Closing Date.
"Intellectual Property" shall have the meaning set forth in Section
2.7 of this Agreement.
"Investment" shall mean (i) prior to the Second Closing, the
$7,000,000 investment by the Purchaser in the Company and (ii) on the Second
Closing, the $10,000,000 investment by the Purchaser in the Company.
"IPA" shall mean an Independent Physician Association which provides
services to enrollees of healthcare plans and other specified patient
populations pursuant to agreements with health care plans.
"Leases" shall have the meaning set forth in Section 2.6 of this
Agreement.
"Lenders" shall have the meaning set forth in the recitals of this
Agreement.
"Marks" shall have the meaning set forth in Section 2.7 of this
Agreement.
"Material Adverse Effect" shall have the meaning set forth in Section
2.1 of this Agreement.
"Margin Stock" shall have the meaning set forth in Regulation U of the
Board of Governors of the Federal Reserve System.
"NASDAQ" shall mean the National Association of Securities Dealers,
Inc. Automatic Quotation System.
"New Securities" shall mean (i) any shares of Preferred Stock; (ii)
any shares of Common Stock; (iii) any Warrants; (iv) any other equity security
of the Company, (v) any debt security of the Company which by its terms is
convertible into or exchangeable for any equity security of the Company, (vi)
any security of the Company that is a combination of debt and equity or (vii)
any option, warrant or other right to subscribe for, purchase or otherwise
acquire any equity security or any such debt security of the Company, provided
that "New Securities" shall not include (I) securities sold pursuant to a public
offering pursuant to an effecting registration statement filed under the
Securities Act, (II) securities issued in the ordinary course of business to
physicians in connection with entering into management service agreements with
physician practices and ancillary businesses, at no less than the fair market
value at such time (including, without limitation, the Series B Preferred
Stock), (III) securities issued upon the direct or indirect conversion, exchange
or exercise of any securities issued by the Company on or prior to the Closing
Date and as set forth on Schedule 2.2 of this Agreement, (IV) up to 100,000
shares of Common Stock issued upon the exercise of non-qualified stock options
issued to employees, directors and independent contractors of the Company and/or
its Subsidiaries, (V) securities issued to any Person who is not an Affiliate as
consideration for an acquisition, purchase of stock or assets, merger,
consolidation, recapitalization or similar transaction at no less than the fair
market value at such time, (VI) Series B Preferred Stock issued to Dr. Naresh
Nagpal in exchange for certain obligations outstanding on the Initial Closing
Date owing to Dr. Naresh Nagpal, which Series B Preferred Stock shall have an
aggregate liquidation preference equal to the principal amount of such
obligation, and, in any event, which shall not have an aggregate liquidation
preference in excess of $991,000, (VII) up to 291,461 options exercisable into
shares of Common Stock issued after the Initial Closing Date pursuant to the
Company's 1996 Amended and Restated Stock Option Plan, as in effect on the date
hereof, and up to 291,461 shares of Common Stock issued upon exercise of such
options but only if the exercise price of such options (A) is fixed and (B)
equals or exceeds the fair market value per share of Common Stock (determined as
of the date of issuance of such options) and (VIII) any shares of Common Stock
issued as consideration in the settlement or other disposition in connection
with any legal and/or equitable claim that has been asserted, or could have been
asserted, by plaintiffs Robert P. Lehmann, M.D., Alan Baum, M.D., David A.
Dewahl, Jr., John Finlay, Janet G. Keats and Harry Near against the Corporation
in the civil action pending before the United States District Court for the
Southern District of Texas, Houston Division, docketed at Civil Action No.
H-97-3317.
"Observer" shall have the meaning set forth in Section 8.10(c) of this
Agreement.
"Patents" shall have the meaning set forth in Section 2.7 of this
Agreement.
"Performance Target" shall mean the valid authorization, execution and
delivery by the Company and the other parties thereto of management services
agreements with Practices, which Practices have, to the Purchaser's reasonable
satisfaction, at least $26,475,000, in the aggregate, of Collected Revenues for
the twelve months ending on the date of execution of each such management
service agreement or asset purchase agreement; so long as such agreements are
with Practices set forth on Schedule 1.0 (or such other Practices as are located
in the existing markets of the Company, as of the date hereof), are
substantially on the terms and conditions set forth on Schedule 1.0, and are
otherwise on terms and conditions reasonably consistent with the Company's
previous affiliation agreements (so long as no such agreement has early
termination rights).
"Performance Warrants" shall mean the number of Warrants equal to (i)
the quotient obtained by dividing (A) the Initial Purchase Price, or if the
Second Closing Date has occurred, the Total Purchase Price by (B) the Adjusted
Price minus (ii) the number of shares of Preferred Stock and Additional
Preferred Stock, if any purchased by the Purchaser pursuant to this Agreement
and (ii) the number of the Initial Warrants and Additional Warrants, if any,
purchased by the Purchaser pursuant to this Agreement.
"Permitted Business" shall mean the management of physician Practices
in the musculoskeletal sector and the provision of ancillary services related
thereto.
"Permitted Encumbrances" shall have the meaning set forth in Section
2.6 of this Agreement.
"Person" shall mean and include natural persons, corporations, limited
partnerships, general partnerships, limited liability companies, joint stock
companies, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations, whether or not
legal entities, and governments and agencies and political subdivisions thereof.
"Practice" shall mean any physician practice.
"Pre-Closing Periods" shall have the meaning set forth in Section 2.11
of this Agreement.
"Preemptive Notice" shall have the meaning set forth in Section 8.11
of this Agreement.
"Preemptive Price" shall mean the price equal to the fair market value
of the New Securities as determined in good faith by the Board of Directors.
"Preferred Stock" shall have the meaning set forth in the recitals of
this Agreement.
"Pro Rata Amount" shall mean the quotient obtained by dividing the
number of shares of Common Stock owned by the Purchaser on a Fully-Diluted Basis
(assuming that the Second Closing has occurred) by the total number of shares of
Common Stock on a Fully-Diluted Basis (assuming that the Second Closing has
occurred).
"Purchaser" shall have the meaning set forth in the first paragraph of
this Agreement.
"Registrable Securities" shall mean (i) any and all Common Stock
acquired by, or issuable to, the Purchaser or any of its Affiliates on or after
the date hereof (ii) any and all securities issuable upon the exercise of the
Warrants or conversion of the Preferred Stock and (iii) any securities issued or
issuable with respect to the Common Stock or other securities referred to in
clause (i) or (ii) by way of conversion, exchange, stock dividend or stock split
or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization or otherwise. As to any particular
Registrable Securities, once issued such securities shall cease to be
Registrable Securities when (A) a registration statement with respect to the
sale of such securities shall have become effective under the Securities Act and
such securities shall have been disposed of in accordance with such registration
statement, or (B) such securities shall have been sold in accordance with Rule
144 (or any successor provision) under the Securities Act.
"Registration" shall mean each Shelf Registration and each Incidental
Registration.
"Registration Expenses" shall mean all expenses incident to the
Company's performance of or compliance with Article VII, inclusive, including,
without limitation, all registration and filing fees, fees and expenses of
compliance with securities or blue sky laws (including reasonable fees and
disbursements of counsel in connection with blue sky qualifications of the
Registrable Securities), expenses of printing certificates for the Registrable
Securities in a form eligible for deposit with Depositary Trust Company,
messenger and delivery expenses, internal expenses (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), and fees and disbursements of counsel for the
Company and its independent certified public accountants (including the expenses
of any management review, cold comfort letters or any special audits required by
or incident to such performance and compliance), securities acts liability
insurance (if the Company elects to obtain such insurance), the reasonable fees
and expenses of any special experts retained by the Company in connection with
such registration, fees and expenses of other Persons retained by the Company
and reasonable fees and expenses of counsel (including local counsel) for
holders of Registrable Securities, selected by the holders of a majority of the
Registrable Securities to be included in such Registration; but not including
any underwriting fees, discounts or commissions attributable to the sale of
securities or fees.
"Registration Warrants" shall have the meaning set forth in Section
4.6 of this Agreement.
"Returns" shall have the meaning set forth in Section 2.11 of this
Agreement.
"Rule 144" shall mean Rule 144 promulgated under the Securities Act.
"SBA Forms" shall have the meaning set forth in Section 5.10 of this
Agreement.
"SBIA" shall have the meaning set forth in Section 8.6 of this
Agreement.
"Second Closing" shall have the meaning set forth in Section 4.2 of
this Agreement.
"Second Closing Date" shall have the meaning set forth in Section 4.2
of this Agreement.
"Second Closing Purchase Price" shall have the meaning set forth in
Section 4.3(b) of this Agreement.
"Second Closing Target" shall mean the valid authorization, execution
and delivery by the Company and the other parties thereto of management service
agreements with Practices, which Practices have, to the Purchaser's reasonable
satisfaction, at least $18,000,000, in the aggregate, of Collected Revenues for
the twelve months ending on the date of execution of each such management
service agreement or asset purchase agreement; so long as such agreements are
with Practices set forth on Schedule 1.0 (or such other Practices as are located
in the existing markets of the Company, as of the date hereof), are
substantially on the terms and conditions set forth on Schedule 1.0, and are
otherwise on terms and conditions reasonably consistent with the Company's
previous affiliation agreements (provided no such agreement shall contain early
termination rights).
"Securities" shall have the meaning set forth in the recitals of this
Agreement.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations of the Commission thereunder.
"Securities Laws" shall have the meaning set forth in Section 2.5 of
this Agreement.
"Senior Credit Documents" shall have the meaning set forth in the
recitals of this Agreement.
"Series B Preferred Stock" shall mean the preferred stock of the
Company issued or to be issued on the terms and conditions set forth on Exhibit
B attached hereto.
"Shares" shall mean the Common Stock and Preferred Stock.
"Shelf Registration" shall have the meaning set forth in Section
7.1(a) of this Agreement.
"Stark Amendments" shall have the meaning set forth in Section
2.13(a).
"Subsidiary" shall have the meaning set forth in Section 2.4(a) of
this Agreement.
"Taxes" shall mean all taxes, assessments, charges, duties, fees,
levies or other governmental charges, including, without limitation, all
Federal, state, local, foreign and other income, franchise, profits, capital
gains, capital stock, transfer, sales, use, occupation, property, excise,
severance, windfall profits, stamp, license, payroll, withholding and other
taxes, assessments, charges, duties, fees, levies or other governmental charges
of any kind whatsoever (whether payable directly or by withholding and whether
or not requiring the filing of a Return), all estimated taxes, deficiency
assessments, additions to tax, penalties and interest and shall include any
liability for such amounts as a result either of being a member of a combined,
consolidated, unitary or affiliated group or of a contractual obligation to
indemnify any person or other entity.
"Total Purchase Price" shall have the meaning set forth in Section
4.3(b) of this Agreement.
"Transaction Party" shall have the meaning set forth in Section 2.1 of
this Agreement.
"Warrant Agreement" shall have the meaning set forth in the recitals
of this Agreement.
"Warrants" shall have the meaning provided in the recitals of this
Agreement and, in any event, shall include the Initial Warrants, the Additional
Warrants, the Performance Warrants and the Registration Warrants.
ARTICLE II
REPRESENTATIONS OF THE COMPANY
ss.2.0 Representations of the Company. In order to induce the
Purchaser to enter into this Agreement and to purchase the Securities, the
Company represents and warrants to and agrees with the Purchaser that on each
Closing Date:
ss.2.1 Existence and Good Standing. The Company and each of its
Subsidiaries (each a "Transaction Party," and collectively, the "Transaction
Parties") is a Person, duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization. Each Transaction Party
has the requisite power and authority to own, lease and operate its properties
and to carry on its business as now being conducted and as proposed to be
conducted. Except as set forth in Schedule 2.1, each Transaction Party is duly
qualified or licensed to do business and is in good standing and is authorized
to do business, in each jurisdiction in which the character or location of the
properties owned, leased or operated by such entity or the nature of the
business conducted by such entity makes such qualification or license necessary,
except where any such failure to be duly qualified or licensed or in good
standing could not reasonably be expected to have a material adverse effect on
the condition (financial or otherwise), properties, assets, business,
liabilities, accounting treatment, results of operations or prospects of the
Transaction Parties, taken as a whole, or on the ability of any Transaction
Party to perform its respective obligations under any of the Documents (a
"Material Adverse Effect").
ss.2.2 Capital Stock. Immediately prior to giving effect to the
transactions contemplated hereby, the Company had an authorized capitalization
consisting of 35,000,000 shares of Common Stock, par value $0.001 per share
("Common Stock") of which 17,669,002 shares of Common Stock were outstanding and
10,000,000 shares of Preferred Stock, par value $0.01 per share ("Preferred
Stock") of which zero shares were outstanding. All outstanding shares of capital
stock of the Company (including, without limitation, those purchased by the
Purchaser hereunder) have been, and will, on each Closing Date, be duly
authorized and validly issued and fully paid and non-assessable. Except as set
forth on Schedule 2.2, and except for the Warrants and the Preferred Stock,
there will be no outstanding subscriptions, options, warrants, rights, calls,
commitments, conversion rights, rights of exchange, plans or other agreements
(including, without limitation, agreements with affiliated physicians or
Practices) or commitments, contingent or otherwise, of any character providing
for the purchase, redemption, acquisition, retirement, issuance or sale by any
Transaction Party of any shares of capital stock of any Transaction Party or
other securities exchangeable or convertible into capital stock of any
Transaction Party and there are no stock appreciation rights or phantom stock
plans outstanding. Schedule 2.2 sets forth the number of shares of Common Stock
which the Company is obligated to issue in connection with each specific item
set forth on Schedule 2.2 and described in the immediately preceding sentence,
after giving effect to the transactions contemplated thereby. In addition,
except as set forth herein, in the Warrant Agreement and on Schedule 2.2, there
are no rights, agreements, restrictions or encumbrances (such as preemptive
rights, rights of first refusal, rights of first offer, proxies, voting
agreements, voting trusts, registration rights agreements, shareholders
agreements, etc., whether or not any Transaction Party is a party thereto) nor
are there any restrictions on the transferability or sale of such capital stock
pursuant to any provision of law, contract or otherwise with respect to the
purchase, sale or voting of any shares of capital stock of any Transaction Party
(whether outstanding or issuable upon conversion, exchange or exercise of any
other security of any Transaction Party). Except as set forth in Schedule 2.2
and except for the Warrants, the Company has no outstanding bonds, debentures,
notes or other obligations the holders of which have the right to vote (or which
are convertible into or exercisable for securities the holders of which have the
right to vote). The shares of Company Common Stock to be issued upon exercise of
Warrants are duly and validly authorized and when issued upon exercise of
Warrants, will be duly and validly issued, fully paid and nonassessable, and
free and clear of all Liens and preemptive or other similar rights.
ss.2.3 Authorization and Validity of the Documents. Each Transaction
Party has the requisite power and authority to execute and deliver the Documents
to which it is a party and to perform its obligations thereunder. The execution,
delivery and performance of the Documents by the Transaction Parties and the
performance of their obligations hereunder have been duly authorized and
approved by all necessary action (including, without limitation, all action of
the Board of Directors and shareholders or other required Persons of each such
Transaction Party) and no other action on the part of such persons is necessary
to authorize the execution, delivery and performance of the Documents by the
Transaction Parties. Each of the Documents has been duly executed and delivered
by the Transaction Parties party thereto and, assuming due execution thereof by
the other parties thereto, is a valid and binding obligation of each Transaction
Party thereto enforceable against such Transaction Party in accordance with its
terms, except to the extent that its enforceability may be subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
the enforcement of creditors' rights generally and by general equitable
principles (regardless of whether such enforceability is considered in a
proceeding brought in equity or at law).
ss.2.4 Subsidiaries and Investments. (a) Set forth in Schedule 2.4
attached hereto is a list of (i) each Person in which the Company owns, directly
or indirectly, any equity or debt security and the extent (expressed in
percentage) of such ownership (each a "Subsidiary") and (ii) each Practice with
whom the Company or any of the its Subsidiaries has entered into a management
services agreement, acquisition agreement or affiliation agreement.
(b) All of the outstanding shares of capital stock or other equity
interests of each Subsidiary of the Company have been duly authorized and
validly issued, are fully paid and nonassessable, and are owned, of record and
beneficially, directly or indirectly, by the Company or a Subsidiary of the
Company, free and clear of all liens, encumbrances, restrictions and claims of
every kind except for liens, encumbrances, restrictions and claims set forth on
Schedule 2.4. No capital stock or other equity interest of any Subsidiary
constitutes Margin Stock.
ss.2.5 SEC and Other Documents; Financial Statements; Undisclosed
Liabilities. (a) The Company has delivered or made available to the Purchaser
the registration statement of the Company filed with the Commission in
connection with the Company's initial public offering of Common Stock, and all
exhibits, amendments and supplements thereto (collectively, the "Company
Registration Statement"), and each registration statement, report, including
annual and quarterly reports, proxy statement or information statement which are
set forth in Schedule 2.5(a) attached hereto, and all exhibits thereto prepared
by it or relating to its properties since the effective date of the Company
Registration Statement, each in the form (including exhibits and any amendments
thereto) filed with the Commission (and including the March 31, 1998 10-K of the
Company which has not yet been filed, collectively, the "Company Reports"). The
Company Reports were filed (or, in the case of the March 31, 1998 10-K, will be
filed) with the Commission in a timely manner and constitute all forms, reports
and documents required to be filed by the Company under the Securities Act, the
Exchange Act and the rules and regulations promulgated thereunder and any
applicable state securities laws (the "Securities Laws"). As of their respective
dates (and, as of the date hereof, in the case of the March 31, 1998, 10-K), the
Company Reports (i) complied in all material respects with the applicable
requirements of the Securities Laws and (ii) did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in the light of
the circumstances under which they were made, not misleading. There is no
unresolved violation asserted by any Government Authority with respect to any of
the Company Reports.
(b) Each of the balance sheets included in or incorporated by
reference into the Company Reports (including any related notes and schedules)
fairly presented the financial position of the entity or entities to which it
relates as of its date and each of the statements of operations, shareholders'
equity (deficit) and cash flows included in or incorporated by reference into
the Company Reports (including any related notes and schedules) fairly presented
the results of operations, retained earnings or cash flows, as the case may be,
of the entity or entities to which it relates for the periods set forth therein,
in each case in accordance with United States generally accepted accounting
principles consistently applied during the periods involved ("GAAP"), except as
may be noted therein and except, in the case of the unaudited statements,
subject to normal recurring year-end adjustments. The Company has heretofore
furnished the Purchaser with a pro forma combined balance sheet of the Company,
as of June 30, 1998, giving effect to the issuance of the Preferred Stock and
Warrants.
(c) Except as set forth on Schedule 2.5(c) attached hereto and except
in connection, with the transactions contemplated hereby and the Senior Credit
Documents, since December 31, 1997, no Transaction Party has: (i) failed to
conduct its business in the ordinary course in a manner consistent with past
practice; (ii) experienced any change, event or circumstance that could
reasonably be expected to have a Material Adverse Effect; (iii) other than in
the ordinary course of business consistent with past practice, purchased, sold,
leased, pledged, encumbered or otherwise acquired or disposed of any properties
or assets relating to its business or operations; (iv) experienced any material
damage, destruction or loss to or of any of its assets which are necessary to
the conduct of its business; (v) except in the ordinary course of business
consistent with past practice, made or agreed to make any increase in the
compensation or severance arrangement of any officer, director or employee; (vi)
paid (or committed to pay) any management fee or made (or committed to make) any
loan or distribution of its property or assets, or declared, paid or set aside
for payment any dividend or distribution with respect to its equity securities,
or purchased or redeemed (or committed to purchase or redeem) any of its equity
securities; (vii) written down or canceled any material Indebtedness or waived
or released any right or claim which individually or in the aggregate is
material; (viii) suffered any judgment with respect to, or made any settlement
of, any claim, suit, action or proceeding which could reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect; (ix) effected
any material change in accounting practices and procedures, other than changes
required as a result of changes in GAAP; (x) amended its organizational
documents; (xi) incurred or assumed any Indebtedness or guaranteed or otherwise
become responsible for any such liabilities, obligations or Indebtedness; (xii)
other than in the ordinary course of business consistent with past practice,
acquired or agreed to acquire by merging or consolidation with, or by purchasing
the assets or stock, of or by any other manner, any Person or division thereof
or otherwise acquire or agree to acquire any assets (other than inventory) which
are material to any Transaction Party taken together; (xiii) initiated or
settled any material litigation to which any Transaction Party is a party; (xiv)
failed to preserve intact its business organization; (xv) failed to keep
available the services of its officers and employees; (xvi) adopted or increased
any profit sharing, bonus, deferred compensation, savings, insurance, pension,
retirement, or other employee benefit plan for or with any of its employees;
(xvii) failed to maintain its reserves in a manner consistent with the policies
and principles used by the Company in connection with the preparation of the
balance sheets included in or incorporated by reference into the Company
Reports; (xviii) other than shares or options issued to employees, as set forth
on Schedule 2.2, issued or sold any shares of capital stock or any other
securities, or issued any securities convertible into, or options warrants or
rights to purchase or subscribe to, or entering into any arrangement or contract
with respect to the issue and sale of, any shares of its capital stock or any
other securities, or made any other changes in its capital structure; or (xix)
agreed to any of the foregoing.
(d) Except as set forth on Schedule 2.5(c), after giving effect to the
transactions contemplated hereby, neither the Company nor any of its
Subsidiaries shall have any outstanding Indebtedness except for Indebtedness
under the Credit Agreement.
ss.2.6 Title to Properties; Encumbrances; Leases. (a) The Transaction
Parties do not own, in fee or otherwise, any interest in any real property,
other than leasehold interests. Except for such properties and assets which have
been sold or otherwise disposed of in the ordinary course of business, each of
the Transaction Parties has good title to all of its properties and assets
(whether real, personal, mixed, tangible or intangible), subject to no
encumbrance, lien, charge or other restriction of any kind or character
("Encumbrances"), except for (i) Encumbrances for current taxes, assessments or
governmental charges or levies on property not yet due and delinquent, (ii)
Encumbrances arising by operation of law, (iii) other Encumbrances which could
not reasonably be expected to have a Material Adverse Effect and (iv)
Encumbrances arising under the Senior Credit Documents (Encumbrances of the type
described in clauses (i) - (iv) above are hereinafter sometimes referred to as
"Permitted Encumbrances"). Each Transaction Party owns or otherwise has the
right to use all of the property now used and material to the operation of the
business of the Transaction Parties taken as a whole, which personal property is
in good operating condition and repair, ordinary wear and tear excepted and
substantially fit for the purpose for which they are being utilized and
constitutes all of the property necessary to conduct its business as it is
presently being conducted.
(b) Schedule 2.6 attached hereto contains an accurate and complete
list of all material property (whether real, personal, mixed, tangible or
intangible) leased or sub-leased by the Transaction Parties, including all
amendments, extensions and other modifications (the "Leases"). Except as
otherwise set forth in Schedule 2.6 attached hereto, each Lease is in full force
and effect; the Transaction Parties have a good and valid leasehold interest in
and to all of the leased property, subject to no Encumbrances, except Permitted
Encumbrances; all rents and additional rents due to date from any of the
Transaction Parties in respect of each such Lease have been paid; no Transaction
Party has received notice that it is in default under any Lease; and, to the
knowledge of each of the Transaction Parties, there exists no event, occurrence,
condition or act (including the consummation of the Transaction) which, with the
giving of notice, the lapse of time or the happening of any further event or
condition, would become a default by any Transaction Party under any such Lease.
ss.2.7 Intellectual Property. Schedule 2.7 attached hereto contains an
accurate and complete description of all (a) registrations for material
trademarks and service marks and all pending applications for such registrations
owned by, assigned to or subject to assignment to the Transaction Parties
anywhere in the world and all material unregistered trademarks, trade names,
service marks, brand names, and business names (collectively "the Marks"); (b)
material copyrights, whether registered or unregistered, owned by, assigned to
or subject to assignment to the Transaction Parties anywhere in the world
(collectively "the Copyrights"); and (c) patents and patent applications owned
by, assigned to or subject to assignment to the Transaction Parties anywhere in
the world (collectively the "Patents"). Unless otherwise indicated on Schedule
2.6 or Schedule 2.7, the Company owns the entire right, title and interest in
and to the Marks, the Copyrights and the Patents free and clear of any
Encumbrances except for Permitted Encumbrances. Each item that is indicated as
registered on Schedule 2.7 has been duly registered, filed with or issued by the
appropriate authorities in the countries indicated on Schedule 2.7 and to the
knowledge of each of the Transaction Parties, all such registrations, filings
and issuances remain in full force and effect. Except as otherwise indicated on
Schedule 2.7, none of the Marks, the Copyrights or the Patents are the subject
of any pending, or to the knowledge of each of the Transaction Parties,
threatened opposition, interference, cancellation proceeding or other legal or
governmental proceeding before a registration or issuing authority in any
jurisdiction. Except as otherwise disclosed in Schedule 2.7, the conduct of the
Transaction Parties' business as presently conducted does not infringe, violate,
or constitute misappropriation of any trademark, service mark, copyright
(whether registered or unregistered), patent, trade secret, industrial design,
computer program, data base, know-how or other proprietary right (collectively
"Intellectual Property") of any other Person, nor, during the past six years,
has any Transaction Party received notice to the contrary from any Person. The
Company owns or has the right to use through assignment, lease, license or other
agreement all Intellectual Property necessary for the conduct of the business as
presently conducted. Except as set forth in Schedule 2.7, there are no pending
or, to the knowledge of each of the Transaction Parties, threatened material
claims by any Person for infringement of any Intellectual Property or unfair
competition by any Transaction Party. Except as set forth in Schedule 2.7, no
Person is infringing upon the Intellectual Property owned by, assigned to or
subject to assignment of, the Transaction Parties, and the Transaction Parties
are aware of no facts that would support such a claim by the Transaction
Parties. The consummation of the transaction contemplated hereby will not result
in the loss or impairment of the Transaction Parties' right to own or use any of
the Intellectual Property necessary to the conduct of the Transaction Parties'
business as presently conducted (including, but not limited to the Marks, the
Copyrights and the Patents) nor will it require the consent of any governmental
authority or third party.
ss.2.8 Material Contracts. Except as set forth on Schedule 2.8 and
Schedule 2.2 attached hereto on the Initial Closing Date, no Transaction Party
is bound by (a) any material agreement, contract or commitment, (b) any
agreement, indenture or other instrument which contains restrictions with
respect to payment of dividends or any other distribution in respect of its
capital stock, (c) any agreement, indenture or instrument relating to
Indebtedness (whether or not such Indebtedness is being repaid in connection
with the transactions contemplated hereby), (d) any agreement or contract with
any Affiliate, (e) any management service agreement, consulting agreement (which
entitles any Transaction Party to over $50,000 per year) or any other similar
type of contract, (f) any agreement, contract or commitment limiting the ability
of any Transaction Party to engage in any line of business or to compete with
any Person or to otherwise acquire property or conduct business in any area or
(g) any effective management service agreement and asset purchase agreements and
any agreement, arrangement or understanding executed or occurring since January
1, 1998, relating to the purchase or affiliation with, or proposed purchase or
affiliation with, or management of, any Practice. Except as otherwise set forth
on Schedule 2.8, each contract or agreement set forth on Schedule 2.8 (or
required to be set forth in Schedule 2.8) is in full force and effect and there
exists no material default or material event of default or to the knowledge of
each of the Transaction Parties, event, occurrence, condition or act (including
the consummation of the sale contemplated hereby) which, with the giving of
notice, the lapse of time or the happening of any other material event or
condition, could become a material default or material event of default
thereunder.
ss.2.9 Consents and Approvals; No Violations. The execution and
delivery of this Agreement and the other Documents by the Transaction Parties to
which any such Person is a party and compliance by each Transaction Party with
the terms and provisions hereof and thereof and the issuance of the Securities
by the Company and the consummation of the transactions contemplated hereby does
not and will not (a) violate or contravene any provision of the Certificates,
Articles of Incorporation or Bylaws of any Transaction Party, (b) violate or
contravene any statute, rule, regulation, licensing requirement, order or decree
of any court, arbitrator or any other public body or authority by which any
Transaction Party is bound or by which any of its properties or assets are
bound, (c) require any filing with, or permit, consent authorization,
qualification or approval of, or exemption from, or the giving of any notice to,
any governmental or regulatory body, agency or authority, or any other Person or
(d) result in a violation or breach of, conflict with, constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation, payment or acceleration) under, or result in
the creation of any Encumbrance (except pursuant to the Senior Credit Documents)
upon any of the properties or assets of any Transaction Party under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, license,
franchise, permit, agreement, lease, franchise agreement or any other instrument
or obligation to which any Transaction Party is bound, or by which it or any of
its properties or assets may be bound.
ss.2.10 Litigation. There is no action, suit, proceeding at law or in
equity, arbitration or administrative or other proceeding by or before (or, to
the knowledge of each of the Transaction Parties, any investigation by) any
governmental or other instrumentality or agency pending, or, to the knowledge of
each of the Transaction Parties, threatened, against or affecting any
Transaction Party or any such entity's properties or rights which could
reasonably be expected to have a Material Adverse Effect. No Transaction Party
is subject to any judgment, order or decree entered in any lawsuit or proceeding
which could reasonably be expected to have a Material Adverse Effect.
ss.2.11 Taxes. (a) Tax Returns. Each of the Transaction Parties has
timely filed or caused to be timely filed or will timely file or cause to be
timely filed with the appropriate taxing authorities all material returns,
statements, forms and reports for Taxes ( each a "Return" and collectively, the
"Returns") that are required to be filed by, or with respect to, the Transaction
Parties on or prior to the Closing Date. The Returns have accurately reflected
and will accurately reflect all material liability for Taxes of the Transaction
Parties for the periods covered thereby.
(b) Payment of Taxes. All Taxes and Tax liabilities of the Transaction
Parties for all taxable years or periods that end on or before each Closing Date
and, with respect to any taxable year or period beginning before and ending
after any Closing Date, the portion of such taxable year or period ending on and
including such Closing Date ("Pre-Closing Periods") have been timely paid or
accrued and adequately disclosed and fully provided for pursuant to the
financial statements which have been provided to the Purchaser by the Company
and are in accordance with GAAP.
(c) Other Tax Matters. (i) Schedule 2.11 attached hereto sets forth
(A) each taxable year or other taxable period of the Transaction Parties for
which an audit or other examination of Taxes by the appropriate tax authorities
of any nation, state or locality is currently in progress (or scheduled as of
the Initial Closing Date to be conducted) together with the names of the
respective tax authorities conducting (or scheduled to conduct) such audit or
examination and a description of the subject matter of such audit or
examination, (B) the most recent taxable year or other taxable period for which
an audit or other examination relating to Federal income taxes of any
Transaction Party has been finally completed and the disposition of such audit
or examination, (C) the taxable years or other taxable periods of any
Transaction Party which will not be subject to the normally applicable statute
of limitations by reason of any waiver or extension of the applicable statute of
limitations for Taxes entered into or granted by or on behalf of such
Transaction Party, (D) the amount of any proposed adjustments (and the principal
reason therefor) relating to any Returns for Tax liability of any Transaction
Party which have been proposed or assessed by any taxing authority and (E) a
list of all notices received by any Transaction Party from any taxing authority
relating to any issue which could affect the Tax liability of any Transaction
Party, which issue has not been finally determined and which, if determined
adversely to such Transaction Party, could result in a Tax liability.
(ii) Except as set forth on Schedule 2.11, no Transaction Party has
been included in any "consolidated," "unitary" or "combined" Return provided for
under the law of the United States, any foreign jurisdiction or any state or
locality with respect to Taxes for any taxable period for which the statute of
limitations has not expired.
(iii)All Taxes which any Transaction Party is (or was) required by law
to withhold or collect have been duly withheld or collected, and have been
timely paid over to the proper authorities to the extent due and payable.
(iv) None of the Transaction Parties is a "United States real property
holding corporation" within the meaning of Section 897(c)(2) of the Code.
(v) There are no tax sharing, allocation, indemnification or similar
agreements or arrangements in effect as between any Transaction Party or any
predecessor or affiliate thereof and any other party under which the Purchaser,
or any of its Affiliates, or any Transaction Party could be liable for any Taxes
or other claims of any party.
(vi) The Transaction Parties have not applied for, been granted, or
agreed to any accounting method change for which it will be required to take
into account any adjustment under Section 481 of the Code or any similar
provision of the Code or the corresponding tax laws of any nation, state or
locality.
(vii)No indebtedness of any Transaction Party consists of "corporate
acquisition indebtedness" within the meaning of Section 279 of the Code.
(viii) The Transaction Parties are not a party to any agreement that
would require them to make any payment that would constitute an "excess
parachute payment" for purposes of Sections 280G and 4999 of the Code.
ss.2.12 Liabilities. Except as set forth on Schedule 2.12 attached
hereto, no Transaction Party has any material outstanding claims, liabilities or
indebtedness, contingent or otherwise, except as set forth in the balance sheet
included in the Company's March 31, 1998 audited financial statements except for
such as has been incurred in the ordinary course of business and could not be
reasonably expected to have a Material Adverse Effect and is not Indebtedness.
No Transaction Party is in default in respect of the terms or conditions of any
Indebtedness other than such defaults as could not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect.
ss.2.13 Compliance with Laws; Permits; Billing Practices. (a) Each of
the Transaction Parties are in compliance with all applicable laws, regulations,
licensing requirements (including without limitation, with respect to leasing
employees), orders, judgments and decrees and have obtained all required
governmental approvals and permits in each jurisdiction in which they currently
do business, including the right to receive Medicare and Medicaid
reimbursements, except where the failure to so comply or obtain, individually or
in the aggregate, could not reasonably be expected to have a Material Adverse
Effect or give rise to criminal liability. Without limiting the generality of
the foregoing:
(i) Each of the Company and its Subsidiaries has timely filed all
reports required to be filed in connection with federal Medicare and applicable
state Medicaid programs and due on or before each Closing Date, and all required
reports are true and complete in all material respects; there are no claims,
actions or appeals pending (and neither the Company nor any of its Subsidiaries
has filed anything that would result in any claims, actions or appeals) before
any commission, board or agency with respect to any state or federal Medicare or
Medicaid cost reports or claims filed by the Company or any of its Subsidiaries
on or before the date hereof, or with respect to any disallowances by any
intermediary, carrier, other insurer, commission, board or agency in connection
with any audit of any cost reports that, if adversely determined, could
reasonably be expected to have a Material Adverse Effect; no validation review
or program integrity review related to the Company or any of its Subsidiaries
has been conducted with respect to the Company or any of its Subsidiaries by any
commission, board or agency in connection with federal Medicare or state
Medicaid programs, and no such reviews are scheduled, pending or, to the
Company's knowledge, threatened against or affecting the Company or any of its
Subsidiaries; each of the Company and its Subsidiaries has timely filed all
material reports, data and other information required by any other Governmental
Authority with authority to regulate the Company or any of its Subsidiaries or
its business in any manner; each of the Company and its Subsidiaries is in
compliance in all material respects with all rules, regulations and requirements
of all health Governmental Authorities, except where such noncompliance would
not have a Material Adverse Effect; and the conduct of the business of each of
the Company and its Subsidiaries does not violate 42 U.S.C. ss.1320a-7b (the
"Anti-Kickback Statute") or 42 U.S.C. ss.1395nn (the "Stark Amendments"),
including all amendments thereto.
(ii) Without limiting anything contained in Section 2.13(a)(i), none
of the Company or any of its Subsidiaries, or any of the Company's or any of its
Subsidiaries' executive offers or directors, or Persons who provide professional
services on behalf of the Company or any of its Subsidiaries, has:
(A) knowingly and willfully made or caused to be made a false
statement or representation of a material fact in any application for any
benefit or payment;
(B) knowingly and willfully made or caused to be made any false
statement or representation of a material fact for use in determining rights to
any benefit or payment;
(C) presented or caused to be presented a claim for reimbursement
under CHAMPUS, Medicare, Medicaid, or other state health care program that is
(1) for an item or service that the Person presenting or causing to be presented
knows or should know was not provided as claimed, or (2) for an item or service
and the Person presenting knows or should know that the claim is false or
fraudulent; (D) failed to disclose knowledge of the occurrence of any event
affecting the initial or continuing right of a claimant to any benefit or
payment on its own behalf or on behalf of another, with intent to fraudulently
secure such benefit or payment; or
(E) knowingly and willfully made or caused to be made or induced or
sought to induce the making of any false statement or representation (or omitted
to state a fact required to be stated therein or necessary to make the
statements contained therein not misleading) of a material fact with respect to
(1) the conditions or operations of a Practice in order that the Practice may
quality for CHAMPUS, Medicare, Medicaid or other state health care program
certification, or (2) information required to be proved under ss.1124A of the
Social Security Act (42 U.S.C ss.1320a-3).
(iii) Without limiting anything contained in Section 2.13(a)(i), there
are no Medicare, Medicaid or CHAMPUS recoupments or recoupments of any other
third-party payor being sought, threatened, requested or claimed against the
Company or any of its Subsidiaries.
(b) Without limiting anything contained in Section 2.13(a)(i), all
billing practices by the Company and its Subsidiaries to all third party payors,
including, but not limited to, the federal Medicare program, state Medicaid
programs and private insurance companies, have been true, fair and correct and
in compliance with all applicable laws, regulations and policies of all such
third party payors. Neither the Company nor any of its Subsidiaries has billed
for or received any payment or reimbursement in excess of amounts allowed by
law.
ss.2.14 Employment Relations. The Transaction Parties are in
compliance in all material respects, with all Federal, state or other applicable
laws, domestic or foreign, respecting employment and employment practices, terms
and conditions of employment and wages and hours, and have not, and are not,
engaged in any unfair labor practice;
(a) No unfair labor practice complaint against any Transaction Party
is pending before the National Labor Relations Board;
(b) There is no labor strike, dispute, slowdown or stoppage actually
pending or threatened against or involving any Transaction Party;
(c) No material claim in respect of the employment of any employee has
been asserted in writing or, to the knowledge of each of the Transaction
Parties, asserted orally or threatened, against the Transaction Parties;
(d) The Transaction Parties have not experienced any material labor
difficulty in the past three years; and
(e) There has not been since December 31, 1997 any material adverse
change in the relations of the Transaction Parties with their employees.
ss.2.15 Employee Benefit Plans. (a) List of Plans. Set forth in
Schedule 2.15 attached hereto is an accurate and complete list of all domestic
and foreign (i) "employee benefit plans," within the meaning of Section 3(3) of
ERISA; (ii) bonus, stock option, stock purchase, restricted stock, incentive,
profit-sharing, pension or retirement, deferred compensation, medical, life,
disability, accident, salary continuation, severance, accrued leave, vacation,
sick pay, sick leave, supplemental retirement and unemployment benefit plans,
programs, arrangements, commitments and/or practices (whether or not insured);
and (iii) employment, consulting, termination, severance, non-competition
contracts or agreements; in each case for active, retired or former employees or
directors/whether or not any such plans, programs, arrangements, commitments,
contracts, agreements and/or practices (referred to in (i), (ii) or (iii) above)
are in writing or are otherwise exempt from the provisions of ERISA; that have
been established, maintained or contributed to (or with respect to which an
obligation to contribute has been undertaken) or with respect to which any
potential liability is borne by the Company or any of its Subsidiaries
(including, for this purpose and for the purpose of all of the representations
in this Section 2.15, any predecessors to the Company or to any of its
Subsidiaries and all employers (whether or not incorporated) that are by reason
of common control treated together with the Company, and/or any of its
Subsidiaries as a single employer (i) within the meaning of Section 414 of the
Code or (ii) as a result of the Company or any Subsidiary being or having been a
general partner of any such employer), since September 2, 1974 ("Employee
Benefit Plans"). Each Employee Benefit Plan is in writing.
(b) Status of Plans. Each Employee Benefit Plan complies in form with
the requirements of all applicable laws, including, without limitation, ERISA
and the Code, and has at all times been maintained and operated in substantial
compliance with its terms and the requirements of all applicable laws,
including, without limitation, ERISA and the Code. No complete or partial
termination of any Employee Benefit Plan has occurred or is expected to occur.
Neither the Company nor any of its Subsidiaries has any commitment, intention or
understanding to create, modify or terminate any Employee Benefit Plan. Except
as required to maintain the tax-qualified status of any Employee Benefit Plan
intended to qualify under Section 401(a) of the Code, no condition or
circumstance exists that would prevent the amendment or termination of any
Employee Benefit Plan. No event has occurred and no condition or circumstance
has existed that could result in a material increase in the benefits under or
the expense of maintaining any Employee Benefit Plan from the level of benefits
or expense incurred for the most recent fiscal year ended thereof.
(c) No Pension Plans. No Employee Benefit Plan is an "employee pension
benefit plan" (within the meaning of Section 3(2) of ERISA) subject to Section
412 of the Code or Section 302 or Title IV of ERISA. Except as set forth on
Schedule 2.15, no Transaction Party has ever maintained or contributed to, or
had any obligation to contribute to (or borne any liability with respect to) any
"multiple employer plan" (within the meaning of the Code or ERISA) or any
"multiemployer plan" (as defined in Section 4001(a)(3) of ERISA).
(d) Liabilities. Neither the Company nor any of its Subsidiaries
maintains any Employee Benefit Plan which is a "group health plan" (as such term
is defined in Section 607(1) of ERISA or Section 5000(b)(1) of the Code) that
has not been administered and operated in all respects in compliance with the
applicable requirements of Section 601 of ERISA and Section 4980B(f) of the Code
and neither the Company nor any of its Subsidiaries is subject to any material
liability, including, without limitation, additional contributions, fines,
taxes, penalties or loss of tax deduction as a result of such administration and
operation. Neither the Company nor any of its Subsidiaries maintains any
Employee Benefit Plan (whether qualified or nonqualified within the meaning of
Section 401(a) of the Code) providing for post-employment or retiree health,
life and/or other welfare benefits and having unfunded liabilities, and neither
the Company nor any of its Subsidiaries have any obligation to provide any such
benefits to any retired or former employees or active employees following such
employees' retirement or termination of service. Neither the Company nor any of
its Subsidiaries maintains any Employee Benefit Plan which is an "employee
welfare benefit plan" (as such term is defined in Section 3(1) of ERISA) that
has provided any "disqualified benefit" (as such term is defined in Section
4976(b) of the Code) with respect to which an excise tax could be imposed.
Neither the Company nor any of its Subsidiaries has any unfunded
liabilities pursuant to any Employee Benefit Plan that is not intended to be
qualified under Section 401(a) of the Code.
Neither the Company nor any of its Subsidiaries has incurred any
liability for any tax or excise tax arising under Chapter 43 of the Code, and no
event has occurred and no condition or circumstance has existed that could give
rise to any such liability.
There are no actions, suits or claims pending, or, to the best
knowledge and belief of each of the Transaction Parties, threatened, anticipated
or expected to be asserted against any Employee Benefit Plan or the assets of
any such plan (other than routine claims for benefits and appeals of denied
routine claims). No civil or criminal action brought pursuant to the provisions
of Title I, Subtitle B, Part 5 of ERISA is pending, threatened, anticipated or
expected to be asserted against the Company or any of its Subsidiaries or any
fiduciary of any Employee Benefit Plan, in any case with respect to any Employee
Benefit Plan. No Employee Benefit Plan or any fiduciary thereof has been the
direct or indirect subject of an audit, investigation or examination by any
governmental or quasi-governmental agency.
(e) Contributions. Full payment has been made of all amounts which the
Company or any of its Subsidiaries is required, under applicable law or under
any Employee Benefit Plan or any agreement relating to any Employee Benefit Plan
to which the Company or any of its Subsidiaries is a party, to have paid as
contributions or premiums thereto as of the last day of the most recent fiscal
year of such Employee Benefit Plan ended prior to the date hereof. All such
contributions and/or premiums have been fully deducted for income tax purposes
and no such deduction has been challenged or disallowed by any governmental
entity, and to the best knowledge and belief of each of the Transaction Parties,
no event has occurred and no condition or circumstance has existed that could
give rise to any such challenge or disallowance. The Company has made adequate
provision for reserves to meet contributions and premiums and any other
liabilities that have not been paid or satisfied because they are not yet due
under the terms of any Employee Benefit Plan, applicable law or related
agreements. Benefits under all Employee Benefit Plans are as represented and
have not been increased subsequent to the date as of which documents have been
provided.
(f) Tax Qualification. Each Employee Benefit Plan intended to be
qualified under Section 401(a) of the Code is so qualified. Each trust
established in connection with any Employee Benefit Plan which is intended to be
exempt from Federal income taxation under Section 501(a) of the Code has been
determined to be so exempt by the Internal Revenue Service. Since the date of
each most recent determination referred to in this paragraph (f), no event has
occurred and no condition or circumstance has existed that resulted or is likely
to result in the revocation of any such determination or that could adversely
affect the qualified status of any such Employee Benefit Plan or the exempt
status of any such trust.
(g) Transactions. Neither the Company nor any of its Subsidiaries nor
any of their respective directors, officers, employees or, to the best knowledge
and belief of each of the Transaction Parties, other persons who participate in
the operation of any Employee Benefit Plan or related trust or funding vehicle,
has engaged in any transaction with respect to any Employee Benefit Plan or
breached any applicable fiduciary responsibilities or obligations under Title I
of ERISA that would subject any of them to a tax, penalty or liability for
prohibited transactions or breach of any obligations under ERISA or the Code or
would result in any claim being made under, by or on behalf of any such Employee
Benefit Plan by any party with standing to make such claim.
(h) Triggering Events. The execution of this Agreement and the
consummation of the transactions contemplated hereby, do not constitute a
triggering event under any Employee Benefit Plan, policy, arrangement,
statement, commitment or agreement, whether or not legally enforceable, which
(either alone or upon the occurrence of any additional or subsequent event) will
or may result in any payment (whether of severance pay or otherwise), "parachute
payment" (as such term is defined in Section 280G of the Code), acceleration,
vesting or increase in benefits to any employee or former employee or director
of the Company or any of its Subsidiaries. No Employee Benefit Plan provides for
the payment of severance, termination, change in control or similar-type
payments or benefits.
(i) Documents. The Company has delivered or caused to be delivered to
the Purchaser and its counsel true and complete copies of all material documents
in connection with each Employee Benefit Plan, including, without limitation
(where applicable): (i) all Employee Benefit Plans as in effect on the date
hereof, together with all amendments thereto, including, in the case of any
Employee Benefit Plan not set forth in writing, a written description thereof;
(ii) all current summary plan descriptions, summaries of material modifications,
and material communications; (iii) all current trust agreements, declarations of
trust and other documents establishing other funding arrangements (and all
amendments thereto and the latest financial statements thereof); (iv) the most
recent Internal Revenue Service determination letter obtained with respect to
each Employee Benefit Plan intended to be qualified under Section 401(a) of the
Code or exempt under Section 501(a) of the Code; (v) the annual report on
Internal Revenue Service Form 5500-series for each of the last three years for
each Employee Benefit Plan required to file such form; (vi) the most recently
prepared financial statements for each Employee Benefit Plan for which such
statements are required; and (vii) all contracts and agreements relating to each
Employee Benefit Plan, including, without limitation, service provider
agreements, insurance contracts, annuity contracts, investment management
agreements, subscription agreements, participation agreements, and recordkeeping
agreements and collective bargaining agreements.
ss.2.16 Environmental Laws and Regulations. Except as could not
reasonably be expected to have a Material Adverse Effect:
(a) No Transaction Party has generated, used, treated or stored any
Hazardous Materials and, to the knowledge of each of the Transaction Parties, no
Hazardous Materials have been generated, used, treated or stored, or released or
disposed by any Transaction Party in each case, except in compliance with
Environmental Laws.
(b) The Transaction Parties are in compliance in all material respects
with Environmental Laws and the terms and conditions of permits issued under
such Environmental Laws.
(c) There are no pending or, to the knowledge of each of the
Transaction Parties, threatened Environmental Claims against any Transaction
Party or, to the knowledge of the Transaction Parties, any Company Property.
(d) There are no facts, circumstances, conditions or occurrences
regarding any Company Property that could reasonably be anticipated (i) to form
the basis of an Environmental Claim against the Company, any of its Subsidiaries
or any Company Property or assets, or (ii) to cause such Company Property or
assets to be subject to any restrictions on its ownership, occupancy, use or
transferability under any Environmental Law.
ss.2.17 Interests in Clients, Suppliers, Etc. Except as set forth on
Schedule 2.17 attached hereto, no Transaction Party and none of their respective
officers, directors or shareholders possess, directly or indirectly, any
financial interest in, and is not a director, officer or employee of, any entity
which is a client, supplier, customer, lessor, lessee or competitor or potential
competitor of any Transaction Party. Ownership of securities of a company whose
securities are registered under the Exchange Act of 1% or less of any class of
such securities shall not be deemed to be a financial interest for purposes of
this Section 2.17.
ss.2.18 Physician Relationships. The transactions contemplated hereby
will not have a material adverse effect on the relationship of the Company or
any of its Subsidiaries with any physician or Practice. Except as set forth in
Schedule 2.18, which is attached hereto for disclosure purposes only and not
with a view to eliminate the indemnification obligations relating to this
representation, since December 31, 1997, no physician or Practice has indicated
to any Transaction Party that such person is reasonably likely to stop
practicing with any Practice and neither the Company nor any of its Subsidiaries
has any reason to believe that any physician or Practice has any intention to
discontinue its affiliation with the Company.
ss.2.19 Accounts Receivable. The amount of all accounts receivable,
unbilled invoices and other debts due or recorded in the accounting records of
the Transaction Parties as being due to the Transaction Parties as at the date
hereof (less the amount of any provision or reserve therefor made in the
accounting records of such Transaction Party) represent sales actually made in
the ordinary course of business, represent or will represent actual indebtedness
incurred by the applicable account debtors and were calculated in accordance
with GAAP. There has been no material adverse change since December 31, 1997 in
the amount, aging or collectibility of accounts receivable or other debts due to
any Transaction Party or the allowances with respect thereto, or accounts
payable of any Transaction Party, from that reflected in the Company Reports.
ss.2.20 No Misstatements or Omissions; Projections. No representation
or warranty by any Transaction Party contained in this Agreement and no
statement contained in any certificate, schedule, exhibit or other instrument
specified or referred to in this Agreement or any other Document whether
heretofore furnished to the Purchaser or hereafter furnished to the Purchaser
pursuant to this Agreement or any other Document contains as of each Closing
Date or will contain any untrue statement of a material fact or omits or will
omit as of the date of such document any material fact necessary to make the
statements contained therein in light of the circumstances under which such
statement was made, not misleading. The financial projections provided by the
Company to the Purchaser were prepared in good faith using the best information
available to management of the Company and represent management's good faith
estimates of the future performance of the Company for the periods referred to
therein. The Company is not aware of any material facts or circumstances which
would render such financial projections unreasonable or unobtainable; provided,
however, it being recognized by the Purchaser that actual results may differ
from the projections and no representation is made that the projections will in
fact be attained.
ss.2.21 Broker's or Finder's Fees. No agent, broker, person or firm
acting on behalf of any Transaction Party is, or will be, entitled to any
commission or broker's or finder's fees from any of the parties hereto, or from
any Person controlling, controlled by or under common control with any of the
parties hereto, in connection with any of the transactions contemplated hereby.
ss.2.22 Investment Company Act. No Transaction Party is an "investment
company" or a company "controlled" by an "investment company," within the
meaning of the Investment Company Act of 1940, as amended.
ss.2.23 Delaware Takeover Law. The purchase of the Securities by the
Purchaser has been approved by the Board of Directors and there shall be no
restriction on the Purchaser or any of its Affiliates pursuant to Section 203 of
the Delaware General Corporation Law.
ss.2.24 Year 2000 Reprogramming. The costs to the Company and its
Subsidiaries of reprogramming required to permit the proper functioning in and
following the year 2000, of the Company's or any of its Subsidiaries' (i)
computer systems and (ii) equipment containing embedded microchips (including
systems and equipment supplied by others) and the testing of all such systems
and equipment and of the reasonably foreseeable consequences of year 2000
(including, without limitation, reprogramming errors and the failure of others'
systems or equipment) could, individually or in the aggregate, not reasonably be
expected to have a Material Adverse Effect. Except for the cost of such of the
reprogramming referred to in the preceding sentence as may be necessary, the
computer and management information systems of the Company and its Subsidiaries
are sufficient to permit the Company and its Subsidiaries to conduct its
business without such conduct resulting in a Material Adverse Effect.
ss.2.25 Practice Management Agreements; Affiliations. As of the
Initial Closing Date, the Company is affiliated with 28 Practices, comprising
136 physicians, in seven states, and operates 1 IPA, comprising 42 physicians,
in Arizona and manages three outpatient ancillary surgery centers.
ss.2.26 6Securities Law Compliance. Assuming that the representations
set forth in Article III are true and correct in all material respects, the
offering, issuance, sale and delivery of the Securities to the Purchaser is
exempt from the registration requirements of the Securities Act. The Company has
complied with, or is exempt from, all registration requirements of all
applicable state securities laws in connection with the offering, issue, sale
and delivery of the Securities.
ss.2.27 Transactions with Affiliates. Except as set forth on Schedule
2.27, none of the Transaction Parties has entered into any transaction or series
of related transactions, whether or not in the ordinary course of business, with
any Affiliate of any Transaction Party.
ss.2.28 Capital Stock Reserved. Sufficient shares of the Company's
Common Stock have been authorized and duly reserved for issuance upon conversion
of the Securities.
ss.2.29 No Conflict of Rights. Set forth on Schedule 2.29 is a
description of all registration rights held by any Person. The registration
rights granted to the Purchaser pursuant to Article VII do not conflict with any
other registration rights granted by the Company.
ss.2.30 Other Representations and Warranties. Each of the
representations and warranties contained in the Credit Agreement as in effect on
the Initial Closing Date are hereby confirmed and restated, each such
representation and warranty, together with all related definitions and ancillary
provisions and any information contained in any schedule to the Credit
Agreement, as in effect on the date hereof relating thereto, being hereby
incorporated by reference into this Agreement (without duplication) as a
representation and warranty to the Purchaser as if specifically set forth in
this Section 2.30 (each such document referred to therein as having been
delivered to a "Lender" thereunder having been delivered to the Purchaser
hereunder).
ss.2.31 SBIC Information. All information set forth in the SBA Forms
regarding the Company and its Affiliates is accurate and complete in all
material respects. Copies of such forms have been, on or prior to the date
hereof, completed and executed by the Company and delivered to the Purchaser.
ss.2.32 SBIC Eligibility. The Company and its Subsidiaries do not
engage in any activity which would render the Company ineligible to receive
financing assistance from a Small Business Investment Company as provided in 13
CFR 107.720.
ss.2.33 Company Awareness. The Company is aware that the Purchaser is
a Federal licensee under the SBIA.
ss.2.34 Use of Proceeds. All of the proceeds from the sale of the
Securities shall be used for general corporate purposes, acquisitions and the
repayment of Indebtedness of the Company and not for any purposes which would
violate 13 CFR 107.720.
ss.2.35 Employee Licensing Matters. The transactions contemplated
hereby will not cause any adverse change (i) to the Company's "experience
modifier" as it relates to unemployment insurance in the various states in which
the Company or its Subsidiaries operate, or (ii) to the Company's qualification
to act as an "employee leasing arrangement", "employee leasing business",
"employee leasing company" or similar statutory qualification.
ss.2.36 Representations Related to the Practices. The Company hereby
represents and warrants that the Practices set forth on Schedule 2.4 as required
by Section 2.4(b) of this Agreement, shall be deemed to be Subsidiaries of the
Company for the purposes of Sections 2.1, 2.5(c), 2.9, 2.10, 2.12, 2.13, 2.14,
2.15 (other than relating to the disclosures required to be made on Schedule
2.15), 2.16, 2.20, 2.21, 2.22 and 2.27; provided, however, that any such
representation or warranty shall be deemed to be breached only in the event that
applying any such representation and warranty to such Practices could reasonably
be expected, individually or in the aggregate, to have a Material Adverse Effect
on the Transaction Parties (but without regard to any other "materiality",
"material adverse effect", "substantial compliance" or similar exception
contained in such representations or warranties).
ARTICLE III
REPRESENTATIONS OF THE PURCHASER
ss.3.0 Representations of the Purchaser. In order to induce the
Company to enter into this Agreement and in order to induce the Company to issue
the Securities, the Purchaser represents, warrants and agrees as follows:
ss.3.1 Existence and Good Standing; Power and Authority. The Purchaser
is duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization. The Purchaser has the requisite power and
authority to execute and deliver the Documents to which it is a party and
perform its obligations thereunder. Each of the Documents to which it is a party
has been duly authorized and approved by the Purchaser, and assuming due
execution by the other parties thereto is a valid and binding obligation of the
Purchaser enforceable against the Purchaser in accordance with its terms, except
to the extent that its enforceability may be subject to applicable bankruptcy,
insolvency, reorganization, moratorium and other similar laws effecting the
enforcement of creditors' rights generally and by general equitable principles
(regardless of whether such enforceability is considered in a proceeding brought
in equity or law).
ss.3.2 Restrictive Documents. The Purchaser is not subject to any
mortgage, lien, lease, agreement, instrument, order, law, rule, regulation,
judgment or decree, or any other restriction of any kind or character, which
would prevent consummation by the Purchaser of the transactions contemplated
hereby or which would result in a violation of breach of, conflict with,
constitute (with or without due notice or lapse of time or both) a default
under, or result in the creation of any Encumbrance on the Securities under the
terms of any agreement to which the Purchaser is a party.
ss.3.3 Purchase for Investment. (a) The Purchaser will acquire the
Securities for its own account for investment and not with a view toward any
resale or distribution thereof; provided, however, that the disposition of the
Purchaser's property shall at all times remain within the sole control of the
Purchaser.
(b) The Purchaser understands that the Securities have not been
registered under the Securities Act or under any state securities laws and may
not be sold or transferred unless they are subsequently registered under the
Securities Act and any applicable state or other securities laws, or unless
exemptions from registration under such laws are available;
(c) The Purchaser represents that it is experienced in investment
matters, fully understands the transactions contemplated by this Agreement, has
the knowledge and experience in financial matters as to be capable of evaluating
the merits and risks of its investment and has the financial ability and
resources to bear the economic risks of its investment;
(d) The Purchaser represents and warrants that the Company has given
the Purchaser the opportunity to ask questions and receive answers concerning
the Company, and the Company has made available to the Purchaser an opportunity
to conduct such investigations and reviews as it has requested to conduct and
all of those investigations and reviews have been completed;
(e) The Purchaser acknowledges that it has received no general
solicitation or general advertising, and that the Purchaser's representatives
have attended no seminar or meeting with respect to the Securities, nor is it
aware of any such solicitation or advertisement that may have been received by
others;
(f) The Purchaser is an "accredited investor" as defined in Rule
501(a) under the Securities Act.
ss.3.4 Broker's or Finder's Fees. No agent, broker, person or firm
acting on behalf of the Purchaser is, or will be, entitled to any commission or
broker's or finder's fees from any Transaction Party, or from any Person
controlling, controlled by or under common control with any Transaction Party,
in connection with the transactions contemplated hereby.
ARTICLE IV
ISSUANCE OF SECURITIES; PAYMENT OF SUBSCRIPTION PRICE; CLOSINGS
ss.4.1 Issuance of Initial Securities. Subject to the terms and
conditions set forth in this Agreement, on the Initial Closing Date, the Company
agrees to sell to the Purchaser, and the Purchaser agrees to purchase the
Initial Securities. Delivery of the Initial Securities to be purchased by the
Purchaser pursuant to this Agreement shall be made, pursuant to Section 4.5, on
the Initial Closing Date by the Company to the Purchaser, against payment of the
Initial Purchase Price.
ss.4.2 Issuance of Additional Securities. (a) Subject to the terms and
conditions set forth in this Agreement, on the Second Closing Date, the Company
agrees to sell to the Purchaser, and the Purchaser agrees to purchase the
Additional Securities (the "Second Closing"). Delivery of the Additional
Securities to be purchased by the Purchaser pursuant to this Agreement shall be
made, pursuant to Section 4.5, on the Second Closing Date by the Company to the
Purchaser, against payment of the Second Closing Purchase Price. In the event
the condition set forth in Section 5.15 hereof has not been satisfied on or
prior to July 30, 1998 (as such date may be extended, the "Second Closing
Date"), the Purchaser may waive the application of such condition, in which case
the Company agrees to use its best efforts to satisfy such condition by
September 8, 1998. The Purchaser shall retain the right to purchase the
Additional Securities through and until September 8, 1998 and, in any event, the
Purchaser may, in its sole discretion, waive any conditions to any Closing.
(b) In connection with the Second Closing, the Company shall create a
new series of preferred stock (the "Additional Preferred Stock"), which
Additional Preferred Stock shall contain provisions substantially the same as
the Preferred Stock issued as of the date hereof and shall have (i) a
liquidation preference per share of Additional Preferred Stock equal to the
Additional Preferred Stock Price Per Share, (ii) dividend and distribution
rights which shall be pari passu with the Preferred Stock, based on the total
liquidation preferences (including accrued dividends) of the respective series
of preferred stock, (iii) voting rights which shall be pari passu with the
Preferred Stock, based on the total liquidation preferences (including accrued
dividends) of the respective series of preferred stock, (iv) rights to receive
distributions upon the occurrence of a liquidation which shall be pari passu
with the Preferred Stock, based on the total liquidation preferences (including
accrued dividends) of the respective series of preferred stock and (v) shall
otherwise be in form and substance satisfactory to the Purchaser. The Additional
Preferred Stock shall be convertible into shares of Common Stock on
substantially the same terms as the Preferred Stock, except that the number of
shares of Common Stock issuable upon conversion of the Additional Preferred
Stock shall be equal to the Second Closing Purchase Price divided by the
Additional Preferred Stock Price Per Share (as adjusted for anti-dilutive
issuances, in a manner substantially similar to the Preferred Stock (including,
without limitation events that occur between the Closing Date and the Second
Closing Date, which result in the Preferred Stock receiving any anti-dilution
adjustment)).
(c) In connection with the Second Closing, the Company shall amend the
Certificate of Designation to provide for pari passu treatment of the Additional
Preferred Stock as set forth in paragraph (b) above.
ss.4.3 Purchase Price. (a) Subject to the terms and conditions set
forth in this Agreement, in full consideration for the sale by the Company of
the Initial Securities to the Purchaser, the Purchaser shall deliver to the
Company $7,000,000 (the "Initial Purchase Price") on the Initial Closing, by
wire transfer of immediately available funds to the accounts specified by the
Company.
(b) Subject to the terms and conditions set forth in this Agreement,
in full consideration for the sale by the Company of the Additional Securities
to the Purchaser, the Purchaser shall deliver to the Company $3,000,000 (the
"Second Closing Purchase Price", which when added to the Initial Purchase Price,
the "Total Purchase Price"), on the Second Closing Date, by wire transfer of
immediately available funds to the accounts specified by the Company.
ss.4.4 Time and Place of Closings. The deliveries made on the Initial
Closing Date and Second Closing Date (each a "Closing" and together, the
"Closings") shall take place at 10:00 a.m. on the applicable Closing Date, at
the offices of White & Case LLP, 1155 Avenue of the Americas, New York, NY
10036, or such other place and time as the Company and the Purchaser shall
mutually agree. The Second Closing Date shall be the date specified by the
Purchaser no more than 5 Business Days following the satisfaction or waiver of
all conditions to the Second Closing contained in Article V.
ss.4.5 Closing Deliveries. At each Closing the Company shall deliver,
or cause to be delivered, to the Purchaser the following: (i) certificates
representing the number of shares of Preferred Stock, Additional Preferred
Stock, and/or Warrants, as the case may be, to be issued and delivered at such
Closing, free and clear of all Encumbrances with all necessary share transfer
and other documentary stamps attached at the expense of the Company, (ii)
evidence or copies of any consents, approvals, orders, qualifications,
agreements or waivers required pursuant to Article V, (iii) all certificates and
other instruments and documents required by this Agreement to be delivered by
the Company to the Purchaser at or prior to each Closing and (iv) such other
documents and instruments reasonably requested by the Purchaser, as may be
necessary or appropriate to confirm or carry out the provisions of the
Documents.
ss.4.6 Issuance of Performance Warrants. If the Company does not
achieve the Performance Target on or before the Affiliation Date, the Company
agrees to issue the Performance Warrants to the Purchaser within 10 Business
Days of the Affiliation Date, without any further consideration from the
Purchaser to the Company.
ss.4.7 Issuance of Registration Warrants. In the event the Company has
not caused a Shelf Registration to have been declared effective (or a Shelf
Registration shall be the subject of any stop order or suspension of
effectiveness) pursuant to the terms of this Agreement prior to the date set
forth below, the Company agrees to issue to the Purchaser on each such date, the
number of Warrants (the "Registration Warrants") set forth below opposite such
date:
<TABLE>
<CAPTION>
Shelf Registration is not declared If the Second Closing has not If the Second Closing has occurred,
effective prior to: occurred, the Number of the Number of
Registration Warrants shall be Registration Warrants shall be
<S> <C> <C>
90 days following the Initial 17,126 24,466
Closing Date
120 days following the Initial 17,502 25,002
Closing Date
150 days following the Initial 17,890 25,556
Closing Date
180 days following the Initial 18,290 26,129
Closing Date
each 30 day period thereafter an additional 20,036 Warrants for an additional 28,623 Warrants for
every 30 days thereafter every 30 days thereafter
</TABLE>
ARTICLE V
CONDITIONS TO THE PURCHASER'S OBLIGATIONS
ss.5.0 Conditions to the Purchaser's Obligations. The obligations of
the Purchaser to purchase the Securities contemplated by this Agreement is
conditioned upon satisfaction, at or prior to each Closing (except as specified
in Section 5.15) of the following conditions:
ss.5.1 Opinions of Counsel. The Company shall have furnished the
Purchaser with the opinion, dated the applicable Closing Date, of Jones Day
Reavis & Pogue, counsel to the Company to the effect set forth in Exhibit A
hereto (with appropriate modifications for the Second Closing, if applicable).
ss.5.2 Good Standing and Other Certificates. The Purchaser shall have
received (a) a copy of the articles of incorporation or other organizational
documents of the Company, including all amendments thereto, certified by the
Secretary of State of Delaware, (b) a certificate from the Secretary of State or
other appropriate official of the respective State or country of incorporation
or formation to the effect that the Company is in good standing and listing all
charter documents of such entity, (c) a certificate from the Secretary of State
or other appropriate official in each State or country in which the Company is
qualified to do business to the effect that such entity is in good standing in
each such State or country and (d) a copy of the Bylaws of the Company and the
resolutions of the Board of Directors of the Company authorizing the
transactions contemplated hereby, certified by the Secretary of such Person as
being true and correct and in effect on such Closing Date.
ss.5.3 No Material Adverse Change. (a) Since December 31, 1997, there
shall have been no material adverse change in the business, operations, assets,
nature of assets, accounting treatment, liabilities, condition (financial or
otherwise), results of operations or prospects of the Company and its
Subsidiaries taken as a whole and the Company shall have delivered to the
Purchaser a certificate of an executive officer of the Company, dated such
Closing Date, to such effect.
(b) Since the date hereof, there shall have not occurred (i) any
general suspension in trading in securities on any national securities exchange
or the over-the-counter market or the establishment of minimum or maximum prices
on any such exchange; (ii) a declaration of a banking moratorium; (iii) any
material change in the United States or any other currency exchange rates or a
suspension of, or limitation on, the markets therefor; (iv) an outbreak or
escalation of hostilities between the United States and any foreign power, an
outbreak or escalation of any other insurrection or armed conflict involving the
United States or any other national or international calamity or emergency, or
any material change in the general financial markets of the United States; (v)
any decline in either the Dow Jones Industrial Average or the Standard & Poor's
Index of 400 Industrial Companies or in the New York Stock Exchange Composite
Index in excess of 15% measured from the close of business on the trading day
next preceding the date of this Agreement; or (vi) any reasonably significant
decline in the public market price of public physician practice management
companies.
ss.5.4 Truth of Representations and Warranties. Each of the
representations and warranties of the Company contained in this Agreement and
the other Documents, shall be true and correct in all material respects on and
as of such Closing Date other than such representations and warranties made as
of a specific date, which shall be true and correct in all material respects as
of such date, with the same effect as though such representations and warranties
had been made on and as of such date, and the Company shall have delivered to
the Purchaser a certificate of an executive officer of the Company dated such
Closing Date, to such effect. In addition, with respect to any representations
and warranties made as of a specific date, the Company shall be deemed to have
remade such representations and warranties as of the Second Closing and the
Company shall be permitted to provide any additional disclosure to the Purchaser
which the Company believes is necessary to make such representations accurate on
the Second Closing and the Purchaser shall be satisfied with all such additional
disclosure.
ss.5.5 Performance of Agreements. The Company shall be in compliance
with the Documents, shall have performed all of its agreements and covenants
thereunder and shall have delivered to the Purchaser a certificate of an
executive officer of the Company to such effect.
ss.5.6 No Litigation Threatened. No action or proceedings shall have
been instituted or, to the knowledge of each of the Transaction Parties,
threatened before a court or other government body or by any public authority to
restrain or prohibit any of the transactions contemplated by the Documents, and
the Company shall have delivered to the Purchaser a certificate of an executive
officer of the Company dated such Closing Date, to such effect.
ss.5.7 Third Party Consents; Governmental Approvals. All consents,
approvals, authorizations, exemptions or waivers required in connection with the
consummation of the transactions contemplated by the Documents shall have been
received.
ss.5.8 Proceedings. All proceedings to be taken in connection with the
transactions contemplated by this Agreement and all documents incident thereto
shall be satisfactory in form and substance to the Purchaser and its counsel,
and the Purchaser shall have received copies of all such documents and other
evidences as it or its counsel may reasonably request in order to establish the
consummation of such transactions and the taking of all proceedings in
connection therewith.
ss.5.9 Certificate of Designation. The Company shall deliver to the
Purchaser evidence that the Certificate of Designation of the Company shall have
been duly filed with the Secretary of State of Delaware and shall be in full
force and effect.
ss.5.10 SBA Forms. On each Closing Date, the Purchaser shall have
received from the Company, fully executed Small Business Administration Forms
480 and 652 and Small Business Administration Form 1031 with Parts A and B
thereof fully executed (the "SBA Forms").
ss.5.11 Due Diligence. At or prior to the first Closing, the Purchaser
shall have completed its business, legal and accounting due diligence and shall
be satisfied with the results thereof.
ss.5.12 Warrant Agreement. At or prior to the first Closing, the
Company shall have executed and delivered the Warrant Agreement.
ss.5.13 Repayment of Indebtedness to Third Parties; Termination of
Security Interests. Except as set forth on Schedule 2.5(c), and except pursuant
to the Credit Agreement, all Indebtedness for borrowed money of the Company
shall have been repaid in full and canceled and all guarantees by the Company of
other person's obligations shall have been released. All security interests,
liens, mortgages, claims or other encumbrances of any kind securing such
indebtedness shall be released.
ss.5.14 Credit Agreement Funding. At least $22 million of proceeds
shall be received from borrowings under the Credit Agreement and all material
conditions to the borrowing thereof shall have been met, without any waiver by
the Lenders or the Agent named therein, and the Purchaser shall have received a
reliance letter with respect to all legal opinions delivered in connection with
the Credit Agreement. There shall exist no Default under and as defined in the
Credit Agreement, as in effect on the date hereof, without giving effect to any
amendments or waivers thereof (both before and after giving effect to the
transactions contemplated hereby on such Closing Date).
ss.5.15 Additional Second Closing Condition. Notwithstanding anything
to the contrary contained herein, the obligation of the Purchaser to purchase
the Additional Securities and pay the Second Closing Purchase Price as
consideration therefor shall be conditioned upon the Second Closing Target
having been satisfied on or prior to July 30, 1998.
ARTICLE VI
CONDITIONS TO THE COMPANY'S OBLIGATIONS
ss.6.0 Conditions to the Company's Obligations. The issuance of the
Securities by the Company is conditioned upon satisfaction, at or prior to each
Closing, of the following conditions:
ss.6.1 Truth of Representations and Warranties. The representations
and warranties of the Purchaser contained in this Agreement shall be true and
correct on and as of such Closing Date other than such representatives and
warranties made as of a specific date, which shall be true and correct in all
material respects as of such date, with the same effect as though such
representations and warranties had been made on and as of such date.
ss.6.2 Third Party Consents; Governmental Approvals. All consents,
approvals authorizations, exemptions or waivers, if any, required in connection
with the consummation of the transactions contemplated by this Agreement shall
have been received.
ss.6.3 Performance of Agreement. The Purchaser shall have performed in
all material respects, its obligations under this Agreement.
ss.6.4 No Litigation Threatened. No action or proceeding shall be
instituted or, to the knowledge of the Purchaser, threatened before a court or
other government body or any public authority to restrain or prohibit any of the
transactions contemplated hereby, and the Purchaser shall have delivered to the
Company a certificate, dated on such Closing Date, to such effect.
ARTICLE VII
REGISTRATION RIGHTS
ss.7.1 Shelf Registration. (a) Obligation to File and Maintain. The
Company shall file a registration statement covering all of the Registrable
Securities and which shall include a number of shares of Common Stock issuable
upon the exercise of all of the shares of Preferred Stock issued hereunder, the
Warrants issued or which may be issued hereunder and the number of shares of
Common Stock issuable upon conversion of any Additional Preferred Stock
(assuming that the Additional Preferred Stock Price Per Share multiplied by 0.85
equals $4.50), on a continuous or delayed basis in the future (the "Shelf
Registration"). The Shelf Registration shall be amended from time to time to
include a number of shares of Common Stock sufficient to include all shares of
Common Stock issuable upon exercise or conversion of all equity securities
issued pursuant to this Agreement or upon conversion or exercise of the
Warrants, the Preferred Stock or the Additional Preferred Stock. The Common
Stock registered under the Shelf Registration shall be reserved for the Common
Stock issuable upon the exercise or conversion of the securities issued pursuant
to this Agreement or exercise of the Warrants, the Preferred Stock or the
Additional Preferred Stock. The Shelf Registration shall be on an appropriate
form and such Registration and any form of prospectus included therein or
prospectus supplement relating thereto shall reflect such plan of distribution
or method of sale as the holders of Registrable Securities may from time to time
notify the Company, including (I) the sale of some or all of the Registrable
Securities in a public offering or, (II) if requested by the any holder of
Registrable Securities, subject to receipt by the Company of such information
(including information relating to purchasers) as the Company reasonably may
require, (i) a transaction constituting an offering outside the United States
which is exempt from the registration requirements of the Securities Act in
which any holder of Registrable Securities undertakes to effect registration
after the completion of such offering in order to permit such shares to be
freely tradable in the United States, (ii) a transaction constituting a private
placement under Section 4(2) of the Securities Act in connection with which any
holder of Registrable Securities undertakes to effect a registration after the
conclusion of such placement to permit such shares to be freely tradable by the
purchasers thereof, or (iii) a transaction under Rule 144A of the Securities Act
in connection with which any holder of Registrable Securities undertakes to
effect a registration after the conclusion of such transaction to permit such
shares to be freely tradable by the purchasers thereof.
(b) Time for Filing and Effectiveness. On or before the date which is
30 days after the date hereof, the Company shall file with the Commission the
Shelf Registration with respect to all Registrable Securities and shall use its
best efforts to cause such Shelf Registration to become effective as promptly as
practicable after filing thereon, but in no event later than the date which is
90 days after the date hereof. The Company shall keep the Shelf Registration
filed pursuant to this Section 7.1 continuously effective until the date of
termination set forth in Section 7.1(i) of this Agreement. During the period
during which the Shelf Registration is effective, the Company shall supplement
or make amendments to the Shelf Registration, if required by the Securities Act
and the policies, rules and regulations of the Commission as announced from time
to time, or if requested by the Purchaser or an underwriter of Registrable
Securities, including to reflect any specific plan of distribution or method of
sale, and shall use its best efforts to have such supplements and amendments
declared effective, if required, as soon as practicable after filing.
(c) Black-Out Periods of the Purchaser. Notwithstanding anything
herein to the contrary, (i) the Company shall have the right from time to time
to require any holder of Registrable Securities not to sell Registrable
Securities pursuant to any Shelf Registration or to suspend the effectiveness
thereof during the period starting with the date 30 days prior to the Company's
good faith estimate, as certified in writing by an executive officer of the
Company to the holders of Registrable Securities, of the proposed date of filing
of a registration statement or a preliminary prospectus supplement relating to
an underwritten public offering of equity securities of the Company for the
account of the Company, and ending on the date 120 days following the delivery
of such estimate and (ii) the Company shall be entitled to require the holders
of Registrable Securities not to sell Registrable Securities pursuant to any
Shelf Registration or to suspend the effectiveness thereof (but not for a period
exceeding 90 days) if the Company determines, based on the opinion of legal
counsel, that such offering or continued effectiveness would interfere with any
material financing, acquisition, disposition, corporate reorganization or other
material transaction involving the Company or any of its subsidiaries because
public disclosure thereof would be required prior to the time such disclosure
might otherwise be required. The Company shall not be entitled to exercise the
rights granted to the Company pursuant to this Section 7.1(c) (either pursuant
to clauses (i) or (ii)) at any time prior to two years following the date of the
latest Closing to occur, and then only to the extent the Purchaser shall not be
deemed to be an "affiliate" of the Company for purposes of Rule 144. In any
event, the Company shall not be entitled to exercise the rights granted to the
Company pursuant to this Section 7.1(c) more than once in any one year period.
(d) Black-Out Periods of the Company. Subject to the conditions of
this Section 7.1(d), each holder of Registrable Securities shall have the right
to require the Company not to sell, and to use its best efforts to cause any
employee, director, agent or representative, who is also a holder of common
equity securities or securities convertible into common equity securities of the
Company not to sell, any equity securities of the Company or any securities
convertible into equity securities of the Company under any registration
statement or prospectus supplement, or to suspend the effectiveness thereof,
during the period starting with the date 30 days prior to such holders' good
faith estimate, as certified in writing by an executive officer of such holder
to the Company, of the proposed date of filing of a preliminary prospectus
supplement relating to a Shelf Registration filed pursuant to Section 7.1(a),
pertaining to an underwritten offering of Registrable Securities, and ending on
the date 90 days following the date of filing of the final prospectus
supplement, but in no event on a date later than 90 days following the date of
filing of the preliminary prospectus supplement.
(e) Priority on Shelf Registrations. If the managing underwriter for
any underwritten offering contemplated by this Section 7.1 shall advise the
Company in writing that, in such underwriter's opinion, the amount of securities
requested to be included in such Shelf Registration would adversely affect the
offering and sale (including pricing) of such securities then the Company will
include in such Shelf Registration, the number of securities that the Company is
so advised can be sold in such offering, in the following priority:
(i) first, all Registrable Securities requested to be sold pro rata
among such holders on the basis of the number of Registrable Securities
requested to be sold by such holders pursuant to this Section 7.1;
(ii) second, securities proposed to be sold by the Company for its own
account; and
(iii) third, any other securities requested to be included in such
Registration in such manner as the Company may determine.
(f) Notice. The Company shall give each holder of Registrable
Securities prompt notice in the event that the Company has suspended sales of
Registrable Securities under Section 7.1(c).
(g) Selection of Underwriters. Any and all underwriters or other
agents involved in any sale of Registrable Securities pursuant to a Shelf
Registration shall include one or more underwriting firms of nationally
recognized standing selected by the Purchaser.
(h) Expenses. All Registration Expenses incurred in connection with
any Shelf Registration shall be borne by the Company. The Company shall, in any
event, bear its internal costs (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting duties),
the expenses of any annual audit and the fees and expenses of any Person,
including special experts, retained by the Company.
(i) Termination. The provisions of this Section 7.1 shall terminate
upon the latest to occur of (A) the date which is the second anniversary of the
latest Closing to occur and (B) the date on which the Purchaser owns less than
20% of the Common Stock (on an as converted basis) owned by the Purchaser
immediately after the Initial Closing Date.
ss.7.2 7.2 Incidental Registrations. (a) Notification and Inclusion.
If the Company proposes to register for its own account or the account of any
other securityholder, any equity securities of the Company or any securities
convertible into equity securities of the Company under the Securities Act
(other than pursuant to a registration on Form S-4 or Form S-8 or any similar
form), the Company shall, at each such time after the date hereof, promptly give
notice to each holder of Registrable Securities (the "Company Notice") of such
registration and of such holder's rights under this Section 7.2(a). Upon the
written request of any holder of Registrable Securities given within 20 days
after receipt of a Company Notice by such holder of Registrable Securities, the
Company shall include in such proposed registration such Registrable Securities
as such holders shall request and shall use its best efforts to cause a
registration statement covering all of the Registrable Securities that such
holders have requested to be registered to become effective under the Securities
Act (an "Incidental Registration").
(b) Priority on Incidental Registration. If an Incidental Registration
pursuant to this Section 7.2 involves an underwritten offering, the managing
underwriter of such underwritten offering shall advise the Company in writing
that, in such underwriter's opinion, the amount of securities requested to be
included in such Incidental Registration, would adversely affect the offering
and sale (including price) of such securities, then the Company will include in
such Incidental Registration, the number of securities that the Company is so
advised can be sold in such offering, in the following priority:
(i) first, all the securities of the Company which the Company
proposes to sell for its own account;
(ii) second, all Registrable Securities requested to be sold pro rata
among such holders on the basis of the number of Registrable Securities
requested to be sold by such holders pursuant to this Section 7.2; and
(iii) third, any other securities requested to be included in such
Registration, in such manner as the Company may determine.
(c) Expenses. All Registration Expenses incurred in connection with
any Incidental Registration shall be borne by the Company. The Company shall, in
any event, bear its internal costs (including, without limitation, all salaries
and expenses of its officers and employees performing legal or accounting
duties), the expenses of any annual audit and the fees and expenses of any
Person, including special experts, retained by the Company.
(d) Duration of Effectiveness. At the request of a majority of the
Registrable Securities, the Company shall use its best efforts to keep any
registration statement for which Registrable Securities are included in an
Incidental Registration effective and usable for not less than 180 days unless
the distribution of securities registered thereunder has been earlier completed.
7.3 Registration Procedures. In connection with the filing of any
registration statement as provided in Section 7.1 or 7.2 of this Agreement, the
Company shall use its best efforts to effect the Registration and sale of
Registrable Securities in accordance with the intended method of disposition
thereof, and pursuant thereto, the Company will as expeditiously as possible:
(a) prepare and (within 60 days after the end of the period within
which requests for registration may be given to the Company) file with the
Commission the requisite registration statement (including a prospectus
therein) to effect such Registration and use its best efforts to cause such
registration statement to become effective, provided that before filing
such registration statement or any amendments or supplements thereto, the
Company will furnish to the counsel selected by the Purchaser copies of all
such documents proposed to be filed, which documents will be subject to the
review of such counsel before any such filing is made, and the Company will
comply with any reasonable request made by such counsel to make changes in
any information contained in such documents relating to such holders, and
upon filing such documents, the Company shall promptly notify in writing
such counsel of the receipt by the Company of any comments by the
Commission with respect to such registration statement or prospectus or any
amendment or supplement thereto or any request by the Commission for the
amending or supplementing thereof or for additional information with
respect thereto;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to maintain the effectiveness of
such registration and to comply with the provisions of the Securities Act
with respect to the disposition of all Registrable Securities covered by
such registration statement until, in the case of Section 7.1, the
termination of the period during which the Shelf Registration is required
to be kept effective, or, in the case of Section 7.2, the earlier of such
time as all of such securities have been disposed of and the date which is
180 days after the date of initial effectiveness of such registration
statement;
(c) furnish to each holder of Registrable Securities included in a
Registration hereunder and the underwriter or underwriters, if any, without
charge, at least one signed copy of the registration statement and any
post-effective amendments thereto, and upon request, such number of
conformed copies of such registration statement and of each such amendment
and supplement thereto (in each case including all exhibits), such number
of copies of the prospectus contained in such registration statements
(including each preliminary prospectus, complete prospectus and any summary
prospectus) and any other prospectus filed under Rule 424 under the
Securities Act, in conformity with the requirements of the Securities Act,
and such other documents, including documents incorporated by reference, as
such holders and the underwriters may request (it being understood that the
Company consents to the use of the prospectus and any amendment or
supplement thereto by each holder of Registrable Securities covered by such
registration statement and the underwriters, if any, in connection with the
offering and sale of the Registrable Securities covered by the prospectus
or any amendment or supplement thereto);
(d) register or qualify all Registrable Securities under such other
securities or blue sky laws of such jurisdictions as the Purchaser shall
request, to keep such registration or qualification in effect for so long
as such registration statement remains in effect, and take any other action
which may be necessary or advisable to enable such holders to consummate
the disposition in such jurisdictions of the securities owned by such
holders, except that the Company shall not for any such purpose be required
to qualify generally to do business as a foreign corporation in any
jurisdiction wherein it would not but for the requirements of this
paragraph be obligated to be so qualified, or to consent to general service
of process in any such jurisdiction, or to subject the Company to any
material tax in any such jurisdiction where it is not then so subject;
(e) cause all Registrable Securities covered by such registration
statement to be registered with or approved by such other government
authority as may be necessary to enable such holder to consummate the
disposition of such Registrable Securities;
(f) furnish to each holder of Registrable Securities included in a
Registration hereunder a signed counterpart, addressed to such holders (and
the underwriters, if any), of (i) an opinion of counsel for the Company,
dated the effective date of such registration statement (and, if such
Registration includes an underwritten public offering, dated the date of
the closing under the underwriting agreement), reasonably satisfactory in
form and substance to the Purchaser, and (ii) a "cold comfort" letter,
dated the effective date of such registration statement (and, if such
registration includes an underwritten public offering, dated the date of
the closing under the underwriting agreement), signed by the independent
public accountants who have certified the Company's financial statements
included in such registration statement, covering substantially the same
matters with respect to such registration statement (and the prospectus
included therein) and, in the case of the accountants' letter, with respect
to events subsequent to the date of such financial statements, all as are
customarily covered in opinions of issuer's counsel and in accountants'
"cold comfort" letters delivered to the underwriters in underwritten public
offerings of securities;
(g) immediately notify each holder of Registrable Securities included
in a registration statement hereunder at any time when the Company becomes
aware that a prospectus relating thereto is required to be delivered under
the Securities Act, upon discovery that, or upon the discovery of the
happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of
a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading in the
light of the circumstances under which they were made, and at the request
of such holders promptly prepare and furnish to such holders a reasonable
number of copies of a supplement to or an amendment of such prospectus as
may be necessary so that, as thereafter delivered to the purchasers of such
securities, such prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the
light of the circumstances under which they were made;
(h) comply or continue to comply in all material respects with the
Securities Act and the Exchange Act and with all applicable policies, rules
and regulations of the Commission, as announced from time to time, and make
available to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least 12 months, but not more
than 18 months, beginning with the first full calendar month after the
effective date of such registration statement, which earnings statement
shall satisfy the provisions of Section 11(a) of the Securities Act, and
not file any amendment or supplement to such registration statement or
prospectus to which the Purchaser shall have reasonably objected on the
grounds that such amendment or supplement does not comply in all material
respects with the requirements of the Securities Act, having been furnished
with a copy thereof at least five business days prior to the filing
thereof;
(i) provide a transfer agent and registrar for all Registrable
Securities covered by such registration statement not later than the
effective date of such registration statement;
(j) list all Registrable Securities covered by such registration
statement on any securities exchange on which any shares of Common Stock
are then listed;
(k) in connection with any sale pursuant to a Registration, cooperate
with the holders of Registrable Securities and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing securities
to be sold under such Registration, and enable such securities to be in
such denominations and registered in such names as the managing underwriter
or underwriters, if any, or such holders may request;
(l) enter into such agreements (including underwriting agreements in
customary form) and take such other actions as the Purchaser shall
reasonably request in order to expedite or facilitate the disposition of
such Registrable Securities; and
(m) cause its employees and personnel to use their best efforts to
support the marketing of the Registrable Securities (including, without
limitation, the participation in "road shows," at the request of the
underwriters or the Purchaser).
7.4 Requested Underwritten Offerings. If requested by the underwriters
for any Registration, the Company will enter into a customary underwriting
agreement with such underwriters for such offering, which shall contain such
representations and warranties by the Company and such other terms as are
customarily contained in agreements of this type, including indemnities to the
effect and to the extent provided in Section 7.6 hereof. Each holder of
Registrable Securities may be a party to such underwriting agreement and may, at
its option, require that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement be conditions
precedent to the obligations of such holders. The holders of Registrable
Securities included in an underwritten registration hereunder shall not be
required to (i) make any representations or warranties to or agreement with the
Company or the underwriters other than representations, warranties or agreements
regarding such holder and such holder's intended method of distribution and (ii)
undertake any indemnification or contribution obligations to the Company or the
underwriters with respect thereto, except such indemnification or contribution
obligations otherwise provided in Section 7.6 hereof.
7.5 Preparation; Reasonable Investigation. In connection with the
preparation and filing of any registration statement under the Securities Act,
the Company will give the Purchaser, its underwriters, if any, and their
respective counsel, the opportunity to participate in the preparation of such
registration statement, each prospectus included therein or filed with the
Commission, and each amendment thereof or supplement thereto, and will give each
of them such access to its books and records and such opportunities to discuss
the business of the Company with its officers, its counsel and the independent
public accountants who have certified its financial statements as shall be
necessary, in the opinion of the Purchaser, such underwriters and their
respective counsel, to conduct a reasonable investigation within the meaning of
the Securities Act.
7.6 Indemnification. (a) Indemnification by the Company. In the event
of any registration of any Registrable Securities of the Company under the
Securities Act, the Company will, and hereby does, indemnify and hold harmless
the holders of such securities, their officers, directors, members, employees,
agents, representatives, stockholders and general and limited partners and each
Person who controls such holder (within the meaning of the Securities Act and
Exchange Act) against any losses, claims, damages, liabilities, costs and
expenses (or actions or proceedings, whether commenced or threatened, in respect
thereof), joint or several, insofar as such losses, claims, damages,
liabilities, costs and expenses (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of, are based upon or are incurred in
connection with, any untrue statement or alleged untrue statement of any
material fact contained in the registration statement under which such
Registrable Securities were registered under the Securities Act, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and the Company will reimburse such indemnified persons for any
legal or any other expenses incurred by them in connection with investigating or
defending any such loss, claim, liability, action or proceedings; provided,
however, that the Company shall not be liable to a holder of Registrable
Securities in any such case to the extent that any such loss, claim, damage,
liability (or action or proceeding in respect thereof), costs or expense arises
out of, is based upon or are incurred in connection with, an untrue statement or
alleged untrue statement or omission or alleged omission made in such
registration statement, any such preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement in reliance upon and in conformity
with written information furnished to the Company by such holder of Registrable
Securities specifically stating that it is for use in the preparation thereof.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of each holder of Registrable Securities and
shall survive the transfer of such securities by such holders.
(b) Indemnification by the Holder of Registrable Securities. The
Company may require, as a condition to including any Registrable Securities in
any registration statement pursuant to Section 7.1, that the Company shall have
received an undertaking satisfactory to it from each holder of Registrable
Securities to indemnify and hold harmless (in the same manner and to the same
extent as set forth in paragraph (a) of this Section 7.6) the Company, each
director of the Company, each officer of the Company and each other person, if
any, who controls the Company within the meaning of the Securities Act with
respect to any untrue statement or alleged untrue statement of a material fact
in or omission or alleged omission to state a material fact from such
registration statement, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, if such
untrue statement or alleged untrue statement or omission or alleged omission was
made in reliance upon and in conformity with written information furnished to
the Company by such holders specifically stating that it is for use in the
preparation of such registration statement, preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of the Company or any such director, officer, or controlling person and
shall survive the transfer of such securities by the holders of Registrable
Securities; provided, however, that the obligation to indemnify will be
individual, not joint and several, for each holder and will be limited to the
net amount of proceeds received by such holder from the sale of Registrable
Securities pursuant to such registration statement.
(c) Notices of Claims, etc. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding paragraphs of this Section 7.6, such
indemnified party will, if a claim in respect thereof is to be made against an
indemnifying party, give written notice to the latter of the commencement of
such action; provided, however, that the failure of any indemnified party to
give notice as provided herein shall not relieve the indemnifying party of its
obligations under the preceding paragraphs of this Section 7.6, except to the
extent that the indemnifying party is actually prejudiced by such failure to
receive such notice. In case any such action is brought against an indemnified
party, unless in such indemnified party's reasonable judgment a conflict of
interest between such indemnified and indemnifying parties may exist in respect
of such claim, the indemnifying party shall be entitled to participate in and to
assume the defense thereof, jointly with any other indemnifying party similarly
notified to the extent that it may wish, with counsel reasonably satisfactory to
such indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to the indemnified party for any legal or
other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation and the
indemnifying party shall not, without the consent of the indemnified party,
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof, a release from all liability in
respect of such claim or litigation provided by the claimant or plaintiff to
such indemnified party.
(d) Contribution. If, for any reason, the foregoing indemnity is
unavailable, or is insufficient to hold harmless an indemnified party, then the
indemnifying party shall contribute to the amount paid or payable by the
indemnified party as a result of such expenses, losses, damages, liabilities or
expenses, (i) in such proportion as is appropriate to reflect the relative
benefits received by the indemnifying party on the one hand and the indemnified
party on the other (determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or omission relates to
information supplied by the indemnifying party or the indemnified party and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission), or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law or provides a
lesser sum to the indemnified party than the amount hereinafter calculated, in
the proportion as is appropriate to reflect not only the relative benefits
received by the indemnifying party on the one hand and the indemnified party on
the other, but also the relative fault of the indemnifying party on the one hand
and the indemnified party on the other, as well as any other relevant equitable
considerations. Notwithstanding the foregoing, no holder of Registrable
Securities shall be required to contribute any amount in excess of the amount
such holder would have been required to pay to an indemnified party if the
indemnity under Section 7.6(b) was available. No indemnified party guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any indemnifying party
who was not guilty of such fraudulent misrepresentation. The obligation of any
Person to contribute pursuant to this Section 7.6 shall be several and not
joint.
ss.7.7 Rule 144. With a view to making available the benefits of
certain rules and regulations of the Commission that may at any time permit the
sale of the Registrable Securities to the public without registration, the
Company shall:
(a) use its best efforts to facilitate the sale of the Registrable
Securities to the public, without registration under the Securities Act,
pursuant to Rule 144;
(b) make and keep public information available, as those terms are
understood and defined in Rule 144 at all times;
(c) use its best efforts to then file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and
(d) deliver a written statement as to whether it has complied with
such requirements of this section, to the holders of Registrable Securities
upon any such holder's request.
ARTICLE VIII
POST-CLOSING AGREEMENTS
ss.8.1 Accountants. The Company shall at
all times retain a "Big Six" or "Big Four" independent, accounting firm as its
auditors.
ss.8.2 Financial Statements and Other Information. The Company shall
deliver to each holder of Securities:
(i) within 30 days after the end of each fiscal month of the Company
other than the last such month of any fiscal quarter of the Company,
consolidated statements of earnings and shareholders' equity of the Company
for such fiscal month, and a consolidated balance sheet of the Company as
of the end of such fiscal month, setting forth, in each case, comparisons
to comparable budgeted figures, and comparable figures for the
corresponding fiscal month for the preceding fiscal year all prepared in
accordance with GAAP, consistently applied, subject to normal year-end
adjustments, and certified by the chief financial officer or controller of
the Company.
(ii) within 45 days after the end of each of the first three quarterly
accounting periods in each fiscal year, consolidated statements of
earnings, shareholders' equity and cash flows of the Company for such
fiscal quarter, and a consolidated balance sheet of the Company as of the
end of such fiscal quarter, setting forth, in each case, comparisons to
comparable budgeted figures and comparable figures for the corresponding
quarter of the preceding fiscal year, all prepared in accordance with GAAP,
consistently applied, subject to normal year-end adjustments, and certified
by the chief financial officer or controller of the Company.
(iii) within 90 days after the end of each fiscal year, audited
consolidating and consolidated statements of earnings, shareholders' equity
and cash flows of the Company for such fiscal year, and consolidated and
consolidating balance sheets of the Company as of the end of such fiscal
year, setting forth in each case comparisons to comparable budgeted figures
and comparable figures for the preceding fiscal year, all prepared in
accordance with GAAP, consistently applied, and certified by, (a) with
respect to the consolidated portions of such statements, an independent
accounting firm of national recognition (such certification to be
accompanied by a copy of such firm's annual management letter to the
management of the Company) and (b) with respect to the consolidating
portions of such statements, the chief financial officer or controller of
the Company and the financial statements shall be accompanied by a
statement from the Company's accountants and the chief financial officer of
the Company that no Transaction Party is in default under any provision of
the Documents or any other agreement evidencing Indebtedness to which any
Transaction Party is a party and if any default exists, specifying the
nature and the period of existence thereof;
(iv) promptly upon receipt thereof, any additional reports, management
letters or other detailed information concerning significant aspects of the
Company's operations or financial affairs of each of the Transaction
Parties prepared by Company's independent accountants and provided to any
Transaction Party (and not otherwise contained in other materials provided
hereunder);
(v) as soon as available but in no event later than 15 days after each
fiscal quarter and fiscal year, a quarterly and an annual budget, as the
case may be, of the Transaction Parties for the following period (such
budget to include, without limitation, budgeted statements of earnings and
sources and uses of cash and balance sheets) and, in addition, to the
extent delivered to any of the Company's lenders or prepared for internal
use, any other significant budgets prepared by the Company, and any
revisions of such budgets each prepared and in reasonable detail with
appropriate presentation and discussion of the principle assumptions upon
which such budgets are based accompanied by a certificate of the chief
financial officer or controller of the Company to the effect that, to the
best of his or her knowledge, such budget is a reasonable estimate for the
period covered thereby, and within 30 days after any monthly period in
which there is a material adverse deviation from the annual budget, an
officer's certificate explaining the deviation and what actions the Company
has taken and proposes to take with respect thereto;
(vi) promptly (but in any event within three Business Days) after the
discovery or receipt of notice of (a) any default under any material
agreement to which any Transaction Party is a party, or (b) any other event
or circumstance affecting any Transaction Party (including, without
limitation, the filing of any material litigation against any Transaction
Party or the existence of any dispute with any Person which involves a
reasonable likelihood of such material litigation being commenced) which
event or circumstance could reasonably be expected to have a Material
Adverse Effect, an officer's certificate specifying the nature and period
of existence thereof and what actions the Company has taken and proposes to
take with respect thereto;
(vii)promptly (but in any event within three Business Days) after
transmission thereof, copies of all financial statements, proxy statements,
reports and any other information, documents or communications which any
Transaction Party sends to its equityholders or which any Transaction Party
sends its lenders (including, without limitation, the lenders under the
Credit Agreement) and copies of all registration statements and all
regular, special or periodic reports which it files with respect to such
Transaction Party, with the Commission or with any securities exchange on
which any of its securities are then listed, and copies of all press
releases and other statements made available generally by any Transaction
Party to the public concerning material developments in the business of the
Transaction Parties;
(viii) at least three Business Days prior to the execution of, any new
management services agreement, asset purchase agreement and any other
agreements related thereto (including, without limitation, agreements
relating to the provision of ancillary services) with Practices or
physicians (or, if earlier, when delivered to the agent under the Credit
Agreement), the Purchaser shall receive a summary of the transaction
covering the matters set forth on Schedule 8.2 and a detailed description
of the consideration (purchase price per share, conversion price and
otherwise) paid in connection therewith; and the Purchaser shall receive
copies of all such management services agreements, asset purchase
agreements and other agreements relating thereto, executed in any month on
the third Business Day of the next succeeding month;
(ix) except as required by item (viii) above, promptly (but in any
event within two Business Days) any document relating to any issuance of
securities by the Company; and
(x) with reasonable promptness, such other information and financial
data concerning any Transaction Party that any person entitled to receive
information under this Section 8.2 may reasonably request.
ss.8.3 Inspection. The Company covenants and agrees that it will
permit each holder of Securities and its representatives (including without
limitation, its legal counsel, accountants and examiners from the Small Business
Administration), upon reasonable notice during normal business hours to inspect
the properties of the Transaction Parties and to examine and make extracts and
copies from the books and records of the Transaction Parties and discuss with
management and the Company's accountants the business and affairs of the
Transaction Parties.
ss.8.4 Regulatory Sale or Disposition. Anything herein to the contrary
notwithstanding, in the event that the Purchaser or any of its Affiliates shall
determine that if the Purchaser or such Affiliate, shall continue to hold some
or all of the Securities or any other securities of the Company held by it,
there is a material risk that such ownership will result in the violation of any
statute, regulation or rule of any governmental authority (including, without
limitation, Regulation Y) or the cost of continuing to hold such securities has,
in the reasonable judgment of such Purchaser, significantly increased, the
Purchaser or such Affiliate, may sell, exchange or otherwise dispose of such
securities or other securities, in as prompt and orderly a manner as is
reasonably necessary. In connection with the preceding sentence, the Company
shall cooperate with the Purchaser or such Affiliate in (i) disposing of such
securities to a third party or (ii) exchanging all or any portion of such voting
Securities on a share-for-share basis for a non-voting security of the Company
(such non-voting security to be identical in all respects to such voting
Securities, except that they shall be non-voting and shall be convertible or
exercisable into voting securities on such conditions as are requested by the
Purchaser in light of the regulatory considerations prevailing). Without
limiting the forgoing, at the request of the Purchaser or such Affiliate, the
Company shall provide (and authorize the Purchaser or such Affiliate, to
provide) financial and other information concerning the Company to any
prospective purchaser of such securities owned by the Purchaser or such
Affiliate, and shall amend this Agreement, the certificate of incorporation of
the Company, the bylaws of the Company, and any related agreements and
instruments and shall take such additional actions in order to effectuate and
reflect the foregoing. The Company shall not be required to provide any such
information unless the recipient thereof signs a confidentiality agreement
reasonably satisfactory to the Company.
ss.8.5 Limitation on Dividend Restrictions. The Company will not, and
will not permit any of its Subsidiaries to directly or indirectly, create or
otherwise cause or suffer to exist or become effective any encumbrance or
restriction on the ability of the Company or any such Subsidiary to pay
dividends or make any other distributions on its equity, except for such
encumbrances or restrictions existing under or by reason of applicable law or
restrictions existing under the Credit Agreement (and for the purposes of this
Section 8.5 only, any amendments, restatements, or refinancings thereto, so long
as such amendments, restatements or refinancings do not adversely affect the
"put" rights or the rights to cause a redemption of the holders of the Warrants
and the Preferred Stock, other than in a manner which allows the Credit
Agreement to prohibit the Company from making any such "put" or redemption
payments prior to the seventh anniversary of the date hereof).
ss.8.6 SBIC Information. In addition, the Company covenants and agrees
to provide the Purchaser any other information which the Purchaser reasonably
requests, including without limitation, at least annually, sufficient financial
and other information necessary to allow the Purchaser to evaluate the financial
condition of the Company for the purpose of valuing the Purchaser's interest in
the Company, to determine the continued eligibility of the Company under the
Small Business Investment Act of 1958, as amended (the "SBIA") and the
regulations thereunder, including 13 CFR 121.301, and to verify the use of the
proceeds received by the Company from the purchase of the Securities. All such
information shall be certified by the President, Chief Executive Officer,
Treasurer or Chief Financial Officer of the Company. Prior to February 28 of
each year, the Company shall provide to the Purchaser a written assessment in
form and substance satisfactory to the Purchaser of the economic impact of the
financing assistance provided to the Company by the Purchaser, specifying the
full time equivalent jobs created or retained, and the impact of the financing
on the revenues and profits of the business and on taxes paid by the business
and its employees. Upon the request of the Purchaser, the Company will also
provide all information requested by the Purchaser in order for it to prepare
and file SBA Form 468 and any other information requested or required by any
governmental agency asserting jurisdiction over the Purchaser.
ss.8.7 Non-Discrimination. The Company will at all times comply with
the nondiscrimination requirements of 13 CFR, Parts 112, 113 and 117.
ss.8.8 Reservation of Common Stock; Valid Issuance. a)" \* MERGEFORMAT
(a) The Company shall at all times reserve for issuance free from preemptive
rights and other rights to preempt or subscribe, (i) a number of shares of
Common Stock at least equal to the number of shares of Common Stock issuable
upon conversion or exercise of the Securities and (ii) all other securities of
the Company convertible into Common Stock including anti-dilution adjustments
then in effect.
(b) The shares of Common Stock issuable upon conversion or exercise of
the Securities, when issued in accordance with their respective terms, will be
validly issued, fully paid and nonassessable, free of all preemptive or similar
rights, and shall be delivered free and clear of all Encumbrances.
ss.8.9 Prohibited Actions. Without the prior written approval of the
holders of the Securities, the Company shall not, and shall not allow any of its
Subsidiaries to:
(i) engage in any business other than a Permitted Business;
(ii) Except as set forth on Schedule 2.27, enter into any transaction
or series of related transactions, whether or not in the ordinary course of
business, with any Affiliate of the Company, or any Affiliate of any
Subsidiary of the Company, other than transactions on terms and conditions
as favorable to the Company or such Subsidiary, as would be obtainable in a
comparable third-party transaction negotiated on an arm's length basis with
a person other than an Affiliate; provided, however, that the Company will
not, nor will the Company allow any of its Subsidiaries to, enter into any
of the following transactions or series of related transactions with any
Affiliate of the Company: (i) any sale or purchase of a material amount of
assets made between the Company or any of its Subsidiaries and any of their
Affiliates (by sale, lease, merger, consolidation or otherwise) or (ii) any
issuance of equity securities of the Company or any of its Subsidiaries to
any of their Affiliates; provided, further, that nothing in this Section
8.5 shall prohibit or otherwise restrict transactions (i) between the
Company and its wholly owned Subsidiaries or (ii) relating to management
service agreements entered into the ordinary course of business.
(iii) allow any Person (other than the Company, physicians, physical
therapists and orthoticists) including without limitation employees or
directors of the Company and its Subsidiaries, to acquire any equity or
financial interest or enter into any other transaction or series of
transactions with, any Subsidiary or other physician Practice with whom the
Company had entered into a management service agreement (including, without
limitation, any entity that provides ancillary services);
(iv) amend any of the organizational documents of the Company in any
manner that would be adverse to the Purchaser;
(v) wind up, dissolve or liquidate any Transaction Party;
(vi) commence a voluntary case concerning any Transaction Party under
Title 11 of the United States Code entitled "Bankruptcy", as now or
hereafter in effect, or any successor thereto, or the general assignment
for the benefit of creditors by the Company or any of its Subsidiaries;
(vii) sell, assign or otherwise dispose of any equity securities of
any Transaction Party or any option, warrant or right to purchase, or
instrument convertible into, any such equity security (other than the
warrants issued to Paribas on the date hereof in connection with the Credit
Agreement) with (i) rights to receive dividends or other distributions on a
pari passu or senior basis to the Preferred Stock, or (ii) a liquidation
preference on a pari passu or senior basis to the holders of Preferred
Stock or (iii) which contains a conversion price that is not fixed at the
time of issuance of such securities (other than the Series B Preferred
Stock);
(viii) declare or make any dividend, distribution, redemption or make
any other payment with respect to any capital stock of the Company (other
than with respect to the Preferred Stock and Series B Preferred Stock).
ss.8.10 Board of Directors. (a) The Company shall take all necessary
or desirable action within its control in order to elect and maintain an eight
member Board of Directors which, unless otherwise requested by the Purchaser,
shall include one director designated by the Purchaser.
(b) Subject to Section 8.10(d) the removal of any director designated
by the Purchaser may be only at the written request of the Purchaser.
(c) The Purchaser shall have the right to appoint a representative
(the "Observer"); provided, however, that if the Purchaser elects not to appoint
a member of the Board of Directors pursuant to Section 8.10(a), then the
Purchaser shall have the right to appoint two representatives (each an,
"Observer"), to attend each meeting of the Board of Directors of the Company
including by telephone at the request of the Purchaser. The Company or any
member of the Board of Directors will give each Observer oral or written notice
of each meeting of the Board of Directors (whether annual or special) at the
same time and in the same manner as oral or written notice is given to the
applicable members of the Board of Directors (which notice may be waived by each
Observer). The Company shall provide each Observer with all written materials
and other information (including copies of meeting minutes) given to the members
of the Board of Directors in connection with any such meeting at the same time
as such information is delivered to the members of the Board of Directors and,
if any Observer does not attend (or, in the case of a telephonic meeting, does
not listen by telephone to) a meeting of the Board of Directors, each Observer
will entitled, upon request, to receive a written or oral summary of the meeting
from the Secretary of the Company. If the Company proposes to take any action by
written consent of the Board of Directors in lieu of a meeting of the Board of
Directors, then the Company shall give written notice of such action to each
Observer.
(d) The Company shall pay the reasonable out-of-pocket expenses of any
Observer or Board Member incurred in connection with the attendance at any such
meeting.
(e) The Purchaser's rights under this Section 8.10 shall terminate if
(i) the Purchaser owns less than 50% of the shares of Common Stock to be
purchased by the Purchaser on the Initial Closing Date (on an as converted
basis, either through its ownership of Preferred Stock, Warrants or Common
Stock) and (ii) the Purchaser holds less than 5% of the Common Stock, (assuming
exercise and conversion of all Securities held by the Purchaser but excluding
any other exercises or conversions by other Persons).
ss.8.11 Grant of Preemptive Rights. (a) In the event (and on each
occasion) that the Company shall decide to undertake an issuance of New
Securities, the Company will give to the Purchaser, written notice (a
"Preemptive Notice") of the Company's decision, describing the amount, type and
terms of such New Securities, the purchase price to be paid by the purchasers of
such New Securities and the general terms upon which the Company has decided to
issue the New Securities (including, without limitation, the expected timing of
such issuance which will in no event be more than ninety (90) days after the
date upon which such Preemptive Notice is given or less than twenty (20)
Business Days after the date upon which such Preemptive Notice is given). The
Purchaser shall have twenty (20) Business Days from the date on which it
receives the Preemptive Notice to agree to purchase its Pro Rata Amount of such
New Securities for the Preemptive Price and upon the general terms specified in
the Preemptive Notice by giving written notice to the Company and stating
therein the quantity of New Securities to be purchased by any such Person. If,
in connection with such a proposed issuance of New Securities, the Purchaser
shall for any reason fail or refuse to give such written notice to the Company
within such 20- Business Day period, the Purchaser shall, for all purposes of
this Section 8.11, be deemed to have refused (in that particular instance only)
to purchase any of such New Securities and to have waived (in that particular
instance only) all of its rights under this Section 8.11 to purchase any of such
New Securities and the Company may issue such New Securities without further
compliance with this Section 8.11 for a period of thirty (30) days beginning
immediately after such 20-Business Day period.
(b) In the event the Purchaser has the right to acquire any voting New
Securities under this Section 8.11, but is prohibited from exercising such right
under applicable law, the Company, at the Purchaser's request, offer to sell to
the Purchaser, New Securities that do not have voting rights but otherwise have
the same terms as such voting New Securities and which shall be convertible into
voting Securities on terms reasonably requested by the Purchaser.
(c) The provisions of this Section 8.11 shall terminate upon on the
date on which the Purchaser owns less than 10% of the Common Stock (on an as
converted basis) owned by the Purchaser immediately after the Initial Closing
Date.
ss.8.12 Second Closing. The Company shall take all actions necessary
to cause all of the conditions to the Second Closing described in Article V to
be satisfied on or prior to July 31, 1998.
ss.8.13 Post Closing Legal Opinion and Certificate. The Company shall
furnish the Purchaser with a legal opinion within two weeks of the date hereof,
of Jones Day Reavis & Pogue, setting forth the outstanding capital stock of the
Company as of the Initial Closing Date. In the event that the number of shares
of outstanding capital stock set forth in such opinion (or the certification set
forth below) is greater than 20,476,193 shares of Common Stock on a Fully
Diluted Basis, excluding the look-back obligations set forth on Schedule 2.2
under the heading, "Lookbacks," then the Company shall issue to the Purchaser a
number of shares of Preferred Stock which when added to the Initial Securities
shall represent 7.71693% of the outstanding Common Stock on a Fully Diluted
Basis, excluding the look-back obligations set forth on Schedule 2.2 under the
heading, "Lookbacks". In the event that the Company does not deliver such a
legal opinion within such time period, in lieu of the delivery of the legal
opinion set forth in the preceding sentence, the Company shall cause its
auditors to prepare a certification of such outstanding shares, and deliver such
certification to the Purchaser.
ss.8.14 Adjusted Deliveries. In the event that after giving effect to
any purchase and delivery of any securities pursuant to this Agreement
(including without limitation, in connection with the Second Closing), the
Purchaser would own over 10% of the outstanding Common Stock of the Company
(assuming that any convertible securities held by the Purchaser have been
converted or exercised, and the convertible securities of all other persons
shall not have been so converted or exercised), or at the time of such delivery
the Purchaser has appointed a director on the Board of Directors of the Company,
then the Company shall deliver a number of Performance Warrants reasonably
acceptable to the Purchaser, based on the Company's acquisitions and
affiliations completed up through such date and the number of reasonably
anticipated acquisitions and other affiliations, and a number of Registration
Warrants (assuming that the Shelf Registration is effected on the 181st day
after the Initial Closing) to the Purchaser at the time of such delivery. In the
event that Performance Target is achieved on or before the Affiliation Date, any
such delivered Performance Warrants shall be automatically canceled without
further act or deed. In the event that Shelf Registration is effected on or
prior to the 180th day after the Initial Closing, a number of such delivered
Registration Warrants shall be automatically canceled without further act or
deed, such that the Purchaser shall only receive the number of Registration
Warrants to which it is entitled pursuant to Section 4.7, if any. As promptly as
reasonably practicable following the foregoing determination, the Purchaser
shall deliver to the Company all such canceled Warrants. Nothing contained
herein shall (i) waive the rights of the Purchaser to receive Registration
Warrants relating to the initial effectiveness of the Shelf Registration taking
place after the 181st day following the Initial Closing or (ii) grant to the
Purchaser any further or greater rights to the Performance Warrants or the
Registration Warrants beyond those set forth herein. The Registration Warrants
and the Performance Warrants delivered pursuant to this Section 8.14 shall not
be entitled to vote and shall not be transferable until to time at which such
Warrants are no longer cancelable pursuant to this Section 8.14.
ss.8.15 Stockholder Consent. If the Purchaser is entitled to
Securities pursuant to this Agreement in excess of 19.9% of the outstanding
Common Stock, and to the extent required by NASDAQ or any other securities
exchange on which the Company's Common Stock is then listed (the Company
agreeing to use its best efforts to seek waiver with respect thereto), the
Company shall obtain the consent of a majority of the stockholders of the
Company with respect thereto. If required by NASDAQ or such exchange, the
Company shall not deliver Securities representing in excess of 19.9% of the
outstanding Common Stock to the Purchaser without the prior consent of a
majority of the stockholders of the Company; provided, however, that if the
Purchaser is entitled to Securities pursuant to this Agreement in excess of
19.9% of the outstanding Common Stock and the Company has not received the
consent of a majority of the stockholders, then the Purchaser shall be entitled
to an amount of cash equal to the fair market value of the Common Stock issuable
upon exercise of any Securities to which the Purchaser is entitled are not
delivered as a result of this Section 8.15.
ARTICLE IX
SURVIVAL
ss.9.1 Survival. The representations, warranties and covenants of the
Company and the Purchaser contained in this Agreement and the schedules and
certificates delivered in connection herewith shall survive the Closing and may
be relied upon by the Purchaser regardless of any investigation made at any time
by or on behalf of the Purchaser.
ARTICLE X
INDEMNIFICATION
ss.10.1 Indemnification. The Company agrees to indemnify and hold the
Purchaser and its officers, directors, employees, Affiliates and agents, and any
successors thereto (and any officers, directors, employees, Affiliates and
agents of such successors) harmless from any liability (whether fixed or
unfixed, liquidated or unliquidated), actual or consequential damage,
deficiency, demand, claim, suit, action, or cause of action, fine, penalty,
loss, cost, expense, including without limitation, reasonable attorney fees
("Damages") incurred or suffered as a result of, in connection with, or arising
out of, the transactions contemplated hereby, including without limitation, any
Damages incurred or suffered as a result of, or in connection with, or arising
out of, the failure of any representation or warranty made by the Company
pursuant to this Agreement, any schedule or exhibit to this Agreement or any
other Transaction Document or any certificates delivered pursuant thereto
(without regard to any "materiality", "material adverse effect", "substantial
compliance" or similar exception or qualifier and without regard to any
knowledge or similar exception or qualifier) to be true and correct as of the
date hereof and on each Closing Date.
ss.10.2 Contribution. To the extent that the undertaking to indemnify,
pay or hold harmless the Purchaser pursuant to Section 10.1 of this Agreement
may be unenforceable, the Company shall make the maximum contribution to the
payment and satisfaction of each of the indemnified liabilities which is
permissible under applicable law.
ss.10.3 Remedies. The rights and remedies of the Purchaser arising out
of, incurred or suffered as a result of, or in connection with, or arising out
of, the failure of any representation or warranty made by the Company pursuant
to this Agreement, shall be limited to indemnification pursuant to this Article
X. The rights and remedies of the Purchaser resulting from the failure of the
Shelf Registration being effected as a result of the Commission shall be limited
to the agreements set forth in Section 4.7 (it being understood that such
limitation shall not affect the rights of the Purchaser to enforce its equitable
rights to have a Shelf Registration effected). The rights and remedies of the
Purchaser resulting from the failure of the Company to meet its obligations set
forth in Section 8.13 shall be limited to those contained in such Section 8.13.
To the extent permitted by law, the Purchaser hereby waives all other rights and
remedies with respect to any such breach of any representation or warranty that
may arise under law or otherwise.
ss.10.4 Limitation on Indemnification. The Company shall not be liable
under this Article X unless the aggregate amount of Damages exceeds $100,000;
provided, however, that in the event the amount of Damages exceeds $100,000 in
the aggregate, the Company shall be responsible for the entire amount of such
Damages and not only for the amount in excess of $100,000. In no event shall the
amount of Company's obligation under this Article X for a breach of
representations or warranties, exceed the Initial Purchase Price and, in the
event that the Second Closing has occurred, the Total Purchase Price.
ARTICLE XI
MISCELLANEOUS
ss.11.1 Knowledge of the Transaction Parties. Where any representation
or warranty made by the Company contained in this Agreement is expressly
qualified by reference to its knowledge, such knowledge shall be deemed to exist
if the matter should be within the knowledge of any director, executive officer
or other senior member of management of the Company after due inquiry.
ss.11.2 Expenses. The Company agrees to pay the costs and expenses
incurred by the Purchaser in connection with the transactions contemplated
hereby and the Purchaser's investment in the Company (including without
limitation, reasonable attorney's fees and expenses incurred in connection with
the (a) preparation, execution and delivery of this Agreement and the other
Documents, (b) any subsequent amendments, modifications or waivers relating
thereto and (c) any regulatory filings) and all costs and expenses incurred by
the Purchaser (including without limitation, the reasonable attorney's fees and
expenses and the fees and expenses of any experts retained by the Purchaser) in
connection with the exercise or enforcement of any rights contained in this
Agreement and the other Documents.
ss.11.3 Governing Law. The interpretation and construction of this
Agreement, and all matters relating hereto, shall be governed by the laws of the
State of New York applicable to agreements executed and to be performed solely
within such State.
ss.11.4 Captions. The Article and Section captions used herein are for
reference purposes only, and shall not in any way affect the meaning or
interpretation of this Agreement.
ss.11.5 Publicity. Except as otherwise required by law, none of the
parties hereto shall issue any press release or make any other public statement,
in each case relating to, connected with or arising out of this Agreement or the
matters contained herein or therein, without obtaining the prior approval of the
Purchaser and the Company to the contents and the manner of presentation and
publication thereof. No references to the Purchaser shall be made in any public
statement without the Purchaser's consent.
ss.11.6 Notices. Any notice or other communication required or
permitted under this Agreement shall be sufficiently given if delivered in
person or sent by telecopy or by registered or certified mail, postage prepaid,
addressed as follows:
if to the Company:
Notice Address:
BMJ Medical Management, Inc.
4800 N. Federal Highway
Suite 101-E
Boca Raton, Florida 33432
Attention: David H Fater,
Executive Vice President and
Chief Financial Officer
Telephone: (561) 391-1311
Telecopier: (561) 391-1389
With a copy to:
Jones, Day, Reavis & Pogue
901 Lakeside Avenue
Cleveland, Ohio 44114
Attention: Charles W. Hardin, Jr.
Telephone: (216) 586-7084
Telecopier: (216) 579-0212
and if to the Purchaser:
Paribas Principal Incorporated
787 Seventh Avenue
New York, New York 10019
Attention: Eric Toizer
Telephone: (212) 841-2000
Telecopier: (212) 841-2502
with a copy to its counsel,
White & Case LLP
1155 Avenue of the Americas
New York, New York 10036
Attention: John Reiss, Esq.
Telephone: (212) 819-8200
Telecopier: (212) 354-8113
or such other address or number as shall be furnished in writing by any such
party, and such notice or communication shall be deemed to have been given upon
automatic confirmation of receipt by the receiving machine if sent by
telecopier, upon delivery if delivered in person, and upon mailing if mailed.
ss.11.7 Parties in Interest. The Company may not transfer, assign or
pledge any of its rights in, or otherwise grant any rights to any Person in,
this Agreement. The Purchaser may transfer any of its rights hereunder and any
assignee or transferee of the Securities (other than transferees receiving the
Securities pursuant to a registered sale or a sale pursuant to Rule 144) shall
have all the rights of the Purchaser hereunder; provided, however, that (i) the
ability of any transferee (other than an Affiliate of the Purchaser) to exercise
the rights set forth in Section 8.10 of this Agreement shall be subject to the
consent of the Company (such consent not to be unreasonably withheld) and (ii)
the Purchaser shall not assign the rights set forth in Sections 8.2, 8.3 or 8.9
to a direct competitor of the Company. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, successors and permitted assigns.
ss.11.8 Counterparts. This Agreement may be executed in two or more
counterparts, all of which taken together shall constitute one instrument.
ss.11.9 Entire Agreement. This Agreement, the Certificate of
Designation and the Warrant Agreement, including the exhibits, schedules, and
other documents referred to herein and therein which form a part hereof and
thereof, contain the entire understanding of the parties hereto with respect to
the subject matter contained herein and therein. This Agreement, the Certificate
of Designation and the Warrant Agreement supersede all prior agreements and
understandings between the parties with respect to such subject matter.
ss.11.10 Amendments. This Agreement may not be changed orally, but
only by an agreement in writing signed by the Purchaser and the Company.
ss.11.11 Severability. In case any provision in this Agreement shall
be held invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions hereof will not in any way be
affected or impaired thereby.
ss.11.12 Third Party Beneficiaries. Each party hereto intends that
this Agreement shall not benefit or create any right or cause of action in or on
behalf of any Person other than the parties hereto (and, in the case of the
Purchaser, its transferees) and those Persons entitled to indemnification
pursuant to Article X hereof. ss.11.13" \* MERGEFORMAT 11.13 Jurisdiction. a)"
\* MERGEFORMAT (a) Each of the parties hereto hereby irrevocably acknowledges
and consents that any legal action or proceeding brought with respect to any of
the obligations arising under or relating to this Agreement may be brought in
the courts of the State of New York or in the United States Southern District
Court of New York, as the party bringing such action or proceeding may elect and
each of the parties hereto hereby irrevocably submits to and accepts with regard
to any such action proceeding, for itself and in respect of its property,
generally and unconditionally, the jurisdiction of the aforesaid courts. Each
party hereby further irrevocably waives any claim that any such courts lack
jurisdiction over such party, and agrees not to plead or claim, in any legal
action or proceeding with respect to this Agreement or the transactions
contemplated hereby brought in any of the aforesaid courts, that any such court
lacks jurisdiction such party. Each party irrevocably consents to the service of
process in any such action or proceeding by the mailing of copies thereof by
registered or certified mail, postage prepaid, to such party, at its address for
notices set forth in Section 11.6, such service to become effective 10 days
after such mailing. Each party hereby irrevocably waives any objection to such
service of process and further irrevocably waives and agrees not to plead or
claim in any action or proceeding commenced hereunder or under any other
documents contemplated hereby that service of process was in any way invalid or
ineffective. The foregoing shall not limit the rights of any party to serve
process in any other manner permitted by law. The foregoing consents to
jurisdiction shall not constitute general consents to service of process for any
purpose except as provided above and shall not be deemed to confer rights on any
Person other than the respective parties to this Agreement.
(b) To the fullest extent permitted by applicable law, each of the
parties hereto hereby irrevocably waives the objection which it may not or
hereafter have to the laying of the venue of any suit, action or proceeding
arising out of or relating to this Agreement or the transactions contemplated
hereby in any of the Courts referred to in Section 11.13(a) and hereby further
irrevocably waives and agrees not to plead or claim that any such court is not a
convenient forum for any such suit, action or proceeding.
(c) The parties hereto agree that any judgment obtained by any party
hereto or its successors or assigns in any action, suit or proceeding referred
to above may, in the discretion of such party (or its successors, or assigns),
be enforced in any jurisdiction, to the extent permitted by applicable law.
* * * * *
<PAGE>
IN WITNESS WHEREOF the Purchaser has signed this Securities Purchase
Agreement and the Company has caused its corporate name to be hereunto
subscribed by its officers thereunto duly authorized, all as of the day and year
first above written.
BMJ MEDICAL MANAGEMENT, INC.
By:_______________________________
Name:
Title:
THE PURCHASER:
PARIBAS PRINCIPAL INCORPORATED
By:_______________________________
Name:
Title:
- --------------------------------------------------------------------------------
BMJ MEDICAL MANAGEMENT, INC.
Common Stock Purchase Warrant
Dated as of June 30, 1998
- --------------------------------------------------------------------------------
This Warrant and any shares acquired upon the exercise of this Warrant
have not been registered under the Securities Act of 1933, as amended,
and may not be transferred, sold or otherwise disposed of except while
a registration under such Act is in effect or pursuant to an exemption
therefrom under such Act. This Warrant and such shares may be
transferred only in compliance with the conditions specified in this
Warrant.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
1. Exercise of Warrant....................................................................1
1.1. Manner of Exercise................................................................1
1.2. When Exercise Effective...........................................................2
1.3. Delivery of Stock Certificates, etc...............................................2
1.4. Company to Reaffirm Obligations...................................................2
1.5. Payment by Application of Notes...................................................2
1.6 Payment by Application of Shares Otherwise Issuable...............................3
2. Adjustment of Common Stock Issuable Upon Exercise......................................3
2.1. General; Warrant Price............................................................3
2.2. Adjustment of Warrant Price.......................................................4
2.2.1 Issuance of Additional Shares of Common Stock....................................4
2.2.2 Extraordinary Dividends and Distributions........................................4
2.3. Treatment of Options and Convertible Securities...................................5
2.4. Treatment of Stock Dividends, Stock Splits, etc...................................8
2.5. Computation of Consideration......................................................8
2.6. Adjustments for Combinations, etc................................................10
2.7. Dilution in Case of Other Securities.............................................10
2.8. Minimum Adjustment of Warrant Price..............................................10
3. Consolidation, Merger, etc............................................................11
3.1. Adjustments for Consolidation, Merger, Sale of Assets, Reorganization, etc.......11
3.2. Assumption of Obligations........................................................12
4. Other Dilutive Events.................................................................12
5. No Dilution or Impairment.............................................................12
6. Accountants' Report as to Adjustments.................................................13
7. Notices of Corporate Action...........................................................14
8. Registration of Common Stock..........................................................15
9. Restrictions on Transfer..............................................................15
9.1. Restrictive Legends..............................................................15
9.2. Notice of Proposed Transfer; Opinions of Counsel.................................16
9.3. Termination of Restrictions......................................................17
10. Availability of Information...........................................................18
11. Reservation of Stock, etc.............................................................19
12. Registration and Transfer of Warrants, etc............................................19
12.1. Warrant Register; Ownership of Warrants.........................................19
12.2. Transfer and Exchange of Warrants...............................................19
12.3. Replacement of Warrants.........................................................19
13. Registration under Securities Act, etc................................................20
13.1. Registration on Request.........................................................20
13.2. Incidental Registration.........................................................22
13.3. Registration Procedures.........................................................24
13.4. Underwritten Offerings..........................................................30
13.5. Preparation; Reasonable Investigation...........................................33
13.6. Rights of Holders...............................................................33
13.7. Indemnification.................................................................34
14. Definitions...........................................................................38
15. Remedies..............................................................................44
16. No Rights or Liabilities as Stockholder. .............................................44
17. Notices...............................................................................44
18. Amendments............................................................................45
19. Expiration............................................................................45
20. Descriptive Headings..................................................................45
21. GOVERNING LAW.........................................................................45
22. Judicial Proceedings; Waiver of Jury..................................................45
</TABLE>
<PAGE>
BMJ MEDICAL MANAGEMENT, INC.
Common Stock Purchase Warrant
------------------
June 30, 1998
BMJ MEDICAL MANAGEMENT, INC. (the "Company"), a Delaware corporation,
for value received, hereby certifies that Paribas, or registered assigns, is
entitled to purchase from the Company 165,000 of the Company's shares of Common
Stock, par value $.001 per share (the "Common Stock"), at the purchase price per
share of $.01, at any time or from time to time prior to 5:00 p.m., New York
City time, on June 30, 2008, all subject to the terms, conditions and
adjustments set forth below in this Warrant.
This Warrant is one of the Common Stock Purchase Warrants (the
"Warrants", such term to include any such warrants issued in substitution
therefor) originally issued in connection with the issuance by the Company of
Notes representing the obligations of the Company pursuant to the Credit
Agreement (the "Credit Agreement"), dated June 30, 1998, among Paribas (the
"Purchaser"), the other Lenders named therein, the Company and Paribas, acting
in its capacity as agent for the Lenders. The Warrants originally so issued
evidence rights to purchase an aggregate of not less than 2.0% of the Company's
fully diluted shares of Common Stock (determined as of June 30, 1998) subject to
adjustment as provided herein. Certain capitalized terms used in this Warrant
are defined in section 14; references to an "Exhibit" are, unless otherwise
specified, to one of the Exhibits attached to this Warrant and references to a
"section" are, unless otherwise specified, to one of the sections of this
Warrant.
1. Exercise of Warrant. 1.1. Manner of Exercise. This Warrant may be
exercised by the holder hereof, in whole or in part, during normal business
hours on any Business Day, by surrender of this Warrant to the Company at its
principal office, accompanied by a subscription in substantially the form
attached to this Warrant (or a reasonable facsimile thereof) duly executed by
such holder and accompanied by payment, in cash, by certified or official bank
check payable to the order of the Company, or in the manner provided in section
1.5 or section 1.6 (or by any combination of such methods), in the amount
obtained by multiplying (a) the number of shares of Common Stock (without giving
effect to any adjustment thereof) designated in such subscription (up to a
maximum of 165,000 shares) by (b) $0.01, and such holder shall thereupon be
entitled to receive the number of duly authorized, validly issued, fully paid
and nonassessable shares of Common Stock (or Other Securities) determined as
provided in sections 2 through 4.
1.2. When Exercise Effective. The exercise of this Warrant shall be
deemed to have been effected immediately prior to the close of business on the
Business Day on which this Warrant shall have been surrendered to the Company as
provided in section 1.1, and at such time the Person or Persons in whose name or
names any certificate or certificates for shares of Common Stock (or Other
Securities) shall be issuable upon such exercise as provided in section 1.3
shall be deemed to have become the holder or holders of record thereof.
1.3. Delivery of Stock Certificates, etc. As soon as practicable after
the exercise of this Warrant and in any event within ten Business Days
thereafter, the Company at its expense will cause to be issued in the name of
and delivered to the holder hereof or, subject to section 9, as such holder
(upon payment by such holder of any applicable transfer taxes) may direct, a
certificate or certificates for the number of duly authorized, validly issued,
fully paid and nonassessable shares of Common Stock (or Other Securities) to
which such holder shall be entitled upon such exercise plus, in lieu of any
fractional share to which such holder would otherwise be entitled, cash in an
amount equal to the same fraction of the Market Price per share on the Business
Day next preceding the date of such exercise.
1.4. Company to Reaffirm Obligations. The Company will, at the time of
the exercise of this Warrant, upon the request of the holder hereof, acknowledge
in writing its continuing obligation to afford to such holder all rights
(including, without limitation, any rights to registration of the shares of
Common Stock or Other Securities issued upon such exercise) to which such holder
shall continue to be entitled after such exercise in accordance with the terms
of this Warrant, provided that if the holder of this Warrant shall fail to make
any such request, such failure shall not affect the continuing obligation of the
Company to afford such rights to such holder.
1.5. Payment by Application of Notes. Upon the exercise of this
Warrant, the holder hereof may, at its option, instruct the Company, by written
notice accompanying the surrender of this Warrant at the time of such exercise,
to apply to the payment required by section 1.1 all or any part of the unpaid
principal amount of any one or more Notes at the time held by such holder which
is at such time due, in which case the Company will accept the principal amount
specified in such notice in satisfaction of a like amount of such payment absent
manifest error. In case less than the entire unpaid principal amount of any Note
shall be so specified, the principal amount so specified shall be credited, as
of the date of such exercise, against the required prepayments of principal then
remaining unpaid on such Note in the inverse order of their maturity dates. Upon
any partial application of a Note, the Company at its expense shall forthwith
issue and deliver to or upon the order of the holder thereof a new Note or Notes
in principal amount equal to the unpaid principal amount of such surrendered
Note which has not been applied against such payment, such new Note or Notes to
be dated and to bear interest from the date to which interest has been paid on
such surrendered Note. The Company's obligation to issue any such new Notes
shall be expressly conditioned upon the simultaneous surrender by the holder of
any existing Notes to be replaced by such new Notes. Within two Business Days
after receipt of any such notice, the Company will pay to the holder of the
Notes giving such notice, in the manner provided in the Notes and in the Credit
Agreement, all unpaid interest on the principal amount so specified in such
notice, accrued to the date of the exercise of such Warrant.
1.6 Payment by Application of Shares Otherwise Issuable. Upon the
exercise of this Warrant, the holder hereof may, at its option, instruct the
Company, by written notice accompanying the surrender of this Warrant at the
time of such exercise, to apply to the payment required by section 1.1 such
number of the shares of Common Stock otherwise issuable to such holder upon such
exercise as shall be specified in such notice, in which case an amount equal to
the excess of the aggregate Current Market Price of such specified number of
shares on the date of exercise over the portion of the payment required by
section 1.1 attributable to such shares shall be deemed to have been paid to the
Company and the number of shares issuable upon such exercise shall be reduced by
such specified number.
2. Adjustment of Common Stock Issuable Upon Exercise. 2.1. General;
Warrant Price. The number of shares of Common Stock which the holder of this
Warrant shall be entitled to receive upon the exercise hereof shall be
determined by multiplying the number of shares of Common Stock which would
otherwise (but for the provisions of this section 2) be issuable upon such
exercise, as designated by the holder hereof pursuant to section 1.1, by the
fraction of which (a) the numerator is $0.01 and (b) the denominator is the
Warrant Price in effect on the date of such exercise. The "Warrant Price" shall
initially be $0.01 per share, shall be adjusted and readjusted from time to time
as provided in this section 2 and, as so adjusted or readjusted, shall remain in
effect until a further adjustment or readjustment thereof is required by this
section 2.
2.2. Adjustment of Warrant Price.
2.2.1 Issuance of Additional Shares of Common Stock. In case the
Company at any time or from time to time after the date hereof shall issue or
sell Additional Shares of Common Stock (including Additional Shares of Common
Stock deemed to be issued pursuant to section 2.3 or 2.4) without consideration
or for a consideration per share less than the greater of the Current Market
Price and the Warrant Price in effect immediately prior to such issue or sale,
then, and in each such case, subject to section 2.8, such Warrant Price shall be
reduced, concurrently with such issue or sale, to a price (calculated to the
nearest .001 of a cent) determined by multiplying such Warrant Price by a
fraction
(a) the numerator of which shall be (i) the number of shares of Common
Stock (including, without limitation, the number of shares of Common Stock
convertible or exchangeable to shares of Common Stock) outstanding
immediately prior to such issue or sale plus (ii) the number of shares of
Common Stock which the aggregate consideration received by the Company for
the total number of such Additional Shares of Common Stock so issued or
sold would purchase at the greater of such Current Market Price and such
Warrant Price, and
(b) the denominator of which shall be the number of shares of Common
Stock (including, without limitation, the number of shares of Common Stock
convertible or exchangeable to shares of Common Stock) outstanding
immediately after such issue or sale,
provided that, for the purposes of this section 2.2.1, (x) immediately after any
Additional Shares of Common Stock are deemed to have been issued pursuant to
section 2.3 or 2.4, such Additional Shares shall be deemed to be outstanding,
and (y) treasury shares shall not be deemed to be outstanding.
2.2.2 Extraordinary Dividends and Distributions. In case the Company
at any time or from time to time after the date hereof shall declare, order, pay
or make a dividend or other distribution (including, without limitation, any
distribution of other or additional stock or other securities or property or
Options by way of dividend or spin-off, reclassification, recapitalization or
similar corporate rearrangement) on the Common Stock, other than (a) a dividend
payable in Additional Shares of Common Stock or (b) a dividend payable in cash
or other property and declared out of the earned surplus of the Company as at
the date hereof as increased by any credits (other than credits resulting from a
revaluation of property) and decreased by any debits made thereto after such
date or (c) a regular periodic cash dividend at a rate not in excess of 110% of
the rate of the last regular periodic cash dividend theretofore paid, then, and
in each such case, subject to section 2.8, the Warrant Price in effect
immediately prior to the close of business on the record date fixed for the
determination of holders of any class of securities entitled to receive such
dividend or distribution shall be reduced, effective as of the close of business
on such record date, to a price (calculated to the nearest .001 of a cent)
determined by multiplying such Warrant Price by a fraction
(x) the numerator of which shall be the Current Market Price in effect
on such record date or, if the Common Stock trades on an ex-dividend basis,
on the date prior to the commencement of ex-dividend trading, less the
amount of such dividend or distribution (as determined in good faith by the
Board of Directors of the Company) applicable to one share of Common Stock,
and
(y) the denominator of which shall be such Current Market
Price.
2.3. Treatment of Options and Convertible Securities. In case the
Company at any time or from time to time after the date hereof shall issue,
sell, grant or assume, or shall fix a record date for the determination of
holders of any class of securities entitled to receive, any Options or
Convertible Securities (other than (i) the issuance of any equity securities of
the Company in connection with the conversion of the Nagpal Note, (ii) the
Series A Preferred Stock, (iii) the Series B Preferred Stock issued at fair
market value, (iv) the Series C Preferred Stock, (v) any stock dividends on
(ii), (iii) or (iv) above, (vi) any convertible promissory notes issued by the
Company existing on the date hereof, and (vii) Options or Convertible Securities
issued, sold or granted to employees, officers, directors, consultants or
affiliated physicians of or to the Company pursuant to one or more benefit plans
or arrangements approved by a disinterested committee of the Board of Directors
of the Company; provided, however, that such Options or Convertible Securities
may only be issued (A) pursuant to such benefit plans or arrangements, (B)up to
a maximum of 15% of the Company's fully diluted capitalization and (C) at fair
market value on the date of grant), then, and in each such case, the maximum
number of Additional Shares of Common Stock (as set forth in the instrument
relating thereto, without regard to any provisions contained therein for a
subsequent adjustment of such number) issuable upon the exercise of such Options
or, in the case of Convertible Securities and Options therefor, the conversion
or exchange of such Convertible Securities, shall be deemed to be Additional
Shares of Common Stock issued as of the time of such issue, sale, grant or
assumption or, in case such a record date shall have been fixed, as of the close
of business on such record date (or, if the Common Stock trades on an
ex-dividend basis, on the date prior to the commencement of ex-dividend
trading), provided that such Additional Shares of Common Stock shall not be
deemed to have been issued unless the consideration per share (determined
pursuant to section 2.5) of such shares would be less than the greater of the
Current Market Price and the Warrant Price in effect on the date of and
immediately prior to such issue, sale, grant or assumption or immediately prior
to the close of business on such record date (or, if the Common Stock trades on
an ex-dividend basis, on the date prior to the commencement of ex-dividend
trading), as the case may be, and provided, further, that in any such case in
which Additional Shares of Common Stock are deemed to be issued
(a) no further adjustment of the Warrant Price shall be made upon the
subsequent issue or sale of Convertible Securities or shares of Common
Stock upon the exercise of such Options or the conversion or exchange of
such Convertible Securities , except in the case of any such Options or
Convertible Securities which contain provisions requiring an adjustment,
subsequent to the date of the issue or sale thereof, of the number of
Additional Shares of Common Stock issuable upon the exercise of such
Options or the conversion or exchange of such Convertible Securities by
reason of (x) a change of control of the Company, (y) the acquisition by
any Person or group of Persons of any specified number or percentage of the
Voting Securities of the Company or (z) any similar event or occurrence,
each such case to be deemed hereunder to involve a separate issuance of
Additional Shares of Common Stock, Options or Convertible Securities, as
the case may be;
(b) if such Options or Convertible Securities by their terms provide,
with the passage of time or otherwise, for any increase in the
consideration payable to the Company, or decrease in the number of
Additional Shares of Common Stock issuable, upon the exercise, conversion
or exchange thereof (by change of rate or otherwise), the Warrant Price
computed upon the original issue, sale, grant or assumption thereof (or
upon the occurrence of the record date, or date prior to the commencement
of ex-dividend trading, as the case may be, with respect thereto), and any
subsequent adjustments based thereon, shall, upon any such increase or
decrease becoming effective, be recomputed to reflect such increase or
decrease insofar as it affects such Options, or the rights of conversion or
exchange under such Convertible Securities, which are outstanding at such
time;
(c) upon the expiration (or purchase by the Company and cancellation
or retirement) of any such Options which shall not have been exercised or
the expiration of any rights of conversion or exchange under any such
Convertible Securities which (or purchase by the Company and cancellation
or retirement of any such Convertible Securities the rights of conversion
or exchange under which) shall not have been exercised, the Warrant Price
computed upon the original issue, sale, grant or assumption thereof (or
upon the occurrence of the record date, or date prior to the commencement
of ex-dividend trading, as the case may be, with respect thereto), and any
subsequent adjustments based thereon, shall, upon such expiration (or such
cancellation or retirement, as the case may be), be recomputed as if:
(i) in the case of Options for Common Stock or Convertible
Securities, the only Additional Shares of Common Stock issued or sold
were the Additional Shares of Common Stock, if any, actually issued or
sold upon the exercise of such Options or the conversion or exchange
of such Convertible Securities and the consideration received therefor
was the consideration actually received by the Company for the issue,
sale, grant or assumption of all such Options, whether or not
exercised, plus the consideration actually received by the Company
upon such exercise, or for the issue or sale of all such Convertible
Securities which were actually converted or exchanged, plus the
additional consideration, if any, actually received by the Company
upon such conversion or exchange, and
(ii) in the case of Options for Convertible Securities, only the
Convertible Securities, if any, actually issued or sold upon the
exercise of such Options were issued at the time of the issue, sale,
grant or assumption of such Options, and the consideration received by
the Company for the Additional Shares of Common Stock deemed to have
then been issued was the consideration actually received by the
Company for the issue, sale, grant or assumption of all such Options,
whether or not exercised, plus the consideration deemed to have been
received by the Company (pursuant to section 2.5) upon the issue or
sale of such Convertible Securities with respect to which such Options
were actually exercised;
(d) no readjustment pursuant to subdivision (b) or (c) above shall
have the effect of increasing the Warrant Price by an amount in excess of
the amount of the adjustment thereof originally made in respect of the
issue, sale, grant or assumption of such Options or Convertible Securities;
and
(e) in the case of any such Options which expire by their terms not
more than 30 days after the date of issue, sale, grant or assumption
thereof, no adjustment of the Warrant Price shall be made until the
expiration or exercise of all such Options, whereupon such adjustment shall
be made in the manner provided in subdivision (c) above.
2.4. Treatment of Stock Dividends, Stock Splits, etc. In case the
Company at any time or from time to time after the date hereof shall declare or
pay any dividend on the Common Stock payable in Common Stock, or shall effect a
subdivision of the outstanding shares of Common Stock into a greater number of
shares of Common Stock (by reclassification or otherwise than by payment of a
dividend in Common Stock), then, and in each such case, Additional Shares of
Common Stock shall be deemed to have been issued (a) in the case of any such
dividend, immediately after the close of business on the record date for the
determination of holders of any class of securities entitled to receive such
dividend, or (b) in the case of any such subdivision, at the close of business
on the day immediately prior to the day upon which such corporate action becomes
effective.
2.5. Computation of Consideration. For the purposes of this section 2,
(a) the consideration for the issue or sale of any Additional Shares
of Common Stock shall, irrespective of the accounting treatment of such
consideration,
(i) insofar as it consists of cash, be computed at the gross
amount of cash received by the Company, without deducting any expenses
paid or incurred by the Company or any commissions or compensations
paid or concessions or discounts allowed to underwriters, dealers or
others performing similar services in connection with such issue or
sale,
(ii) insofar as it consists of property (including securities)
other than cash, be computed at the fair value thereof at the time of
such issue or sale, as determined in good faith by the Board of
Directors of the Company, and
(iii) in case Additional Shares of Common Stock are issued or
sold together with other stock or securities or other assets of the
Company for a consideration which covers both, be the portion of such
consideration so received, computed as provided in clauses (i) and
(ii) above, allocable to such Additional Shares of Common Stock, all
as determined in good faith by the Board of Directors of the Company;
(b) Additional Shares of Common Stock deemed to have been issued
pursuant to section 2.3, relating to Options and Convertible Securities,
shall be deemed to have been issued for a consideration per share
determined by dividing
(i) the total amount, if any, received and receivable by the
Company as consideration for the issue, sale, grant or assumption of
the Options or Convertible Securities in question, plus the minimum
aggregate amount of additional consideration (as set forth in the
instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such consideration to
protect against dilution) payable to the Company upon the exercise in
full of such Options or the conversion or exchange of such Convertible
Securities or, in the case of Options for Convertible Securities, the
exercise of such Options for Convertible Securities and the conversion
or exchange of such Convertible Securities, in each case computing
such consideration as provided in the foregoing subdivision (a),
by
(ii) the maximum number of shares of Common Stock (as set forth
in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number to
protect against dilution) issuable upon the exercise of such Options
or the conversion or exchange of such Convertible Securities; and
(c) Additional Shares of Common Stock deemed to have been issued
pursuant to section 2.4, relating to stock dividends, stock splits, etc.,
shall be deemed to have been issued for no consideration.
2.6. Adjustments for Combinations, etc. In case the outstanding shares
of Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, the Warrant Price in
effect immediately prior to such combination or consolidation shall,
concurrently with the effectiveness of such combination or consolidation, be
proportionately increased.
2.7. Dilution in Case of Other Securities. In case any Other
Securities shall be issued or sold or shall become subject to issue or sale upon
the conversion or exchange of any stock (or Other Securities) of the Company (or
any issuer of Other Securities or any other Person referred to in section 3) or
to subscription, purchase or other acquisition pursuant to any Options issued or
granted by the Company (or any such other issuer or Person) for a consideration
such as to dilute, on a basis consistent with the standards established in the
other provisions of this section 2, the purchase rights granted by this Warrant,
then, and in each such case, the computations, adjustments and readjustments
provided for in this section 2 with respect to the Warrant Price shall be made
as nearly as possible in the manner so provided and applied to determine the
amount of Other Securities from time to time receivable upon the exercise of the
Warrants, so as to protect the holders of the Warrants against the effect of
such dilution.
2.8. Minimum Adjustment of Warrant Price. If the amount of any
adjustment of the Warrant Price required pursuant to this section 2 would be
less than one tenth (1/10) of one percent (1%) of the Warrant Price in effect at
the time such adjustment is otherwise so required to be made, such amount shall
be carried forward and adjustment with respect thereto made at the time of and
together with any subsequent adjustment which, together with such amount and any
other amount or amounts so carried forward, shall aggregate at least one tenth
(1/10) of one percent (1%) of such Warrant Price.
3. Consolidation, Merger, etc. 3.1. Adjustments for Consolidation,
Merger, Sale of Assets, Reorganization, etc. In case the Company after the date
hereof (a) shall consolidate with or merge into any other Person and shall not
be the continuing or surviving corporation of such consolidation or merger, or
(b) shall permit any other Person to consolidate with or merge into the Company
and the Company shall be the continuing or surviving Person but, in connection
with such consolidation or merger, the Common Stock or Other Securities shall be
changed into or exchanged for stock or other securities of any other Person or
cash or any other property, or (c) shall transfer all or substantially all of
its properties or assets to any other Person, or (d) shall effect a capital
reorganization or reclassification of the Common Stock or Other Securities
(other than a capital reorganization or reclassification resulting in the issue
of Additional Shares of Common Stock for which adjustment in the Warrant Price
is provided in section 2.2.1 or 2.2.2), then, and in the case of each such
transaction, proper provision shall be made so that, upon the basis and the
terms and in the manner provided in this Warrant, the holder of this Warrant,
upon the exercise hereof at any time after the consummation of such transaction,
shall be entitled to receive (at the aggregate Warrant Price in effect at the
time of such consummation for all Common Stock or Other Securities issuable upon
such exercise immediately prior to such consummation), in lieu of the Common
Stock or Other Securities issuable upon such exercise prior to such
consummation, the highest amount of securities, cash or other property to which
such holder would actually have been entitled as a shareholder upon such
consummation if such holder had exercised the rights represented by this Warrant
immediately prior thereto, subject to adjustments (subsequent to such
consummation) as nearly equivalent as possible to the adjustments provided for
in sections 2 through 4, provided that if a purchase, tender or exchange offer
shall have been made to and accepted by the holders of more than 50% of the
outstanding shares of Common Stock, and if the holder of such Warrants so
designates in a notice given to the Company on or before the date immediately
preceding the date of the consummation of such transaction, the holder of such
Warrants shall be entitled to receive the highest amount of securities, cash or
other property to which such holder would actually have been entitled as a
shareholder if the holder of such Warrants had exercised such Warrants prior to
the expiration of such purchase, tender or exchange offer and accepted such
offer, subject to adjustments (from and after the consummation of such purchase,
tender or exchange offer) as nearly equivalent as possible to the adjustments
provided for in sections 2 through 4.
3.2. Assumption of Obligations. Notwithstanding anything contained in
the Warrants or in the Credit Agreement to the contrary, the Company will not
effect any of the transactions described in clauses (a) through (d) of section
3.1 unless, prior to the consummation thereof, each Person (other than the
Company) which may be required to deliver any stock, securities, cash or
property upon the exercise of this Warrant as provided herein shall assume, by
written instrument delivered to, and reasonably satisfactory to, the holder of
this Warrant, (a) the obligations of the Company under this Warrant (and if the
Company shall survive the consummation of such transaction, such assumption
shall be in addition to, and shall not release the Company from, any continuing
obligations of the Company under this Warrant) and (b) the obligation to deliver
to such holder such shares of stock, securities, cash or property as, in
accordance with the foregoing provisions of this section 3, such holder may be
entitled to receive, and such Person shall have similarly delivered to such
holder an opinion of counsel for such Person, which counsel shall be reasonably
satisfactory to such holder, stating that this Warrant shall thereafter continue
in full force and effect and the terms hereof (including, without limitation,
all of the provisions of this section 3) shall be applicable to the stock,
securities, cash or property which such Person may be required to deliver upon
any exercise of this Warrant or the exercise of any rights pursuant hereto.
Nothing in this section 3 shall be deemed to authorize the Company to enter into
any transaction not otherwise permitted by the Credit Agreement.
4. Other Dilutive Events. In case any event shall occur as to which
the provisions of section 2 or section 3 are not strictly applicable but the
failure to make any adjustment would not fairly protect the purchase rights
represented by this Warrant in accordance with the essential intent and
principles of such sections, then, in each such case, the Company shall appoint
a firm of independent certified public accountants of recognized national
standing (which may be the regular auditors of the Company), which shall give
their opinion upon the adjustment, if any, on a basis consistent with the
essential intent and principles established in sections 2 and 3, necessary to
preserve, without dilution, the purchase rights represented by this Warrant.
Upon receipt of such opinion, the Company will promptly mail a copy thereof to
the holder of this Warrant and shall make the adjustments described therein.
5. No Dilution or Impairment. The Company will not, by amendment of
its certificate of incorporation or through any consolidation, merger,
reorganization, transfer of assets, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such action as
may be necessary or appropriate in order to protect the rights of the holder of
this Warrant against dilution or other impairment. Without limiting the
generality of the foregoing, the Company (a) will not permit the par value of
any shares of stock receivable upon the exercise of this Warrant to exceed the
amount payable therefor upon such exercise, (b) will take all such action as may
be necessary or appropriate in order that the Company may validly and legally
issue fully paid and nonassessable shares of stock on the exercise of the
Warrants from time to time outstanding, (c) will not take any action which
results in any adjustment of the Warrant Price if the total number of shares of
Common Stock (or Other Securities) issuable after the action upon the exercise
of all of the Warrants would exceed the total number of shares of Common Stock
(or Other Securities) then authorized by the Company's certificate of
incorporation and available for the purpose of issue upon such exercise, and (d)
will not issue any capital stock of any class which is preferred as to dividends
or as to the distribution of assets upon voluntary or involuntary dissolution,
liquidation or winding-up, unless the rights of the holders thereof shall be
limited to a fixed sum or percentage of par value or a sum determined by
reference to a formula based on a published index of interest rates, an interest
rate publicly announced by a financial institution or a similar indicator of
interest rates in respect of participation in dividends and to a fixed sum or
percentage of par value in any such distribution of assets.
6. Accountants' Report as to Adjustments. In each case of any
adjustment or readjustment in the shares of Common Stock (or Other Securities)
issuable upon the exercise of this Warrant, the Company at its expense will
promptly compute such adjustment or readjustment in accordance with the terms of
this Warrant and, at the written request of the holder, cause independent
certified public accountants of recognized national standing (which may be the
regular auditors of the Company) selected by the Company to verify such
computation (other than any computation of the fair value of property as
determined in good faith by the Board of Directors of the Company) and prepare a
report setting forth such adjustment or readjustment and showing in reasonable
detail the method of calculation thereof and the facts upon which such
adjustment or readjustment is based, including a statement of (a) the
consideration received or to be received by the Company for any Additional
Shares of Common Stock issued or sold or deemed to have been issued, (b) the
number of shares of Common Stock outstanding or deemed to be outstanding, and
(c) the Warrant Price in effect immediately prior to such issue or sale and as
adjusted and readjusted (if required by section 2) on account thereof. The
Company will forthwith mail a copy of each such report to each holder of a
Warrant and will, upon the written request at any time of any holder of a
Warrant, furnish to such holder a like report setting forth the Warrant Price at
the time in effect and showing in reasonable detail how it was calculated. The
Company will also keep copies of all such reports at its principal office and
will cause the same to be available for inspection at such office during normal
business hours by any holder of a Warrant or any prospective purchaser of a
Warrant designated by the holder thereof.
7. Notices of Corporate Action. In the event of
(a) any taking by the Company of a record of the holders of any
class of securities for the purpose of determining the holders thereof
who are entitled to receive any dividend (other than a regular
periodic dividend payable in cash out of earned surplus in an amount
not exceeding the amount of the immediately preceding cash dividend
for such period) or other distribution, or any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any
other securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the
Company or any consolidation or merger involving the Company and any
other Person or any transfer of all or substantially all the assets of
the Company to any other Person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
the Company will mail to each holder of a Warrant a notice specifying (i) the
date or expected date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and the amount and character of such
dividend, distribution or right, and (ii) the date or expected date on which any
such reorganization, reclassification, recapitalization, consolidation, merger,
transfer, dissolution, liquidation or winding-up is to take place and the time,
if any such time is to be fixed, as of which the holders of record of Common
Stock (or Other Securities) shall be entitled to exchange their shares of Common
Stock (or Other Securities) for the securities or other property deliverable
upon such reorganization, reclassification, recapitalization, consolidation,
merger, transfer, dissolution, liquidation or winding-up. Such notice shall be
mailed at least 30 days prior to the date therein specified.
8. Registration of Common Stock. If any shares of Common Stock
required to be reserved for purposes of exercise of this Warrant require
registration with or approval of any governmental authority under any federal or
state law (other than the Securities Act) before such shares may be issued upon
exercise, the Company will, at its expense and as expeditiously as possible, use
its best efforts to cause such shares to be duly registered or approved, as the
case may be. At any such time as Common Stock is listed on any national
securities exchange, the Company will, at its expense, obtain promptly and
maintain the approval for listing on each such exchange, upon official notice of
issuance, the shares of Common Stock issuable upon exercise of the then
outstanding Warrants and maintain the listing of such shares after their
issuance; and the Company will also list on such national securities exchange,
will register under the Exchange Act and will maintain such listing of, any
Other Securities that at any time are issuable upon exercise of the Warrants, if
and at the time that any securities of the same class shall be listed on such
national securities exchange by the Company.
9. Restrictions on Transfer. 9.1. Restrictive Legends. Except as
otherwise permitted by this section 9, each Warrant (including each Warrant
issued upon the transfer of any Warrant) shall be stamped or otherwise imprinted
with a legend in substantially the following form:
"This Warrant and any shares acquired upon the exercise of this
Warrant have not been registered under the Securities Act of 1933, as
amended, and may not be transferred, sold or otherwise disposed of except
while a registration under such Act is in effect or pursuant to an
exemption therefrom under such Act. This Warrant and such shares may be
transferred only in compliance with the conditions specified in this
Warrant."
Except as otherwise permitted by this section 9, each certificate for Common
Stock (or Other Securities) issued upon the exercise of any Warrant, and each
certificate issued upon the transfer of any such Common Stock (or Other
Securities), shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933 and may not be transferred in the absence
of such registration or an exemption therefrom under such Act. Such shares
may be transferred only in compliance with the conditions specified in that
certain Common Stock Purchase Warrant, dated June 30, 1998, between BMJ
Medical Management, Inc. and Paribas. A complete and correct copy of the
form of such Warrant is available for inspection at the principal office of
BMJ Medical Management, Inc. or at the office or agency maintained by BMJ
Medical Management, Inc. as provided in such Warrants and will be furnished
to the holder of such shares upon written request and without charge."
9.2. Notice of Proposed Transfer; Opinions of Counsel. Prior to any
transfer of any Restricted Securities which are not registered under an
effective registration statement under the Securities Act, the holder thereof
will give written notice to the Company of such holder's intention to effect
such transfer and to comply in all other respects with this section 9.2. Each
such notice (a) shall describe the manner and circumstances of the proposed
transfer in sufficient detail to enable counsel to render the opinions referred
to below, and (b) shall designate counsel for the holder giving such notice (who
may be house counsel for such holder). The holder giving such notice will submit
a copy thereof to the counsel designated in such notice and the Company will
promptly submit a copy thereof to its counsel. The following provisions shall
then apply:
(i) If (A) in the opinion of such counsel for the holder the
proposed transfer may be effected without registration of such
Restricted Securities under the Securities Act, and (B) counsel for
the Company shall not have rendered an opinion within 15 days after
the receipt by the Company of such written notice that such
registration is required, such holder shall thereupon be entitled to
transfer such securities in accordance with the terms of the notice
delivered by such holder to the Company. Each warrant or certificate,
if any, representing such securities issued upon or in connection with
such transfer shall bear the appropriate restrictive legend required
by section 9.1, unless in the opinion of each such counsel such legend
is no longer required to insure compliance with the Securities Act. If
for any reason counsel for the Company (after having been furnished
with the information required to be furnished by clause (a) of this
section 9.2) shall fail to deliver an opinion to the Company as
aforesaid, then for all purposes of this Warrant the opinion of
counsel for the Company shall be deemed to be the same as the opinion
of counsel for such holders.
(ii) If in the opinion of either of or both such counsel the
proposed transfer may not legally be effected without registration of
such Restricted Securities under the Securities Act (such opinion or
opinions to state the basis of the legal conclusions reached therein),
the Company will promptly so notify the holder thereof and thereafter
such holder shall not be entitled to transfer such Restricted
Securities until either (x) receipt by the Company of a further notice
from such holder pursuant to the foregoing provisions of this section
9.2 and fulfillment of the provisions of clause (i) above or (y) such
shares have been effectively registered under the Securities Act.
Notwithstanding the foregoing provisions of this section 9.2(ii), the purchaser
of the Warrants shall be permitted to transfer any Restricted Securities to a
limited number of institutional investors, provided that (A) each such investor
represents in writing that it is acquiring such Restricted Securities for
investment and not with a view to the distribution thereof (subject, however, to
any requirement of law that the disposition thereof shall at all times be within
the control of such transferee), (B) each such investor agrees in writing to be
bound by all the restrictions on transfer of such Restricted Securities
contained in this section 9.2 and (C) the purchaser of the Warrants delivers to
the Company an opinion of counsel satisfactory to the Company, stating that such
transfer may be effected without registration under the Securities Act. The
holder of Restricted Securities will pay all fees and disbursements of its
counsel and the Company shall pay all fees and disbursements of its counsel in
connection with all opinions rendered by them pursuant to this section 9.2 and
pursuant to section 9.3.
9.3. Termination of Restrictions. The restrictions imposed by this
section 9 upon the transferability of Restricted Securities shall cease and
terminate as to any particular Restricted Securities (a) when such securities
shall have been effectively registered under the Securities Act, or (b) when, in
the opinions of both counsel for the holder thereof and counsel for the Company,
such restrictions are no longer required in order to insure compliance with the
Securities Act. Whenever such restrictions shall cease and terminate as to any
Restricted Securities, the holder thereof shall be entitled to receive from the
Company, without expense (other than applicable transfer taxes, if any), new
securities of like tenor not bearing the applicable legends required by section
9.1.
10. Availability of Information. So long as the Company shall not have
filed a registration statement pursuant to section 12 of the Exchange Act or a
registration statement pursuant to the requirements of the Securities Act, the
Company shall, at any time and from time to time, upon the request of any holder
of Registrable Securities and upon the request of any Person designated by such
holder as a prospective purchaser of any Registrable Securities, furnish in
writing to such holder or such prospective purchaser, as the case may be, a
statement as of a date not earlier than 12 months prior to the date of such
request of the nature of the business of the Company and the products and
services it offers and copies of the Company's most recent balance sheet and
profit and loss and retained earnings statements, together with similar
financial statements for such part of the two preceding fiscal years as the
Company shall have been in operation, all such financial statements to be
audited to the extent audited statements are reasonably available, provided
that, in any event the most recent financial statements so furnished shall
include a balance sheet as of a date less than 16 months prior to the date of
such request, statements of profit and loss and retained earnings for the 12
months preceding the date of such balance sheet, and, if such balance sheet is
not as of a date less than 6 months prior to the date of such request,
additional statements of profit and loss and retained earnings for the period
from the date of such balance sheet to a date less than 6 months prior to the
date of such request. If the Company shall have filed a registration statement
pursuant to the requirements of section 12 of the Exchange Act or a registration
statement pursuant to the requirements of the Securities Act, the Company shall
timely file the reports required to be filed by it under the Securities Act and
the Exchange Act (including but not limited to the reports under sections 13 and
15(d) of the Exchange Act referred to in subparagraph (c) of Rule 144 adopted by
the Commission under the Securities Act) and the rules and regulations adopted
by the Commission thereunder (or, if the Company is not required to file such
reports, will, upon the request of any holder of Registrable Securities, make
publicly available other information) and will take such further action as any
holder of Registrable Securities may reasonably request, all to the extent
required from time to time to enable such holder to sell Registrable Securities
without registration under the Securities Act within the limitation of the
exemptions provided by (a) Rule 144 under the Securities Act, as such Rule may
be amended from time to time, or (b) any similar rule or regulation hereafter
adopted by the Commission. Upon the request of any holder of Registrable
Securities, the Company will deliver to such holder a written statement as to
whether it has complied with the requirements of this section 10.
11. Reservation of Stock, etc. The Company will at all times reserve
and keep available, solely for issuance and delivery upon exercise of the
Warrants, the number of shares of Common Stock (or Other Securities) from time
to time issuable upon exercise of all Warrants at the time outstanding. All
shares of Common Stock (or Other Securities) issuable upon exercise of any
Warrants shall be duly authorized and, when issued upon such exercise, shall be
validly issued and, in the case of shares, fully paid and nonassessable with no
liability on the part of the holders thereof.
12. Registration and Transfer of Warrants, etc.
12.1. Warrant Register; Ownership of Warrants. The Company will keep
at its principal office a register in which the Company will provide for the
registration of Warrants and the registration of transfers of Warrants. The
Company may treat the Person in whose name any Warrant is registered on such
register as the owner thereof for all other purposes, and the Company shall not
be affected by any notice to the contrary, except that, if and when any Warrant
is properly assigned in blank, the Company may (but shall not be obligated to)
treat the bearer thereof as the owner of such Warrant for all purposes. Subject
to section 9, a Warrant, if properly assigned, may be exercised by a new holder
without a new Warrant first having been issued.
12.2. Transfer and Exchange of Warrants. Upon surrender of any Warrant
for registration of transfer or for exchange to the Company at its principal
office, the Company at its expense will (subject to compliance with section 9,
if applicable) execute and deliver in exchange therefor a new Warrant or
Warrants of like tenor, in the name of such holder or as such holder (upon
payment by such holder of any applicable transfer taxes) may direct, calling in
the aggregate on the face or faces thereof for the number of shares of Common
Stock called for on the face or faces of the Warrant or Warrants so surrendered.
12.3. Replacement of Warrants. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction of any Warrant,
upon delivery of an indemnity bond in such reasonable amount as the Company may
determine (or, in the case of any Warrant held by any Institutional Holder or
its nominee, of an indemnity agreement from such Institutional Holder reasonably
satisfactory to the Company), or, in the case of any such mutilation, upon the
surrender of such Warrant for cancellation to the Company at its principal
office, the Company at the expense of the requesting holder will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
13. Registration under Securities Act, etc.
13.1. Registration on Request.
(a) Request. At any time after the date on which the Company shall
become eligible to utilize Form S-3 in effecting sales of its securities,
upon the written request of the Initiating Holders, requesting that the
Company effect the registration under the Securities Act of all or part of
such Initiating Holders' Registrable Securities and specifying the intended
method of disposition thereof, the Company will, on a one-time only basis,
subject to the terms of this Agreement, promptly give written notice of
such requested registration to all registered holders of Registrable
Securities, and thereupon the Company will effect the registration under
the Securities Act on Form S-3 if the Company is eligible to utilize such
form and otherwise on Form S-1 of
(i) the Registrable Securities which the Company has been so
requested to register by such Initiating Holders for disposition in
accordance with the intended method of disposition stated in such
request, and
(ii) all other Registrable Securities the holders of which shall
have made a written request to the Company for registration thereof
within 30 days after the giving of such written notice by the Company
(which request shall specify the intended method of disposition of
such Registrable Securities), and
(iii) all shares of Common Stock which the Company may elect to
register in connection with the offering of Registrable Securities
pursuant to this section 13.1,
all to the extent requisite to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Registrable Securities and the
additional shares of Common Stock, if any so to be registered.
(b) Registration Statement Form. Registrations under this section 13.1
shall be on such appropriate registration form of the Commission as shall
permit the disposition of such Registrable Securities in accordance with
the intended method or methods of disposition specified in the request for
such registration. The Company agrees to include in any such registration
statement all information which holders of Registrable Securities being
registered shall reasonably request.
(c) Expenses. The Company will pay all Registration Expenses in
connection with any registration requested pursuant to this section 13.1 by
any Initiating Holders of Registrable Securities; provided, however, that
for any registration, any selling holder of Registrable Securities shall
pay its own legal and accounting fees and expenses and any underwriting
spreads or discounts associated with its shares.
(d) Effective Registration Statement. A registration requested
pursuant to this section 13.1 shall not be deemed to have been effected (i)
unless a registration statement with respect thereto has become effective,
provided that a registration which does not become effective after the
Company has filed a registration statement with respect thereto solely by
reason of the refusal to proceed of the Initiating Holders (other than a
refusal to proceed based upon the advice of counsel relating to a matter
with respect to the Company) shall be deemed to have been effected by the
Company at the request of such Initiating Holders unless the Initiating
Holders shall have elected to pay all Registration Expenses in connection
with such registration, (ii) if, after it has become effective, such
registration becomes subject to any stop order, injunction or other order
or requirement of the Commission or other governmental agency or court for
any reason, or (iii) the conditions to closing specified in the purchase
agreement or underwriting agreement entered into in connection with such
registration are not satisfied, other than by reason of some act or
omission by such Initiating Holders.
(e) Selection of Underwriters. If a requested registration pursuant to
this section 13.1 involves an underwritten offering, the underwriter or
underwriters thereof shall be selected by the holders of at least a
majority (by number of shares) of the Registrable Securities as to which
registration has been requested. (f) Priority in Requested Registrations.
If a requested registration pursuant to this section 13.1 involves an
underwritten offering, and the managing underwriter shall advise the
Company in writing (with a copy to each holder of Registrable Securities
requesting registration) that, in its opinion, the number of securities
requested to be included in such registration exceeds the number which can
be sold in such offering within a price range acceptable to the holders of
a majority of the Registrable Securities requested to be included in such
registration, the Company will include in such registration, to the extent
of the number which the Company is so advised can be sold in such offering,
Registrable Securities (and any securities owned by any affiliate of the
Purchaser) requested to be included in such registration by the holder or
holders of Registrable Securities, pro rata among the holders thereof such
holders requesting such registration on the basis of the number of such
securities requested to be included by such holders.
13.2. Incidental Registration.
(a) Right to Include Registrable Securities. If the Company at any
time proposes to register any of its securities under the Securities Act
(other than (A) a registration on Form S-4 or S-8 or any successor or
similar forms, (B) a registration pursuant to section 13.1, (C) a shelf
registration for shares of the Company's Series A Preferred Stock issued to
an affiliate of the Purchaser and (D) any registration of the shares
underlying the Company's Series B Preferred Stock), whether or not for sale
for its own account, it will each such time give prompt written notice to
all holders of Registrable Securities of its intention to do so and of such
holders' rights under this section 13.2. Upon the written request of any
such holder made within 20 days after the receipt of any such notice (which
request shall specify the Registrable Securities intended to be disposed of
by such holder and the intended method of disposition thereof), the Company
will, subject to the terms of this Agreement, effect the registration under
the Securities Act of all Registrable Securities which the Company has been
so requested to register by the holders thereof, to the extent requisite to
permit the disposition (in accordance with the intended methods thereof as
aforesaid) of the Registrable Securities so to be registered, by inclusion
of such Registrable Securities in the registration statement which covers
the securities which the Company proposes to register, provided that if, at
any time after giving written notice of its intention to register any
securities and prior to the effective date of the registration statement
filed in connection with such registration, the Company shall determine for
any reason either not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to each holder of Registrable Securities and, thereupon, (i)
in the case of a determination not to register, shall be relieved of its
obligation to register any Registrable Securities in connection with such
registration (but not from its obligation to pay the Registration Expenses
in connection therewith), without prejudice, however, to the rights of any
holder or holders of Registrable Securities entitled to do so to request
that such registration be effected as a registration under section 13.1,
and (ii) in the case of a determination to delay registering, shall be
permitted to delay registering any Registrable Securities, for the same
period as the delay in registering such other securities. No registration
effected under this section 13.2 shall relieve the Company of its
obligation to effect any registration upon request under section 13.1 nor
shall any such registration hereunder be deemed to have been effected
pursuant to section 13.1. The Company will pay all Registration Expenses in
connection with each registration of Registrable Securities requested
pursuant to this section 13.2; provided, however, that for any
registration, any selling holder of Registrable Securities shall pay its
own legal and accounting fees and expenses and any underwriting spreads or
discounts associated with its shares.
(b) Priority in Incidental Registrations. If (i) a registration
pursuant to this section 13.2 involves an underwritten offering of the
securities so being registered, whether or not for sale for the account of
the Company, to be distributed (on a firm commitment basis) by or through
one or more underwriters of recognized standing under underwriting terms
appropriate for such a transaction, (ii) the Registrable Securities so
requested to be registered for sale for the account of holders of
Registrable Securities are not also to be included in such underwritten
offering (either because the Company has not been requested so to include
such Registrable Securities pursuant to section 13.4(b) or, if requested to
do so, is not obligated to do so under section 13.4(b)), and (iii) the
managing underwriter of such underwritten offering shall inform the Company
and holders of the Registrable Securities requesting such registration by
letter of its belief that the distribution of all or a specified number of
such Registrable Securities concurrently with the securities being
distributed by such underwriters would interfere with the successful
marketing of the securities being distributed by such underwriters (such
writing to state the basis of such belief and the approximate number of
such Registrable Securities which may be distributed without such effect),
then the Company may, upon written notice to all holders of such
Registrable Securities, reduce pro rata (if and to the extent stated by
such managing underwriter to be necessary to eliminate such effect) the
number of such Registrable Securities the registration of which shall have
been requested by each holder of Registrable Securities so that the
resultant aggregate number of such Registrable Securities so included in
such registration shall be equal to the number of shares stated in such
managing underwriter's letter.
13.3. Registration Procedures. If and whenever the Company is required
to effect the registration of any Registrable Securities under the Securities
Act as provided in sections 13.1 and 13.2, the Company shall, as expeditiously
as possible:
(i) prepare and (within 60 days after the end of the period
within which requests for registration may be given to the Company or
in any event as soon thereafter as possible) (in the case of a
registration pursuant to section 13.1, such filing to be made within
60 days after the initial request of one or more Initiating Holders of
Registrable Securities or in any event as soon thereafter as possible)
file with the Commission the requisite registration statement to
effect such registration (including such audited financial statements
as may be required by the Securities Act or the rules and regulations
promulgated thereunder) and thereafter use its best efforts to cause
such registration statement to become and remain effective, provided,
however, that the Company may discontinue any registration of its
securities which are not Registrable Securities (and, under the
circumstances specified in section 13.2(a), its securities which are
Registrable Securities) at any time prior to the effective date of the
registration statement relating thereto;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the
Securities Act with respect to the disposition of all securities
covered by such registration statement until the earlier of such time
as all of such securities have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof set
forth in such registration statement or (i) in the case of a
registration pursuant to section 13.1, the expiration of 180 days
after such registration statement becomes effective, or (ii) in the
case of a registration pursuant to section 13.2, the expiration of 90
days after such registration statement becomes effective;
(iii) furnish to each seller of Registrable Securities covered by
such registration statement and each underwriter, if any, of the
securities being sold by such seller such number of conformed copies
of such registration statement and of each such amendment and
supplement thereto (in each case including all exhibits), such number
of copies of the prospectus contained in such registration statement
(including each preliminary prospectus and any summary prospectus) and
any other prospectus filed under Rule 424 under the Securities Act, in
conformity with the requirements of the Securities Act, and such other
documents, as such seller and underwriter, if any, may reasonably
request in order to facilitate the public sale or other disposition of
the Registrable Securities owned by such seller;
(iv) use its reasonable best efforts to register or qualify all
Registrable Securities and other securities covered by such
registration statement under such other securities laws or blue sky
laws of such jurisdictions as any seller thereof and any underwriter
of the securities being sold by such seller shall reasonably request,
to keep such registrations or qualifications in effect for so long as
such registration statement remains in effect, and take any other
action which may be reasonably necessary or advisable to enable such
seller and underwriter to consummate the disposition in such
jurisdictions of the securities owned by such seller, except that the
Company shall not for any such purpose be required to qualify
generally to do business as a foreign corporation in any jurisdiction
wherein it would not but for the requirements of this subdivision (iv)
be obligated to be so qualified, to subject itself to taxation in any
such jurisdiction or to consent to general service of process in any
such jurisdiction;
(v) use its reasonable best efforts to cause all Registrable
Securities covered by such registration statement to be registered
with or approved by such other governmental agencies or authorities as
may be necessary to enable the seller or sellers thereof to consummate
the disposition of such Registrable Securities;
(vi) furnish to each seller of Registrable Securities a signed
counterpart, addressed to such seller and the underwriters, if any of
(x) an opinion of counsel for the Company, dated the effective date of
such registration statement (or, if such registration includes an
underwritten public offering, an opinion dated the date of the closing
under the underwriting agreement), reasonably satisfactory in form and
substance to such seller, and
(y) a "comfort" letter (or, in the case of such Person which does not
satisfy the conditions for receipt of a "comfort" letter specified in
Statement on Auditing Standards No. 72, an "agreed upon procedures"
letter), dated the effective date of such registration statement (and, if
such registration includes an underwritten public offering, a letter dated
the date of the closing under the underwriting agreement), signed by the
independent public accountants who have certified the Company's financial
statements included in such registration statement,
covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of the
accountants' letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions of issuer's counsel
and in accountants' letters delivered to the underwriters in underwritten public
offerings of securities (with, in the case of an "agreed upon procedures"
letter, such modifications or deletions as may be required under Statement on
Auditing Standards No. 35) and, in the case of the accountants' letter, such
other financial matters, and, in the case of the legal opinion, such other legal
matters, as such seller (or the underwriters, if any) may reasonably request;
(vii) notify the holders of Registrable Securities and the
managing underwriter or underwriters, if any, promptly and confirm
such advice in writing promptly thereafter:
(v) when the registration statement, the prospectus or any prospectus
supplement related thereto or post-effective amendment to the registration
statement has been filed, and, with respect to the registration statement or any
post-effective amendment thereto, when the same has become effective;
(w) of any request by the Commission for amendments or supplements to
the registration statement or the prospectus or for additional information;
(x) of the issuance by the Commission of any stop order suspending the
effectiveness of the registration statement or the initiation of any proceedings
by any Person for that purpose;
(y) if at any time the representations and warranties of the Company
made as contemplated by section 13.4 below cease to be true and correct;
(z) of the receipt by the Company of any notification with respect to
the suspension of the qualification of any Registrable Securities for sale under
the securities or blue sky laws of any jurisdiction or the initiation or threat
of any proceeding for such purpose;
(viii) notify each seller of Registrable Securities covered by
such registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, upon the
Company's discovery that, or upon the happening of any event as a
result of which, the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing under which
they were made, and at the request of any such seller promptly prepare
and furnish to such seller and each underwriter, if any, a reasonable
number of copies of a supplement to or an amendment of such prospectus
as may be necessary so that, as thereafter delivered to the purchasers
of such securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing under which
they were made;
(ix) otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the Commission, and make available
to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve months, but
not more than eighteen months, beginning with the first day of the
Company's first full calendar month quarter after the effective date
of such registration statement, which earnings statement shall satisfy
the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder, and will furnish to each such seller at least three
Business Days prior to the filing thereof a copy of any amendment or
supplement to such registration statement or prospectus and shall not
file any thereof to which any such seller shall have reasonably
objected on the grounds that such amendment or supplement does not
comply in all material respects with the requirements of the
Securities Act or of the rules or regulations thereunder;
(x) make available for inspection by a representative or
representatives of the holders of Registrable Securities , each such
representative representing the holders of not less than a majority of
the Registrable Securities included in the registration, any
underwriter participating in any disposition pursuant to the
registration statement and any attorney or accountant retained by such
selling holders or underwriter (each, an "Inspector"), all financial
and other records, pertinent corporate documents and properties of the
Company (the "Records"), and cause the Company's officers, directors
and employees to supply all information reasonably requested by any
such Inspector in connection with such registration in order to permit
a reasonable investigation within the meaning of Section 11 of the
Securities Act, provided that the Company shall not be required to
comply with this subdivision (x) if there is a reasonable likelihood,
in the judgment of the Company, that such delivery could result in the
loss of any attorney-client privilege related thereto; and provided
further that Records which the Company determines, in good faith, to
be confidential and which it notifies the Inspectors are confidential
shall not be disclosed by the Inspectors (other than to any holder of
Registrable Securities) unless (x) such Records have become generally
available to the public or (y) the disclosure of such Records may be
necessary or appropriate (A) in compliance with any law, rule,
regulation or order applicable to any such Inspectors or holder of
Registrable Securities, (B) in response to any subpoena or other legal
process or (C) in connection with any litigation to which such
Inspectors or any holder of Registrable Securities is a party;
(xi) provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by such registration
statement from and after a date not later than the effective date of
such registration statement;
(xii) enter into such agreements and take such other actions as
sellers of such Registrable Securities holding 51% of the shares so to
be sold shall reasonably request in order to expedite or facilitate
the disposition of such Registrable Securities;
(xiii) use its reasonable best efforts to list all Registrable
Securities covered by such registration statement on any securities
exchange on which any of the securities of the same class as the
Registrable Securities are then listed; and
(xiv) use its best efforts to provide a CUSIP number for the
Registrable Securities, not later than the effective date of the
registration statement.
The Company may require each seller of Registrable Securities as to which any
registration is being effected to furnish the Company such information regarding
such seller and the distribution of such securities as the Company may from time
to time reasonably request in writing.
Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that, upon receipt of any notice from the Company of the
occurrence of any event of the kind described in subdivision (vii) of this
section 13.3, such holder will forthwith discontinue such holder's disposition
of Registrable Securities pursuant to the registration statement relating to
such Registrable Securities until such holder's receipt of the copies of the
supplemented or amended prospectus contemplated by subdivision (vii) of this
section 13.3 and, if so directed by the Company, will deliver to the Company (at
the Company's expense) all copies, other than permanent file copies, then in
such holder's possession of the prospectus relating to such Registrable
Securities current at the time of receipt of such notice. In the event the
Company shall give any such notice, the period mentioned in paragraph (ii) of
this section 13.3 shall be extended by the length of the period from and
including the date when each seller of any Registrable Securities covered by
such registration statement shall have received such notice to the date on which
each such seller has received the copies of the supplemented or amended
prospectus contemplated by paragraph (vii) of this section 13.3.
If any such registration or comparable statement refers to any holder
of Registrable Securities by name or otherwise as the holder of any securities
of the Company then such holder shall have the right to require (i) the
insertion therein of language, in form and substance satisfactory to such
holder, to the effect that the holding by such holder of such securities is not
to be construed as a recommendation by such holder of the investment quality of
the Company's securities covered thereby and that such holding does not imply
that such holder will assist in meeting any future financial requirements of the
Company, or (ii) in the event that such reference to such holder by name or
otherwise is not required by the Securities Act or any similar federal statute
then in force, the deletion of the reference to such holder.
13.4. Underwritten Offerings.
(a) Requested Underwritten Offerings. If requested by the underwriters
for any underwritten offering by holders of Registrable Securities pursuant
to a registration requested under section 13.1, the Company will enter into
an underwriting agreement with such underwriters for such offering, such
agreement to be satisfactory in substance and form to the Company, each
such holder and the underwriters, and to contain such representations and
warranties by the Company and such other terms as are generally prevailing
in agreements of this type, including, without limitation, indemnities to
the effect and to the extent provided in section 13.7. The holders of the
Registrable Securities will cooperate with the Company in the negotiation
of the underwriting agreement and will give consideration to the reasonable
suggestions of the Company regarding the form thereof, provided that
nothing herein contained shall diminish the foregoing obligations of the
Company. The holders of Registrable Securities to be distributed by such
underwriters shall be parties to such underwriting agreement and may, at
their option, require that any or all of the representations and warranties
by, and the other agreements on the part of, the Company to and for the
benefit of such underwriters shall also be made to and for the benefit of
such holders of Registrable Securities and that any or all of the
conditions precedent to the obligations of such underwriters under such
underwriting agreement be conditions precedent to the obligations of such
holders of Registrable Securities. Any such holder of Registrable
Securities shall not be required to make any representations or warranties
to or agreements with the Company or the underwriters other than
representations and warranties contained in a writing furnished by such
holder expressly for use in such registration statement or agreements
regarding such holder, such holder's Registrable Securities and such
holder's intended method of distribution and any other representation
required by law.
(b) Incidental Underwritten Offerings. If the Company at any time
proposes to register any of its securities under the Securities Act as
contemplated by section 13.2 and such securities are to be distributed by
or through one or more underwriters, the Company will, if requested by any
holder of Registrable Securities as provided in section 13.2 and subject to
the provisions of section 13.2(b), use its reasonable best efforts to
arrange for such underwriters to include all the Registrable Securities to
be offered and sold by such holder among the securities to be distributed
by such underwriters. The holders of Registrable Securities to be
distributed by such underwriters shall be parties to the underwriting
agreement between the Company and such underwriters and may, at their
option, require that any or all of the representations and warranties by,
and the other agreements on the part of, the Company to and for the benefit
of such underwriters shall also be made to and for the benefit of such
holders of Registrable Securities and that any or all of the conditions
precedent to the obligations of such underwriters under such underwriting
agreement be conditions precedent to the obligations of such holders of
Registrable Securities. Any such holder of Registrable Securities shall not
be required to make any representations or warranties to or agreements with
the Company or the underwriters other than representations, warranties or
agreements regarding such holder, such holder's Registrable Securities and
such holder's intended method of distribution and any other representation
required by law.
(c) Holdback Agreements.
(i) Each holder of Registrable Securities agrees by acquisition
of such Registrable Securities, if so required by the managing
underwriter, not to sell, make any short sale of, loan, grant any
option for the purchase of, effect any public sale or distribution of
or otherwise dispose of any equity securities of the Company, during
the seven days prior to and the 135 days after any underwritten
registration pursuant to section 13.1 or 13.2 has become effective,
except as part of such underwritten registration. Notwithstanding the
foregoing sentence, each holder of Registrable Securities subject to
the foregoing sentence shall be entitled to sell during the foregoing
period securities in a private sale.
(ii) The Company agrees (x) if so required by the managing
underwriter not to sell, make any short sale of, loan, grant any
option for the purchase of, effect any public sale or distribution of
or otherwise dispose of its equity securities or securities
convertible into or exchangeable or exercisable for any of such
securities during the seven days prior to and the 135 days after any
underwritten registration pursuant to section 13.1 or 13.2 has become
effective, except as part of such underwritten registration and except
pursuant to registrations on Form S-4, S-8 or any successor or similar
forms thereto, and (y) to cause each holder of its equity securities
or any securities convertible into or exchangeable or exercisable for
any of such securities, in each case purchased directly from the
Company at any time after the date of this Agreement (other than in a
public offering) to agree not to sell, make any short sale of, loan,
grant any option for the purchase of, effect any such public sale or
distribution of or otherwise dispose of such securities during such
period except as part of such underwritten registration.
(d) Participation in Underwritten Offerings. No Person may participate
in any underwritten offering hereunder unless such Person (i) agrees to sell
such Person's securities on the basis provided in any underwriting arrangements
approved, subject to the terms and conditions hereof, by the Company and the
holders of a majority of Registrable Securities to be included in such
underwritten offering and (ii) completes and executes all questionnaires,
indemnities, underwriting agreements and other documents (other than powers of
attorney) required under the terms of such underwriting arrangements.
Notwithstanding the foregoing, no underwriting agreement (or other agreement in
connection with such offering) shall require any holder of Registrable
Securities to make any representations or warranties to or agreements with the
Company or the underwriters other than representations and warranties contained
in a writing furnished by such holder expressly for use in the related
registration statement or agreements regarding such holder, such holder's
Registrable Securities and such holder's intended method of distribution and any
other representation required by law.
13.5. Preparation; Reasonable Investigation. In connection with the
preparation and filing of each registration statement under the Securities Act
pursuant to this Agreement, the Company will give the holders of Registrable
Securities registered under such registration statement, their underwriters, if
any, and their respective counsel and accountants, the opportunity to
participate in the preparation of such registration statement, each prospectus
included therein or filed with the Commission, and each amendment thereof or
supplement thereto, and will give each of them such access to its books and
records and such opportunities to discuss the business of the Company with its
officers and the independent public accountants who have certified its financial
statements as shall be necessary, in the opinion of such holders' and such
underwriters' respective counsel, to conduct a reasonable investigation within
the meaning of the Securities Act.
13.6. Rights of Holders. If any registration statement under the
Securities Act refers to any holder by name or otherwise as the holder of any
securities of the Company, then such holder shall have the right to require (a)
the insertion therein of language, in form and substance satisfactory to such
holder, to the effect that the holding by such holder of such securities does
not necessarily make such holder a "controlling person" of the Company within
the meaning of the Securities Act and is not to be construed as recommendation
by such holder of the investment quality of the Company's debt or equity
securities covered thereby and that such holding does not imply that such holder
will assist in meeting any future financial requirements of the Company, or (b)
in the event that such reference to such holder by name or otherwise is not
required by the Securities Act or any rules and regulations promulgated
thereunder, the deletion of the reference to such holder. 13.7. Indemnification.
(a) Indemnification by the Company. In the case of any registration
statement filed pursuant to Section 13.1 or 13.2, the Company will, and
hereby does, indemnify and hold harmless the holder of any Registrable
Securities covered by such registration statement, its directors and
officers, each other Person who participates as an underwriter in the
offering or sale of such securities and each other Person, if any, who
controls such holder or any such underwriter within the meaning of the
Securities Act, against any losses, claims, damages or liabilities, joint
or several, to which such holder or any such director or officer or
underwriter or controlling person may become subject under the Securities
Act or otherwise, insofar as such losses, claims, damages or liabilities
(or actions or proceedings, whether commenced or threatened, in respect
thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration
statement under which such securities were registered under the Securities
Act, any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, 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, and the
Company will reimburse such holder and each such director, officer,
underwriter and controlling person for any legal or any other expenses
reasonably incurred by them in connection with investigating or defending
any such loss, claim, liability, action or proceeding, provided that the
Company shall not be liable in any such case to the extent that any such
loss, claim, damage, liability (or action or proceeding in respect thereof)
or expense arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in such registration
statement, any such preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement in reliance upon and in conformity with
written information furnished to the Company through an instrument duly
executed by such holder specifically stating that it is for use in the
preparation thereof and, provided, further that the Company shall not be
liable to any Person who participates as an underwriter, in the offering or
sale of Registrable Securities or to any other Person, if any, who controls
such underwriter within the meaning of the Securities Act, in any such case
to the extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of such Person's
failure to send or give a copy of the final prospectus, as the same may be
then supplemented or amended, within the time required by the Securities
Act to the Person asserting an untrue statement or alleged untrue statement
or omission or alleged omission at or prior to the written confirmation of
the sale of Registrable Securities to such Person if such statement or
omission was corrected in such final prospectus. Such indemnity shall
remain in full force and effect regardless of any investigation made by or
on behalf of such holder or any such director, officer, underwriter or
controlling person and shall survive the transfer of such securities by
such holder.
(b) Indemnification by the Sellers. The Company may require, as a
condition to including any Registrable Securities in any registration
statement filed pursuant to section 13.3, that the Company shall have
received an undertaking satisfactory to it from the prospective seller of
such Registrable Securities, to indemnify and hold harmless (in the same
manner and to the same extent as set forth in subdivision (a) of this
section 13.7) the Company, each director of the Company, each officer of
the Company and each other person, if any, who controls the Company within
the meaning of the Securities Act, with respect to any statement or alleged
statement in or omission or alleged omission from such registration
statement, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, if
such statement or alleged statement or omission or alleged omission was
made in reliance upon and in conformity with written information furnished
to the Company through an instrument duly executed by such seller
specifically stating that it is for use in the preparation of such
registration statement, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement. Any such indemnity shall remain in
full force and effect, regardless of any investigation made by or on behalf
of the Company or any such director, officer or controlling person and
shall survive the transfer of such securities by such seller.
(c) Notices of Claims, etc. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding subdivisions of this section 13.7, such
indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the
commencement of such action, provided that the failure of any indemnified
party to give notice as provided herein shall not relieve the indemnifying
party of its obligations under the preceding subdivisions of this section
13.7, except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice. In case any such action is
brought against an indemnified party, unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, the indemnifying
party shall be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly notified, to
the extent that the indemnifying party may wish, with counsel reasonably
satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party shall not be liable to such
indemnified party for any legal or other expenses subsequently incurred by
the latter in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the consent of
the indemnified party, consent to entry of any judgment or enter into any
settlement of any such action which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified
party of a release from all liability, or a covenant not to sue, in respect
to such claim or litigation. No indemnified party shall consent to entry of
any judgment or enter into any settlement of any such action the defense of
which has been assumed by an indemnifying party without the consent of such
indemnifying party.
(d) Other Indemnification. Indemnification similar to that specified
in the preceding subdivisions of this section 13.7 (with appropriate
modifications) shall be given by the Company and each seller of Registrable
Securities with respect to any required registration or other qualification
of securities under any Federal or state law or regulation of any
governmental authority, other than the Securities Act.
(e) Indemnification Payments. The indemnification required by this
section 13.7 shall be made by periodic payments of the amount thereof
during the course of the investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred.
(f) Contribution. If the indemnification provided for in the preceding
subdivisions of this section 13.7 is unavailable to an indemnified party in
respect of any expense, loss, claim, damage or liability referred to
therein, then each indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such expense, loss, claim, damage or
liability (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the holder or
underwriter, as the case may be, on the other from the distribution of the
Registrable Securities or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the Company on the one hand and of
the holder or underwriter, as the case may be, on the other in connection
with the statements or omissions which resulted in such expense, loss,
damage or liability, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one
hand and the holder or underwriter, as the case may be, on the other in
connection with the distribution of the Registrable Securities shall be
deemed to be in the same proportion as the total net proceeds received by
the Company from the initial sale of the Registrable Securities by the
Company to the purchasers pursuant to the Credit Agreement bear to the
gain, if any, realized by the selling holder or the underwriting discounts
and commissions received by the underwriter, as the case may be. The
relative fault of the Company on the one hand and of the holder or
underwriter, as the case may be, on the other shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or omission to state a material fact relates
to information supplied by the Company, by the holder or by the underwriter
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission, provided that
the foregoing contribution agreement shall not inure to the benefit of any
indemnified party if indemnification would be unavailable to such
indemnified party by reason of the provisions contained in the first
sentence of subdivision (a) of this section 13.7, and in no event shall the
obligation of any indemnifying party to contribute under this subdivision
(f) exceed the amount that such indemnifying party would have been
obligated to pay by way of indemnification if the indemnification provided
for under subdivisions (a) or (b) of this section 13.7 had been available
under the circumstances.
The Company and the holders of Registrable Securities agree that it
would not be just and equitable if contribution pursuant to this
subdivision (f) were determined by pro rata allocation (even if the holders
and any underwriters were treated as one entity for such purpose) or by any
other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
in the preceding sentence and subdivision (c) of this section 13.7, any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subdivision (f), no holder of
Registrable Securities or underwriter shall be required to contribute any
amount in excess of the amount by which (i) in the case of any such holder,
the net proceeds received by such holder from the sale of Registrable
Securities or (ii) in the case of an underwriter, the total price at which
the Registrable Securities purchased by it and distributed to the public
were offered to the public exceeds, in any such case, the amount of any
damages that such holder or underwriter has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
14. Definitions. Capitalized terms used but not defined herein have
the meanings ascribed to such terms in the Credit Agreement. As used herein,
unless the context otherwise requires, the following terms have the following
respective meanings:
Acquiring Person: With reference to the transactions referred to in
clauses (a) through (d) of section 3.1, the continuing or surviving corporation
of a consolidation or merger with the Company (if other than the Company), the
transferee of substantially all of the properties of the Company, the
corporation consolidating with or merging into the Company in a consolidation or
merger in connection with which the Common Stock is changed into or exchanged
for stock or other securities of any other Person or cash or any other property,
or, in the case of a capital reorganization or reclassification, the Company.
Acquisition Price: As applied to the Common Stock, (a) the Market Price on the
date immediately preceding the date on which any transaction to which section 3
applies is consummated, or (b) if a purchase, tender or exchange offer is made
by the Acquiring Person (or by any of its affiliates) to the holders of the
Common Stock and such offer is accepted by the holders of more than 50% of the
outstanding shares of Common Stock, the greater of (i) the price determined in
accordance with the provisions of the foregoing clause (a) of this sentence and
(ii) the Market Price on the date immediately preceding the acceptance of such
offer by the holders of more than 50% of the outstanding shares of Common Stock.
Additional Shares of Common Stock: All shares (including treasury
shares) of Common Stock issued or sold (or, pursuant to section 2.3 or 2.4,
deemed to be issued) by the Company after the date hereof, whether or not
subsequently reacquired or retired by the Company.
Business Day: Any day other than a Saturday or a Sunday or a day on
which commercial banking institutions in the City of New York are authorized by
law to be closed. Any reference to "days" (unless Business Days are specified)
shall mean calendar days.
Commission: The Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
Common Stock: As defined in the introduction to this Warrant, such
term to include any stock into which such Common Stock shall have been changed
or any stock resulting from any reclassification of such Common Stock, and all
other stock of any class or classes (however designated) of the Company the
holders of which have the right, without limitation as to amount, either to all
or to a share of the balance of current dividends and liquidating dividends
after the payment of dividends and distributions on any shares entitled to
preference.
Company: As defined in the introduction to this Warrant, such term to
include any corporation which shall succeed to or assume the obligations of the
Company hereunder in compliance with section 3.
Convertible Securities: Any evidences of indebtedness, shares of stock
(other than Common Stock) or other securities directly or indirectly convertible
into or exchangeable for Additional Shares of Common Stock.
Credit Agreement: As defined in the introduction to this Warrant.
Current Market Price: On any date specified herein, the average daily
Market Price during the period of the most recent 20 days, ending on such date,
on which the national securities exchanges were open for trading, except that if
no Common Stock is then listed or admitted to trading on any national securities
exchange or quoted in the over-the-counter market, the Current Market Price
shall be the Market Price on such date.
Exchange Act: The Securities Exchange Act of 1934, or any similar
federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time.
Initiating Holders: Any holder or holders of Registrable Securities
holding at least 25% of the Registrable Securities (by number of shares at the
time issued and outstanding), and initiating a request pursuant to section 13.1
for the registration of all or part of such holder's or holders' Registrable
Securities.
Institutional Holder: Any original purchaser of any Warrant, any
insurance company, pension fund, mutual fund, investment company, bank, savings
bank, savings and loan association, broker-dealer, investment adviser,
investment banking company, trust company or any finance or credit company, any
portfolio or any investment fund managed by any of the foregoing, any other
institutional investor and any nominee of any of the foregoing.
Market Price: On any date specified herein, the amount per share of
the Common Stock, equal to (a) the last sale price of such Common Stock, regular
way, on such date or, if no such sale takes place on such date, the average of
the closing bid and asked prices thereof on such date, in each case as
officially reported on the principal national securities exchange on which such
Common Stock is then listed or admitted to trading, or (b) if such Common Stock
is not then listed or admitted to trading on any national securities exchange
but is designated as a national market system security by the NASD, the last
trading price of the Common Stock on such date, or (c) if there shall have been
no trading on such date or if the Common Stock is not so designated, the average
of the closing bid and asked prices of the Common Stock on such date as shown by
the NASD automated quotation system, or (d) if such Common Stock is not then
listed or admitted to trading on any national exchange or quoted in the
over-the-counter market, the higher of (x) the book value thereof as determined
by any firm of independent public accountants of recognized standing selected by
the Board of Directors of the Company as of the last day of any month ending
within 60 days preceding the date as of which the determination is to be made or
(y) the fair value thereof determined in good faith by the Board of Directors of
the Company as of a date which is within 18 days of the date as of which the
determination is to be made.
Market Value: Per share of common stock (or equivalent equity
interests) of the Acquiring Person or its Parent on any date specified herein,
(a) the average of the last sale prices, regular way, on the 20 consecutive
business days immediately preceding such date or, if there shall have been no
sale on any such day, the average of the closing bid and asked prices on such
date, in each case as officially reported on the principal national securities
exchange on which such common stock is at the time listed or admitted to
trading, or (b) if such common stock is not then listed or admitted to trading
on any national securities exchange, but is designated as a national market
system security by the NASD, the last trading price of the common stock on such
date, or if there shall have been no trading on such date or if the common stock
is not so designated, the average of the reported closing bid and asked prices
on such 20 days as shown by the NASD automated quotation system.
NASD: The National Association of Securities Dealers, Inc.
Notes: Collectively, the Tranche A Term Notes, due June 30, 2003, of
the Company originally issued in the aggregate principal amount of $25 million,
the Tranche B Term Notes, due June 30, 2004, of the Company originally issued in
the aggregate amount of $25 million, and the Revolving Notes, issued originally
due June 30, 2001, of the Company in the aggregate amount of $10 million, in
each case issued pursuant to the Credit Agreement, and such term to include any
such notes issued in substitution for such notes.
Options: Rights, options or warrants to subscribe for, purchase or
otherwise acquire either Additional Shares of Common Stock or Convertible
Securities.
Other Securities: Any stock (other than Common Stock) and other
securities of the Company or any other Person (corporate or otherwise) which the
holders of the Warrants at any time shall be entitled to receive, or shall have
received, upon the exercise of the Warrants, in lieu of or in addition to Common
Stock, or which at any time shall be issuable or shall have been issued in
exchange for or in replacement of Common Stock or Other Securities pursuant to
section 3 or otherwise.
Parent: As to any Acquiring Person any corporation which (a) controls
the Acquiring Person directly or indirectly through one or more intermediaries,
(b) is required to include the Acquiring Person in the consolidated financial
statements contained in such Parent's Annual Report on Form 10-K and (c) is not
itself included in the consolidated financial statements of any other person
(other than its consolidated subsidiaries).
Person: A corporation, an association, a partnership, a limited
liability company, an organization, a business, an individual, a government or
political subdivision thereof or a governmental agency.
Purchaser: As defined in the introduction to this Warrant.
Registrable Securities: (a) Any shares of Common Stock or Other
Securities issued or issuable upon exercise of this Warrant and (b) any
securities issued or issuable with respect to any securities referred to in the
foregoing subdivision by way of stock dividend or stock split or in connection
with a combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise. As to any particular Registrable Securities, once
issued such securities shall cease to be Registrable Securities when (a) a
registration statement with respect to the sale of such securities shall have
become effective under the Securities Act and such securities shall have been
disposed of in accordance with such registration statement, (b) they shall have
been distributed to the public pursuant to Rule 144 (or any successor provision)
under the Securities Act, (c) they shall have been otherwise transferred, new
certificates for them not bearing a legend restricting further transfer shall
have been delivered by the Company and subsequent disposition of them shall not
require registration or qualification of them under the Securities Act or any
similar state law then in force, or (d) they shall have ceased to be
outstanding.
Registration Expenses: All expenses incident to the Company's
performance of or compliance with section 13, including, without limitation, all
registration, filing and NASD fees, all fees and expenses of complying with
securities or blue sky laws, all word processing, duplicating and printing
expenses, messenger and delivery expenses, the fees and disbursements of counsel
for the Company and of its independent public accountants, including the
expenses of any special audits or "cold comfort" letters required by or incident
to such performance and compliance, premiums and other costs of policies of
insurance issued to the Company against liabilities arising out of the public
offering of the Registrable Securities being registered and any fees and
disbursements of underwriters retained by the Company and customarily paid by
issuers or sellers of securities, but excluding underwriting discounts and
commissions and transfer taxes, if any, provided that, in any case where
Registration Expenses are not to be borne by the Company, such expenses shall
not include salaries of Company personnel or general overhead expenses of the
Company, auditing fees, premiums or other expenses relating to liability
insurance required by underwriters of the Company or other expenses for the
preparation of financial statements or other data normally prepared by the
Company in the ordinary course of its business or which the Company would have
incurred in any event.
Restricted Securities: (a) Any Warrants bearing the applicable legend
set forth in section 9.1, (b) any shares of Common Stock (or Other Securities)
issued upon the exercise of Warrants which are evidenced by a certificate or
certificates bearing the applicable legend set forth in such section, (c) any
shares of Common Stock (or Other Securities) issued subsequent to the exercise
of any of the Warrants as a dividend or other distribution with respect to, or
resulting from a subdivision of the outstanding shares of Common Stock (or Other
Securities) into a greater number of shares by reclassification, stock splits or
otherwise, or in exchange for or in replacement of the Common Stock (or Other
Securities) issued upon such exercise, which are evidenced by a certificate or
certificates bearing the applicable legend set forth in such section, and (d)
unless the context otherwise requires, any shares of Common Stock (or Other
Securities) issuable upon the exercise of Warrants, which, when so issued, will
be evidenced by a certificate or certificates bearing the applicable legend set
forth in such section.
Securities Act: The Securities Act of 1933, or any similar federal
statute, and the rules and regulations of the Commission thereunder, all as the
same shall be in effect at the time.
Series A Preferred Stock: The Company's Series A Convertible Preferred
Stock, par value $.01 per share.
Series B Preferred Stock: The Company's Series B Convertible Preferred
Stock, par value $.001 per share.
Series C Preferred Stock: The Company's Series C Convertible Preferred
Stock, par value $.01 per share.
Transfer: Any sale, assignment, pledge or other disposition of any
security, or of any interest therein, which could constitute a "sale" as that
term is defined in section 2(3) of the Securities Act. Voting Securities: Stock
of any class or classes (or equivalent interests), if the holders of the stock
of such class or classes (or equivalent interests) are ordinarily, in the
absence of contingencies, entitled to vote for the election of the directors (or
persons performing similar functions) of such business entity, even though the
right so to vote has been suspended by the happening of such a contingency.
Warrant Price: As defined in section 2.1.
Warrants: As defined in the introduction to this Warrant.
Weighted Average Warrant Price: As to any holder of Restricted
Securities, the price determined by dividing (a) the sum of the aggregate
consideration previously paid by such holder upon the exercise of Warrants plus
the consideration payable upon the exercise of all Warrants held by such holder
by (b) the sum of (i) the aggregate number of shares previously received by such
holder upon the exercise of Warrants plus (ii) the number of shares which would
be received by such holder upon the exercise of all Warrants held by such
holder, based upon the Warrant Price in effect on the effective date of the
registration statement in respect of which the Weighted Average Warrant Price is
being determined.
15. Remedies. The Company stipulates that the remedies at law of the
holder of this Warrant in the event of any default or threatened default by the
Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate and that, to the fullest extent
permitted by law, such terms may be specifically enforced by a decree for the
specific performance of any agreement contained herein or by an injunction
against a violation of any of the terms hereof or otherwise.
16. No Rights or Liabilities as Stockholder. Nothing contained in this
Warrant shall be construed as conferring upon the holder hereof any rights as a
stockholder of the Company or as imposing any obligation on such holder to
purchase any securities or as imposing any liabilities on such holder as a
stockholder of the Company, whether such obligation or liabilities are asserted
by the Company or by creditors of the Company.
17. Notices. All notices and other communications under this Warrant
shall be in writing and shall be delivered, or mailed by registered or certified
mail, return receipt requested, by a nationally recognized overnight courier,
postage prepaid, addressed (a) if to any holder of any Warrant, at the
registered address of such holder as set forth in the register kept at the
principal office of the Company, or (b) if to the Company, to the attention of
its President at its principal office, provided that the exercise of any Warrant
shall be effective in the manner provided in section 1.
18. Amendments. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought.
19. Expiration. The right to exercise this Warrant shall expire at
5:00 p.m., New York City time, on June 30, 2008.
20. Descriptive Headings. The headings in this Agreement are for
purposes of reference only and shall not limit or otherwise affect the meaning
hereof.
21. GOVERNING LAW. THIS WARRANT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF
THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.
22. Judicial Proceedings; Waiver of Jury. Any judicial proceeding
brought against the Company with respect to this Warrant may be brought in any
court of competent jurisdiction in the State of New York or of the United States
of America for the Southern District of New York and, by execution and delivery
of this Agreement, the Company (a) accepts, generally and unconditionally, the
nonexclusive jurisdiction of such courts and any related appellate court, and
irrevocably agrees to be bound by any judgment rendered thereby in connection
with this Warrant, subject to any rights of appeal, and (b) irrevocably waives
any objection the Company may now or hereafter have as to the venue of any such
suit, action or proceeding brought in such a court or that such court is an
inconvenient forum. The Company hereby waives personal service of process and
consents, that service of process upon it may be made by certified or registered
mail, return receipt requested, at its address specified or determined in
accordance with the provisions of section 17, and service so made shall be
deemed completed on the third Business Day after such service is deposited in
the mail or, if earlier, when delivered. Nothing herein shall affect the right
to serve process in any other manner permitted by law or shall limit the right
of any holder of any Warrant to bring proceedings against the Company in the
courts of any other jurisdiction. THE COMPANY HEREBY WAIVES TRIAL BY JURY IN ANY
JUDICIAL PROCEEDING INVOLVING, DIRECTLY, OR INDIRECTLY, ANY MATTER (WHETHER
SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO,
OR CONNECTED WITH THIS WARRANT OR THE RELATIONSHIP ESTABLISHED HEREUNDER.
BMJ MEDICAL MANAGEMENT, INC.
By:_________________________
Name:
Title:
<PAGE>
FORM OF SUBSCRIPTION
[To be executed only upon exercise of Warrant]
To [NAME OF ISSUER]
The undersigned registered holder of the within Warrant hereby irrevocably
exercises such Warrant for, and purchases thereunder, ______ shares of Common
Stock of [NAME OF ISSUER] and herewith makes payment of $ therefor,
and requeststhat the certificates for such shares be issued in the name of, and
delivered to , whose address is .
Dated:
(Signature must conform in all
respects to name of holder as
specified on the face of Warrant)
____________________________________
(Street Address)
____________________________________
(City)(State)(Zip Code)
<PAGE>
FORM OF ASSIGNMENT
[To be executed only upon transfer of Warrant]
For value received, the undersigned registered holder of the within Warrant
hereby sells, assigns and transfers unto the right represented by
such Warrant to purchase shares of [Common Stock] of [NAME OF
ISSUER] to which such Warrant relates, and appoints Attorney to
make such transfer on the books of [NAME OF ISSUER] maintained for such
purpose, with full power of substitution in the premises.
Dated: ____________________________________
(Signature must conform in all
respects to name of holder as
specified on the face of Warrant)
___________________________________
(Street Address)
___________________________________
(City)(State)(Zip Code)
Signed in the presence of:
--------------------------------------------------------
BMJ MEDICAL MANAGEMENT, INC.
Common Stock Purchase Warrant
Dated as of June 30, 1998
---------------------------------------------------------
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE
A REGISTRATION UNDER SUCH ACT IS IN EFFECT OR PURSUANT TO AN EXEMPTION
THEREFROM UNDER SUCH ACT. THIS WARRANT AND SUCH SHARES MAY BE
TRANSFERRED ONLY IN COMPLIANCE WITH THE CONDITIONS SPECIFIED IN THIS
WARRANT.
<PAGE>
1. Exercise of Warrant..................................................1
1.1. Manner of Exercise..............................................1
1.2. When Exercise Effective.........................................2
1.3. Delivery of Stock Certificates, etc.............................2
1.4. Company to Reaffirm Obligations.................................2
1.5. Payment by Application of Notes.................................2
1.6. Payment by Application of Shares Otherwise Issuable.............3
2. Adjustment of Common Stock Issuable Upon Exercise....................3
2.1. General; Warrant Price..........................................3
2.2. Adjustment of Warrant Price.....................................4
2.2.1 Issuance of Additional Shares of Common Stock................4
2.2.2 Extraordinary Dividends and Distributions....................5
2.3. Treatment of Options and Convertible Securities.................5
2.4. Treatment of Stock Dividends, Stock Splits, etc.................8
2.5. Computation of Consideration....................................9
2.6. Adjustments for Combinations, etc..............................10
2.7. Dilution in Case of Other Securities...........................10
2.8. Minimum Adjustment of Warrant Price............................11
3. Consolidation, Merger, etc..........................................11
3.1. Adjustments for Consolidation, Merger, Sale
of Assets, Reorganization,
etc...........................................................11
3.2. Assumption of Obligations......................................12
4. Other Dilutive Events...............................................12
5. No Dilution or Impairment...........................................13
6. Accountants' Report as to Adjustments...............................14
7. Notices of Corporate Action.........................................14
8. Registration of Common Stock........................................15
9. Restrictions on Transfer............................................15
9.1. Restrictive Legends............................................15
9.2. Notice of Proposed Transfer; Opinions of Counsel...............16
9.3. Termination of Restrictions....................................18
10. Availability of Information........................................18
11. Reservation of Stock, etc..........................................19
12. Registration and Transfer of Warrants, etc..........................19
12.1. Warrant Register; Ownership of Warrants........................19
12.2. Transfer and Exchange of Warrants.............................20
12.3. Replacement of Warrants.......................................20
13. Registration under Securities Act, etc.............................20
13.1. Registration on Request.......................................20
13.2. Incidental Registration.......................................23
13.3. Registration Procedures.......................................25
13.4. Underwritten Offerings........................................31
13.5. Preparation; Reasonable Investigation.........................34
13.6. Rights of Holders.............................................34
13.7. Indemnification...............................................35
14. Definitions........................................................39
15. Remedies...........................................................45
16. No Rights or Liabilities as Stockholder............................46
17. Notices............................................................46
18. Amendments.........................................................46
19. Expiration.........................................................46
20. Descriptive Headings...............................................46
FORM OF SUBSCRIPTION................................................... 53
FORM OF ASSIGNMENT..................................................... 53
<PAGE>
BMJ MEDICAL MANAGEMENT, INC.
Common Stock Purchase Warrant
------------------
No. W-2 June 30, 1998
BMJ MEDICAL MANAGEMENT, INC. (the "Company"), a Delaware corporation,
for value received, hereby certifies that Paribas, or registered assigns, is
entitled to purchase from the Company 175,000 of the Company's shares of Common
Stock, par value $.001 per share (the "Common Stock"), at the purchase price per
share of $9.00, at any time or from time to time prior to 5:00 p.m., New York
City time, on June 30, 2008, all subject to the terms, conditions and
adjustments set forth below in this Warrant.
This Warrant is one of the Common Stock Purchase Warrants (the
"Warrants", such term to include any such warrants issued in substitution
therefor) originally issued in connection with the issuance by the Company of
Notes representing the obligations of the Company pursuant to the Credit
Agreement (the "Credit Agreement"), dated June 30, 1998, among Paribas (the
"Purchaser"), the other Lenders named therein, the Company and Paribas, acting
in its capacity as agent for the Lenders. The Warrants originally so issued
evidence rights to purchase an aggregate of not less than 2.0% of the Company's
fully diluted shares of Common Stock (determined as of June 30, 1998) subject to
adjustment as provided herein. Certain capitalized terms used in this Warrant
are defined in section 14; references to an "Exhibit" are, unless otherwise
specified, to one of the Exhibits attached to this Warrant and references to a
"section" are, unless otherwise specified, to one of the sections of this
Warrant.
1. Exercise of Warrant. 1.1. Manner of Exercise. This Warrant may be
exercised by the holder hereof, in whole or in part, during normal business
hours on any Business Day, by surrender of this Warrant to the Company at its
principal office, accompanied by a subscription in substantially the form
attached to this Warrant (or a reasonable facsimile thereof) duly executed by
such holder and accompanied by payment, in cash, by certified or official bank
check payable to the order of the Company, or in the manner provided in section
1.5 or section 1.6 (or by any combination of such methods), in the amount
obtained by multiplying (a) the number of shares of Common Stock (without giving
effect to any adjustment thereof) designated in such subscription by (b) $9.00
(up to a maximum of 175,000 shares), and such holder shall thereupon be entitled
to receive the number of duly authorized, validly issued, fully paid and
nonassessable shares of Common Stock (or Other Securities) determined as
provided in sections 2 through 4.
1.2. When Exercise Effective. The exercise of this Warrant shall be
deemed to have been effected immediately prior to the close of business on the
Business Day on which this Warrant shall have been surrendered to the Company as
provided in section 1.1, and at such time the Person or Persons in whose name or
names any certificate or certificates for shares of Common Stock (or Other
Securities) shall be issuable upon such exercise as provided in section 1.3
shall be deemed to have become the holder or holders of record thereof.
1.3. Delivery of Stock Certificates, etc. As soon as practicable after
the exercise of this Warrant and in any event within ten Business Days
thereafter, the Company at its expense will cause to be issued in the name of
and delivered to the holder hereof or, subject to section 9, as such holder
(upon payment by such holder of any applicable transfer taxes) may direct, a
certificate or certificates for the number of duly authorized, validly issued,
fully paid and nonassessable shares of Common Stock (or Other Securities) to
which such holder shall be entitled upon such exercise plus, in lieu of any
fractional share to which such holder would otherwise be entitled, cash in an
amount equal to the same fraction of the Market Price per share on the Business
Day next preceding the date of such exercise.
1.4. Company to Reaffirm Obligations. The Company will, at the time of
the exercise of this Warrant, upon the request of the holder hereof, acknowledge
in writing its continuing obligation to afford to such holder all rights
(including, without limitation, any rights to registration of the shares of
Common Stock or Other Securities issued upon such exercise) to which such holder
shall continue to be entitled after such exercise in accordance with the terms
of this Warrant, provided that if the holder of this Warrant shall fail to make
any such request, such failure shall not affect the continuing obligation of the
Company to afford such rights to such holder.
1.5. Payment by Application of Notes. Upon the exercise of this
Warrant, the holder hereof may, at its option, instruct the Company, by written
notice accompanying the surrender of this Warrant at the time of such exercise,
to apply to the payment required by section 1.1 all or any part of the unpaid
principal amount of any one or more Notes at the time held by such holder which
is at such time due, in which case the Company will accept the principal amount
specified in such notice in satisfaction of a like amount of such payment absent
manifest error. In case less than the entire unpaid principal amount of any Note
shall be so specified, the principal amount so specified shall be credited, as
of the date of such exercise, against the required prepayments of principal then
remaining unpaid on such Note in the inverse order of their maturity dates. Upon
any partial application of a Note, the Company at its expense shall forthwith
issue and deliver to or upon the order of the holder thereof a new Note or Notes
in principal amount equal to the unpaid principal amount of such surrendered
Note which has not been applied against such payment, such new Note or Notes to
be dated and to bear interest from the date to which interest has been paid on
such surrendered Note. The Company's obligation to issue any such new Notes
shall be expressly conditioned upon the simultaneous surrender by the holder of
any existing Notes to be replaced by such new Notes. Within two Business Days
after receipt of any such notice, the Company will pay to the holder of the
Notes giving such notice, in the manner provided in the Notes and in the Credit
Agreement, all unpaid interest on the principal amount so specified in such
notice, accrued to the date of the exercise of such Warrant.
1.6. Payment by Application of Shares Otherwise Issuable. Upon the
exercise of this Warrant, the holder hereof may, at its option, instruct the
Company, by written notice accompanying the surrender of this Warrant at the
time of such exercise, to apply to the payment required by section 1.1 such
number of the shares of Common Stock otherwise issuable to such holder upon such
exercise as shall be specified in such notice, in which case an amount equal to
the excess of the aggregate Current Market Price of such specified number of
shares on the date of exercise over the portion of the payment required by
section 1.1 attributable to such shares shall be deemed to have been paid to the
Company and the number of shares issuable upon such exercise shall be reduced by
such specified number.
2. Adjustment of Common Stock Issuable Upon Exercise. 2.1. General;
Warrant Price. The number of shares of Common Stock which the holder of this
Warrant shall be entitled to receive upon the exercise hereof shall be
determined by multiplying the number of shares of Common Stock which would
otherwise (but for the provisions of this section 2) be issuable upon such
exercise, as designated by the holder hereof pursuant to section 1.1, by the
fraction of which (a) the numerator is $9.00 and (b) the denominator is the
Warrant Price in effect on the date of such exercise. The "Warrant Price" shall
initially be $9.00 per share, shall be adjusted and readjusted from time to time
as provided in this section 2 and, as so adjusted or readjusted, shall remain in
effect until a further adjustment or readjustment thereof is required by this
section 2.
2.2. Adjustment of Warrant Price.
2.2.1 Issuance of Additional Shares of Common Stock. In case the
Company at any time or from time to time after the date hereof shall issue or
sell Additional Shares of Common Stock (including Additional Shares of Common
Stock deemed to be issued pursuant to section 2.3 or 2.4) without consideration
or for a consideration per share less than the greater of the Current Market
Price and the Warrant Price in effect immediately prior to such issue or sale,
then, and in each such case, subject to section 2.8, such Warrant Price shall be
reduced, concurrently with such issue or sale, to a price (calculated to the
nearest .001 of a cent) determined by multiplying such Warrant Price by a
fraction
(a) the numerator of which shall be (i) the number of shares of Common
Stock (including, without limitation, the number of shares of Common Stock
convertible or exchangeable to shares of Common Stock) outstanding
immediately prior to such issue or sale plus (ii) the number of shares of
Common Stock which the aggregate consideration received by the Company for
the total number of such Additional Shares of Common Stock so issued or
sold would purchase at the greater of such Current Market Price and such
Warrant Price, and
(b) the denominator of which shall be the number of shares of Common
Stock (including, without limitation, the number of shares of Common Stock
convertible or exchangeable to shares of Common Stock) outstanding
immediately after such issue or sale,
provided that, for the purposes of this section 2.2.1, (x) immediately after any
Additional Shares of Common Stock are deemed to have been issued pursuant to
section 2.3 or 2.4, such Additional Shares shall be deemed to be outstanding,
and (y) treasury shares shall not be deemed to be outstanding.
2.2.2 Extraordinary Dividends and Distributions. In case the Company
at any time or from time to time after the date hereof shall declare, order, pay
or make a dividend or other distribution (including, without limitation, any
distribution of other or additional stock or other securities or property or
Options by way of dividend or spin-off, reclassification, recapitalization or
similar corporate rearrangement) on the Common Stock, other than (a) a dividend
payable in Additional Shares of Common Stock or (b) a dividend payable in cash
or other property and declared out of the earned surplus of the Company as at
the date hereof as increased by any credits (other than credits resulting from a
revaluation of property) and decreased by any debits made thereto after such
date or (c) a regular periodic cash dividend at a rate not in excess of 110% of
the rate of the last regular periodic cash dividend theretofore paid, then, and
in each such case, subject to section 2.8, the Warrant Price in effect
immediately prior to the close of business on the record date fixed for the
determination of holders of any class of securities entitled to receive such
dividend or distribution shall be reduced, effective as of the close of business
on such record date, to a price (calculated to the nearest .001 of a cent)
determined by multiplying such Warrant Price by a fraction
(x) the numerator of which shall be the Current Market Price in effect
on such record date or, if the Common Stock trades on an ex-dividend basis,
on the date prior to the commencement of ex-dividend trading, less the
amount of such dividend or distribution (as determined in good faith by the
Board of Directors of the Company) applicable to one share of Common Stock,
and
(y) the denominator of which shall be such Current Market Price.
2.3. Treatment of Options and Convertible Securities. In case the
Company at any time or from time to time after the date hereof shall issue,
sell, grant or assume, or shall fix a record date for the determination of
holders of any class of securities entitled to receive, any Options or
Convertible Securities (other than (i) the issuance of any equity securities of
the Company in connection with the conversion of the Nagpal Note, (ii) the
Series A Preferred Stock, (iii) the Series B Preferred Stock issued at fair
market value, (iv) the Series C Preferred Stock, (v) any stock dividends on
(ii), (iii) or (iv) above, (vi) any convertible promissory notes issued by the
Company existing on the date hereof, and (vii) Options or Convertible Securities
issued, sold or granted to employees, officers, directors, consultants or
affiliated physicians of or to the Company pursuant to one or more benefit plans
or arrangements approved by a disinterested committee of the Board of Directors
of the Company; provided, however, that such Options or Convertible Securities
may only be issued (A) pursuant to such benefit plans or arrangements, (B)up to
a maximum of 15% of the Company's fully diluted capitalization and (C) at fair
market value on the date of grant), then, and in each such case, the maximum
number of Additional Shares of Common Stock (as set forth in the instrument
relating thereto, without regard to any provisions contained therein for a
subsequent adjustment of such number) issuable upon the exercise of such Options
or, in the case of Convertible Securities and Options therefor, the conversion
or exchange of such Convertible Securities, shall be deemed to be Additional
Shares of Common Stock issued as of the time of such issue, sale, grant or
assumption or, in case such a record date shall have been fixed, as of the close
of business on such record date (or, if the Common Stock trades on an
ex-dividend basis, on the date prior to the commencement of ex-dividend
trading), provided that such Additional Shares of Common Stock shall not be
deemed to have been issued unless the consideration per share (determined
pursuant to section 2.5) of such shares would be less than the greater of the
Current Market Price and the Warrant Price in effect on the date of and
immediately prior to such issue, sale, grant or assumption or immediately prior
to the close of business on such record date (or, if the Common Stock trades on
an ex-dividend basis, on the date prior to the commencement of ex-dividend
trading), as the case may be, and provided, further, that in any such case in
which Additional Shares of Common Stock are deemed to be issued
(a) no further adjustment of the Warrant Price shall be made upon the
subsequent issue or sale of Convertible Securities or shares of Common
Stock upon the exercise of such Options or the conversion or exchange of
such Convertible Securities , except in the case of any such Options or
Convertible Securities which contain provisions requiring an adjustment,
subsequent to the date of the issue or sale thereof, of the number of
Additional Shares of Common Stock issuable upon the exercise of such
Options or the conversion or exchange of such Convertible Securities by
reason of (x) a change of control of the Company, (y) the acquisition by
any Person or group of Persons of any specified number or percentage of the
Voting Securities of the Company or (z) any similar event or occurrence,
each such case to be deemed hereunder to involve a separate issuance of
Additional Shares of Common Stock, Options or Convertible Securities, as
the case may be;
(b) if such Options or Convertible Securities by their terms provide,
with the passage of time or otherwise, for any increase in the
consideration payable to the Company, or decrease in the number of
Additional Shares of Common Stock issuable, upon the exercise, conversion
or exchange thereof (by change of rate or otherwise), the Warrant Price
computed upon the original issue, sale, grant or assumption thereof (or
upon the occurrence of the record date, or date prior to the commencement
of ex-dividend trading, as the case may be, with respect thereto), and any
subsequent adjustments based thereon, shall, upon any such increase or
decrease becoming effective, be recomputed to reflect such increase or
decrease insofar as it affects such Options, or the rights of conversion or
exchange under such Convertible Securities, which are outstanding at such
time;
(c) upon the expiration (or purchase by the Company and cancellation
or retirement) of any such Options which shall not have been exercised or
the expiration of any rights of conversion or exchange under any such
Convertible Securities which (or purchase by the Company and cancellation
or retirement of any such Convertible Securities the rights of conversion
or exchange under which) shall not have been exercised, the Warrant Price
computed upon the original issue, sale, grant or assumption thereof (or
upon the occurrence of the record date, or date prior to the commencement
of ex-dividend trading, as the case may be, with respect thereto), and any
subsequent adjustments based thereon, shall, upon such expiration (or such
cancellation or retirement, as the case may be), be recomputed as if:
(i) in the case of Options for Common Stock or Convertible
Securities, the only Additional Shares of Common Stock issued or sold
were the Additional Shares of Common Stock, if any, actually issued or
sold upon the exercise of such Options or the conversion or exchange
of such Convertible Securities and the consideration received therefor
was the consideration actually received by the Company for the issue,
sale, grant or assumption of all such Options, whether or not
exercised, plus the consideration actually received by the Company
upon such exercise, or for the issue or sale of all such Convertible
Securities which were actually converted or exchanged, plus the
additional consideration, if any, actually received by the Company
upon such conversion or exchange, and
(ii) in the case of Options for Convertible Securities, only the
Convertible Securities, if any, actually issued or sold upon the
exercise of such Options were issued at the time of the issue, sale,
grant or assumption of such Options, and the consideration received by
the Company for the Additional Shares of Common Stock deemed to have
then been issued was the consideration actually received by the
Company for the issue, sale, grant or assumption of all such Options,
whether or not exercised, plus the consideration deemed to have been
received by the Company (pursuant to section 2.5) upon the issue or
sale of such Convertible Securities with respect to which such Options
were actually exercised;
(d) no readjustment pursuant to subdivision (b) or (c) above shall
have the effect of increasing the Warrant Price by an amount in excess of
the amount of the adjustment thereof originally made in respect of the
issue, sale, grant or assumption of such Options or Convertible Securities;
and
(e) in the case of any such Options which expire by their terms not
more than 30 days after the date of issue, sale, grant or assumption
thereof, no adjustment of the Warrant Price shall be made until the
expiration or exercise of all such Options, whereupon such adjustment shall
be made in the manner provided in subdivision (c) above.
2.4. Treatment of Stock Dividends, Stock Splits, etc. In case the
Company at any time or from time to time after the date hereof shall declare or
pay any dividend on the Common Stock payable in Common Stock, or shall effect a
subdivision of the outstanding shares of Common Stock into a greater number of
shares of Common Stock (by reclassification or otherwise than by payment of a
dividend in Common Stock), then, and in each such case, Additional Shares of
Common Stock shall be deemed to have been issued (a) in the case of any such
dividend, immediately after the close of business on the record date for the
determination of holders of any class of securities entitled to receive such
dividend, or (b) in the case of any such subdivision, at the close of business
on the day immediately prior to the day upon which such corporate action becomes
effective.
2.5. Computation of Consideration. For the purposes of this section 2,
(a) the consideration for the issue or sale of any Additional Shares
of Common Stock shall, irrespective of the accounting treatment of such
consideration,
(i) insofar as it consists of cash, be computed at the gross
amount of cash received by the Company, without deducting any expenses
paid or incurred by the Company or any commissions or compensations
paid or concessions or discounts allowed to underwriters, dealers or
others performing similar services in connection with such issue or
sale,
(ii) insofar as it consists of property (including securities)
other than cash, be computed at the fair value thereof at the time of
such issue or sale, as determined in good faith by the Board of
Directors of the Company, and
(iii) in case Additional Shares of Common Stock are issued or
sold together with other stock or securities or other assets of the
Company for a consideration which covers both, be the portion of such
consideration so received, computed as provided in clauses (i) and
(ii) above, allocable to such Additional Shares of Common Stock, all
as determined in good faith by the Board of Directors of the Company;
(b) Additional Shares of Common Stock deemed to have been issued
pursuant to section 2.3, relating to Options and Convertible Securities,
shall be deemed to have been issued for a consideration per share
determined by dividing
(i) the total amount, if any, received and receivable by the
Company as consideration for the issue, sale, grant or assumption of
the Options or Convertible Securities in question, plus the minimum
aggregate amount of additional consideration (as set forth in the
instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such consideration to
protect against dilution) payable to the Company upon the exercise in
full of such Options or the conversion or exchange of such Convertible
Securities or, in the case of Options for Convertible Securities, the
exercise of such Options for Convertible Securities and the conversion
or exchange of such Convertible Securities, in each case computing
such consideration as provided in the foregoing subdivision (a),
by
(ii) the maximum number of shares of Common Stock (as set forth
in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number to
protect against dilution) issuable upon the exercise of such Options
or the conversion or exchange of such Convertible Securities; and
(c) Additional Shares of Common Stock deemed to have been issued
pursuant to section 2.4, relating to stock dividends, stock splits, etc.,
shall be deemed to have been issued for no consideration.
2.6. Adjustments for Combinations, etc. In case the outstanding shares
of Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, the Warrant Price in
effect immediately prior to such combination or consolidation shall,
concurrently with the effectiveness of such combination or consolidation, be
proportionately increased.
2.7. Dilution in Case of Other Securities. In case any Other
Securities shall be issued or sold or shall become subject to issue or sale upon
the conversion or exchange of any stock (or Other Securities) of the Company (or
any issuer of Other Securities or any other Person referred to in section 3) or
to subscription, purchase or other acquisition pursuant to any Options issued or
granted by the Company (or any such other issuer or Person) for a consideration
such as to dilute, on a basis consistent with the standards established in the
other provisions of this section 2, the purchase rights granted by this Warrant,
then, and in each such case, the computations, adjustments and readjustments
provided for in this section 2 with respect to the Warrant Price shall be made
as nearly as possible in the manner so provided and applied to determine the
amount of Other Securities from time to time receivable upon the exercise of the
Warrants, so as to protect the holders of the Warrants against the effect of
such dilution.
2.8. Minimum Adjustment of Warrant Price. If the amount of any
adjustment of the Warrant Price required pursuant to this section 2 would be
less than one tenth (1/10) of one percent (1%) of the Warrant Price in effect at
the time such adjustment is otherwise so required to be made, such amount shall
be carried forward and adjustment with respect thereto made at the time of and
together with any subsequent adjustment which, together with such amount and any
other amount or amounts so carried forward, shall aggregate at least one tenth
(1/10) of one percent (1%) of such Warrant Price.
3. Consolidation, Merger, etc. 3.1. Adjustments for Consolidation,
Merger, Sale of Assets, Reorganization, etc. In case the Company after the date
hereof (a) shall consolidate with or merge into any other Person and shall not
be the continuing or surviving corporation of such consolidation or merger, or
(b) shall permit any other Person to consolidate with or merge into the Company
and the Company shall be the continuing or surviving Person but, in connection
with such consolidation or merger, the Common Stock or Other Securities shall be
changed into or exchanged for stock or other securities of any other Person or
cash or any other property, or (c) shall transfer all or substantially all of
its properties or assets to any other Person, or (d) shall effect a capital
reorganization or reclassification of the Common Stock or Other Securities
(other than a capital reorganization or reclassification resulting in the issue
of Additional Shares of Common Stock for which adjustment in the Warrant Price
is provided in section 2.2.1 or 2.2.2), then, and in the case of each such
transaction, proper provision shall be made so that, upon the basis and the
terms and in the manner provided in this Warrant, the holder of this Warrant,
upon the exercise hereof at any time after the consummation of such transaction,
shall be entitled to receive (at the aggregate Warrant Price in effect at the
time of such consummation for all Common Stock or Other Securities issuable upon
such exercise immediately prior to such consummation), in lieu of the Common
Stock or Other Securities issuable upon such exercise prior to such
consummation, the highest amount of securities, cash or other property to which
such holder would actually have been entitled as a shareholder upon such
consummation if such holder had exercised the rights represented by this Warrant
immediately prior thereto, subject to adjustments (subsequent to such
consummation) as nearly equivalent as possible to the adjustments provided for
in sections 2 through 4, provided that if a purchase, tender or exchange offer
shall have been made to and accepted by the holders of more than 50% of the
outstanding shares of Common Stock, and if the holder of such Warrants so
designates in a notice given to the Company on or before the date immediately
preceding the date of the consummation of such transaction, the holder of such
Warrants shall be entitled to receive the highest amount of securities, cash or
other property to which such holder would actually have been entitled as a
shareholder if the holder of such Warrants had exercised such Warrants prior to
the expiration of such purchase, tender or exchange offer and accepted such
offer, subject to adjustments (from and after the consummation of such purchase,
tender or exchange offer) as nearly equivalent as possible to the adjustments
provided for in sections 2 through 4.
3.2. Assumption of Obligations. Notwithstanding anything contained in
the Warrants or in the Credit Agreement to the contrary, the Company will not
effect any of the transactions described in clauses (a) through (d) of section
3.1 unless, prior to the consummation thereof, each Person (other than the
Company) which may be required to deliver any stock, securities, cash or
property upon the exercise of this Warrant as provided herein shall assume, by
written instrument delivered to, and reasonably satisfactory to, the holder of
this Warrant, (a) the obligations of the Company under this Warrant (and if the
Company shall survive the consummation of such transaction, such assumption
shall be in addition to, and shall not release the Company from, any continuing
obligations of the Company under this Warrant) and (b) the obligation to deliver
to such holder such shares of stock, securities, cash or property as, in
accordance with the foregoing provisions of this section 3, such holder may be
entitled to receive, and such Person shall have similarly delivered to such
holder an opinion of counsel for such Person, which counsel shall be reasonably
satisfactory to such holder, stating that this Warrant shall thereafter continue
in full force and effect and the terms hereof (including, without limitation,
all of the provisions of this section 3) shall be applicable to the stock,
securities, cash or property which such Person may be required to deliver upon
any exercise of this Warrant or the exercise of any rights pursuant hereto.
Nothing in this section 3 shall be deemed to authorize the Company to enter into
any transaction not otherwise permitted by the Credit Agreement.
4. Other Dilutive Events. In case any event shall occur as to which
the provisions of section 2 or section 3 are not strictly applicable but the
failure to make any adjustment would not fairly protect the purchase rights
represented by this Warrant in accordance with the essential intent and
principles of such sections, then, in each such case, the Company shall appoint
a firm of independent certified public accountants of recognized national
standing (which may be the regular auditors of the Company), which shall give
their opinion upon the adjustment, if any, on a basis consistent with the
essential intent and principles established in sections 2 and 3, necessary to
preserve, without dilution, the purchase rights represented by this Warrant.
Upon receipt of such opinion, the Company will promptly mail a copy thereof to
the holder of this Warrant and shall make the adjustments described therein.
5. No Dilution or Impairment. The Company will not, by amendment of
its certificate of incorporation or through any consolidation, merger,
reorganization, transfer of assets, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such action as
may be necessary or appropriate in order to protect the rights of the holder of
this Warrant against dilution or other impairment. Without limiting the
generality of the foregoing, the Company (a) will not permit the par value of
any shares of stock receivable upon the exercise of this Warrant to exceed the
amount payable therefor upon such exercise, (b) will take all such action as may
be necessary or appropriate in order that the Company may validly and legally
issue fully paid and nonassessable shares of stock on the exercise of the
Warrants from time to time outstanding, (c) will not take any action which
results in any adjustment of the Warrant Price if the total number of shares of
Common Stock (or Other Securities) issuable after the action upon the exercise
of all of the Warrants would exceed the total number of shares of Common Stock
(or Other Securities) then authorized by the Company's certificate of
incorporation and available for the purpose of issue upon such exercise, and (d)
will not issue any capital stock of any class which is preferred as to dividends
or as to the distribution of assets upon voluntary or involuntary dissolution,
liquidation or winding-up, unless the rights of the holders thereof shall be
limited to a fixed sum or percentage of par value or a sum determined by
reference to a formula based on a published index of interest rates, an interest
rate publicly announced by a financial institution or a similar indicator of
interest rates in respect of participation in dividends and to a fixed sum or
percentage of par value in any such distribution of assets.
6. Accountants' Report as to Adjustments. In each case of any
adjustment or readjustment in the shares of Common Stock (or Other Securities)
issuable upon the exercise of this Warrant, the Company at its expense will
promptly compute such adjustment or readjustment in accordance with the terms of
this Warrant and, at the written request of the holder, cause independent
certified public accountants of recognized national standing (which may be the
regular auditors of the Company) selected by the Company to verify such
computation (other than any computation of the fair value of property as
determined in good faith by the Board of Directors of the Company) and prepare a
report setting forth such adjustment or readjustment and showing in reasonable
detail the method of calculation thereof and the facts upon which such
adjustment or readjustment is based, including a statement of (a) the
consideration received or to be received by the Company for any Additional
Shares of Common Stock issued or sold or deemed to have been issued, (b) the
number of shares of Common Stock outstanding or deemed to be outstanding, and
(c) the Warrant Price in effect immediately prior to such issue or sale and as
adjusted and readjusted (if required by section 2) on account thereof. The
Company will forthwith mail a copy of each such report to each holder of a
Warrant and will, upon the written request at any time of any holder of a
Warrant, furnish to such holder a like report setting forth the Warrant Price at
the time in effect and showing in reasonable detail how it was calculated. The
Company will also keep copies of all such reports at its principal office and
will cause the same to be available for inspection at such office during normal
business hours by any holder of a Warrant or any prospective purchaser of a
Warrant designated by the holder thereof.
7. Notices of Corporate Action. In the event of
(a) any taking by the Company of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend (other than a regular periodic dividend
payable in cash out of earned surplus in an amount not exceeding the amount
of the immediately preceding cash dividend for such period) or other
distribution, or any right to subscribe for, purchase or otherwise acquire
any shares of stock of any class or any other securities or property, or to
receive any other right, or
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company or any consolidation
or merger involving the Company and any other Person or any transfer of all
or substantially all the assets of the Company to any other Person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
the Company will mail to each holder of a Warrant a notice specifying (i) the
date or expected date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and the amount and character of such
dividend, distribution or right, and (ii) the date or expected date on which any
such reorganization, reclassification, recapitalization, consolidation, merger,
transfer, dissolution, liquidation or winding-up is to take place and the time,
if any such time is to be fixed, as of which the holders of record of Common
Stock (or Other Securities) shall be entitled to exchange their shares of Common
Stock (or Other Securities) for the securities or other property deliverable
upon such reorganization, reclassification, recapitalization, consolidation,
merger, transfer, dissolution, liquidation or winding-up. Such notice shall be
mailed at least 30 days prior to the date therein specified.
8. Registration of Common Stock. If any shares of Common Stock
required to be reserved for purposes of exercise of this Warrant require
registration with or approval of any governmental authority under any federal or
state law (other than the Securities Act) before such shares may be issued upon
exercise, the Company will, at its expense and as expeditiously as possible, use
its best efforts to cause such shares to be duly registered or approved, as the
case may be. At any such time as Common Stock is listed on any national
securities exchange, the Company will, at its expense, obtain promptly and
maintain the approval for listing on each such exchange, upon official notice of
issuance, the shares of Common Stock issuable upon exercise of the then
outstanding Warrants and maintain the listing of such shares after their
issuance; and the Company will also list on such national securities exchange,
will register under the Exchange Act and will maintain such listing of, any
Other Securities that at any time are issuable upon exercise of the Warrants, if
and at the time that any securities of the same class shall be listed on such
national securities exchange by the Company.
9. Restrictions on Transfer. 9.1. Restrictive Legends. Except as
otherwise permitted by this section 9, each Warrant (including each Warrant
issued upon the transfer of any Warrant) shall be stamped or otherwise imprinted
with a legend in substantially the following form:
"This Warrant and any shares acquired upon the exercise of this
Warrant have not been registered under the Securities Act of 1933, as
amended, and may not be transferred, sold or otherwise disposed of except
while a registration under such Act is in effect or pursuant to an
exemption therefrom under such Act. This Warrant and such shares may be
transferred only in compliance with the conditions specified in this
Warrant."
Except as otherwise permitted by this section 9, each certificate for Common
Stock (or Other Securities) issued upon the exercise of any Warrant, and each
certificate issued upon the transfer of any such Common Stock (or Other
Securities), shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933 and may not be transferred in the absence
of such registration or an exemption therefrom under such Act. Such shares
may be transferred only in compliance with the conditions specified in that
certain Common Stock Purchase Warrant, dated June 30, 1998, between BMJ
Medical Management, Inc. and Paribas. A complete and correct copy of the
form of such Warrant is available for inspection at the principal office of
BMJ Medical Management, Inc. or at the office or agency maintained by BMJ
Medical Management, Inc. as provided in such Warrants and will be furnished
to the holder of such shares upon written request and without charge."
9.2. Notice of Proposed Transfer; Opinions of Counsel. Prior to any
transfer of any Restricted Securities which are not registered under an
effective registration statement under the Securities Act, the holder thereof
will give written notice to the Company of such holder's intention to effect
such transfer and to comply in all other respects with this section 9.2. Each
such notice (a) shall describe the manner and circumstances of the proposed
transfer in sufficient detail to enable counsel to render the opinions referred
to below, and (b) shall designate counsel for the holder giving such notice (who
may be house counsel for such holder). The holder giving such notice will submit
a copy thereof to the counsel designated in such notice and the Company will
promptly submit a copy thereof to its counsel. The following provisions shall
then apply:
(i) If (A) in the opinion of such counsel for the holder the
proposed transfer may be effected without registration of such
Restricted Securities under the Securities Act, and (B) counsel for
the Company shall not have rendered an opinion within 15 days after
the receipt by the Company of such written notice that such
registration is required, such holder shall thereupon be entitled to
transfer such securities in accordance with the terms of the notice
delivered by such holder to the Company. Each warrant or certificate,
if any, representing such securities issued upon or in connection with
such transfer shall bear the appropriate restrictive legend required
by section 9.1, unless in the opinion of each such counsel such legend
is no longer required to insure compliance with the Securities Act. If
for any reason counsel for the Company (after having been furnished
with the information required to be furnished by clause (a) of this
section 9.2) shall fail to deliver an opinion to the Company as
aforesaid, then for all purposes of this Warrant the opinion of
counsel for the Company shall be deemed to be the same as the opinion
of counsel for such holders.
(ii) If in the opinion of either of or both such counsel the
proposed transfer may not legally be effected without registration of
such Restricted Securities under the Securities Act (such opinion or
opinions to state the basis of the legal conclusions reached therein),
the Company will promptly so notify the holder thereof and thereafter
such holder shall not be entitled to transfer such Restricted
Securities until either (x) receipt by the Company of a further notice
from such holder pursuant to the foregoing provisions of this section
9.2 and fulfillment of the provisions of clause (i) above or (y) such
shares have been effectively registered under the Securities Act.
Notwithstanding the foregoing provisions of this section 9.2(ii), the purchaser
of the Warrants shall be permitted to transfer any Restricted Securities to a
limited number of institutional investors, provided that (A) each such investor
represents in writing that it is acquiring such Restricted Securities for
investment and not with a view to the distribution thereof (subject, however, to
any requirement of law that the disposition thereof shall at all times be within
the control of such transferee), (B) each such investor agrees in writing to be
bound by all the restrictions on transfer of such Restricted Securities
contained in this section 9.2 and (C) the purchaser of the Warrants delivers to
the Company an opinion of counsel satisfactory to the Company, stating that such
transfer may be effected without registration under the Securities Act. The
holder of Restricted Securities will pay all fees and disbursements of its
counsel and the Company shall pay all fees and disbursements of its counsel in
connection with all opinions rendered by them pursuant to this section 9.2 and
pursuant to section 9.3.
9.3. Termination of Restrictions. The restrictions imposed by this
section 9 upon the transferability of Restricted Securities shall cease and
terminate as to any particular Restricted Securities (a) when such securities
shall have been effectively registered under the Securities Act, or (b) when, in
the opinions of both counsel for the holder thereof and counsel for the Company,
such restrictions are no longer required in order to insure compliance with the
Securities Act. Whenever such restrictions shall cease and terminate as to any
Restricted Securities, the holder thereof shall be entitled to receive from the
Company, without expense (other than applicable transfer taxes, if any), new
securities of like tenor not bearing the applicable legends required by section
9.1.
10. Availability of Information. So long as the Company shall not have
filed a registration statement pursuant to section 12 of the Exchange Act or a
registration statement pursuant to the requirements of the Securities Act, the
Company shall, at any time and from time to time, upon the request of any holder
of Registrable Securities and upon the request of any Person designated by such
holder as a prospective purchaser of any Registrable Securities, furnish in
writing to such holder or such prospective purchaser, as the case may be, a
statement as of a date not earlier than 12 months prior to the date of such
request of the nature of the business of the Company and the products and
services it offers and copies of the Company's most recent balance sheet and
profit and loss and retained earnings statements, together with similar
financial statements for such part of the two preceding fiscal years as the
Company shall have been in operation, all such financial statements to be
audited to the extent audited statements are reasonably available, provided
that, in any event the most recent financial statements so furnished shall
include a balance sheet as of a date less than 16 months prior to the date of
such request, statements of profit and loss and retained earnings for the 12
months preceding the date of such balance sheet, and, if such balance sheet is
not as of a date less than 6 months prior to the date of such request,
additional statements of profit and loss and retained earnings for the period
from the date of such balance sheet to a date less than 6 months prior to the
date of such request. If the Company shall have filed a registration statement
pursuant to the requirements of section 12 of the Exchange Act or a registration
statement pursuant to the requirements of the Securities Act, the Company shall
timely file the reports required to be filed by it under the Securities Act and
the Exchange Act (including but not limited to the reports under sections 13 and
15(d) of the Exchange Act referred to in subparagraph (c) of Rule 144 adopted by
the Commission under the Securities Act) and the rules and regulations adopted
by the Commission thereunder (or, if the Company is not required to file such
reports, will, upon the request of any holder of Registrable Securities, make
publicly available other information) and will take such further action as any
holder of Registrable Securities may reasonably request, all to the extent
required from time to time to enable such holder to sell Registrable Securities
without registration under the Securities Act within the limitation of the
exemptions provided by (a) Rule 144 under the Securities Act, as such Rule may
be amended from time to time, or (b) any similar rule or regulation hereafter
adopted by the Commission. Upon the request of any holder of Registrable
Securities, the Company will deliver to such holder a written statement as to
whether it has complied with the requirements of this section 10.
11. Reservation of Stock, etc. The Company will at all times reserve
and keep available, solely for issuance and delivery upon exercise of the
Warrants, the number of shares of Common Stock (or Other Securities) from time
to time issuable upon exercise of all Warrants at the time outstanding. All
shares of Common Stock (or Other Securities) issuable upon exercise of any
Warrants shall be duly authorized and, when issued upon such exercise, shall be
validly issued and, in the case of shares, fully paid and nonassessable with no
liability on the part of the holders thereof.
12. Registration and Transfer of Warrants, etc.
12.1. Warrant Register; Ownership of Warrants. The Company will keep
at its principal office a register in which the Company will provide for the
registration of Warrants and the registration of transfers of Warrants. The
Company may treat the Person in whose name any Warrant is registered on such
register as the owner thereof for all other purposes, and the Company shall not
be affected by any notice to the contrary, except that, if and when any Warrant
is properly assigned in blank, the Company may (but shall not be obligated to)
treat the bearer thereof as the owner of such Warrant for all purposes. Subject
to section 9, a Warrant, if properly assigned, may be exercised by a new holder
without a new Warrant first having been issued.
12.2. Transfer and Exchange of Warrants. Upon surrender of any Warrant
for registration of transfer or for exchange to the Company at its principal
office, the Company at its expense will (subject to compliance with section 9,
if applicable) execute and deliver in exchange therefor a new Warrant or
Warrants of like tenor, in the name of such holder or as such holder (upon
payment by such holder of any applicable transfer taxes) may direct, calling in
the aggregate on the face or faces thereof for the number of shares of Common
Stock called for on the face or faces of the Warrant or Warrants so surrendered.
12.3. Replacement of Warrants. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction of any Warrant,
upon delivery of an indemnity bond in such reasonable amount as the Company may
determine (or, in the case of any Warrant held by any Institutional Holder or
its nominee, of an indemnity agreement from such Institutional Holder reasonably
satisfactory to the Company), or, in the case of any such mutilation, upon the
surrender of such Warrant for cancellation to the Company at its principal
office, the Company at the expense of the requesting holder will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
13. Registration under Securities Act, etc.
13.1. Registration on Request.
(a) Request. At any time after the date on which the Company shall
become eligible to utilize Form S-3 in effecting sales of its securities,
upon the written request of the Initiating Holders, requesting that the
Company effect the registration under the Securities Act of all or part of
such Initiating Holders' Registrable Securities and specifying the intended
method of disposition thereof, the Company will, on a one-time only basis,
subject to the terms of this Agreement, promptly give written notice of
such requested registration to all registered holders of Registrable
Securities, and thereupon the Company will effect the registration under
the Securities Act on Form S-3 if the Company is eligible to utilize such
form and otherwise on Form S-1 of
(i) the Registrable Securities which the Company has been so
requested to register by such Initiating Holders for disposition in
accordance with the intended method of disposition stated in such
request, and
(ii) all other Registrable Securities the holders of which shall
have made a written request to the Company for registration thereof
within 30 days after the giving of such written notice by the Company
(which request shall specify the intended method of disposition of
such Registrable Securities), and
(iii) all shares of Common Stock which the Company may elect to
register in connection with the offering of Registrable Securities
pursuant to this section 13.1,
all to the extent requisite to permit the disposition (in accordance
with the intended methods thereof as aforesaid) of the Registrable Securities
and the additional shares of Common Stock, if any so to be registered.
(b) Registration Statement Form. Registrations under this section 13.1
shall be on such appropriate registration form of the Commission as shall permit
the disposition of such Registrable Securities in accordance with the intended
method or methods of disposition specified in the request for such registration.
The Company agrees to include in any such registration statement all information
which holders of Registrable Securities being registered shall reasonably
request.
(c) Expenses. The Company will pay all Registration Expenses in
connection with any registration requested pursuant to this section 13.1 by any
Initiating Holders of Registrable Securities; provided, however, that for any
registration, any selling holder of Registrable Securities shall pay its own
legal and accounting fees and expenses and any underwriting spreads or discounts
associated with its shares.
(d) Effective Registration Statement. A registration requested
pursuant to this section 13.1 shall not be deemed to have been effected (i)
unless a registration statement with respect thereto has become effective,
provided that a registration which does not become effective after the Company
has filed a registration statement with respect thereto solely by reason of the
refusal to proceed of the Initiating Holders (other than a refusal to proceed
based upon the advice of counsel relating to a matter with respect to the
Company) shall be deemed to have been effected by the Company at the request of
such Initiating Holders unless the Initiating Holders shall have elected to pay
all Registration Expenses in connection with such registration, (ii) if, after
it has become effective, such registration becomes subject to any stop order,
injunction or other order or requirement of the Commission or other governmental
agency or court for any reason, or (iii) the conditions to closing specified in
the purchase agreement or underwriting agreement entered into in connection with
such registration are not satisfied, other than by reason of some act or
omission by such Initiating Holders.
(e) Selection of Underwriters. If a requested registration pursuant to
this section 13.1 involves an underwritten offering, the underwriter or
underwriters thereof shall be selected by the holders of at least a majority (by
number of shares) of the Registrable Securities as to which registration has
been requested.
(f) Priority in Requested Registrations. If a requested registration
pursuant to this section 13.1 involves an underwritten offering, and the
managing underwriter shall advise the Company in writing (with a copy to each
holder of Registrable Securities requesting registration) that, in its opinion,
the number of securities requested to be included in such registration exceeds
the number which can be sold in such offering within a price range acceptable to
the holders of a majority of the Registrable Securities requested to be included
in such registration, the Company will include in such registration, to the
extent of the number which the Company is so advised can be sold in such
offering, Registrable Securities (and any securities owned by any affiliate of
the Purchaser) requested to be included in such registration by the holder or
holders of Registrable Securities, pro rata among the holders thereof such
holders requesting such registration on the basis of the number of such
securities requested to be included by such holders.
13.2. Incidental Registration.
(a) Right to Include Registrable Securities. If the Company at any
time proposes to register any of its securities under the Securities Act (other
than (A) a registration on Form S-4 or S-8 or any successor or similar forms,
(B) a registration pursuant to section 13.1, (C) a shelf registration for shares
of the Company's Series A Preferred Stock issued to Paribas Principal
Incorporated or its affiliate and (D) any registration of the shares underlying
the Company's Series B Preferred Stock), whether or not for sale for its own
account, it will each such time give prompt written notice to all holders of
Registrable Securities of its intention to do so and of such holders' rights
under this section 13.2. Upon the written request of any such holder made within
20 days after the receipt of any such notice (which request shall specify the
Registrable Securities intended to be disposed of by such holder and the
intended method of disposition thereof), the Company will, subject to the terms
of this Agreement, effect the registration under the Securities Act of all
Registrable Securities which the Company has been so requested to register by
the holders thereof, to the extent requisite to permit the disposition (in
accordance with the intended methods thereof as aforesaid) of the Registrable
Securities so to be registered, by inclusion of such Registrable Securities in
the registration statement which covers the securities which the Company
proposes to register, provided that if, at any time after giving written notice
of its intention to register any securities and prior to the effective date of
the registration statement filed in connection with such registration, the
Company shall determine for any reason either not to register or to delay
registration of such securities, the Company may, at its election, give written
notice of such determination to each holder of Registrable Securities and,
thereupon, (i) in the case of a determination not to register, shall be relieved
of its obligation to register any Registrable Securities in connection with such
registration (but not from its obligation to pay the Registration Expenses in
connection therewith), without prejudice, however, to the rights of any holder
or holders of Registrable Securities entitled to do so to request that such
registration be effected as a registration under section 13.1, and (ii) in the
case of a determination to delay registering, shall be permitted to delay
registering any Registrable Securities, for the same period as the delay in
registering such other securities. No registration effected under this section
13.2 shall relieve the Company of its obligation to effect any registration upon
request under section 13.1 nor shall any such registration hereunder be deemed
to have been effected pursuant to section 13.1. The Company will pay all
Registration Expenses in connection with each registration of Registrable
Securities requested pursuant to this section 13.2; provided, however, that for
any registration, any selling holder of Registrable Securities shall pay its own
legal and accounting fees and expenses and any underwriting spreads or discounts
associated with its shares.
(b) Priority in Incidental Registrations. If (i) a registration
pursuant to this section 13.2 involves an underwritten offering of the
securities so being registered, whether or not for sale for the account of the
Company, to be distributed (on a firm commitment basis) by or through one or
more underwriters of recognized standing under underwriting terms appropriate
for such a transaction, (ii) the Registrable Securities so requested to be
registered for sale for the account of holders of Registrable Securities are not
also to be included in such underwritten offering (either because the Company
has not been requested so to include such Registrable Securities pursuant to
section 13.4(b) or, if requested to do so, is not obligated to do so under
section 13.4(b)), and (iii) the managing underwriter of such underwritten
offering shall inform the Company and holders of the Registrable Securities
requesting such registration by letter of its belief that the distribution of
all or a specified number of such Registrable Securities concurrently with the
securities being distributed by such underwriters would interfere with the
successful marketing of the securities being distributed by such underwriters
(such writing to state the basis of such belief and the approximate number of
such Registrable Securities which may be distributed without such effect), then
the Company may, upon written notice to all holders of such Registrable
Securities, reduce pro rata (if and to the extent stated by such managing
underwriter to be necessary to eliminate such effect) the number of such
Registrable Securities the registration of which shall have been requested by
each holder of Registrable Securities so that the resultant aggregate number of
such Registrable Securities so included in such registration shall be equal to
the number of shares stated in such managing underwriter's letter.
13.3. Registration Procedures. If and whenever the Company is required
to effect the registration of any Registrable Securities under the Securities
Act as provided in sections 13.1 and 13.2, the Company shall, as expeditiously
as possible:
(i) prepare and (within 60 days after the end of the period
within which requests for registration may be given to the Company or
in any event as soon thereafter as possible) (in the case of a
registration pursuant to section 13.1, such filing to be made within
60 days after the initial request of one or more Initiating Holders of
Registrable Securities or in any event as soon thereafter as possible)
file with the Commission the requisite registration statement to
effect such registration (including such audited financial statements
as may be required by the Securities Act or the rules and regulations
promulgated thereunder) and thereafter use its best efforts to cause
such registration statement to become and remain effective, provided,
however, that the Company may discontinue any registration of its
securities which are not Registrable Securities (and, under the
circumstances specified in section 13.2(a), its securities which are
Registrable Securities) at any time prior to the effective date of the
registration statement relating thereto;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the
Securities Act with respect to the disposition of all securities
covered by such registration statement until the earlier of such time
as all of such securities have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof set
forth in such registration statement or (i) in the case of a
registration pursuant to section 13.1, the expiration of 180 days
after such registration statement becomes effective, or (ii) in the
case of a registration pursuant to section 13.2, the expiration of 90
days after such registration statement becomes effective;
(iii) furnish to each seller of Registrable Securities covered by
such registration statement and each underwriter, if any, of the
securities being sold by such seller such number of conformed copies
of such registration statement and of each such amendment and
supplement thereto (in each case including all exhibits), such number
of copies of the prospectus contained in such registration statement
(including each preliminary prospectus and any summary prospectus) and
any other prospectus filed under Rule 424 under the Securities Act, in
conformity with the requirements of the Securities Act, and such other
documents, as such seller and underwriter, if any, may reasonably
request in order to facilitate the public sale or other disposition of
the Registrable Securities owned by such seller;
(iv) use its reasonable best efforts to register or qualify all
Registrable Securities and other securities covered by such
registration statement under such other securities laws or blue sky
laws of such jurisdictions as any seller thereof and any underwriter
of the securities being sold by such seller shall reasonably request,
to keep such registrations or qualifications in effect for so long as
such registration statement remains in effect, and take any other
action which may be reasonably necessary or advisable to enable such
seller and underwriter to consummate the disposition in such
jurisdictions of the securities owned by such seller, except that the
Company shall not for any such purpose be required to qualify
generally to do business as a foreign corporation in any jurisdiction
wherein it would not but for the requirements of this subdivision (iv)
be obligated to be so qualified, to subject itself to taxation in any
such jurisdiction or to consent to general service of process in any
such jurisdiction;
(v) use its reasonable best efforts to cause all Registrable
Securities covered by such registration statement to be registered
with or approved by such other governmental agencies or authorities as
may be necessary to enable the seller or sellers thereof to consummate
the disposition of such Registrable Securities;
(vi) furnish to each seller of Registrable Securities a signed
counterpart, addressed to such seller and the underwriters, if any of
(x) an opinion of counsel for the Company, dated the effective date of
such registration statement (or, if such registration includes an
underwritten public offering, an opinion dated the date of the closing
under the underwriting agreement), reasonably satisfactory in form and
substance to such seller, and
(y) a "comfort" letter (or, in the case of such Person which does not
satisfy the conditions for receipt of a "comfort" letter specified in
Statement on Auditing Standards No. 72, an "agreed upon procedures"
letter), dated the effective date of such registration statement (and, if
such registration includes an underwritten public offering, a letter dated
the date of the closing under the underwriting agreement), signed by the
independent public accountants who have certified the Company's financial
statements included in such registration statement,
covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of the
accountants' letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions of issuer's counsel
and in accountants' letters delivered to the underwriters in underwritten public
offerings of securities (with, in the case of an "agreed upon procedures"
letter, such modifications or deletions as may be required under Statement on
Auditing Standards No. 35) and, in the case of the accountants' letter, such
other financial matters, and, in the case of the legal opinion, such other legal
matters, as such seller (or the underwriters, if any) may reasonably request;
(vii) notify the holders of Registrable Securities and the
managing underwriter or underwriters, if any, promptly and confirm
such advice in writing promptly thereafter:
(v) when the registration statement, the prospectus or any prospectus
supplement related thereto or post-effective amendment to the registration
statement has been filed, and, with respect to the registration statement
or any post-effective amendment thereto, when the same has become
effective;
(w) of any request by the Commission for amendments or supplements to
the registration statement or the prospectus or for additional information;
(x) of the issuance by the Commission of any stop order suspending the
effectiveness of the registration statement or the initiation of any
proceedings by any Person for that purpose;
(y) if at any time the representations and warranties of the Company
made as contemplated by section 13.4 below cease to be true and correct;
(z) of the receipt by the Company of any notification with respect to
the suspension of the qualification of any Registrable Securities for sale
under the securities or blue sky laws of any jurisdiction or the initiation
or threat of any proceeding for such purpose;
(viii) notify each seller of Registrable Securities covered by
such registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, upon the
Company's discovery that, or upon the happening of any event as a
result of which, the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing under which
they were made, and at the request of any such seller promptly prepare
and furnish to such seller and each underwriter, if any, a reasonable
number of copies of a supplement to or an amendment of such prospectus
as may be necessary so that, as thereafter delivered to the purchasers
of such securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing under which
they were made;
(ix) otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the Commission, and make available
to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve months, but
not more than eighteen months, beginning with the first day of the
Company's first full calendar month quarter after the effective date
of such registration statement, which earnings statement shall satisfy
the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder, and will furnish to each such seller at least three
Business Days prior to the filing thereof a copy of any amendment or
supplement to such registration statement or prospectus and shall not
file any thereof to which any such seller shall have reasonably
objected on the grounds that such amendment or supplement does not
comply in all material respects with the requirements of the
Securities Act or of the rules or regulations thereunder;
(x) make available for inspection by a representative or
representatives of the holders of Registrable Securities , each such
representative representing the holders of not less than a majority of
the Registrable Securities included in the registration, any
underwriter participating in any disposition pursuant to the
registration statement and any attorney or accountant retained by such
selling holders or underwriter (each, an "Inspector"), all financial
and other records, pertinent corporate documents and properties of the
Company (the "Records"), and cause the Company's officers, directors
and employees to supply all information reasonably requested by any
such Inspector in connection with such registration in order to permit
a reasonable investigation within the meaning of Section 11 of the
Securities Act, provided that the Company shall not be required to
comply with this subdivision (x) if there is a reasonable likelihood,
in the judgment of the Company, that such delivery could result in the
loss of any attorney-client privilege related thereto; and provided
further that Records which the Company determines, in good faith, to
be confidential and which it notifies the Inspectors are confidential
shall not be disclosed by the Inspectors (other than to any holder of
Registrable Securities) unless (x) such Records have become generally
available to the public or (y) the disclosure of such Records may be
necessary or appropriate (A) in compliance with any law, rule,
regulation or order applicable to any such Inspectors or holder of
Registrable Securities, (B) in response to any subpoena or other legal
process or (C) in connection with any litigation to which such
Inspectors or any holder of Registrable Securities is a party;
(xi) provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by such registration
statement from and after a date not later than the effective date of
such registration statement;
(xii) enter into such agreements and take such other actions as
sellers of such Registrable Securities holding 51% of the shares so to
be sold shall reasonably request in order to expedite or facilitate
the disposition of such Registrable Securities;
(xiii) use its reasonable best efforts to list all Registrable
Securities covered by such registration statement on any securities
exchange on which any of the securities of the same class as the
Registrable Securities are then listed; and
(xiv) use its best efforts to provide a CUSIP number for the
Registrable Securities, not later than the effective date of the
registration statement.
The Company may require each seller of Registrable Securities as to which any
registration is being effected to furnish the Company such information regarding
such seller and the distribution of such securities as the Company may from time
to time reasonably request in writing.
Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that, upon receipt of any notice from the Company of the
occurrence of any event of the kind described in subdivision (vii) of this
section 13.3, such holder will forthwith discontinue such holder's disposition
of Registrable Securities pursuant to the registration statement relating to
such Registrable Securities until such holder's receipt of the copies of the
supplemented or amended prospectus contemplated by subdivision (vii) of this
section 13.3 and, if so directed by the Company, will deliver to the Company (at
the Company's expense) all copies, other than permanent file copies, then in
such holder's possession of the prospectus relating to such Registrable
Securities current at the time of receipt of such notice. In the event the
Company shall give any such notice, the period mentioned in paragraph (ii) of
this section 13.3 shall be extended by the length of the period from and
including the date when each seller of any Registrable Securities covered by
such registration statement shall have received such notice to the date on which
each such seller has received the copies of the supplemented or amended
prospectus contemplated by paragraph (vii) of this section 13.3.
If any such registration or comparable statement refers to any holder
of Registrable Securities by name or otherwise as the holder of any securities
of the Company then such holder shall have the right to require (i) the
insertion therein of language, in form and substance satisfactory to such
holder, to the effect that the holding by such holder of such securities is not
to be construed as a recommendation by such holder of the investment quality of
the Company's securities covered thereby and that such holding does not imply
that such holder will assist in meeting any future financial requirements of the
Company, or (ii) in the event that such reference to such holder by name or
otherwise is not required by the Securities Act or any similar federal statute
then in force, the deletion of the reference to such holder.
13.4. Underwritten Offerings.
(a) Requested Underwritten Offerings. If requested by the underwriters
for any underwritten offering by holders of Registrable Securities pursuant
to a registration requested under section 13.1, the Company will enter into
an underwriting agreement with such underwriters for such offering, such
agreement to be satisfactory in substance and form to the Company, each
such holder and the underwriters, and to contain such representations and
warranties by the Company and such other terms as are generally prevailing
in agreements of this type, including, without limitation, indemnities to
the effect and to the extent provided in section 13.7. The holders of the
Registrable Securities will cooperate with the Company in the negotiation
of the underwriting agreement and will give consideration to the reasonable
suggestions of the Company regarding the form thereof, provided that
nothing herein contained shall diminish the foregoing obligations of the
Company. The holders of Registrable Securities to be distributed by such
underwriters shall be parties to such underwriting agreement and may, at
their option, require that any or all of the representations and warranties
by, and the other agreements on the part of, the Company to and for the
benefit of such underwriters shall also be made to and for the benefit of
such holders of Registrable Securities and that any or all of the
conditions precedent to the obligations of such underwriters under such
underwriting agreement be conditions precedent to the obligations of such
holders of Registrable Securities. Any such holder of Registrable
Securities shall not be required to make any representations or warranties
to or agreements with the Company or the underwriters other than
representations and warranties contained in a writing furnished by such
holder expressly for use in such registration statement or agreements
regarding such holder, such holder's Registrable Securities and such
holder's intended method of distribution and any other representation
required by law.
(b) Incidental Underwritten Offerings. If the Company at any time
proposes to register any of its securities under the Securities Act as
contemplated by section 13.2 and such securities are to be distributed by
or through one or more underwriters, the Company will, if requested by any
holder of Registrable Securities as provided in section 13.2 and subject to
the provisions of section 13.2(b), use its reasonable best efforts to
arrange for such underwriters to include all the Registrable Securities to
be offered and sold by such holder among the securities to be distributed
by such underwriters. The holders of Registrable Securities to be
distributed by such underwriters shall be parties to the underwriting
agreement between the Company and such underwriters and may, at their
option, require that any or all of the representations and warranties by,
and the other agreements on the part of, the Company to and for the benefit
of such underwriters shall also be made to and for the benefit of such
holders of Registrable Securities and that any or all of the conditions
precedent to the obligations of such underwriters under such underwriting
agreement be conditions precedent to the obligations of such holders of
Registrable Securities. Any such holder of Registrable Securities shall not
be required to make any representations or warranties to or agreements with
the Company or the underwriters other than representations, warranties or
agreements regarding such holder, such holder's Registrable Securities and
such holder's intended method of distribution and any other representation
required by law.
(c) Holdback Agreements.
(i) Each holder of Registrable Securities agrees by acquisition
of such Registrable Securities, if so required by the managing
underwriter, not to sell, make any short sale of, loan, grant any
option for the purchase of, effect any public sale or distribution of
or otherwise dispose of any equity securities of the Company, during
the seven days prior to and the 135 days after any underwritten
registration pursuant to section 13.1 or 13.2 has become effective,
except as part of such underwritten registration. Notwithstanding the
foregoing sentence, each holder of Registrable Securities subject to
the foregoing sentence shall be entitled to sell during the foregoing
period securities in a private sale.
(ii) The Company agrees (x) if so required by the managing
underwriter not to sell, make any short sale of, loan, grant any
option for the purchase of, effect any public sale or distribution of
or otherwise dispose of its equity securities or securities
convertible into or exchangeable or exercisable for any of such
securities during the seven days prior to and the 135 days after any
underwritten registration pursuant to section 13.1 or 13.2 has become
effective, except as part of such underwritten registration and except
pursuant to registrations on Form S-4, S-8 or any successor or similar
forms thereto, and (y) to cause each holder of its equity securities
or any securities convertible into or exchangeable or exercisable for
any of such securities, in each case purchased directly from the
Company at any time after the date of this Agreement (other than in a
public offering) to agree not to sell, make any short sale of, loan,
grant any option for the purchase of, effect any such public sale or
distribution of or otherwise dispose of such securities during such
period except as part of such underwritten registration.
(d) Participation in Underwritten Offerings. No Person may participate
in any underwritten offering hereunder unless such Person (i) agrees to sell
such Person's securities on the basis provided in any underwriting arrangements
approved, subject to the terms and conditions hereof, by the Company and the
holders of a majority of Registrable Securities to be included in such
underwritten offering and (ii) completes and executes all questionnaires,
indemnities, underwriting agreements and other documents (other than powers of
attorney) required under the terms of such underwriting arrangements.
Notwithstanding the foregoing, no underwriting agreement (or other agreement in
connection with such offering) shall require any holder of Registrable
Securities to make any representations or warranties to or agreements with the
Company or the underwriters other than representations and warranties contained
in a writing furnished by such holder expressly for use in the related
registration statement or agreements regarding such holder, such holder's
Registrable Securities and such holder's intended method of distribution and any
other representation required by law.
13.5. Preparation; Reasonable Investigation. In connection with the
preparation and filing of each registration statement under the Securities Act
pursuant to this Agreement, the Company will give the holders of Registrable
Securities registered under such registration statement, their underwriters, if
any, and their respective counsel and accountants, the opportunity to
participate in the preparation of such registration statement, each prospectus
included therein or filed with the Commission, and each amendment thereof or
supplement thereto, and will give each of them such access to its books and
records and such opportunities to discuss the business of the Company with its
officers and the independent public accountants who have certified its financial
statements as shall be necessary, in the opinion of such holders' and such
underwriters' respective counsel, to conduct a reasonable investigation within
the meaning of the Securities Act.
13.6. Rights of Holders. If any registration statement under the
Securities Act refers to any holder by name or otherwise as the holder of any
securities of the Company, then such holder shall have the right to require (a)
the insertion therein of language, in form and substance satisfactory to such
holder, to the effect that the holding by such holder of such securities does
not necessarily make such holder a "controlling person" of the Company within
the meaning of the Securities Act and is not to be construed as recommendation
by such holder of the investment quality of the Company's debt or equity
securities covered thereby and that such holding does not imply that such holder
will assist in meeting any future financial requirements of the Company, or (b)
in the event that such reference to such holder by name or otherwise is not
required by the Securities Act or any rules and regulations promulgated
thereunder, the deletion of the reference to such holder.
13.7. Indemnification.
(a) Indemnification by the Company. In the case of any registration
statement filed pursuant to Section 13.1 or 13.2, the Company will, and
hereby does, indemnify and hold harmless the holder of any Registrable
Securities covered by such registration statement, its directors and
officers, each other Person who participates as an underwriter in the
offering or sale of such securities and each other Person, if any, who
controls such holder or any such underwriter within the meaning of the
Securities Act, against any losses, claims, damages or liabilities, joint
or several, to which such holder or any such director or officer or
underwriter or controlling person may become subject under the Securities
Act or otherwise, insofar as such losses, claims, damages or liabilities
(or actions or proceedings, whether commenced or threatened, in respect
thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration
statement under which such securities were registered under the Securities
Act, any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, 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, and the
Company will reimburse such holder and each such director, officer,
underwriter and controlling person for any legal or any other expenses
reasonably incurred by them in connection with investigating or defending
any such loss, claim, liability, action or proceeding, provided that the
Company shall not be liable in any such case to the extent that any such
loss, claim, damage, liability (or action or proceeding in respect thereof)
or expense arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in such registration
statement, any such preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement in reliance upon and in conformity with
written information furnished to the Company through an instrument duly
executed by such holder specifically stating that it is for use in the
preparation thereof and, provided, further that the Company shall not be
liable to any Person who participates as an underwriter, in the offering or
sale of Registrable Securities or to any other Person, if any, who controls
such underwriter within the meaning of the Securities Act, in any such case
to the extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of such Person's
failure to send or give a copy of the final prospectus, as the same may be
then supplemented or amended, within the time required by the Securities
Act to the Person asserting an untrue statement or alleged untrue statement
or omission or alleged omission at or prior to the written confirmation of
the sale of Registrable Securities to such Person if such statement or
omission was corrected in such final prospectus. Such indemnity shall
remain in full force and effect regardless of any investigation made by or
on behalf of such holder or any such director, officer, underwriter or
controlling person and shall survive the transfer of such securities by
such holder.
(b) Indemnification by the Sellers. The Company may require, as a
condition to including any Registrable Securities in any registration
statement filed pursuant to section 13.3, that the Company shall have
received an undertaking satisfactory to it from the prospective seller of
such Registrable Securities, to indemnify and hold harmless (in the same
manner and to the same extent as set forth in subdivision (a) of this
section 13.7) the Company, each director of the Company, each officer of
the Company and each other person, if any, who controls the Company within
the meaning of the Securities Act, with respect to any statement or alleged
statement in or omission or alleged omission from such registration
statement, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, if
such statement or alleged statement or omission or alleged omission was
made in reliance upon and in conformity with written information furnished
to the Company through an instrument duly executed by such seller
specifically stating that it is for use in the preparation of such
registration statement, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement. Any such indemnity shall remain in
full force and effect, regardless of any investigation made by or on behalf
of the Company or any such director, officer or controlling person and
shall survive the transfer of such securities by such seller.
(c) Notices of Claims, etc. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding subdivisions of this section 13.7, such
indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the
commencement of such action, provided that the failure of any indemnified
party to give notice as provided herein shall not relieve the indemnifying
party of its obligations under the preceding subdivisions of this section
13.7, except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice. In case any such action is
brought against an indemnified party, unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, the indemnifying
party shall be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly notified, to
the extent that the indemnifying party may wish, with counsel reasonably
satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party shall not be liable to such
indemnified party for any legal or other expenses subsequently incurred by
the latter in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the consent of
the indemnified party, consent to entry of any judgment or enter into any
settlement of any such action which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified
party of a release from all liability, or a covenant not to sue, in respect
to such claim or litigation. No indemnified party shall consent to entry of
any judgment or enter into any settlement of any such action the defense of
which has been assumed by an indemnifying party without the consent of such
indemnifying party.
(d) Other Indemnification. Indemnification similar to that specified
in the preceding subdivisions of this section 13.7 (with appropriate
modifications) shall be given by the Company and each seller of Registrable
Securities with respect to any required registration or other qualification
of securities under any Federal or state law or regulation of any
governmental authority, other than the Securities Act.
(e) Indemnification Payments. The indemnification required by this
section 13.7 shall be made by periodic payments of the amount thereof
during the course of the investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred.
(f) Contribution. If the indemnification provided for in the preceding
subdivisions of this section 13.7 is unavailable to an indemnified party in
respect of any expense, loss, claim, damage or liability referred to
therein, then each indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such expense, loss, claim, damage or
liability (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the holder or
underwriter, as the case may be, on the other from the distribution of the
Registrable Securities or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the Company on the one hand and of
the holder or underwriter, as the case may be, on the other in connection
with the statements or omissions which resulted in such expense, loss,
damage or liability, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one
hand and the holder or underwriter, as the case may be, on the other in
connection with the distribution of the Registrable Securities shall be
deemed to be in the same proportion as the total net proceeds received by
the Company from the initial sale of the Registrable Securities by the
Company to the purchasers pursuant to the Credit Agreement bear to the
gain, if any, realized by the selling holder or the underwriting discounts
and commissions received by the underwriter, as the case may be. The
relative fault of the Company on the one hand and of the holder or
underwriter, as the case may be, on the other shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or omission to state a material fact relates
to information supplied by the Company, by the holder or by the underwriter
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission, provided that
the foregoing contribution agreement shall not inure to the benefit of any
indemnified party if indemnification would be unavailable to such
indemnified party by reason of the provisions contained in the first
sentence of subdivision (a) of this section 13.7, and in no event shall the
obligation of any indemnifying party to contribute under this subdivision
(f) exceed the amount that such indemnifying party would have been
obligated to pay by way of indemnification if the indemnification provided
for under subdivisions (a) or (b) of this section 13.7 had been available
under the circumstances.
The Company and the holders of Registrable Securities agree that it
would not be just and equitable if contribution pursuant to this
subdivision (f) were determined by pro rata allocation (even if the holders
and any underwriters were treated as one entity for such purpose) or by any
other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
in the preceding sentence and subdivision (c) of this section 13.7, any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subdivision (f), no holder of
Registrable Securities or underwriter shall be required to contribute any
amount in excess of the amount by which (i) in the case of any such holder,
the net proceeds received by such holder from the sale of Registrable
Securities or (ii) in the case of an underwriter, the total price at which
the Registrable Securities purchased by it and distributed to the public
were offered to the public exceeds, in any such case, the amount of any
damages that such holder or underwriter has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
14. Definitions. Capitalized terms used but not defined herein have
the meanings ascribed to such terms in the Credit Agreement. As used herein,
unless the context otherwise requires, the following terms have the following
respective meanings:
Acquiring Person: With reference to the transactions referred to in
clauses (a) through (d) of section 3.1, the continuing or surviving corporation
of a consolidation or merger with the Company (if other than the Company), the
transferee of substantially all of the properties of the Company, the
corporation consolidating with or merging into the Company in a consolidation or
merger in connection with which the Common Stock is changed into or exchanged
for stock or other securities of any other Person or cash or any other property,
or, in the case of a capital reorganization or reclassification, the Company.
Acquisition Price: As applied to the Common Stock, (a) the Market Price on the
date immediately preceding the date on which any transaction to which section 3
applies is consummated, or (b) if a purchase, tender or exchange offer is made
by the Acquiring Person (or by any of its affiliates) to the holders of the
Common Stock and such offer is accepted by the holders of more than 50% of the
outstanding shares of Common Stock, the greater of (i) the price determined in
accordance with the provisions of the foregoing clause (a) of this sentence and
(ii) the Market Price on the date immediately preceding the acceptance of such
offer by the holders of more than 50% of the outstanding shares of Common Stock.
Additional Shares of Common Stock: All shares (including treasury
shares) of Common Stock issued or sold (or, pursuant to section 2.3 or 2.4,
deemed to be issued) by the Company after the date hereof, whether or not
subsequently reacquired or retired by the Company.
Business Day: Any day other than a Saturday or a Sunday or a day on
which commercial banking institutions in the City of New York are authorized by
law to be closed. Any reference to "days" (unless Business Days
are specified) shall mean calendar days.
Commission: The Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
Common Stock: As defined in the introduction to this Warrant, such
term to include any stock into which such Common Stock shall have been changed
or any stock resulting from any reclassification of such Common Stock, and all
other stock of any class or classes (however designated) of the Company the
holders of which have the right, without limitation as to amount, either to all
or to a share of the balance of current dividends and liquidating dividends
after the payment of dividends and distributions on any shares entitled to
preference.
Company: As defined in the introduction to this Warrant, such term to
include any corporation which shall succeed to or assume the obligations of the
Company hereunder in compliance with section 3.
Convertible Securities: Any evidences of indebtedness, shares of stock
(other than Common Stock) or other securities directly or indirectly convertible
into or exchangeable for Additional Shares of Common Stock.
Credit Agreement: As defined in the introduction to this Warrant.
Current Market Price: On any date specified herein, the average daily
Market Price during the period of the most recent 20 days, ending on such date,
on which the national securities exchanges were open for trading, except that if
no Common Stock is then listed or admitted to trading on any national securities
exchange or quoted in the over-the-counter market, the Current Market Price
shall be the Market Price on such date.
Exchange Act: The Securities Exchange Act of 1934, or any similar
federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time.
Initiating Holders: Any holder or holders of Registrable Securities
holding at least 25% of the Registrable Securities (by number of shares at the
time issued and outstanding), and initiating a request pursuant to section 13.1
for the registration of all or part of such holder's or holders' Registrable
Securities.
Institutional Holder: Any original purchaser of any Warrant, any
insurance company, pension fund, mutual fund, investment company, bank, savings
bank, savings and loan association, broker-dealer, investment adviser,
investment banking company, trust company or any finance or credit company, any
portfolio or any investment fund managed by any of the foregoing, any other
institutional investor and any nominee of any of the foregoing.
Market Price: On any date specified herein, the amount per share of
the Common Stock, equal to (a) the last sale price of such Common Stock, regular
way, on such date or, if no such sale takes place on such date, the average of
the closing bid and asked prices thereof on such date, in each case as
officially reported on the principal national securities exchange on which such
Common Stock is then listed or admitted to trading, or (b) if such Common Stock
is not then listed or admitted to trading on any national securities exchange
but is designated as a national market system security by the NASD, the last
trading price of the Common Stock on such date, or (c) if there shall have been
no trading on such date or if the Common Stock is not so designated, the average
of the closing bid and asked prices of the Common Stock on such date as shown by
the NASD automated quotation system, or (d) if such Common Stock is not then
listed or admitted to trading on any national exchange or quoted in the
over-the-counter market, the higher of (x) the book value thereof as determined
by any firm of independent public accountants of recognized standing selected by
the Board of Directors of the Company as of the last day of any month ending
within 60 days preceding the date as of which the determination is to be made or
(y) the fair value thereof determined in good faith by the Board of Directors of
the Company as of a date which is within 18 days of the date as of which the
determination is to be made.
Market Value: Per share of common stock (or equivalent equity
interests) of the Acquiring Person or its Parent on any date specified herein,
(a) the average of the last sale prices, regular way, on the 20 consecutive
business days immediately preceding such date or, if there shall have been no
sale on any such day, the average of the closing bid and asked prices on such
date, in each case as officially reported on the principal national securities
exchange on which such common stock is at the time listed or admitted to
trading, or (b) if such common stock is not then listed or admitted to trading
on any national securities exchange, but is designated as a national market
system security by the NASD, the last trading price of the common stock on such
date, or if there shall have been no trading on such date or if the common stock
is not so designated, the average of the reported closing bid and asked prices
on such 20 days as shown by the NASD automated quotation system.
NASD: The National Association of Securities Dealers, Inc.
Notes: Collectively, the Tranche A Term Notes, due June 30, 2003, of
the Company originally issued in the aggregate principal amount of $25 million,
the Tranche B Term Notes, due June 30, 2004, of the Company originally issued in
the aggregate amount of $25 million, and the Revolving Notes, issued originally
due June 30, 2001, of the Company in the aggregate amount of $10 million, in
each case issued pursuant to the Credit Agreement, and such term to include any
such notes issued in substitution for such notes.
Options: Rights, options or warrants to subscribe for, purchase or
otherwise acquire either Additional Shares of Common Stock or Convertible
Securities.
Other Securities: Any stock (other than Common Stock) and other
securities of the Company or any other Person (corporate or otherwise) which the
holders of the Warrants at any time shall be entitled to receive, or shall have
received, upon the exercise of the Warrants, in lieu of or in addition to Common
Stock, or which at any time shall be issuable or shall have been issued in
exchange for or in replacement of Common Stock or Other Securities pursuant to
section 3 or otherwise.
Parent: As to any Acquiring Person any corporation which (a) controls
the Acquiring Person directly or indirectly through one or more intermediaries,
(b) is required to include the Acquiring Person in the consolidated financial
statements contained in such Parent's Annual Report on Form 10-K and (c) is not
itself included in the consolidated financial statements of any other person
(other than its consolidated subsidiaries).
Person: A corporation, an association, a partnership, a limited
liability company, an organization, a business, an individual, a government or
political subdivision thereof or a governmental agency.
Purchaser: As defined in the introduction to this Warrant.
Registrable Securities: (a) Any shares of Common Stock or Other
Securities issued or issuable upon exercise of this Warrant and (b) any
securities issued or issuable with respect to any securities referred to in the
foregoing subdivision by way of stock dividend or stock split or in connection
with a combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise. As to any particular Registrable Securities, once
issued such securities shall cease to be Registrable Securities when (a) a
registration statement with respect to the sale of such securities shall have
become effective under the Securities Act and such securities shall have been
disposed of in accordance with such registration statement, (b) they shall have
been distributed to the public pursuant to Rule 144 (or any successor provision)
under the Securities Act, (c) they shall have been otherwise transferred, new
certificates for them not bearing a legend restricting further transfer shall
have been delivered by the Company and subsequent disposition of them shall not
require registration or qualification of them under the Securities Act or any
similar state law then in force, or (d) they shall have ceased to be
outstanding.
Registration Expenses: All expenses incident to the Company's
performance of or compliance with section 13, including, without limitation, all
registration, filing and NASD fees, all fees and expenses of complying with
securities or blue sky laws, all word processing, duplicating and printing
expenses, messenger and delivery expenses, the fees and disbursements of counsel
for the Company and of its independent public accountants, including the
expenses of any special audits or "cold comfort" letters required by or incident
to such performance and compliance, premiums and other costs of policies of
insurance issued to the Company against liabilities arising out of the public
offering of the Registrable Securities being registered and any fees and
disbursements of underwriters retained by the Company and customarily paid by
issuers or sellers of securities, but excluding underwriting discounts and
commissions and transfer taxes, if any, provided that, in any case where
Registration Expenses are not to be borne by the Company, such expenses shall
not include salaries of Company personnel or general overhead expenses of the
Company, auditing fees, premiums or other expenses relating to liability
insurance required by underwriters of the Company or other expenses for the
preparation of financial statements or other data normally prepared by the
Company in the ordinary course of its business or which the Company would have
incurred in any event.
Restricted Securities: (a) Any Warrants bearing the applicable legend
set forth in section 9.1, (b) any shares of Common Stock (or Other Securities)
issued upon the exercise of Warrants which are evidenced by a certificate or
certificates bearing the applicable legend set forth in such section, (c) any
shares of Common Stock (or Other Securities) issued subsequent to the exercise
of any of the Warrants as a dividend or other distribution with respect to, or
resulting from a subdivision of the outstanding shares of Common Stock (or Other
Securities) into a greater number of shares by reclassification, stock splits or
otherwise, or in exchange for or in replacement of the Common Stock (or Other
Securities) issued upon such exercise, which are evidenced by a certificate or
certificates bearing the applicable legend set forth in such section, and (d)
unless the context otherwise requires, any shares of Common Stock (or Other
Securities) issuable upon the exercise of Warrants, which, when so issued, will
be evidenced by a certificate or certificates bearing the applicable legend set
forth in such section.
Securities Act: The Securities Act of 1933, or any similar federal
statute, and the rules and regulations of the Commission thereunder, all as the
same shall be in effect at the time.
Series A Preferred Stock: The Company's Series A Convertible Preferred
Stock, par value $.01 per share.
Series B Preferred Stock: The Company's Series B Convertible Preferred
Stock, par value $.001 per share.
Series C Preferred Stock: The Company's Series C Convertible Preferred
Stock, par value $.01 per share.
Transfer: Any sale, assignment, pledge or other disposition of any
security, or of any interest therein, which could constitute a "sale" as that
term is defined in section 2(3) -------- of the Securities Act.
Voting Securities: Stock of any class or classes (or equivalent
interests), if the holders of the stock of such class or classes (or equivalent
interests) are ordinarily, in the absence of contingencies, entitled to vote for
the election of the directors (or persons performing similar functions) of such
business entity, even though the right so to vote has been suspended by the
happening of such a contingency.
Warrant Price: As defined in section 2.1.
Warrants: As defined in the introduction to this Warrant.
Weighted Average Warrant Price: As to any holder of Restricted
Securities, the price determined by dividing (a) the sum of the aggregate
consideration previously paid by such holder upon the exercise of Warrants plus
the consideration payable upon the exercise of all Warrants held by such holder
by (b) the sum of (i) the aggregate number of shares previously received by such
holder upon the exercise of Warrants plus (ii) the number of shares which would
be received by such holder upon the exercise of all Warrants held by such
holder, based upon the Warrant Price in effect on the effective date of the
registration statement in respect of which the Weighted Average Warrant Price is
being determined.
15. Remedies. The Company stipulates that the remedies at law of the
holder of this Warrant in the event of any default or threatened default by the
Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate and that, to the fullest extent
permitted by law, such terms may be specifically enforced by a decree for the
specific performance of any agreement contained herein or by an injunction
against a violation of any of the terms hereof or otherwise.
16. No Rights or Liabilities as Stockholder. Nothing contained in this
Warrant shall be construed as conferring upon the holder hereof any rights as a
stockholder of the Company or as imposing any obligation on such holder to
purchase any securities or as imposing any liabilities on such holder as a
stockholder of the Company, whether such obligation or liabilities are asserted
by the Company or by creditors of the Company.
17. Notices. All notices and other communications under this Warrant
shall be in writing and shall be delivered, or mailed by registered or certified
mail, return receipt requested, by a nationally recognized overnight courier,
postage prepaid, addressed (a) if to any holder of any Warrant, at the
registered address of such holder as set forth in the register kept at the
principal office of the Company, or (b) if to the Company, to the attention of
its President at its principal office, provided that the exercise of any Warrant
shall be effective in the manner provided in section 1.
18. Amendments. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or
termination is sought.
19. Expiration. The right to exercise this Warrant shall expire at
5:00 p.m., New York City time, on June 30, 2008.
20. Descriptive Headings. The headings in this Agreement are for
purposes of reference only and shall not limit or otherwise affect the meaning
hereof.
21. GOVERNING LAW. THIS WARRANT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF
THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.
<PAGE>
22. Judicial Proceedings; Waiver of Jury. Any judicial proceeding
brought against the Company with respect to this Warrant may be brought in any
court of competent jurisdiction in the State of New York or of the United States
of America for the Southern District of New York and, by execution and delivery
of this Agreement, the Company (a) accepts, generally and unconditionally, the
nonexclusive jurisdiction of such courts and any related appellate court, and
irrevocably agrees to be bound by any judgment rendered thereby in connection
with this Warrant, subject to any rights of appeal, and (b) irrevocably waives
any objection the Company may now or hereafter have as to the venue of any such
suit, action or proceeding brought in such a court or that such court is an
inconvenient forum. The Company hereby waives personal service of process and
consents, that service of process upon it may be made by certified or registered
mail, return receipt requested, at its address specified or determined in
accordance with the provisions of section 17, and service so made shall be
deemed completed on the third Business Day after such service is deposited in
the mail or, if earlier, when delivered. Nothing herein shall affect the right
to serve process in any other manner permitted by law or shall limit the right
of any holder of any Warrant to bring proceedings against the Company in the
courts of any other jurisdiction. THE COMPANY HEREBY WAIVES TRIAL BY JURY IN ANY
JUDICIAL PROCEEDING INVOLVING, DIRECTLY, OR INDIRECTLY, ANY MATTER (WHETHER
SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO,
OR CONNECTED WITH THIS WARRANT OR THE RELATIONSHIP ESTABLISHED HEREUNDER.
BMJ MEDICAL MANAGEMENT, INC.
By:________________________
Name:
Title:
<PAGE>
FORM OF SUBSCRIPTION
[To be executed only upon exercise of Warrant]
To [NAME OF ISSUER]
The undersigned registered holder of the within Warrant hereby irrevocably
exercises such Warrant for, and purchases thereunder, ______ shares of Common
Stock of [NAME OF ISSUER] and herewith makes payment of $ therefor, and requests
that the certificates for such shares be issued in the name of, and delivered to
, whose address is .
Dated: ___________________________________
(Signature must conform in all
respects to name of holder as
specified on the face of Warrant)
___________________________________
(Street Address)
___________________________________
(City)(State)(Zip Code)
<PAGE>
FORM OF ASSIGNMENT
[To be executed only upon transfer of Warrant] For value received, the
undersigned registered holder of the within Warrant hereby sells, assigns and
transfers unto __________ the right represented by such Warrant to purchase
______ shares of [Common Stock] of [NAME OF ISSUER] to which such Warrant
relates, and appoints _______ Attorney to make such transfer on the books of
[NAME OF ISSUER] maintained for such purpose, with full power of substitution in
the premises.
Dated: ____________________________________
(Signature must conform in all
respects to name of holder as
specified on the face of Warrant)
____________________________________
(Street Address)
____________________________________
(City)(State)(Zip Code)
Signed in the presence of:
